In order to create a healthy, sustainable and just world, we need a healthy, sustainable and just money system. We do not have this at present, but instead have a system that is profoundly dysfunctional. Financial decisions that run completely counter to our sense of goodness - such as a decision to harm the life-sustaining capacity of the planet in spite of a wish that one's grandchildren have a healthy world to live in - are a direct result of seriously flawed money system.
What's wrong with the money system we use now?
The dominant money system is harmful to life because it is based on scarcity, encourages short-term thinking, creates incentive to turn valuable natural resources into cash, rewards greed, and is designed to transfer wealth toward the top of the economic pyramid. A system like this is by nature unsustainable and destined to collapse. As the money system approaches collapse, those in control of the system may resort to desperate measures such as war to postpone the inevitable.
What can we do?
It is completely within our power to establish a better system and empower ourselves and further our objectives of justice and sustainability through implementation and use of a money system designed to help us achieve these goals. This website provides an introduction to the possibility of creating a better money system. Please see the links on this page for more in depth discussion.
What is money?
It's a lot easier to say what money does than what it is. It is important that we understand that there are different kinds of money. Bernard Lietaer, a leading writer (The Future of Money) on the subject of money and proponent of community currency systems, says that money is not a tangible thing, and defines money as an agreement to use something as a medium of exchange. He would define the medium itself as currency. For now I will use these terms interchangably, and refer to a medium of exchange as money. Human beings have relied on some form of a medium of exchange in virtually every culture throughout history. Money is very basic to human civilization and to the human psyche itself. We rely upon it to facilitate transactions through which we share with one another. Money as medium of exhange is a vital tool that allows for a flourishing of human activity.
Money used as medium of exchange vs as store of value
Unfortunately, in a money system like our fiat (created from nothing by an authority) money system in which money is necessarily scarce, the function of money as medium of exchange is impaired by the use of money as a store of value. If people hoard the medium of exchange (because the money system supports its use as a store of value), then a shortage of the medium of exchange develops. When there is a shortage of money we end up with such problems as idle people living in communities wherein much work needs to be done. Un (and under) employment are a direct result of a shortage of money. Human beings are industrious and creative by nature and thrive on a sense of engaging in meaningful work and contributing to their communities. Money shortage is a severe impediment to human fulfillment and is a direct result of a money system based on interest-bearing debt. This is but one of the many flaws within the dominant bank-debt money system.
Why tolerating a dysfunctional money system is not necessary
It is completely unnecessary that we accept such a flawed money system. We have knowingly, in the case of policy makers who have participated in the process, and unknowingly, in the case of the majority of people, allowed a few people who understand how to set up and control an exploitive system to take control of this most basic human commodity and use this system for their enrichment at the expense of the rest of us. With an awareness of how money is created and how a money system functions, there is nothing in the world that can stop us, the sovereign souls incarnated as people here on Planet Earth, to create and utilize a money system which serves our own needs. We are all living our incredibly precious lives, and to do so under the conditions of an exploitive and destructive money system makes no sense whatsoever.
Human nature problem, or money system problem?
While it could be argued that human nature is flawed, it is also reasonable to think that human beings for the most part have good intentions. A flawed money system exploits weaknesses of human nature, such as fear and greed, and leads us to make decisions that are counter to our own personal and collective well-being. The adage that "power corrupts and absolute power corrupts absolutely," if true, should be considered in light of a global human civilization in which the absolute power of controlling the creation of money and renting it to us at interest is in the hands of a very small number of people. However, if we want to give everyone the benefit of the doubt, let us assume that the people with this awesome power to control our money are not corrupt by nature but that they, like the rest of us, are victims of a flawed system that exploits human weaknesses.
The money monopoly
The banking system has a global monopoly on money. This cartel, the privately owned banks of the world, owns the money we use. It creates the money - the medium of exchange we all rely upon - out of thin air, using OUR wealth, our productive capacity, and our ability and willingness to pay taxes as backing for the money - and then lends it to us at interest. Practically every dollar, peso, yen and euro in existence in billfolds and bank accounts all over the planet is subject to interest. The money is loaned into existence, and someone somewhere is paying interest on it. To a large degee it is taxpayers who pay the interest on the money in circulation, because much of the money is created through loans to governments. The interest paid on the US government debt of 6.4 trillion dollars (and increasing every day), is an example of the transfer of wealth that occurs because we rely on banks to issue money.
The problem of interest-based money
Interest results in a relentless, almost imperceptible yet massive transfer of the wealth created by the ingenuity, risk taking, and hard work of human beings everywhere to the people at the top of the economic pyramid. These are people who produce nothing of value and take very litle risk, but are the beneficiaries of significant share of our wealth simply because they create the money that we use, and then rent it to us, with our assets as collateral. The problems of interest-based money are many, and once one understands the profound realities of money and of the damaging affects of interest it is no surprise that Judaism, Christianity and Islam all forbid usury, the practice of loaning money at interest. While it could be questioned whether lending money that one has earned at a reasonable rate of interest constitutes usury, there can hardly be a question that the act of lending money that one has not earned but has simply created out of thin air, while using the assets of the borrower as the basis for the money, and charging interest for this, constitutes usury. In the Christian bible, the one act of aggression commited by the otherwise pacifist figure of Jesus was disrupting the business of the bankers at the temple. According to the story, he was crucified for this.
