I was the featured guest on Ellen Brown’s podcast of December 30, 2021. I consider this to be one of my best interviews in which I covered a wide range of the most important questions related to rebuilding our system of money and finance. My interview is comprised of the first 38 minutes of the program.
Here is a transcript
Ellen Brown
It’s my pleasure to be speaking with Thomas Greco, a writer and lecturer who is regarded as one of the leading experts in monetary theory and history, Credit Clearing systems and complementary currencies. Tom has written many articles and four books, the most recent of which is the end of money and the future of civilization is also a former professor of business and has traveled all over the world lecturing, teaching and advising. So, Tom, it’s great to be talking to you again.
Thomas Greco
Good to be back.
Ellen Brown
Thanks. So I heard you recently on a quite good podcast that I thought really, or sorry, PowerPoint that laid out quite well, what our current issues are, and some very interesting possible solutions. So I’ll start out right the same way the PowerPoint started out. What are the underlying causes of economic depressions and inflation? What’s the problem we have right now with our current monetary system?
Thomas Greco
Okay, well, the presentation that you refer to, I gave last month for the University of Hertfordshire in the United Kingdom. And I titled that slideshow, The End of Money, Interest and Debt, which is something that is hard for people to conceive, because they’ve been so much a part of our experience for the last several hundred years. So basically, what I tried to outline there was the basic problem that we’re facing, which is an interest based debt money system that is causing a growth imperatives. Now, economists, they don’t like to talk about re-dividing up the pie in a more equitable way. All they want to talk about is if we grow the economy, we don’t have to do any redistribution. Everybody will be better off if the economy keeps growing. But of course, there are limits to growth in anything physical, or material. Nothing can keep growing forever; eventually you reach some kind of limit. And we see examples in nature. All kinds of examples, like populations of a particular species will grow somewhat to point and then you’ll have a catastrophic collapse when they outrun their food supply, or some other environmental factor comes into play. So basically, we have this growth imperative, which we need to transcend. And the basis for the growth imperative is the kind of money system that we’ve been under for the last 300 years at least. I trace it back to the founding of the Bank of England in 1694. Actually, central banking goes back earlier than that, but the central bank of the Bank of England was the model for central banks that have proliferated around the world to this point. Basically, the problem was that the King, King William III was fighting a war against France and he was unable to raise taxes sufficiently to continue to fight the war. So William Patterson in his cohorts came to the king and said, if you let us found the Bank of England, and lend banknotes into circulation, at interest, we will make sure you get all the money you need to fight your war. So that’s the Faustian bargain that was set back then, and has been replicated in virtually every country around the world, from then to now. So we have this collusive arrangement between politics and finance, whereby the political power gets to spend beyond its tax revenues. And the financial power gets to control credit, and lend money into circulation, at interest. So actually, the only qualified issuers of money are producers of real value, because money should be a virtual representation of value that’s in the market, already available to be sold, or soon to arrive in the market and ready to be sold. But that’s not the kind of system we have and that’s the kind of system we need to create. So we have this debt imperative. When I tell people how money is created, they have a hard time accepting it because it’s so simple. As John Kenneth Galbraith, the noted economist of the 20th century said, “The way in which money is created is so simple that the mind is repelled.” And basically, the way money is created is when banks make loans at interest, they make two entries on their books. They take, for example, your signature on a mortgage note, which is an asset to their accounts. And they make a deposit to your account, which is a liability. So with two entries on their, on their ledger, they’ve created money, and they’ve created the basic principle of the loan. But as time goes on interest accrues on the loans. And of course, they didn’t create the interest. So there’s never enough money, the stock of money is never sufficient for everyone to repay what they owe to the banks. So that’s why we’ve seen this continue exponential expansion in debt in both the private sector and the public sector. And it’s just going astronomical, especially in the last decade or so. So what we have is this debt growth imperative, which forces the borrowers, that’s all the players in the economy that take loans from the banks, it forces them to compete with one another in the marketplace, to try to accumulate enough revenue to service both the principal and the interest that’s due on their debts. So this is all outlined in the in the PowerPoint that I showed during that presentation you mentioned, and it’s available for people to see and download on my website beyondmoney.net.
