Rethinking Money: How New Currencies Turn Scarcity into Prosperity

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Many of the world's economic ills are due to our competitive money system - in which there is built-in economic scarcity and never enough money for people to pay off their debts, due to the debt-based way money is created. Bernard Lietaer - one of the world's most knowledgeable experts about our money system - and journalist Jacqui Dunne team up to describe how individual citizens, entrepreneurs, businesses, communities, and governments are creating new cooperative money systems around the world that provide a way out of our economic morass.

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1 The Failure of Money: The Competitive Society

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What need you, being come to sense,
But fumble in a greasy till
And add the halfpence to the pence
And prayer to shivering prayer, until
You have dried the marrow from the bone?

WILLIAM BUTLER YEATS,
Irish poet and Nobel laureate

It’s a cold Tuesday morning, and already the line is forming outside the David Ellis Pawn Shop in the upscale neighborhood of Cherry Creek, Denver, bordering the foothills of the Colorado Rockies. It will be another 10 minutes before the doors open. A woman in a fur coat sits in her parked car with its license tags about to expire. She runs the engine to keep warm while others shuffle around in silence, dodging any direct eye contact.

Denver, the Mile High city, is one of the country’s top 10 metropolitan areas where people are saddled with the highest levels of personal debt. This is a result of high housing prices, a steep cost of living, and a culture of spending—a hangover from better days.1 The David Ellis Pawn Shop has been in business in the same location for over 25 years and during this time has seesawed through multiple financial highs and lows. Trade, however, has never been so brisk or with such a dramatically broadened demographic as it is now.

 

2 The Myth of Money: What It Really Is

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So you think that money is the root of all evil. Have you ever asked what is the root of all money?

AYN RAND, Russian-born American writer

It is a slow day in the small Saskatchewan town of Pumphandle, and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit. A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night. As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer. The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op. The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner. The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything. At that moment, the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill, and leaves.

 

3 A Fate Worse Than Debt: Interest’s Hidden Consequences

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It may sometimes be expedient for a man
to heat the stove with his furniture.
But he should not delude himself by
believing that he has discovered a
wonderful new method of heating his
premises.

LUDWIG VON MISES, Austrian economist

The small village was bustling with locals proudly displaying their wares, chickens, eggs, cheeses, and bread as they entered into the time-honored ritual of negotiations and trade for what they needed. At harvests, or whenever someone’s barn needed repair after a storm, the village-dwellers simply exercised another age-old tradition of helping one another, knowing that if they themselves had a problem one day, others would come to their aid in turn. No coins ever exchanged hands.

One market day, a stranger with shiny black shoes and an elegant white hat came by and observed with a knowing smile. When one farmer who wanted a big ham ran around to corral the six chickens needed in exchange, the stranger could not refrain from laughing. “Poor people,” he said, “so primitive.”

 

4 The Flying Fish: A New Perspective on Money

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To say that a state cannot pursue its aims,
because there is no money, is like saying
that an engineer cannot build roads,
because there are no kilometers.

EZRA POUND, American poet and economic historian

It’s quite common to think of money in terms of its material representations. Although money has taken many forms throughout human history, from shells to zappozats (decorated axes),1 it is not a material object but, rather, is merely represented as such. For instance, if you are stranded alone on a desert island, a thing, say a knife, is still useful as a knife, but a million dollars in whatever form it takes—cash, coins, or debit and credit cards—ceases to be money. It becomes merely paper, metal, or plastic and no longer functions as currency. For any thing to act as money, it requires a community to agree that the particular object is acceptable in an exchange.

That is why our working definition of money is: an agreement, within a community, to use something standardized as a medium of exchange.2

 

5 The Future Has Arrived But Isn’t Distributed Evenly . . . Yet!

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There is not the slightest indication that we will ever
be able to harness atomic energy.

ALBERT EINSTEIN, 1932
(13 years before the atomic bomb
was dropped on Hiroshima)

A quiet revolution is happening that has, for the most part, gone under-reported. The number of contemporary cooperative currencies operating in the Western world has grown exponentially from two in 1984 to more than 4,000 mature systems today. They are more prominently in use in Latin America, Australia, Japan, and continental Europe than in the United States, although the current economic downturn is resulting in a significant increase in the United States and globally. The oldest written record of an operational cooperative system still in use today is found in Bali, Indonesia. The island-wide system was first documented in 826 AD, when writing was first introduced in that area, and it’s believed the system was thriving for centuries prior to that date.

