There were a number of ideas in the book that particularly caught my eye.
One is an idea for interest free lending that has been successfully used by Sweden's JAK Members Bank since 1965.
Normally, Banks require interest charges to cover various costs. Kennedy takes a typical case where an 8% interest charge might be broken down as follows:
- Bank service charge (1.7%)
- Risk premium (0.8%)
- Liquidity premium (4.0%)
- Inflation offset (1.5%)
- a component that pays back the loan
- a component that pays for the work of the bank
- a component that goes into the savings account
The critical feature of the system is that it can operate without the need for compound interest, and so the system is insulated from the effects of the current system in which there is automatically a flow of money from those who need to borrow money to the wealthiest members of the population. This point is made very clearly in a study by Helmut Creutz who divided the German population into 10 slices depending on household income, and calculated how the burden of interest payments was distributed across the different groups. He also calculated the income from interest for the same groups. As you can see in the figure below, 80% of the population lose out. Only the top 20% of households benefit from the system at all, and the bulk of the benefit goes to the top 10% who "earn" nearly all the money that the interest based system produces.