End of Money and the Future of Civilization

Book: Thomas Greco. The End of Money and the Future of Civilization

Description

From the publisher:

"The End of Money and the Future of Civilization considers the money problem within the broad historical and political context that has made the control of money and banking the primary mechanism for concentrating power and wealth and the nullification of democratic governance.

It provides the necessary understanding for entrepreneurs, activists, and civic leaders to implement approaches toward monetary liberation, approaches that empower communities to restore their environments and democratic institutions, and begin to build economies that are sustainable, equitable, and insulated from the financial crises that plague the dominant systems of money, banking and finance.

It provides specific design proposals and exchange-system architectures for local, regional, national, and global financial systems, and offers strategies for their implementation prescribing actions that grassroots organizations, businesses, and governments will need to take to achieve success."

By the author:

"The End of Money and the Future of Civilization is my fourth book in which I address what I refer to as “the money problem.” My intensive focus on the particular realm of money, banking and finance, which spans a period of more than three decades, has been motivated by an early realization of the crucial role it plays in determining the world order and the course of human events.

The simple facts are that money and banking have been politicized and structured to achieve the centralization of power and the concentration of wealth, to circumvent democratic processes, and to manipulate the populace. The substance of modern money is simply credit and we have allowed our credit to be privatized and monopolized. Money makes the material world go round, and whoever controls money/credit are in a position to control everything else—our economy, our politics, our technologies, our entertainment and news media, and our culture.

I strongly believe that if we are to achieve peace, justice, personal freedom, environmental regeneration, a sustainable economy, and a dignified life for all, it is essential that we reclaim “the credit commons” from the money monopoly. That is the key to empowerment of communities and the way toward government of the people, by the people and for the people.

My choice of title for this book is not at all based on wishful thinking. It expresses what is actually happening NOW. The recent emergence of commercial “barter” exchanges, mutual credit clearing associations, private voucher systems and community currencies represent the early stages of a process of power devolution that will inevitably lead to the end of POLITICAL moneyand the emergence of economic democracy. But the end of money does not refer ONLY to the end of political money. It refers also to the evolutionary process by which the essential nature of money has changed over the past two or three centuries—from commodity money, to symbolic (redeemable paper) money, to credit money. Of course, the reciprocal exchange process will continue, but in a different way from before, a way that does not require the use of conventional money or banks. The ultimate stage in the evolution of money and the exchange process is the offset of purchases against sales, i.e., direct credit clearing amongst buyers and sellers, and the widespread application of this process does indeed mean, in a very real sense, the end of money.

The word evolution may connote passivity, but in the realm of human-contrived systems, it involves the application of creativity, intelligence, and will. This particular evolution depends upon responsible ACTION on our part to assert our own credit power by organizing and promoting the rapid deployment of distributed (non-monopoly) credit clearing circles in ways that maintain local control within globally useful networks."

Interview

See also: Thomas Greco on the End of Money

Interviewer is Michel Bauwens.

Thomas Greco:

1. There seems to be a fast-growing monetary reform and transformation but there are also a confusing number of different approaches being proposed. How can one find one's way in these various proposals and how do you specifically position yourself in this field.

TG: That is precisely the kind of question my book answers in detail. First of all, one needs to clearly distinguish between two basic approaches to solving what I broadly term “the money problem,” then secondly to consider the architecture of the various exchange systems and currencies that have been tried or proposed.

The dysfunctional nature of the dominant global system of money and banking has for a long time been apparent to anyone who has cared to look at it. Now, in light of the present financial meltdown, it has become painfully obvious to virtually everyone.

Monetary reformers have always been around. They have been warning that the system needs to be fixed, and some of them have even had some good ideas about how to fix it, but their voices have mostly been ignored or drowned out by the vested interests who have promoted an orthodox doctrine that works to their advantage. During periods of severe financial or economic distress, such as the present one, some reformers are able to get space in the media, so today we are hearing calls for a variety of political solutions—abolition of the Fed, direct issuance of money by the government (the “greenback” solution), a return to the gold standard, tighter regulation of banks and financial institutions, etc.

Some of these might have a short-run salutary effect, if they could be achieved. But in my view, statist and political approaches are at best futile and at worst inclined to take us further in the wrong direction toward more centralized control and still greater concentration of wealth. They are futile in that the political process in most countries of the world has long since been removed beyond our grasp. If the people are to regain political control, we will need to first assert our economic power, especially our “money power” by organizing ourselves to mediate the exchange process apart from the banking cartel and without the use of politicized national currencies. Putting the money monopoly under new management will not solve the fundamental dysfunctions that are inherent in it. The “greenback solution," for instance, does nothing to eliminate deficit spending and inflation, which are enabled by legal tender laws. So long as political currencies, however issued, are legally forced to circulate at face value, the abusive issuance of money, the debasement of national currencies, and the centralization of power will continue, and the empowerment of communities, relocalization, and the shift to a steady-state economy will be thwarted.