The benefit of demurrage-based money
Demurrage is reverse interest. In a demurrage-based money system the cash (or positive money balance) loses value over time through a demurrage charge. The creator of the money, the person who issues it based on his or her ability to deliver value, is the recipient of the demurrage fee. Demurrage is based on an assumption that the things of value upon which the money is based cost something to store or lose value over time. To comprehend this we can think of money backed by wheat in storage that is slowly being eaten by bugs and deteriorating in quality. Demurrage is inherent in such a money system. The effect of demurrage is the opposite of interest. It encourages preservation of resources and long term thinking, moves wealth down from the top of the pyramid toward the bottom, keeps money in circulation, is a sustainable system, and generally promotes sustainability, sanity and justice. This link provides more information on demurrage.
Bank-debt based money is not necessary
Our money system is an injustice of monumental proportions that we voluntarily submit ourselves to. We do not need the banking cartel to provide a medium of exchange for us to use at such an astronomical price. Since banks loan us money with our assets as collateral anyway, why not just create our own, WITHOUT interest? It is easy to do so, and if we can all understand the virtues of such an undertaking a great benefit can be realized by all. The implications of a healthier money system are profound.
We have a right to a just money system
The ability to create money is a kind of sovereignty, and under our current money system we have all relinquished our sovereignty to people who do not necessarily have the best interests of humanity or the future of our planet as their guiding principal. If they did, they most certainly would alert us to the fact that we don't need them skimming the cream off the milk of humanity's labors. There could never be a just law dictating that we must passively accept this situation and allow ourselves to be exploited. One of our inalienable rights as sovereign beings is to have a just money system through which to interact with one another.
A good government would give us a good money system
So how do we create our own money? How can interest-free money be brought into existence? Without going too far into what our government should be doing, it can be briefly mentioned that instead of borrowing money at interest to pay for the things that it does for us, the government could spend the money into existence. There is no reason on Earth why the people are better off with a government borrowing money from banks who create it from nothing, and then collecting taxes to pay the interest, instead of just spending the money into existence. The currency that a government can rightly issue is a tax credit. This currency can circulate until someone pays their taxes with it. It is backed by the taxes levied by the government, which should never be less than the amount of currency it issues. (The common misperception that our government is in the money creation business is one that the bankers are probably very happy about. The only money created by the government is coinage, which is a minute fraction of the money supply.) But let's focus on how we the people can create a healthy money system in spite of the failure of our government to do so.
The basis for a better money system
Things of value are what money represents, or at least should. A bank uses the things of value that its borrowers possess - a great idea, a home, a business, our potential to earn money - as the basis or collateral for the money it loans us. It won't loan the money unless we have the means of repayment or something of value as collateral. A means of repayment is the thing of value that the borrower has, and this thing is the basis of the money. Why not just use the thing of value to create the money ourselves? This has been done throughout history and is being done today, and it is entirely possible to create a genuine money system based the things of value owned by the issuer of money.
How it works
Here is a simple explanation of how a community currency could work. If I own a bakery, I can issue a document which promises to deliver to the bearer of the document a certain dollar amount of bread, and give this document as payment for some goods or services that I purchase. The party to whom I issue this document could in turn pass this "promissory note" on to someone else as payment for some other purchase. Eventually, as this document makes its way into the posession of a grocer who buys bread from my bakery, he can redeem it as payment for bread. Thus this promissory note is used as currency. Now, an employee in my bakery also has something of value that a bank would use as the basis to create (i.e., loan) money: her status as a working person earning a salary, i.e., her ability to provide value to someone - me in this instance - through work. Thus, she could issue her own document promising to provide a certain dollar amount of work, and use this as payment for some good or service offered by someone in the community. Again, this document could pass from hand to hand until someone uses it to buy some of my bread. At that time I could redeem this promissory note by returning it to her as payment for her work. Go to this link to view a more detailed description, about 2 pages, of how such a system could work. The Popp book called Money, Bona Fide or Non Bona Fide is an excellent 60 page essay that does an excellent job of demystifying money, explaining the shortcomings of our national fiat currency money system and laying out a proposal for what he calls a bona fide money system. The Thomas Greco book New Money For Healthy Communities (98 pages) is a superb overview of the whole realm of issues around money and alternative money systems.
How do we go about creating this system?
To envision this system working, all we have to do is imagine four things: a critical mass of people interested in the opportunity of creating interest free money, an agreement among these people that they will accept one another's currency, a technological infrastructure enabling all of this to happen electronically through a central clearinghouse, and a mechanism for evaluating the creditworthiness of the participants in the system.. With these components we have a money system that is at least as reliable, and far more beneficial that the system we now work within. This scenario for a complimentary community currency is entirely feasible, and can be created if we only have the will to break from inertia and take the vital power of money creation into our own hands. This is an effort that can happen at a community level. It will build and enhance the spirit of community and the spirit of community will fortify this system.