Tag Archives: credit clearing

Money, debt and the end of the growth imperative

My latest article, Money, debt and the end of the growth imperative, was published today (March 3) in the online journal, Transformation. Read it here. –t.h.g.

How does mutual credit clearing enable moneyless exchange?

Here’s and excellent, short and sweet description of how mutual credit clearing works to provide interest-free liquidity. From Bartercard New Zealand…

Competing currencies essential to freedom

This appeal by Congressman Ron Paul is perhaps the most important proposal by an American politician in the last 100 years.
I’m glad to know that Congressman Paul is not limiting his proposal to gold and silver currencies.

The most liberating means of payment is “mutual credit clearing” through independent non-bank associations of businesses and individuals.

Of course, the credit in such accounts needs to be denominated in some objective units, which could be specified weights of gold or silver, but better still, would be an “index unit” based on a “market basket” of basic commodities that are widely and freely traded.

My four books on the subject, and my websites, provide coverage of pertinent concepts and history, and full details on my prescriptions for businesses, communities, and governments.–t.h.g. 

Legalize Competing Currencies

I recently held a hearing in my congressional subcommittee on the subject of competing currencies.  This is an issue of enormous importance, but unfortunately few Americans understand how the Federal Reserve and Treasury Department impose a strict monopoly on money in America.

This monopoly is maintained using federal counterfeiting laws, which is a bit rich.  If any organization is guilty of counterfeiting dollars, it is our own Treasury.  But those who dare to challenge federal legal tender laws by circulating competing currencies– at least physical currencies– risk going to prison.

Like all government created monopolies, the federal monopoly on money results in substandard product in the form of our ever-depreciating dollars.

Yet governments have always sought to monopolize the issuance of money, either directly or through the creation of central banks. The expanding role of the Federal Reserve in the 20th century enabled our federal government to grow wildly larger than would have been possible otherwise.  Our Fed, like all central banks, encourages deficits by effectively monetizing Treasury debt.  But the price we pay is the terrible and ongoing debasement of our money.

Allowing individuals and business to use alternate currencies, especially currencies backed by gold and silver, would expose the whole rotten system because the marketplace would prefer such alternate currencies unless and until the Fed suddenly imposed radical discipline on its dollar inflation.

Sadly, Americans are far less free than many others around the world when it comes to protecting themselves against the rapidly depreciating US dollar.  Mexican workers can set up accounts denominated in ounces of silver and take tax-free delivery of that silver whenever they want.  In Singapore and other Asian countries, individuals can set up bank accounts denominated in gold and silver.  Debit cards can be linked to gold and silver accounts so that customers can use gold and silver to make point of sale transactions, a service which is only available to non-Americans.

The obvious solution is to legalize monetary freedom and allow the circulation of parallel and competing currencies.  There is no reason why Americans should not be able to transact, save, and invest using the currency of their choosing.  They should be free to use gold, silver, or other currencies with no legal restrictions or punitive taxation standing in the way.  Restoring the monetary system envisioned by the Constitution is the only way to ensure the economic security of the American people.

After all, if our monetary system is fundamentally sound– and the Federal Reserve indeed stabilizes the dollar as its apologists claim–then why fear competition?  Why do we accept that centralized, monopoly control over our money is compatible with a supposedly free-market economy?  In a free market, the government’s fiat dollar should compete with alternate currencies for the benefit of American consumers, savers, and investors.

As Austrian economist Ludwig von Mises explained, sound money is an instrument that protects our civil liberties against despotic government. Our current monetary system is indeed despotic, and the surest way to correct things simply is to legalize competing currencies.

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Cyclos, worth another look??

I Just received a message from one of my advisee groups on the west coast. They are seriously considering Cyclos as the platform for their local exchange system.

Here is what they say:

Cyclos offers a complete Open-Source on-line banking system with additional modules such as e-commerce and communication tools. Check this out at http://project.cyclos.org/

The objective of the project is to develop open source complementary currency software that is easy to use and maintain, flexible, secure, and highly customizable. The Cyclos structure is entirely dynamic.

This means that it is possible to ‘build’ a monetary system from scratch. Organizations that want a standard system can use the default database that comes with basic configurations and can be easily enhanced. Cyclos is used for mutual credit systems like LETS, Barter systems, administration of Micro credits or remittances, Time banks and backed currency systems such as a C3 (consumer and commerce circuit). Cyclos just started to be used as a back-end for mobile banking services in Africa, and various Universities are studying the possibility to use Cyclos as a campus payment system.

It seems that the newest version of Cyclos may have the functionality, ease of use, and customizability that we have been looking for.

I’d be interested to see or hear expert reviews and people’s actual experience with using the Cyclos platform. Please send them as a comment to this post.

Coming soon: a world without money and banks.

Who in their right mind would be so bold as to predict the end of money and banking as we’ve known it (besides yours truly, that is)?

Well, how about the Governor of the Bank of England?

“There is no reason products and services could not be swapped directly by consumers and producers through a system of direct exchange – essentially a massive barter economy. All it requires is some commonly used unit of account and adequate computing power to make sure all transactions could be settled immediately. People would pay each other electronically, without the payment being routed through anything that we would currently recognize as a bank. Central banks in their present form would no longer exist – nor would money.”

– Mervyn King – Governor of the Bank of England

You see, even the insiders can see the writing on the wall.

Another observer who has been in the thick of cashless trading developments for decades is Bob Meyer, publisher and editor of Barter News. A while back, Bob wrote an article that gives some pertinent history of the “barter” industry and sketches his vision of how “Simple One-to-One Exchanges Will Give Way to Organized, Computerized, Multi-Lateral Barter.” I strongly recommend that people read it: THE ORIGINAL MEANING OF TRADE MEETS THE FUTURE IN BARTER

“Real Money” features Malaysia confernce presentation

Real Money: Money and Payment Systems from an Islamic Perspective is a new anthology from the IIUM Press, Malaysia. Edited by Professor Ahamed Kameel Mydin Meera of the International Islamic University Malaysia (IIUM), this book contains contributions from several authors including yours truly. My chapter titled, The End of Money and the Liberation of Exchange, is essentially a transcript of the presentation I gave at the 2007 Gold Dinar Conference in Kuala Lumpur.

In it, I outlined the basic framework for a global credit clearing network that utilizes no national currencies as payment media and no political currency unit as a value measure. As I did in my first book, Money and Debt: A Solution to the Global Crisis, I argued that the various functions that money is supposed to serve—medium of exchange, measure of value, and store of value—can and must be segregated, and described a global payment system based on direct credit clearing, using an objective, concretely defined measure of value, like the gold Dinar, silver dirham, or some composite commodity standard.

I outlined how this Shari’ah compliant approach could provide inflation-free accounting, achieve full employment, reduce the need for foreign exchange reserves, eliminate exchange rate risks, and provide more equitable trading relations among all the peoples of the world.

My presentation can be viewed at http://video.google.com/googleplayer.swf?docId=-1399011433067824706&hl=en

The book is available from IIUM Press, Kuala Lumpur, Malaysia. Email: rescentre@iium.edu.my. Phone: +6603-6196-4862

Demurrage: is it a good idea for a local currency or exchange system?

I’ve added a new monograph on the subject of demurrage to this site. You’ll find it in the sidebar to the right under Resources: Monographs: Demurrage: is it a good idea for a local currency or exchange system?