People need to disengage from the systems and structures that disempower communities and enable a small elite to use the present centralized control mechanisms to their own advantage and purpose. Primary among these is the global monetary and financial regime (the structures of money, banking and finance). I favor an approach that is based on voluntary, free market and community-based initiatives which enable people to transcend the money monopoly and the “war machine.” Socially responsible businesses and social entrepreneurs have a crucial role to play in organizing these parallel systems that can shift enough power to achieve greater measures of independence and self-determination and bring enormous benefits across the board—social, political, economic, environmental, and cultural.

With regard to the various alternative exchange systems and community currencies that have been tried, almost all have been designed to solve secondary problems, or have been lacking in scalability. I devote several entire chapters to exploring those deficiencies as well as highlighting the specific characteristics necessary in a truly empowering exchange system. The primary objective of an exchange alternative should be to utilize the credit of local producers to mediate the exchange of goods and services locally. The bottom line is that non-bank exchange system credits and community currencies must be issued in ways that monetize the value inherent in goods and services being exchanged. This means they must be “spent” into circulation, not “sold” into circulation.

2. Your book's title suggests the end of money, yet you also advocate a 'credit commons', which most people would associate with lending money to each other. So, could you specify: do you advocate the abolition of money, or not, and if a credit commons is not about lending money, what is it?

TG: My choice of title for this book is not at all based on wishful thinking. It expresses what is actually happening NOW. The recent emergence of commercial “barter” exchanges, mutual credit clearing associations, private voucher systems and community currencies represent the early stages of a process of power devolution that will inevitably lead to the end of POLITICAL money. But the end of money does not refer ONLY to the end of political money. It refers also to the evolutionary process by which the essential nature of money has changed over the past two or three centuries—from commodity money, to symbolic (redeemable paper) money, to credit money. Of course, the reciprocal exchange process will continue, but in a different way from before, a way that does not require the use of conventional money or banks. The ultimate stage in the evolution of money and the exchange process is the offset of purchases against sales, i.e., direct credit clearing amongst buyers and sellers, and the widespread application of this process does indeed mean, in a very real sense, the end of money.

Reciprocal exchange and finance are necessary aspects of any developed economy. As I explained above, money is nothing but credit. It is our common or collective credit that supports any generally used payment medium, including political money. We have allowed the credit commons to be privatized. What I advocate is the reclamation of the credit commons from the money and banking monopoly. We have seen how that can be, and is being done within cashless trading systems like LETS and the commercial “barter” exchanges that provide credit clearing services. Of the existing examples, the Swiss WIR cooperative trading circle (now called the WIR Bank) has been the most impressive for its longstanding success. These systems involve the allocation of credit, but they do not require the use of money as we have known it. However, the collective credit balances in the accounts of such a system can be thought of as a kind of internal currency. But it is one that is not “loaned” into existence, but comes into being in the course of trade among the members. If properly organized, it provides credit on a more honest, transparent, and democratic basis.

3. How do we get from the current financial system, via all the current experiments with local money, to a fundamentally different system .Do you have any concrete proposals for a transition?

Yes, the book contains multiple proposals and prescriptions addressed to various entities including individuals, businesses, social entrepreneurs, and various levels of government. These cover both system designs and implementation strategies. Perhaps the most promising and easily attainable is the bioregional development plan that I outline in Chapter Sixteen.

This is a multi-stage plan involving diverse segments of the community. It is designed to accomplish the following:

1. Institute measures that promote import substitution

2. Provide an alternative payment medium, independent of any political currency and banking establishment

3. Issue a supplemental regional currency

4. Develop basic support structures that strengthen the local economy and enhance the community’s quality of life

5. Develop an independent value standard and unit of account

The keystone of this plan is the organization of a mutual credit clearing association in the second stage.

I also describe the emergent web based exchange systems and slight modifications that are required to make them fully functional as non-governmental exchange and finance alternatives.

4. How do you reply to the traditional critique of the left, which says that money is just an external phenomena of our economic system of capitalism, and that changing just the money won't effect any fundamental change

If that is, indeed the “traditional critique” then I must conclude that the “left” is both lacking in imagination and does not understand the real basis of power. What is capitalism, and what is the basis of power within a capitalist system? As the saying goes, “the devil is in the details.” Why get bogged down in ideological debates when there is an obvious “elephant in the living room?”

