Bank of Dave

It's hard not to admire Dave Fishwick, the eponymous Dave in 'Bank of Dave' the TV series and "Bank on Dave" (aka Burnley Savings and Loans) the company that he founded to provide banking services to Burnley, Lancashire, England and the area, but which he wanted to be a bank.

In a Dave v Goliath struggle, the entrepreneur, plain-speaker and shooter from the hip takes on the might of banking law and the Financial Services Authority. He sort of wins out, because by the end of episode 2 of the TV series he is allowed to make loans and take deposits, though he must match them. In six months he makes a profit of £000s which he generously give to charity.

But is this all scaleable? He has to charge interest on his loans, even though he is careful about what he invests in. This is in part because he offers savers 5% pa (with a few sweeeners to early adopters). I think he was (is?) lending at around 8-9% pa.

Where does the money to pay interest come from? Other people - well yes, but where ultimately? Money supply has to increase so that there can be enough money in the system to pay back the interest. If it doesn't, mathematically some people have to go bust. (If it does, some people still do go bust, but not because of  shortfall in all money).

This is a big, big problem for money. The total utility of goods and services increases over time, so money should increase in supply in keeping with it. But how do you quantify it?

Problems of lack of co-operation

A few examples have come to my attention recently:

1) Another car journey sharing venture, gocarshare, to compete with Liftshare and the other very similar offerings.

2) Google's beta test of its cycle route directions on its maps, despite parallel offerings from cyclestreets.net, TfL and others,

3) Qype. I downloaded the Androis app as it had been avourably reviewed in the Webscape segment of BBC TV's Click. One of the first things I found was a reference to a pub that closed ages ago. I entered a 'review' saying this - I could see no other more appropriate facility. There are so many websites / apps holding data about businesses that to tell them all would be a lifetime's work. In Qype, we have an app that cpould be extremely useful, but it can only ever be as useful as the data it is working on and my first experience has put me off.

Money supply

Further to my previous post about the gold standard here, I made a similar point on Facebook alongside a slide published by positive money. I got a reponse - thanks - which I have posted below, interspersed with my further responses:

• Surely the number of people alive is as arbitrary as the amount of gold that has been discovered!

 Not at all. Gold has very little direct use in improving the quality of human life. It's good as an electrical conductor, but I'm unaware of any other day to day use. If all the gold in the world vanished (except what is in practical use) we would be no worse of so far as health and well being were concerned.


I was looking fo some measure of the quality of human existence, or our ability as a society to protect and preserve our own species. Whilst a long life isn't necessarily a good quality life, it is a reasonably good proxy - if you're healthy you live longer. If there's no war, hunger, disease etc, people live longer. It then occured to me that if people lived longer there would be more people alive at any one time, so perhaps population rather than life length would do.

• One third of all the worlds refined gold is kept in one place - around the necks of Indian women. Scott's approach would make India rich!

Depends what you mean by rich. You can't eat gold, you can only exchange it for something that actually sustains life - nutrition, shelter, safety, health care to start with.

• How could we be sure that India, having one of the largest populations, would get it's fair share of the money that is created under your suggestion, any more than it does under the current one? 

My proposal is about money supply, not about its distribution, fair or otherwise. As we know, currently nearly all money is created by banks and lent out at interest to whoever the bank  wants to lend it to to make a profit.Obviously money supply needs to go up and down - but we need sound reasons for that.

Perhaps the Indian Government (or any other government) would be able to create the money that corresponds to India's population, so it would have the money and it could spend it as it chose. What we would have to decide is how many money creating authorities there would be. For example, if the UK created some its per capita money, then England, N Ireland, Scotland and Wales couldn't also do it - this would be double counting.

•  Also, wouldn't it encourage countries to inflate their population?

As population increased there would be more money, but more people too. The amount of money per person alive would stay the same.  Therefore, what you would have to do is be as efficient as possible with the money you have in order to allow population to grow naturally and live longer. I would guess that would involve 'prevention is better than cure'.


What underlies your question seems to be the tacit assumption that more money is better. We are brought up to think/act like this, but what is in fact better? Better health ( longer life) and more happiness (which may be the same as better health). 


The only way to cause population and longevity to rise is to manage physical resources in order to achieve more and longer lives per unit of  resource.

• The Greens wouldn't like you.

The planet can obviously only support a finite population. All the greens are pointing out is that our consumption is currently unsuatainable over time. With the current system we are wasting the planet's resources  and also not distributing them at all fairly. Yet we keep creating more and more money. If we managed the planet's resources properly and fairly we would be able to sustain a greater population than we currently can. We should not equate comsumption with quality of life.

===

 Addendum - what is gold really useful (non aesthetically) for?


1) Its electrical conductivity cf its corrosion resistance makes it useful in electronics
2) Its reflectivity of radiation so for satellites and space suits.
3) Its transparency when thin enables it to be used in heated windscreens in aviation.


Thanks to Wikipedia for information.

Gold standard lunatics

The episode of BBC Radio 4's Analysis programme which aired tonight at 1930 GMT had a scary false dichotomy between the gold standard and our current monetary supply system.

It is true that it doesn't make sense to have a money supply without a physical referent, but that doesn't make the gold standard any more logical. If money supply was related to the amount of gold that has been discovered, the absurd situation arises that discovering a quantity of a comparatively useless metal would increase the size of the economy, and once all gold has been discovered, the economy cannot grow.

Relating money supply to the price of gold is nonsensical, because the price of gold must be in units related to the price of gold (as money is on the gold standard). Or, if the price of gold could float freely, money supply would be related to a free floating variable.

In the gold standard, gold had to be shipped. Ridiculous. All this relatively useless stuff did was sit in vaults wile it wasn't being transferred betwwen them. No wonder governments realised it was utterly stupid, and sold the gold without admitting it.

But the gold standard proponents were right that money supply should not be unrestrained. It is a starting point to say that it should be related to the amount of goods and services being produced. The problem here is the problem of growth in GDP - the planet is finite so far as physical stuff goes, so insofar as it relates to stuff, money supply should not increase. Services are a different matter. Technology is a case in point. Microproccessor based technology is getting smaller as it gets more powerful. It sis clear that, over time, we can get more service per unit of stuff. If we could quantify service, we might have a guide to the quantity of money that there should be, but how do you compare a basic human need (nutrition, say) against a higher order need or service (finding out where the nearest restaurant is using your smart phone).

For me, human well-being is the key and for the moment, I'm thinking money supply should be a function of the number of people alive and their age. I'm sure this is less than perfect, but it is a starting point.