A diverse monetary ecology is what is needed to stabilize the global economy, but the flowering of cooperative systems and other monetary innovations has tended to be in small pockets, driven by struggling local economies. As futurist John Naisbitt noted, “Change occurs when there is a confluence of both changing values and economic necessity, not before.”1 The cooperative currency movement is a major boon to the million-plus nongovernmental organizations and local communities around the world that Paul Hawken identifies as the most powerful instruments for change in his book Blessed Unrest. He observes, “After spending years researching this phenomenon. … No one knows its scope, and how it functions is more mysterious than meets the eye. What does meet the eye is compelling: coherent, organic, self-organized congregations involving tens of millions of people dedicated to change.”2

 

6 Strategies for Banking

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Of all the many ways of organizing banking,
the worst is the one we have today. Change is,
I believe, inevitable. The question is only
whether we can think our way through to a
better outcome before the next generation is
damaged by a future and bigger crisis.
1

SIR MERVYN KING, Governor of the Bank of England

Ordinary people all over the world have been rethinking money in an effort to resolve their pressing cash problems. Rethinking money leads us to reconsider the entire banking sector as the source of money and loans. This has generated some interesting and provocative innovations, some by clear intent, others by happenstance.

Dissatisfaction with the banking sector is at an all-time high. The Facebook movement Move Your Money materialized when Bank of America announced plans to increase its bank fees. Within 90 days, 5.6 million U.S. adults changed banks. “Of those switchers, 610,000 U.S. adults (or 11 percent of the 5.6 million) cited Bank Transfer Day as their reason and actually moved their accounts from a large to a small institution.”2

 

7 Strategies for Business and Entrepreneurs

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Our Age of Anxiety is, in great part, the result of trying
to do today’s jobs with yesterday’s tools.

MARSHALL MCLUHAN,
Canadian philosopher of
communication theory

In response to one U.S. governor’s braggadocio about massive job creation in his state during the nation’s continued employment slump, some wag responded, “Yes, I know all about his job creation; I’ve got three of those jobs.”

“There’s been great progress made since the end of World War II to create a broad base of high-paying jobs, although the bulk of those positions were in unionized manufacturing companies, nearly all of which have cut back, shut down or outsourced. High-wage jobs left urban manufacturing districts to be replaced by low-wage service jobs or occupational deserts.”1

If this prospect isn’t tough enough, Silicon Valley entrepreneur Martin Ford writes about how automation eventually will eliminate most jobs.2 Jeremy Rifkin makes a similar case in his insightful book, The End of Work. MIT economist David Autor predicts that automation will eliminate middle-class jobs, and shows that the trend of demand for mainly high-and low-wage extremes will continue for the foreseeable future.

 

8 Strategies for Governments

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Money is the crowbar of power.

FRIEDRICH NIETZSCHE,
19th-century German philosopher

Trash was a nightmare problem in Curitiba, the capital of the southeastern state of Paraná, Brazil. There was a large slum population dwelling in shantytowns, makeshift, improvised housing constructed from corrugated steel, cinder blocks, and whatever else was available.

“Back in 1989, the primary problem we faced was garbage in the favelas. We needed to avoid pollution in our streams and, of course, to protect the kids who were playing in what were very contaminated areas. The problem was that we had to have the garbage collected with trucks, but they couldn’t get into the favelas because the pathways were too narrow and the terrain was very hilly,” recalls Jaime Lerner, who was mayor at the time.

The issue was further compounded because the city simply did not have the funds to deal with the crisis. Raising the necessary money through conventional methods, such as requesting funding from the federal government, was not an option. Something else had to be done.

 

9 Strategies for NGOs

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Money does not have to be legal tender.
It can be what one might call “common tender,”
i.e. commonly accepted in payment of
debt without coercion through legal means.

