Conventional banking practices are going to be revolutionized in response to the Work-Standard. The methodology will be different than how they were in Liberal Capitalism and most historical and existing Socialisms. No other Socialism has been able to realize this for reasons that pertain to the concept of Currency being pegged to Arbeit. The banks will operate as the subordinates of the Central Bank, the Central Bank subordinate to the State Council and Heads of State and Government in the Socialist nation-state. The State wields the Intents of Command and Obedience.
Under the Work-Standard, most banks are to be ranked as State-Administrated Enterprises (SAEs), the highest rank in terms of political-economic governance. That means following the direct orders of the State itself, from the amount of Geld that banks are allowed to lend to the role they will play within the allocation of Geld as Paygrades on a per-household basis. The banks will not be operating according to Fractional-Reserve Banking; Geld is now created by the Central Bank through conversions from Arbeit. They will also not be operating according to Full-Reserve and Narrow-Reserve Banking. Apart from their own efforts, most of the Arbeit will be coming from the VCS Economy and the State, in addition to Real Trade Agreements. The only real exception to this rule is “National-Socialized Banks,” which are to be discussed in regard to the Kontore and its NSFIs.
The implications of the Work-Standard compel the need for a new-old form of banking, a revolutionization of what has already been done before. This form of banking will require a special set of conditions where Lenders and Borrowers both contribute Arbeit by the former doing their Vocation and the latter financing a new Vocation with loans. The Lender contribute 50% of their Arbeit and the Borrower contributes 50% of their Arbeit, and the State pays both Lender and Borrower in Geld for their efforts. At the same time, the State is expecting the Lender’s other 50% of their Arbeit and the Borrower’s other 50% of their Arbeit for the other halves of their Geld.
It makes sense for the Lender to contribute 50% of their Arbeit by lending to potential Borrowers and receiving the “Service Fee.” It also makes sense for the Borrower to contribute 50% of their Arbeit by borrowing and paying the “Service Fee.” That Service Fee is charged to the Borrower for consulting the financial services of the bank to borrow a loan. Where does the other 50% of the Lender’s Arbeit come from? And where does the other 50% of the Borrower’s Arbeit come from? The State, Central Bank, Kontore and State Commissariats, and the VCS Economy are all uninvolved here until certain conditions are met by both the Lender and the Borrower.
When the Borrower visits the bank, the Lender is expecting them to borrow a loan. The Borrower is doing it on their own volition because they are convinced something needs to be done but they lack the Geld needed to make it happen. The Borrower may have a payment card and they need the bank to put Geld into it to pay for something sooner rather than later. The Borrower could be an artist looking to commission a new work of art that is beyond what the State normally allocates to them. They could be somebody looking to start their own personal enterprise or the Figure of the Arbeiter interested in introducing a new Technology and needs to implement it on their own terms. That sort of behavior is to be expected under the Work-Standard and the State must realize every new revolutionary Technology may require more Geld than what is normally expected.
When the Borrower takes out the loan, do they automatically receive Schuld for the act of borrowing? Not if the Borrower does what was expected of them by the Lender. The Lender has a Legal Duty and a Constitutional Obligation by law to see to it that the Borrower follows through with their promise. The Lender is expecting results from the Borrower. If the Borrower achieves the Intent behind their borrowing, they pay the Lender back with the other half of their Arbeit. The Lender contributes their Arbeit and their Borrower’s Arbeit to the Life-Energy Reserve.
If the Borrower fails realize the Intent behind their borrowing, that is when Schuld will be given to the Borrower. Here, the Borrower must pay the Lender with their Geld. The Lender receives the Geld as compensation for their losses, which is to be recognized by the State. Under no circumstances is there to be an Interest Rate; the Mechanization Rate applies only for the VCS Economy, not the banks under the command of the Central Bank.
What has been described here is an elaboration of what has been discussed earlier:
Borrowing a loan under the Work-Standard is going to be different from borrowing a loan under Liberal Capitalism. Those who decide to borrow loans will not be charged Interest, but they will be charged a special “Service Fee” because they had chosen to rely on the services of the banks. This Service Fee is to be set by the Central Bank and it is applicable to all National-Socialized Financial Instruments (NSFIs) under the Work-Standard. It is to be paid up front as part of most financial transactions. The banks contribute half of their Arbeit through maintaining deposits and lending; the other half comes from their clients borrowing and withdrawing Geld as part of pursuing a new Vocation or establishing their own State-Owned Enterprise. This deters Usury and the Schuld Bondage which plague banking establishments under Liberal Capitalism.
Loans issued by National-Socialized Banks are known as “Work-Tenures.” Despite their similarities to the Four-Year or Five-Year Work-Plans issued by the Kontore, Work-Tenures are tied to the Intents of the Borrower. The Borrower states that they needed a fixed amount of Geld to create their own Vocation or found their own State-Owned Enterprise. The Lender issues them the Geld under the condition that the Borrower will assume command responsibility of living economic life at their own initiative. The Borrower must pay back the Geld by contributing the equivalent amount in Arbeit. If the Borrower fail to pay back the Geld, then the bank is legally bound to charge any remaining amount as Schuld. The Borrower will then be asked to reconsider their personal pursuits, the State intervening to return them to their original Vocation.
