Category Archives: Exchange Design

Sovereign or Slave? How perversion of the money power has decided the issue—until now!

As I indicated in my previous post, No democracy when government has the money power, E. C. Riegel, more than 75 years ago, explained, better than anyone else I’ve encountered, the nature of money, its fundamental function, and the history and consequences of its politicization, and outlined a way of transcending the perverse and dysfunctional system that we have lived under for far too long. His work is perhaps best summarized in his book, Private Enterprise Money, from which I quoted. I continue here with further quotes that elucidate the key points of sovereignty, money and government.

Riegel’s solution involved the organization of credit clearing circles that he called “Valun Exchanges” that would be joined together in networks for exchanging goods and services. He argues, as I do, that it is the individual person that is sovereign, not any king, emperor or government, and that the power to issue money, therefore, also resides in the individual. When we realize that money is really only short-term credit, it becomes clear that it is in our power as individuals to give it or withhold it as we go about our daily business of exchanging the value (goods and services) we produce and consume.

In Chapter 9 of his book, Riegel proposes that the Valun Exchanges be organized on a “state-wise” basis. He observes that:  “The sovereign power of the citizen rises to the state government; and from there it is delegated upward to the federal government, and downward to subdivisions. We are, first of all, citizens of our respective states; and this implies citizenship also in local and national governments.” p. 139

He then recounts the history of the union of the American colonies after their separation from British rule and argues that: “The advantage in abolishing this multiplicity of monies [of the various colonies] was obvious, but the implications involved in surrendering the money issuing power to the federal government was not comprehended. The gain to all in uniformity of money unit was visualized; the loss in sovereignty thereby suffered, was not.”  p. 140

From this point onward, I will let Riegel’s words speak for themselves. All page number refer to the printed edition.

“We now realize that the money power of the private citizen is in fact his sovereignty; and that in yielding it he yields his sovereignty. Thus the transferring of the money power from the states to the federal government was the transferring of the citizens’ sovereignty to the national government, and the reducing of the state to the status of a subordinate. p. 140

“The political money system implies that the citizen will abate his natural money issuing power, and make the criterion of his exchanges and the regulation of the money system entirely dependent upon the government that he recognizes as the money power. By making the federal government the sole money issuing power, the individual states transferred the fealty of their citizens to the national government, because they became thereby dependent upon its money power. The citizen having thus had his fealty transferred to the national  government—it was taken from the state governments—and the latter are now dismayed by the increase of federal power and the commensurate subordination of state power.”

“What has actually transpired is a reversal of the intent of the federal plan whereby the national government was to be dependent upon the states for grants of power. The national government, through its money power, is now supreme and in reality holds the state governments in subjection to it. Federal fiscal policy now determines the bounds of state sovereignty. It took many years to reveal this structural weakness because, in the earlier days of the federation, the economy depended more upon the private issuance of money through the banking system, and thus federal fiscal power was dormant. The policy of the federal government up to 1932 was to leave to the banks the function of supplying money. During the Jackson administration, with the abolishment of the United States Bank, government participation in money supply reached its lowest point—with the government confining itself to the mere minting of gold and silver coins at a seigniorage charge to any one who brought the metal to the mint.” pp. 140-141.

Money Power Is Sovereignty
The states, to recapture their independence and sovereignty, must look to their citizens who, in turn, must assert their sovereignty by exercising their inherent money power. It was right that the states should have surrendered their money power; but they should have surrendered it to their citizens, and not to another government. At the time the federation was formed the nature of the money power was not understood; and it was not realized that it is the essence of sovereignty. But we know now that it is and if we wish to preserve the federation and also home rule, we must now deal intelligently with the money power.

While the states have surrendered their money power, their citizens have not. The citizens have merely failed to exercise their natural powers against which there is no prohibition in either state or federal constitutions. This is not a political issue – requiring legislation or repeal of legislation, or constitutional amendments, or any official action – but it is, nevertheless, a profound political movement; because, as the people assert their money power, their natural intimacy with their state and local governments asserts itself – since there is no other power that can step between. Today, the federal government stands between the citizen and local government, and thus alienates him.