So we have this debt growth imperative, which leads to an economic growth imperative. And, of course, as I said, growth cannot continue forever, in any material sense of the word. So we had, back in the 1970s a publication called the Limits to Growth, which was basically sponsored by the Club of Rome. And some analysts, systems analysts, took a look at the situation. And they said that we cannot continue to increase economic output, that is material output indefinitely, we’re reaching the limits of the planet, to sustain that kind of expansion in economic output and consumption. So that doesn’t mean that we can’t continue to develop, but it will be qualitative development rather than quantitative development. So, when you think about the system and how it operates, every country has a central bank, which is basically the gatekeeper for the banking cartel and allocates the money creation power amongst the banks, amongst the members. But even that is no longer become operative. You may have continuing discussion about legal reserves that banks have to have. But reserves have long since ceased to be a limiting factor in the creation of bank money on the basis of debt. So the problem is more than economic, it’s more than financial; the problem becomes political and social, as well.
Ellen Brown
Can I stop you for just for one minute, on the limits to growth I just just saw a podcast on technology is growing so exponentially, that I mean, you can use the same amount of resources that we have and feed a lot more people and make a lot more things because of technological development. But the problem is we’ve got like that $30 trillion debt in the US that never gets paid off, only the interest gets paid off. So it is that it’s the debt that is unsustainable, but not actually the growth. I mean, if if you mean growth, by growth, you mean improve the ability to feed more people, house more people or you know, make more things or make better things, all that stuff. We still have a long way to go?
Thomas Greco
Well, I don’t believe that techno fixes are sufficient; we need to restructure the financial system, particularly money…
Ellen Brown
Well he wasn’t talking about a techno fix either, he was saying the problem is somewhere else, it’s in the financial system like you’re saying,
Thomas Greco
Yeah. So we need to restructure the whole financial system to get rid of this debt growth imperative, and get rid of this economic growth imperative. And we can do that by re-localizing control of credit. But I’ll get to that in a minute. I wanted to continue my train of thought about how finance, economics, politics, and social controls all converge in a despotic global system, which is the necessary ultimate outcome, if they try to keep this, the system going with this built in growth imperatives. And we see how that’s been developing recently, increasing challenges to cherished civil rights and basic tenets of our society that our democratic governments have been founded on. And that is going to continue. When you look back to the 20th century, we saw fascist governments rising in so many different places, Spain, Italy, Germany, and a few others, Japan. Why did that happen? Well, it happened because people wanted things to be better and they thought by centralized control, they could make them better. But that centralized control comes at the expense of basic human rights, basic freedoms that are enshrined in our Constitution and the Bill of Rights. And we thought we defeated fascism at the end of World War II but now we’re seeing it’s been slowly replicated in the so called democracies, the Western democracies, as they’ve converged and pulled together to basically dominate the rest of the world. So we’ve seen the United States, particularly, and NATO along with it, go into one country after another, illegally without any legal justification, to create regime change. You know, we’ve done it in Somalia, we did it in Iraq, we tried to do it in Afghanistan, we’ve been trying to do it in Syria, and we’ve been doing it in a different way in the Ukraine, through cooptation, and trying to install a puppet government there. So you know what we’re headed for is a global fascist tyranny.
