Friends of iff,

Colleagues, ladies and gentlemen,

With best wishes from iff for a peaceful New Year in 2016. 

1. Europe was, at the New Year, more split between rich and poor than ever before. After three years at an Italian university, I recognised the situation differs even in education. Teaching students into unemployment in the South coincides with open doors even for refugees in Germany where a strong demand for skilled labour puts philanthropies and industry into an astonishing welcome coalition while other countries are overwhelmed by the so-called refugee crisis.

Globalisation has taken hold of nation states.  Surging nationalism is a desperate act of mourning of peoples for their lost homeland and lost sense of belonging.  What is left are individuals, equalised by the digitalisation dreamed up by the Franco-American revolution.  At the same time, the reality of the inequality of individuals is becoming an international problem. The poverty of others is the social explosive which unfortunately we first experience as potential terrorism when it equips itself with dynamite.  Our statisticians continue to intoxicate themselves with average people, average Europeans, average consumers, average families, even though in reality there is not a single example of such a thing.

The solution to these problems appears to have breathed new life into old socialist utopias.  The war of huts against palaces, the resentment felt by immigrants and people left behind against the wealth of those for whom they are expected to work and, conversely, the resentment felt by the middle classes against immigrants and the power of people who have nothing to lose.  Everything just needs money, because that alone can iron out the difference between rich and poor.  We deal with every problem, be it war, refugees or exclusion, by spending money.  Bill Gates solves Africa’s health problems, transfer payments to Turkey solve the refugee problem.  Does that work?

In a recent survey with lord mayors in Germany regarding their refugee problems one of the astonishing impressions they gave was that most of their present problems they cannot solve with money: they lack homes and people to manage the crisis but seem to be confident that the enormous social engagement of layperson has brought this lesson to the public.

In fact no-one ever has enough money.  But people can’t eat money.  Having money merely provides a claim against others, which can be circulated, imposing an obligation on them to work for the owner of the money directly, or to provide the owner of money with the products of labour.  Over the past three years, I have attempted to set out this insight in three volumes on the subject of Money (Das Geld), which will be published in the summer.  This publication is about the use of money and its applications from an economic, sociological and legal perspective.  Much of its contents seem counter-intuitive.  Thus, those who give money away just substitute for the creditors, but do not change the debtors.  There is no need to have money, just to have access to its use, because money does not reveal its owner.  Ownership of money is replaced by liquidity and creditworthiness.  Indebtedness is thus an opportunity, not a problem.

Use of money means taking out credit in order to become a creditor.  That has consequences.  As we become accustomed to the idea that owning money separates people from each other and pits them against each other, an understanding of money as credit will enable us to grasp the function of money in binding people together.  People could then utilise it more consciously because, when money equals credit, creditors and debtors enter into a relationship of cooperation, which is the essence of productivity and economic progress  The creditor is then no longer the investor, but the debtor of the person whose work sustains the value of the creditor’s money. The fact that this, and not the capital gain, is the true function of credit-driven cooperation is revealed by the recent zero-interest policy of the ECB  Money is a claim and not a casg-cow to be milked. The insurrection of debtors across the world to make this truth self-evident is thus more an opportunity than a threat.  

2. Yet we observe in the projects we are commissioned to undertake that the dogma that having money is the meaning of life is such a productive ideology that we have long been unable to manage without it.  The idea of money as an end in itself can only be suppressed slowly and replaced with a sense of money as a means, and an awareness of the meaningfulness of the cooperation it mediates.

The German Federal Government commissioned us to design an educational savings scheme for social groups with limited access to education in line with its policy of promoting saving for education, and to investigate its marketability.  We developed a government-funded savings process aimed at creating access to educational loans.  That concept was not a good fit in the countryside, but would have been more realistic for the migrant target group.  We also researched alleged insurance mis-selling for the European Commission.  On 28 January 2016, we submitted a similar project on bankers’ bonuses.  Politicians and the press assume that performance-related pay is responsible for excessive risk-taking.  We are sceptical.  True, even economics students say that making money is the purpose of their studies.   But it is also true that such people frequently lack alternative cultural experiences and lack collective integration into sustainable objectives, and so fall back on the folly of money.   Abstinence is no solution.  Nor does Fernando Pessoa’s fantasy of ”anarchist bankers” offer much help, people who accumulate money in order to become independent of it by means of its sheer volume. Money must be used in order to experience it as a means for cooperation, instead of the goal of individualism.    

These notions leave us between two stools.  Is money good when it is used, bad when it is owned?  The lesson of human greed haunts economics and dominates sociology and pedagogy in research into overindebtedness.  Our annual overindebtedness report provides facts on over 60,000 households, which we source from the application of our CAWIN money advice software.  These show that greed for money is as (in)significant in overindebtedness as thirst is in alcoholism.   

(Failed) capital investment illustrates the misconception.   It is the short-changed capital investor, not the defaulting borrower, who becomes the model consumer.  As a typical victim of credit institutions, he or she exemplifies the need for consumer protection.   Policy and legislation are haunted by the human right to money which increases in value all by itself.  The well-off appear to be everywhere endangered by the deception of the financial system.  People with money are threatened with pitfalls even when ever more wealthy people are themselves exposed as cheats.   

Consumer legislation is generating a flood of information on this, which displaces the absence of content and the pointlessness of money investments into the realm of the unconscious.  Because the questions of where money comes from and where it goes to barely arise, or are diverted into apparently ethical investment opportunities, it becomes easier to give to those who already have.  Access to money is so richly concentrated among ever fewer people that it is not even subject to inflation anymore.  Owners of money no longer seek to exchange it for consumable products of labour and instead seek only to make it grow yet more. But that is the best solution for all of us, enabling the real economy to remain undisturbed  by the flood of purely financial money. 