If our states are to develop their individuality and counter the stereotyping influence of a monetary dictatorship, if local government and private enterprise are to work out their natural virtues, if democracy is to prevail in business and government, and if our federal republican system is to survive, we must meet our problems by dealing with their fundamental causes – the political money system.”

To accomplish these broad and vital aims, the Governor or some other public official should take the leadership of this cause within his state. In the absence of this, leadership must be taken by private citizens. It offers an incomparable opportunity for public service.”

While the money issuing power is inherent in every man, it can be realized only by a pact among many. Therefore, the individual is helpless, and organized action is necessary. The method of organizing a Valun Exchange should be no different from organizing any other cooperative movement.” pp. 143-144.

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Move your money, preserve your capital, improve your community and make housing more affordable

Poverty and homelessness have been persistent problems in virtually every community and are becoming worse, and disparities in incomes and wealth have long been increasing. Meanwhile the stock markets are booming while returns of savings accounts have been driven below zero in real terms. All of this has been happening while human productivity is greater than at any time in human history. What’s wrong with this picture?

Clearly, there must be some serious defects in the systems by which our collective production is distributed and used. This is the realm of money, banking and finance which controls the functions of value exchange, saving, and investment. As I’ve repeatedly argued, it is not just a matter of how these systems are managed (policy), but the way they’ve been designed, i.e., their very structure. Whether by intention or by accident, these system are designed to do precisely what they are doing. They enrich and empower the few at the expense of impoverishing and dis-empowering the many.

While there may be little possibility of reforming these systems, they can be transcended. New systems and structures can be designed and deployed that better serve the necessary functions. My work has been focused mainly, but not entirely, on the exchange of value function, which is the fundamental purpose of money. Over the past forty years I’ve written and lectured extensively about private and community currencies and mutual credit clearing as ways of transcending the political money regime. See, for example, How to Bring Liquidity Into an Economy, Free of Interest, Inflation, and Boom and Bust Cycles.

Others have been active in addressing the functions of saving, and investment. Notable in this regard are Ellen Brown and her associates at the Public Banking Institute, John Katovich and associates at Cutting Edge Capital, attorney Jenny Kassan, John Fullerton at the Capital Institute, and community economist Michael Shuman.

Michael, in his recent newsletter, Gimme Shelter (With Local Investment), reports on some exciting developments, one of which is “…the SEC quietly increased the ceiling on a crowdfunding raise from $1.07 million to $5 million—effectively enabling significantly more housing projects to be funded by grassroots investors sick of Wall Street.” Another is the emergence of community investment trusts (CITs), which “allow members of the community to invest in neighborhood projects. Whereas most CLTs [Community Land Trusts] are nonprofit, CITs can be for-profit and issue equity.”

“Still another approach is to buy pieces of equity in homes to make home ownership more affordable. That’s the strategy of a new company called Landed. It strikes a deal with new homeowners to pick up half or more of the down payment.”

For more details on all of that, read Michael’s entire article here.
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Get Ready to Play in the Butterfly Economy

Presentation by Thomas H. Greco, Jr. to the (virtual) 2020 Annual Convention of the International Reciprocal Trade Association (IRTA.) on September 24, 2020.

Community Currencies — Questions and Answers

I receive a steady stream of requests for information and advice, which I’m not able to address as fully as I might like. For the most part, the answers that people seek have already been expressed in my various writings, presentation and interviews. Still, I understand and share the desire to save time and effort by finding shortcuts to enlightenment. So I take these inquiries as opportunities to rethink and work out better ways of explaining the ideas I’ve been trying to get across for many years.

Thinking that many of my followers might benefit from my recent responses, I’ve compiled some of them to share in this document.
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Q1: What is money and what is its purpose?

A: Money is a credit instrument that facilitates the exchange of value.
That’s a simply as I can state it.

Q2: Who can or should issue a currency?

A: Any business can issue a currency (essentially an IOU) to suppliers, who are willing to accept it. But to make it credible and acceptable to them, the issuer must be ready, willing, and able to redeem it in a timely manner. They redeem it by accepting it back as payment for the goods or services they sell. That’s all there is to it. But, it’s better if a group of sellers do this together with other others rather than singly. That can be done by organizing a mutual credit clearing circle (trade exchange) as I’ve described in numerous writings and presentations, e.g., Credit Clearing – Pure and Simple.

