By Guy Brandon, 13 September 2016
Yesterday provided the perfect example of why our monetary system needs an overhaul. Markets fell across the world. The FTSE dropped 1.1%, following a 1.2% drop on Friday – when the US Dow Jones had also fallen 2.1%. Altogether £40 billion in value was erased from Britain’s largest companies. European and Asian markets were similarly affected.
Whilst it’s tempting to see these solely as numbers, of interest only to the financial sector and those who make a living out of predicting market movements, the reality is that behind each company’s stock price there are employees, suppliers and pensioners who may be impacted.
The reason for the falls? Uncertainty about the Federal Reserve’s next decision on interest rates. For several weeks, investors had been fairly clear that there would not be a rise in September, but the mood shifted after officials’ comments suggested that an increase could be coming after all. The cost of borrowing money has big implications for how willing companies are to spend on new projects, on mortgages, and on company profits (because their costs go up).
This is why the global markets hang not just on the Federal Reserve’s interest rate decision, but on every little piece of information that might hint at the next movement. Fed chair Janet Yellen and the members of the board who collectively make decisions have enormous influence over not just the US but the global economy – something that plays into Donald Trump’s narrative that Yellen has been keeping interest rates low unnecessarily in order to boost the stock market and, with it, President Obama’s popularity. (In response, Minneapolis Federal Reserve president Neel Kashkari commented that ‘politics simply does not come up’ at Federal Reserve meetings.)
Questions about politicisation of the money supply aside, power over monetary policy is concentrated in the hands of a very few people. The way we create and administer money has big implications for ordinary people. Debt-based money – that is, money that is created by commercial banks lending it into existence when they grant mortgages and other loans – has the effect of siphoning value from the real economy into the financial sector through interest payments. Quantitative Easing, whilst it may have been the least-worst solution at the time, has had the effect of increasing inequality, inflating stock markets and house prices. In relational terms, there is a lack of Parity and Commonality between those who create and those who use money: it serves different purposes for central and commercial banks than it does for regular citizens.
The monetary systems used in the Bible were a world apart from our complex system of money creation. Silver and grain appear to be the most common currencies, as well as gold and cattle in some circumstances. However, the principles that underpin it have ongoing relevance. For example, in early Israel, no one had control over the money supply – at least until the first coins were minted around 600 BC. When Jesus asks for a denarius (Mark 12:13-17), he holds a very tangible symbol of centralised political and financial power: the silver coin had recently been debased by the emperor, and subsequent years would see its value diluted still further.
The Jubilee Centre’s forthcoming booklet, Crumbling Foundations: a biblical critique of modern money, will explore the principles embodied in the Bible’s teaching and norms for money and offer application for our own monetary system based on them. We will be holding an event later in the year at which a panel of experts will discuss some of the key issues at stake and ask how we might go about reforming money creation to create a more just and sustainable system.