The conceptual world of money and finance seems unclear and confusing to many people. When talking about money, investment, credit and interest, problems of understanding soon arise. However, a correct definition and use of the terms is a prerequisite for understanding monetary and financial interrelationships and for drawing the right conclusions.
Distinguish between money and investment
In a narrower sense, the term money includes coins, banknotes and current accounts and is used for payment transactions. When one puts one's money in the bank, it is an investment that is usually associated with an interest return. The interest income serves two important purposes at once. People put the money they don't need for payment purposes in the bank. The bank books this as a savings deposit and in return grants loans to other economic agents.
The rich get richer and richer
But unfortunately, today's money and credit system also has serious disadvantages. People with high financial assets are getting richer through interest and compound interest. This is a system property of the monetary economy and happens all by itself, without the intervention of the wealthy. For example, a millionaire receives an interest income of €10,000 per year for every million invested, at an interest rate of only 1%. Such disproportionate growth of wealth is a privilege of the rich: Where there is a lot of financial assets, there is always more to come. But how do the interest earnings of the rich actually come about? Who "pays" for them in the end? Is it not the working population, primarily the middle class, that must earn and generate the interest income of the wealthy? Is it not ultimately a redistribution of financial assets from the bottom to the top??
Interest burdens borrowers
Today's money and credit economy has another drawback: private households, associations, companies and institutions have to pay interest for bank loans. This makes it more difficult to finance investments and creates the risk of financial dependence, not only for households and companies, but also for states. Isn't there talk in the media every day about over-indebtedness, debt restructuring and debt relief? So the question is: How can we sustainably reduce the interest burden on households, companies and institutions??
Conclusions
If the analysis up to this point was correct, then three important demands emerge: First, safe investments must be taxed more heavily; second, 500-euro bills must be abolished; and third, households, associations, companies and institutions should have access to interest-free and low-interest subsidized loans.
Secure financial assets must be taxed more heavily in order to neutralize the compound interest effect and to limit the exponential wealth creation associated with it. The above example of the millionaire makes it clear that it is not enough to tax interest income only at 25%, as has been the case up to now. A wealth tax could be used to tax overnight and fixed-term deposit accounts, government bonds and other safe investments of money from the substance. A generous tax allowance allows tax-free savings within the tax-free allowance and spares small savers. A wealth tax on all safe investments of 3% and year above an allowance of €200,000 would be conceivable. In this way, risk-free asset growth could be effectively limited by interest and compounding interest rates.
The treasury must ensure that taxes on financial assets are collected evenly. Wealthy individuals could try to keep surplus funds that exceed the exemption amount of z. B. 200,000 simply to keep it at home in the form of banknotes, z. B. in a home safe. That's why it makes sense to abolish all banknotes over €100 and leave only small change in circulation for daily purchases.
Finally, new financing instruments are needed to enable households, associations, companies and institutions to obtain cheap loans. Interest-free or subsidized loans could help to facilitate the financing of sustainable investments. These could be normal bank loans subsidized by the government to reduce the interest burden. The granting of subsidized loans should be linked to strict social and environmental sustainability criteria, so that only those investments that contribute to the common good are subsidized.