Q3: Why do communities adopt their own currencies?

A: There are various reasons why communities adopt their own currencies and there are various ways of issuing them.

Most of the hundreds of community currencies that have been issued over the past three decades in various places around the world have had the avowed purpose of keeping money circulating locally instead of “leaking out” to the wider world. The idea is that if money can be kept circulating within the community it will enable a greater number of local business transactions leading to greater community prosperity.

Most of these currencies have been backed by conventional money. That is all well and good, and there are various conditions and procedures that can be employed to maximize the impact, as I have described in my recent article, Monetary alchemy: how to turn bad money into good.

Another reason why communities issue their own currencies is to create “home grown liquidity,” i.e., to make up for the failure of the banking system to provide adequate amounts of exchange media to local businesses, especially the small and medium sized enterprises that for the backbone of every community economy. This type of currency is not backed by conventional money, but by the goods and services that local businesses stand ready, willing and able to sell. This type of currency may sometimes be spent into circulation by a single business then accepted back as payment for the merchandise it sell, but more typically, it will take the form of “trade credits” issued within a cooperative trading circle comprised of several hundred businesses and/or individuals. Illustrative of this are the scores of commercial trade exchanges that are operating in countries around the world, and the grassroots trade networks known as LETS, Local exchange trading system. For a comparison of the effectiveness of different models of currency and exchange systems, see my article, Local Currencies—what works; what doesn’t?

Q4: Do community currencies generally exist to solve a particular problem? In the case of Tenino, WA, I know the money is going primarily to low-income residents, but I’m curious why specifically they’re being given a local currency instead of cash aid in US dollars.

A: Yes, as described above, community currencies generally exist to enable more local transactions and/or to make up for the shortage of official exchange media (dollars).

I had not heard of the Tenino currency before, but after reading the article about it in the Seattle Times I understand that it is a dollar backed voucher currency in which theTenino2020 dollars are provided as a grant from the city government to eligible recipients. The city government may have their own reasons for giving out “a local currency instead of cash aid in US dollars,” but a couple obvious advantages of the local currency are that (1) it can circulate numerous times before being redeemed for dollars, giving a boost to the local economy, and (2) restrictions can be placed on how recipients can spend it. In the Tenino case, according to the Seattle Times, the local currency cannot be used to purchase alcohol, tobacco or marijuana. Of course some clever people will likely find ways to circumvent that restriction.

There are other restrictions that I would suggest be applied to maximize the benefits that derive from such a currency. These relate to who is allowed to redeem it for dollars (e.g., only local business operators), when they are allowed to redeem it (perhaps several months or years in the future), and on what terms (maybe at a 10% discount from face value). Each of these would encourage the local currency to change hands many more times and thus provide a greater stimulus to the local economy.

Q5: Does Tenino’s model resemble any other community currencies you’re aware of? How do these currencies differ from each other, generally?

The Tenino currency resembles a great many other local currencies around the world that are all backed by conventional money and follow the ‘convertible local currency’ (CLC) model. Examples include the Bristol Pound and Brixton Pound in the UK, Toronto Dollars and Salt Spring Island Dollars in Canada, and Berkshares in the US.

Further, Salt Spring Island Dollars and Tenino currency both have appeal as collectibles and will never be redeemed for dollars, thus providing a windfall profit for the community.

Q6: Many currencies base their value on how the public perceives its value. For example, the US dollar is the world’s most accepted currencies because people know they can spend it in most places. How do you convince individuals and businesses to use it and trust it?

A: Political currencies, like the US dollar, have the support of their governments and central banks. The US dollar has the “full faith and credit” of the US government behind it and it must be accepted “for all debts, public and private.” These are the factors that cause it to be generally acceptable as payment. As the global reserve currency, the US dollar is in high demand among the banks and governments of other countries, despite the fact of rapidly rising UD government debt and the dollar’s continual loss of purchasing power.

Community currencies do not have those same advantages so they must stand on their own feet as credible credit instruments. What makes such a currency credible, sound, and acceptable in trade is its redeemability either in conventional money, or in goods and/or services that are generally desired and needed.