We conducted an empirical assessment of the effects of accounts protected from seizure on the banking world and found astonishingly successful results for this effective reform, which put into perspective our own concerns that specialist products for the poor could lead to a ghetto economy.  We produced an information sheet for another Ministry on the subject of making economic and legal jargon understandable to consumers in its scope and form, which we had previously also done for a high street bank.   Its importance is currently demonstrated by the transposition of banking terms and conditions, in which consumers are expected to deal with the linguistic compromises of EU Directives.  In the end, only a radical insight will help us, namely that contracts should be formulated by consumers.  It is a matter for the courts to translate their intent into legal language and to give effect to them.  Those who seek to force the ever more complex legal language used in the banking sector on consumers have no understanding of freedom of volition in contract law.

3. In 2015, iff had to re-invent itself. Integration into the university landscape is unlikely to be our future.  Nowadays, universities want to make money.  Knowledge, research and teaching are now often only a means to that end.  On the other hand, cooperation on specific projects is helpful.  For that reason, we are happy to remain an external partner of the University of Hamburg and pleased that we have entered into cooperation agreements with the universities of Rostock, Trento and Santiago.  In 2015, the focus of the Institute shifted to international projects.  We have won two framework agreements with the European Parliament on consumer protection and contract law, from which we hope to secure new projects.  At the same time, we have secured four multinational projects from the European Commission on bankers bonuses (CRD IV), on the use of housing to finance retirement pensions (Equity Release Schemes), on the development of legal advice for consumers in Turkey and on models of financial education in a number of EU states.  These are in fact all projects for research into the future except that so many vested interests simply want to use them to defend their livings.

Imperceptibly, iff ‘s projects have preceded it.  iff began as an Institute for the sociology of law (when it was founded in 1987 it was called the Arbeitskreis für Rechtssoziologie e.V.- Sociology of Law Study Group) and evolved into an economics Institute which applies specialist legal expertise to its research into the impact and shortcomings of the contractual and legal dealings of financial services providers for the state (Parliament, regulatory, courts), and to its research into targeted improvements.  With the appointment of our second Director, economist  Prof. Doris Neuberger, its development began.  It has a team of specialist staff, including Sebastien Clerc-Renaud, Laura Flach and Michael Feigl.  As of 1.1 2016, we had to relinquish our former Chief Executive, lawyer Michael Knobloch, because he was selected as Chief Executive of Verbraucherzentrale Hamburg (Hamburg Consumer Advice Centre).  By 15.1.2016, however, we were successful in appointing a new Chief Executive, Dr. Dirk Ulbricht, previously an economics researcher into the financial system at the ifo-institut and the Deutsches Institut für Wirtschaftsforschung, before working as Speaker for the Bund der Versicherten.  This appointment has decisively strengthened the skills of the Institute in the area of consumer-orientated supervision of the financial markets and shifted the emphasis in the direction of market analysis. 

In the course of this development of the Institute, our support of financial and debt advice both at home and abroad has acquired a second important function, namely data collection.  Our most recent EU projects already involve the use of large volumes of data provided by BankScope or the European Banking Authority.  The overindebtedness data collected by CAWIN is an enormous resource, which we evaluate annually for our Overindebtedness Report.  Its combination with existing data sets, such as that of Schufa, would be extremely valuable for a better understanding of debt.  Use of CAWIN has hitherto been confined to Germany.  This year’s version enables its application in other countries in principle.  Standardised data could lay the foundation for international comparative studies in the area of overindebtedness.  We have demonstrated how productive the use of online tools can be for checking the figures for financial products through the application of our iff-Finanzcheck programme on individual projects, for example in checking the clawback of fees.  Unfortunately, unlike in the case of overindebtedness (Deutschland im Plus Foundation), we have to invest and finance its development out of its future use for consumers because the resources recently provided to consumer organisations for data collection in financial services have already been largely absorbed instead of improving successful cooperation in the public domain .  There are numerous potential applications of iff-FinanzCheck.  It enables a simple core calculation based on payments in and out.  The accrued inputs offer a unique opportunity efficiently to observe the market in financial services and recognise  shortcomings at an early stage. 

In the meantime, we are able to show the real effects of the financial system on people and the economy to cities and regions, as well as to individual banks and the legislature, by constantly gathering data using database combinations.  This enables us to provide competent advice on implementation in the law of the lessons learned, and on opportunities for action.  Our advice is in demand from numerous committees, conferences and working parties, but unfortunately this often also jeopardises our work, because iff lives from its earnings.  What is perceived by lobbyists with other sources of income as an unpaid honour in being asked is a heavy financial burden for iff.    

Nevertheless, it remains the aim of the Institute to advise the press, the public, politicians and voluntary organisations and to offer suggestions, even when unpaid.  The fact that that is frequently done during the night is something we have just experienced again as we submitted our EU project.   

5. It is my personal hope that, after 33 years under my leadership, iff and its new team will be strengthened by my continuing socio-legal contribution to this work and will receive still more support from the economy, society and the state.  The challenge is to convert this support into paid contracts, which is essential for consumer protection and consumer-orientated financial services.  Our current project successes show that we have something to offer and that we have no need to rely on a begging bowl.

In that spirit I wish all of those who are kindly disposed to iff a good 2016 and I hope to welcome many of you to our annual international conference in Hamburg 2 and 3 June 2016 ( this time on the theme of digitalisation.   


With best wishes.

Udo Reifner