Ellen Brown
And we actually use the World Bank and the IMF which capture them by debt, which is the same
Thomas Greco
Absolutely, that used to be the way to go is to get every country into the debt trap, which they could never get out of, and force them to produce basic commodities for export to the first world. And it’s just another way of imperial exploitation. It’s not direct political control, but its economic, financial control. So you know, we have all of this playing out over the last several decades. And it’s only going to get worse unless we put a stop to it. And we don’t have the political power at this point to go up against the super class, as I call it, which is calling the shots. What we need to do is to build new systems from the bottom up community by community, particularly starting with the exchange process. You know, money is said to serve three functions, medium of exchange, means of savings, and measure of value. But that’s not the case. Really, when you think about it, you don’t save by hoarding money; you save by investing it in some kind of long term asset like a bond or a note or certificate of deposit, savings deposit in a bank or an equity share in a corporation. So, the savings function really is performed in a different way. And as far as the measure of value, we used to use precious metals, gold or silver, as a measure of value. But we have long since stopped using commodities as value measures. And now the currencies measure themselves, which is really a non-functional approach to measuring value. The currency needs to be measured in terms of something objectives, either a commodity or as I’ve been suggesting, a market basket of commodities that we use to define the unit of account.
So, where are we at with that, over the last several decades, we’ve seen a number of initiatives to create local exchange systems. We had LETS systems, we’ve had local currencies at the community level, we’ve had a long history of private currencies, issued by producers a real value. We’ve had railway notes; I’ve proposed a solar dollar, based on the production and sale of renewable energy by electric utilities. We have commercial trade exchanges, which do a process called credit clearing, where producers come together into an organization, they associate together and agree to pay each other, not with dollars, or Euros or pounds or any other political currency, but pay each other by using the products that they produce and sell. So basically, in the circles, your sales pay for your purchases. So, now what we are trying to do is to perfect those approaches, and scale them up. And in my presentation that you mentioned, I did present a visionary piece called VITA, in which I described a system where we have small, relatively local Credit Clearing associations that are limited to maybe two or three hundred members that know each other and trust each other and are accustomed to doing business with one another on a regular basis. And we would build that system up in hierarchical fashion; this would be a natural system hierarchy, where local nodes would be associated into regional nodes. And the regional nodes would be associated into statewide nodes or continental nodes, and on up to the global level. So we might have four or five different layers in this natural system hierarchy, where we have credit that’s controlled at the local level, but is globally useful. So if you want to buy something from somebody in a foreign country, you could still do it using your local credit. And we work out the details of clearing behind the scenes,
Ellen Brown
How would you compare these local currencies to each other, you still have a standard back a basket of currencies, and that’s your measure or basket of goods. And that’s a measure of…
Thomas Greco
Ultimately, we need to define an independent standard of value. And as I said, my proposal has been to use a market basket of basic commodities that are commonly traded, and use that to define a unit of account. But, you know, in the interim, we can continue to use the particular political currency units as measures of value. And when we cross national borders, we can use the foreign exchange rates that are determined by the foreign exchange markets. That’s not ideal, but it’ll work in the short run.
Ellen Brown
Yeah, I’ve actually written about that too. And one advantage to the current digital system is the reviews like Amazon and, you know, product reviews, and merchant reviews like on eBay. So you get all these people that will, you know, if you’re not a trustworthy person, will quickly let everybody know. So, you know, it’s another means of testing, whether there’s somebody you want to trade with,
Thomas Greco
Yes, in these systems you would have social scores, you know, as we do now. If you go on amazon.com, as you mentioned, or Airbnb, the host rates guests and guests rate the hosts. And they do it simultaneously before these ratings are posted. So you know, the bad actors are quickly identified and weeded out, or they correct their behavior. So we’ll have that at the local level. And with the small local nodes, it’s easy to help people correct their bad behavior. Because if you’re a part of my local node, and we know each other and you do something that isn’t acceptable to the rest of the group, we’ll let you know about it pretty quickly and give you a chance to straighten up. So that’s, that’s more ideal than trying to punish someone after the fact.
Ellen Brown
I saw a proposal recently for a crypto currency, there, I mean, currently, most crypto currencies are not backed by anything, but this will be a crypto currency backed by futures. So a group of farmers could form a food currency, for example, that was redeemable in the sometime in the future for the crops, or the produce that was produced by the money that came in from this currency. So people would be willing to trade it because it’s like insurance against if we’re going to have food shortages or food prices are going to go way up, you can cash your food coins in for food at some future time.