To cut through all of the obfuscatory rhetoric, the main problems with the political money and banking system (and the relevant principles that need to be applied) are as follows:

1. The issuance of money on improper bases, mainly government debt, real estate, and assets of questionable value.

Principle: Money should be issued on the basis of goods and services already in the market or shortly to arrive there. All other needs (capital formation and consumer spending) should be financed out of savings.

2. Legal tender laws that force acceptance at par of debased political currencies. Principle: Legal tender laws should be abolished. Only the issuer of a currency should be required to accept it at par. In the absence of legal tender, debased currencies will either be refused or pass at a discount in the market.

3. The charging of interest on credit money that is created as “loans.”

Principle: Money should be created interest free as a generalization of trade credit that facilitates the exchange of goods and services.

If the system cannot be reformed, then new systems need to be created that apply the correct principles.

5. Your book seems very inspired by U.S. history and developments, and also seems to share a strong libertarian critique of the state, while audiences in Europe would be a lot more sympathetic if not nostalgic for the welfare state and its social protections. How international and global do you think your prescriptions are? What kind of reactions have you gotten in other continents that the U .S., say Europe and Asia?

TG: The prescriptions that I offer in my book are both comprehensive and global. The story of power in modern history has been pretty much the same throughout the world. The central banking, political money system has been established in virtually every country and in fact originated in Europe. What most people have failed to recognize is that, regardless of the nominal form of their government, their political power has been neutralized and exhausted by the privatization and misallocation of credit money.

Up to now, Europeans have managed better than Americans to preserve their hard won state benefits, but there too, these benefits are steadily being eroded and that trend will surely continue. My argument is not with government-sponsored social programs, per se, and certainly not with “social protections.” There is a legitimate role for governments but people seem confused about what that role should be or at what level the various government functions should be carried out. But it would be a digression for me to speak about general political philosophy. My objections are to the centralized control of credit money, whether that be by the state directly or by a nominally independent central bank. It is undemocratic, corrupting, and fraudulent. It misallocates credit, making it both scarce and expensive for the productive private sector while enabling central governments to circumvent, by deficit spending, the natural limits imposed by its above-board revenue streams.

All government programs, including social programs, need to be funded by legitimate state revenues, not by the underhanded means of monetary debasement. Centralized control of credit money and the imposition of legal tender laws enables the hidden tax called inflation.

Further, that system creates a small privileged class that is able to dominate economics, politics, and virtually everything else in the material realm. If we desire to have a peaceful world that can provide a dignified life for all, power must devolve to the people and their communities. That cannot happen so long as we allow the money power to be privatized and undemocratically allocated. Fortunately, we the people have in our hands the means of our own liberation. It is the power to allocate our credit directly without the use of banks or political forms of money. How to effectively assert that power is the main theme of my book." (via email, May 2009)

Contents

1 My Purpose and My Journey

My Personal Journey • Seeds of Disillusionment • Awakening • In the Wake of Inflation • E.C. Riegel • Why Yet Another Book?

2 Mega-Crisis and Metamorphosis — Can Civilization Be Saved?

Prospects and Prognostication • Exponential Growth • Limits to Growth • Paradigm Shift • Metamorphosis • The Egg, the Caterpillar, and the Butterfly • Get With the Program

3 The Contest for Rulership — Two Opposing Philosophies

Elitist or Egalitarian? • The Contest in American History: Monarchy or Republic? • Power by Other Means

4 Central Banking and the Rise of the Money Power

Central Banking, an Unholy Alliance • The Bank of England • Central Banking in the United States • The First Bank of the United States • Andrew Jackson and the “Bank War” • The Free Banking Era • The Federal Reserve • Central Banking Spreads around the World

5 The New World Order

The Power Behind the Central Banks • A Merging of Interests • Wars, Internal and External • Money Power, the Key Element in the New World Order • Erosion of National Sovereignty

6 Usury and the Engine of Destruction

Monetary Stringency, Past and Present • Increasing Instability • The Magic of Compound Interest • What’s Wrong with the Global System of Money and Banking? • How Debt-Money is Dysfunctional • Three Aspects of Money Dysfunction • Moral Arguments, Laws, and Practical Solutions • Keys to Transcendence • Exchange and Finance—Two Distinct Credit Functions

7 The Nature and Cause of Inflation

What Is Inflation? • Who Has the Power to Inflate? • Improper Basis of Issue by Banks Is Inflationary • Government Deficits and Inflation • The German Hyperinflation—A Classic Case • How the Inflation Was Ended • Constraints Upon Debasement of the Money • Responding to Inflation