RICHARD TIMBERLAKE, former Professor Emeritus of
Economics at the University of Georgia1

Within the space of less than 10 years, the small rural village of Blaengarw, South Wales, with high unemployment and a bleak future, totally transformed itself. David Pugh, a local TimeBanking manager who oversees the currency explains, “On the Welsh index of material deprivation, we were 128th on the scale of 1,800 communities with one being the worst in the country. We’ve now progressed to 735th in just a decade. So we’ve climbed more than 600 places. These statistics are based on such things as antisocial behavior, crime, and of course, unemployment—in fact, there is a whole array of indices. We’ve really come a very long way.”2

The residents of Blaengarw worked their way out of the all-too-common story of social blight and decay by making an assessment of their unused resources and their unmet needs and, in this case, linking these with a time-banking currency coordinated by a regional and local NGO.

 

10 Truth and Consequences: Lessons Learned

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In dreams begin responsibility. 1

WILLIAM BUTLER YEATS,
20th-century Irish poet and playwright

It was hard to contain the emotions that were surprisingly welling up inside while I was standing on the bridge in the small Tyrolean village of Wörgl. The bridge was so different from how it had been described in various books and articles. It seemed in real life more diminutive, plainer, and definitely shorter, yet its impact was unexpectedly overwhelming. Back in the dreary days of the 1930s Great Depression, this nondescript yet iconic overpass symbolized the dreams of full employment and a decent standard of living for all. Scholars, government officials, and thousands of others traveled to this Austrian community to personally witness and learn from the miracle of Wörgl. Today, the town has little significance, noted mostly for its railway junction connecting the line from Innsbruck to Munich with the inner-Austrian line to Salzburg. A small museum run by volunteers bears homage to Wörgl’s short-lived chapter in monetary history.

 

11 Governance and We, the Citizens: An Ancient Future?

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The economy of the future is based on
relationships rather than possessions.

JOHN PERRY BARLOW, former lyricist for
the Grateful Dead and founding member of
the Electronic Frontier Foundation

Bali is a small island in the Indonesian archipelago that fervently embraces and preserves its Hindu culture, though it is situated in a huge, mostly Islamic nation. What makes Bali compelling is the longevity of its complex cooperative currency system, which is inextricably interwoven with its cultivation of rice, allocation of vital water rights, celebrations of festivals, and hyperdemocratic system of governance.

From this ancient civilization, there are gripping and undeniable guidelines and strategies that may have some useful lessons relevant for our collective future.

The community at large is organized into three main networks:

Banjar: the most important civic organization, which is in charge of the social aspects of the community

Pemaksan: a group responsible for the coordination of religious rituals

 

12 Our Available Future: The Cooperative Society

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What if you slept, and what if in your
sleep you dreamed, and what if in your
dreams you went to heaven and there
you plucked a strange and beautiful flower,
and what if when you awoke you had
the flower in your hand? Ah, what then?

SAMUEL TAYLOR COLERIDGE,
19th-century English poet and philosopher

Since the dawning of the Industrial Age and the instigation of the modern monetary system, no truly cooperative society has been able to operate, let alone thrive on a large scale.

The five scenarios that follow portray how a future society might look once it has transitioned from today’s highly competitive structure to one based on greater cooperation and mutual support, within the span of one generation. The discrepancies between where we stand now and our possible future are enormous. The driver behind each of these transformations is a cooperative currency innovation. Such transformations are possible not because of the amount of money that is circulating but rather from the type of money that is in use.

 

13 Rethinking Money: From Scarcity to Sustainable Abundance

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The debate on the future of money is not
about inflation or deflation,
fixed or flexible exchange rates,
gold or paper standards,
but about the kind of society in which
money is to operate.1

GEORG SIMMEL, German philosopher and sociologist

Scarcity, particularly our warped view of monetary scarcity, which we inherited, can best be summed up in the following allegorical tale.

A fisherman encounters a philosopher and happily informs her about his discovery: that all life in the sea is at least two inches long. Furthermore, the fishmonger has repeatedly made several market tests that prove his position unequivocally. Consequently, nobody wants fish smaller than two inches because they have never seen one. The philosopher smiles kindly and advises him gently, “There is a simple explanation for your findings: Your net has a two-inch mesh. If you were to use a net with finer-gauged netting, or employ another method, you would find that the ocean is a lot richer than you think. In fact, it’s teeming with life. There are thousands of smaller species of fish in the sea, and oysters, clams, and snails that your nets will never catch. What’s more, your research is skewed, since anyone you’ve ever surveyed could only buy seafood that’s greater than two inches long, or wide, for that matter. Your fishing nets, dear man, predetermine your perception of reality.”2

 

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