Thomas Greco
Right. Yeah, let’s pursue that a little bit. You could organize a group of local farmers. And some of us are trying to do that here where I live in Tucson. You could organize a group of local farmers and have them jointly issue farm currency. And it could be crypto, but it doesn’t have to be. And they could spend that into circulation by buying the things that they need to produce their crops, they can perhaps pay their employees to some degree with their farm currency. And they of course, would accept that currency back and payment for the farm produce that they sell. So that’s the reciprocity circuit that I talk about. Currency is created when somebody spends it into circulation and another provider accepts it in payment. And it circulates any number of times in the community but eventually, when it comes back to the issuer, it gets redeemed for real value, in this case, farm produce, and it gets extinguished. So the currency has a beginning and an end, it’s created and it’s extinguished. It’s created by the act of spending and it’s extinguished in the act of redemption, not in some other currency, but in goods and services that have been promised.
Ellen Brown
Yeah, we’re particularly interested, because we’re all about public banking, local public banks. I know a state can’t issue its own currency under the Constitution, but a city could. So, but the issue is, what would the city be issuing against as what would be the collateral that you could cash in on with the currency. I know, California tried to pay with warrants in 2008. And they didn’t want to take them back in payment of taxes, because that would cut into their future tax rates. And that was…
Thomas Greco
That’s reneging, that’s reneging on a promise. I mean, you can’t put an IOU out there and then refuse to accept it back and redeem it.
Ellen Brown
Well, it would be better if we had some actual good or service to redeem it in because we want to get more currency out there. If you’re just taking people’s taxes ahead of time, then you’re not getting more currency into the system.
Thomas Greco
You made a point that it cuts into your conventional money revenue. Yeah, well, that’s true, but also by issuing it, you’ve cut down on your conventional money expenses. So it’s a wash. The basically a municipal government does provide services, some of those we voluntarily subscribe to and others we don’t. In any case, we have to pay for them. So if a municipal government wanted to issue its own currency, it could do so on the basis of its anticipated tax revenues. But it has to accept them back in payment for taxes and fees, which are its revenue streams.
Ellen Brown
And you’ve mentioned before what has gone wrong with community, community currencies have been tried for decades. But they don’t seem to get very far. And you discussed what they’ve done wrong.
Thomas Greco
Yeah, I made that point as well, why community currencies haven’t had more impact. You know, for the last several decades, we’ve had LETS systems springing up all over the world, particularly in the UK, Australia, New Zealand, a few in the US but they no longer exist. Some of them still continue in the UK and other places. And basically, they do Credit Clearing, which is the effective means of your goods that you sell paying for things that you buy. But with the case of LETS it was not business based, it was individuals who aren’t in regular businesses of selling things that are in general demand. For a LETS system to thrive it has to have a major participation of local business communities. As far as the community currencies, the local currencies like Bristol pounds, and Brixton pounds, and so many others in the UK, Salt Spring Island dollars and Toronto dollars in Canada, and the Berkshares in the United States, these are all sold for cash. So we’re not gaining any independence from the existing system by requiring the existing cash, political money, to be used to bring them into circulation. A proper currency needs to be SPENT into circulation when it pays for real goods and services, not when it’s accepted for cash payment. So then we have a supplemental medium of exchange that’s apart from the dysfunctional money and banking system that I described. So we need to do more of this, we need to SPEND local currencies into circulation and that can be done by an individual business. During the Great Depression this happened. One case that I mentioned in my book was Larson merchandised bonds, as they were called, one of many scrip issues that were issued during the Great Depression. Basically, the Larson Company, which had many retail outlets in the Buffalo-Niagara Falls region of New York State, what they did was, they paid their employees in part with their merchandise bonds, and they also I think, paid some of their suppliers with their merchandise bonds, which they would then accept back as payment for anything that they sold in one of their retail outlets. So that completed the reciprocity circuit. The Larson bonds were spent into circulation when employees or suppliers accepted them in payment. And they were redeemed, when those people brought them back and bought something from the Larson Company and Larson Company accepted their bonds back as payment. So this is the way a currency needs to be issued and redeemed by real producers of real value who have something that’s in general demand, ready to be sold.