The original of the preceding paragraphs appeared in The Fourth Estate, on a Blog post entitled “A Work-Standard Critique of the ‘Fractional-Reserve vs. Full-Reserve Banking Dialectic.’” What was discussed here pertains to the common everyday banking practices under the Work-Standard. Banks are going to be doing far than accepting deposits and withdraws as well as issuing loans and overseeing their payments. They will also be overseeing the financial side of MTEP (Mission-Type Economic Planning). The justification, as stated in that Blog post, was three-fold:
-There needs to be somebody besides the economic planners to register the contributions of Arbeit to the Life-Energy Reserve on behalf of the Central Bank. The economic planners cannot oversee this task because they need to focus on the Solidarity of the national economy. At the same time, the economic planners’ accountants cannot do it since their attention is focused on the Quality of Arbeit across various professions, enterprises and economic sectors;
-There needs to be somebody to help the Central Bank facilitate the conversions of Arbeit into Geld based on the overall Quality of Arbeit and the Quality of Geld. The Central Bank can readily convert Arbeit into Geld, but they are counting on somebody else keeping track of the financial ledgers provided by the accountants and economic planners;
-And there needs to be somebody to help the State distribute Revenues intended for Expenses and Paygrades. Additionally, that same somebody needs to facilitate the wiring of Geld to different accounts, can issue Geld as loans in exchange for Arbeit. They must act as the immediate between the State and Central Bank, the State Commissariats and Kontore, economic planners and accountants, and the enterprises and professions that govern various Vocations.
When the economic planners record the Work-Productivity (WP) and Work-Intensity (WI) of their enterprises, they and their fellow accountants calculate the numerical values in accordance with the Total Economic Potential (TEP) and by extension the Real Total Economic Potential (RTEP). The accountants send their calculations to these National-Socialized Banks for them to register them in their accounts at the Central Bank. Included in their registrations are the numerical values for Quality of Arbeit (QW) and the Quality of Geld (QM).
With the calculations in the Quality of Arbeit and the Quality of Geld, the Central Bank is finally able to oversee the conversions of Arbeit into Geld. Geld is then given to the State as Revenues. Some of that Revenue will be spent on Expenses and Paygrades, the rest allocated to the State Budget. It is up to the State to decide how much the Central Bank should be allowed to give to the banks for potential loans. But unlike the loans under Liberal Capitalism, these loans are drawn from the Solidarity of the nation insofar as they operate within the framework of Arbeit and Geld. This Solidarity intended for the banks is called the “Earmark Requisition” and the banks can only issue loans based on the amount of Geld allowed by the Central Bank.
This kind of banking practice deserves the proper designation of “Reciprocal-Reserve Banking.” The term is appropriate because of how the Lenders and Borrowers are both directly involved in the Life-Energization Reciprocity (LER) process of Life-Energy into Arbeit, Arbeit into Geld. It is going to be the closest any one person is going to be physically engaging with it outside of the State, VCS Economy, the Kontore or the State Commissariats. The banks act as the intermediate within the interplay of Arbeit and Geld. Without Kapital and with Schuld being limited as much as possible, it is now possible to further flesh out the details of Reciprocal-Reserve Banking.
How will Reciprocal-Reserve Banking change the role of borrowing loans for making large-scale purchases like homes, automobiles, and higher education? What is the relationship, if any, that Schuld has with payment cards, since credit cards as they are commonly understood do not exist?
Recall earlier that the State wires a Paygrade to somebody’s account at their bank. Recall the SMP Compendium entries pertaining to Paygrades on a per-household basis like “Taxation and the Work-Standard Pt. III.” It should be remembered that Paygrades are adjusted according to years of service and number of dependents. The longer somebody is devoted to their Vocation, the more Geld they are likely to receive. It can be argued that there may be options in place where a young adult entering the workforce to have a portion of their own Paygrade be allocated to a savings account intended for the purchase of their own car, home or university education. While they are working and attending classes, the Geld intended for that saving account is going to gradually accumulate. A young adult could expedite this process as early as sixteen or seventeen and avoid a potential Childlessness Tax before by age twenty-four or twenty-five by not draft dodging.
Young people under the Work-Standard do not have to spend a third of their adult years depending on their parents as is the case under Liberal Capitalism. In Socialism, they may be entitled to receive their very own Paygrade by either deciding to pursue a Vocation early on in their secondary school years or receive their draft card upon turning the age of sixteen or seventeen. This draft card does not necessarily have to be a three-year’s conscription into the armed forces; it can just as easily be a three-year’s apprenticeship into any Vocation that needs help from the youth. There is their chance to save Geld for the future because the longer they are involved in a Vocation that they are called to pursue, the more Geld they will be receiving from the State. The Arbeit to be contributed from either decision is worth it over the long run.
A university education is going to become cheaper under the Work-Standard, especially since the teaching professions contribute far more Arbeit and thus more Geld for the Totality. A similar occurrence will also be discerned on the assembly lines of manufactured automobiles, depending on their overall Work-Intensity within the production process and the Mechanization Rate set by the Central Bank. And housing is also going to become cheaper under the Work-Standard because land and buildings are not commodities in themselves; they belong to the Totality and their State on the grounds of national sovereignty. The Totality governs the State and they own their nation’s soil through their State. The moment any citizen decides to purchase a plot of land or a building is when it finally belongs to them alone. When they sell that same plot of land or building, it is temporarily under the State’s control until somebody else decides to buy it. And the people who are going to take care of that land and building until that next purchase will be the youths themselves as one of the ways they will be earning a decent Paygrade from the State.
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