Q7: If a community currency wants to survive for the long-term, what does it need to do?

To survive long-term, a community currency must be issued into circulation on a sound basis or foundation; it must be usable as payment for a wide variety of essential goods and services; it must be have the support of the local business community.

Specific design and operation details are provided in my various writings and presentations, including my article, How to Bring Liquidity Into an Economy, Free of Interest, Inflation, and Boom and Bust Cycles, and my most recent book, The End of Money and the Future of Civilization.

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My latest article in Medium

The global money system: not the kind of normal we should get back to describes the urgency, and the opportunity, of ushering in a new, more equitable and sustainable economy based on the deployment of the innovative mechanisms of exchange and finance that I have long advocated. We need to ask ourselves what it is that keeps us on the treadmill. We try to get ahead but so often we end up simply standing still or falling farther behind. We are all chasing after that thing that everyone demands from us–money. The problem is that there is never enough money in the right places to fairly distribute the vast amount of wealth that the economy produces. What if we could all stop chasing after money? Money scarcity is an artifact of the interest-based, debt-money regime. Better means of exchange are available; we simply need to organize and use them.

A Conversation About the Dysfunctions of Money, and the Need for Decentralized Exchange Alternatives

This conversation, sponsored by the Praxis Peace Institute, is Episode 8 in our podcast series. It was recorded on April 10, 2020 and covers such critical questions as:

  • What is the essence of money?
  • What are the functions of money?
  • Where does money come from?
  • How does money enter the economy?
  • Who controls the issuance and flow of money?
  • Why does total debt in the world keep growing?
  • Is the system of money, banking, and finance stable, fair, sustainable?
  • Are there better ways to “do” money?
  • Why have local currencies not been more successful?
  • Are there any success stories?
  • Is there a “magic formula” for making an alternative money system work?

It continues with a discussion of the history of local currency efforts in Sonoma County, California and a description of straight forward approaches to creating local liquidity that is independent of banks and conventional money.

The Economics of Peace, Justice and Sustainability

This video is based on a presentation I gave at the Economics of Peace Conference in Sonoma, California in October, 2009. My prescriptions for reclaiming the credit commons and creating a new “butterfly economy” remain completely relevant, and their implementation is becoming ever more urgent.

A PDF of the slide show can be downloaded here.

The Exchange Revolution

In November of 2009, I gave a presentation at the conference on Michigan’s Future Energy, Economy & Environment, at Crystal Mountain Resort in Thompsonville, Michigan. More than 10 years later, this presentation is still timely.

Ken Freeman has recently augmented and adapted recordings of that presentation to produce this new video, titled, Exchange Revolution, which has now been posted on our Beyond Money Podcast site. It is a comprehensive description of the what and how of transcending the political fiat money regime, and building a new equitable system of value exchange.

It can also be found on YouTube at https://youtu.be/MvTMcvVzNuQ. The transcript can be found here.

 

Latest news from Thomas Greco — November 2019

In this edition:

The End of Money and the Future of Civilization now published in Spanish
I’ve waited ten years for it to happen but I’m delighted to announce that, thanks to the efforts of translator Enric Montesa and editor Julio Fernández, my book, The End of Money and the Future of Civilization, is now available in Spanish. The Spanish language edition, titled El Fin del Dinero y el Futuro de la Civilización, can be ordered from the publisher, Ediciones Kaicron, at their website. Please help spread the word to your networks of Spanish speakers.

Continue reading the newsletter here…

Spanish Edition of The End of Money and the Future of Civilization

I’ve waited ten years for it to happen but I’m delighted to announce that, thanks to the efforts of translator Enric Montesa and publisher Julio Fernández, my book, The End of Money and the Future of Civilization, is now available in Spanish. The Spanish language edition, titled El Fin del Dinero y el Futuro de la Civilización, can be ordered from the publisher, Ediciones Kaicron, at their website, https://www.kaicron.es/tienda/el-fin-del-dinero-y-el-futuro-de-la-civilizacion/.

The book will be introduced and discussed in Madrid this Friday (November 8) during a roundtable session, Money and Sustainability, at the four day event, Biocultura: La Revolución Ecológica (Bioculture: The Ecological Revolution).