Ellen Brown
And then for solving the interest problem, it seems to me the interest does serve some useful purposes. But how would you, you do want to be able to take out loans or advance an advance of credit in some way? And whoever is gonna give you the advance, I mean; if it’s private credit, they usually want something for taking that risk.
Thomas Greco
Good point, good point, how can we reward risk without using interest? First of all, let me mention that these Credit Clearing circles, they allocate interest-free lines of credit. When you belong to a commercial trade exchange, you get an interest free line of credit, according to your capacity to produce and sell value to the other members of the exchange. And it’s interest-free because this is the way business has traditionally been conducted. When a merchant sells to another merchant, they will generally send the merchandise along with an invoice and give a certain amount of time to pay. And there’s no interest involved in this line of credit. So we’re just generalizing this interest-free credit to all of the members in the trade exchange according to the amount of value that they bring to the exchange, and are ready to sell. So as far as the exchange process is concerned, there doesn’t need to be any interest on exchange credit. Now, when it comes to long term investments, that’s another story. We could continue to do it with interest-bearing loans, or we could do it with non-interest-bearing loans. But if people are going to risk their resources on long term basis, they do deserve to get some return for taking that risk. But how can we do that? Well, we already have a way of doing that, by taking an equity share, or part ownership; when you buy a share of stock in a company that’s basically what you’re doing, you’re becoming a part owner, you have an equity share, not a fixed dollar claim against the company, as you would if you bought the company’s bonds. So we can still reward risk by providing equity shares, or shared revenue options. So that’s the way I would handle long term investment.
Ellen Brown
Yeah that would be similar to your Sharia loans but I remember talking to somebody in Malaysia that said the problem is that the lenders, the creditors, were in your business all the time, you know, they want to control stuff so there is that, whereas if you’re a stockholder you don’t really have any control unless you’re Blackrock, of course, but most stockholders have no vote that’s meaningful.
Thomas Greco
Well we’re talking about rebuilding the economy from the bottom up, community by community starting with small and medium size enterprises, so presumably you would know the people that you’re investing in, the businesses that you’re investing in. And as far as the problem you mentioned it also extends to venture capitalists, you know, if you have a good idea you want to start a business and you go to a venture capitalist, they want to basically be in there forever and they want to control what you do to make sure they get the return that they want. What I’m seeing in the future is equity investments that are limited in time, they would be temporary not permanent. And once you get a reasonable return on your investment you’re out, you have to sell back that part of your interest to the entrepreneur. So this is a much more friendly way of doing finance and I think it’s a friendlier way to create a society. Right now, because we’ve given capital so much power and we’ve allowed the accumulation of capital to an unlimited extent, a few people, were being dominated by those who control capital but in the system that I envision we will not have that concentrations capital; capital will take its proper place alongside labor uh as an equal partner but not as a dominator. So this is the kind of thinking we have to engage in and the kind of systems we need to build.
Ellen Brown
Yeah that’s great and I think it’s an idea whose time has come because there’s so much interest right now in forming small communities, people are worried about food etcetera, they want to be local, go local is a very popular concept today, so yeah, so thank you very much. I think we’ve come to the end of our time, but it’s been super talking to you.
Thomas Greco
Okay, I’ve enjoyed it a lot. Thanks Ellen for giving me the opportunity.
Ellen Brown
Can you remind me what your website is?
Thomas Greco
The website is beyondmoney.net. Now if you try to post that link on Facebook they won’t let you, for some strange reason. But you can spell it out as I do: beyondmoney as one word, then space and dot as another word, then another space, and net.
Ellen Brown
Okay, thank you. I’ve been speaking with Thomas Greco a writer and lecturer, author of many books and articles. His latest book is The End of Money and the Future of Civilization. His website is beyondmoney.net.
Thomas Greco
Thanks again. Bye bye.
# # #
Beyond Money 