8 The Separation of Money and State

The Separation of Church and State—A Comparison • The Disestablishment of Monetary “Religion” • Two Meanings of “Dollar” • Delinking from the Dollar as a Payment Medium • Delinking from the Dollar as a Measure of Value • Stable Value Reckoning • Toward Freedom of Exchange

9 The Evolution of Money — From Commodity Money to Credit Money

What We Don’t Know Is Hurting Us • Kinds of Economic Interaction • “The Ladder of Economic Civilization” • The First Evolutionary Step—Barter to Commodity Money • Commodity Money • Symbolic Money • The Second Evolutionary Step—From Commodity Money to Credit Money • Two Distinct Kinds of Money—Fractional Reserve Banking • Redeemability Abandoned • Checks and Checkable Deposits Displace the Use of Banknotes • Gold Versus Credit Money—A Comparison • How Credit Money Malfunctions

10 The Third Evolutionary Stage — The Emergence of Credit Clearing

Banks and the Credit Clearing Process • A Confusion of Language • Particle or Wave? Thing or Relationship? • Clearing Through Banks Versus Mutual Credit Clearing • Direct Credit Clearing Makes Conventional Money and Banking Obsolete

11 Solving the Money Problem

The Basis of Monetary Dysfunction • Reform or Transcendence? • Emerging Exchange Alternatives • Separating the Functions of Money • Back to Commodity Money? • The Unit of Account Versus the Unit of Currency • The Measurement of Value • Proper Relationship Between Commodities (Gold/Silver) and Credit • Confusion Caused by Legal Tender Laws

12 Credit Clearing, the “UnMoney”

What Is Credit Clearing? • A Simple Example of Clearing among Banks • Settlement of Accounts • Mutual Credit Clearing Systems as Clearing Houses • Direct Credit Clearing — A Simple Illustration Using Four Accounts and Ten Transactions • Balance Limits and Settlement • Providing Surety of Contract • An Insurance Fund

13 The State of the Alternative Exchange Movement

Two Currents of Alternative Exchange • The Tucson Experience • Why Exchange Alternatives Fail to Thrive • Failure of Reciprocity • Inadequate Scale and Scope of Operation

14 How Complementary Currencies Succeed or Fail

Architecture of the Currency Itself • Principle 1: Who Is Qualified to Issue Currency? • Principle 2: On What Basis Should Currency Be Issued? • Principle 3: How Much Currency May Be Issued By Each Issuer? • Implementation Strategies • The Situational Context • WIR • Social Money in Argentina

15 Commercial Trade Exchanges—Their Present Limitations and Potential Future

Limiting Factors • Limited Scale and Scope • The Value Proposition • Operations and Agreements • Proposed Remedies • The Real Deal—Credit Clearing Services • Tapping the Vast Potential Market • What About Taxes? • An Eventual Cashless Trading Network

16 A Regional Economic Development Plan Based on Credit Clearing

Approaches to Community Economic Development • Stage I: Mapping the Territory and Import Substitution • Stage II: Mutual Credit Clearing Provides an Alternative Means of Payment • Sage III: The Credit of “Trusted Issuers” Provides an Alternative Currency for Regional Circulation • Stage IV: Support Structures for Localization—Saving, Investment, Finance, and Education • Stage V and Beyond: Transition to an Objective Measure of Value and Accounting Unit

17 The Next Big Thing in Business: A Complete Web-Based Trading Platform

The Convenience of Cards • Improving the Exchange Process—Challenge and Opportunity • Significant Trends and “Disruptive Technologies” • Strengths and Vulnerabilities of Political Money and Conventional Banking • From Disruptive to Sustaining—Moving Upmarket • The Emergence of a Complete Web-Based Trading Platform • Essential Components of the Web-Based Trading Platform • Completing the Web-Based Trading Platform

18 Organizational Forms and Structures for Local Self-Determination and Complementary Exchange

Toward Economic Independence • The “Banjar” and the Balinese Governance Structure • The Mondragon Cooperatives • Ways of Organizing Credit Clearing Exchanges • Corporations • Limited Liability Companies and Limited Liability Partnerships • Mutual Companies • Scale of Organization

19 The Role of Governments in Establishing Economic and Financial Stability

What National Governments Should Do • Objectives • Rationale • Legislative Proposals in Brief • The Role of State, Provincial, and Local Governments • An Early Example of a Local Currency

20 Exchange, Finance, and the Store of Value

The Store of Value • Saving and Investment • Liberating Saving and Investment • Debt Claims Versus Equity Claims • A Shared Equity Mortgage • Savings and Investment within Complementary Exchange Systems