Category Archives: Exchange Design

2022 September Newsletter – Economic Prospects and Exchange Innovations

In this issue:

  • The Legacy and Vision of Dee Hock
  • My Upcoming Presentation: Private and complementary currency systems
  • My Latest Article
  • There once was a river …an allegorical tale of money and credit
  • Will 2023 Be the Year from Hell?
  • Central Bank Digital Currency, a the Totalitarian Nightmare

The Legacy and Vision of Dee Hock (b. March 21, 1929 – d. July 16, 2022)

I had occasion to meet Dee Hock in September of 1995 when we were both invited to participate in the first of a series of symposia titled Peace Building for the 21st Century, a semi-annual gathering that was jointly organized by the Institute of Noetic Sciences, the World Business Academy, and Pathways to Peace and convened at the Fetzer Institute in Michigan. When prior to the meeting I read that Hock was CEO of VISA International, a rather lofty position in the world of conventional banking, I wondered how his beliefs and objectives about money and exchange could possibly find any agreement with my own. I soon discovered that my pre-judgments about him could not have been more wrong. During the symposium he impressed me as being a man of integrity and vision, and more a “monkish” philosopher than a banker.

That impression was strongly reinforced when in 1999 I read Hock’s newly published book, Birth of the Chaordic Age (later republished as One From Many), which told his personal story along with the story of how the VISA organization came into being and became “the largest commercial enterprise on earth.” To give you a sense of what captivated me I will share just a few quotes from the book. In the prolog, Hock said, “We are experiencing and epidemic of institutional failure that knows no bounds,” and, “The organization of the future will be the embodiment of community based on shared purpose calling to the higher aspirations of the people.” Such an observation and expectation were quite remarkable and unexpected but consistent with my own observations and aspirations. Then, on the back of the dust cover I read, “We are at that very point in time when a 400-year- old age is dying and another is struggling to be born–a shifting of culture, science, society and institutions enormously greater than the world has ever experienced. Ahead, the possibility of regeneration of individuality, liberty, community, and ethics such as the world has never known, and a harmony with nature, with one another, and with the divine intelligence, such as the world has always dreamed.”

Such ideas could not have resonated more closely with my own, and as I delved further into the book I was delighted to find a great deal more of that sort of visionary, humane, and wise thinking and expression. I took some time to ponder all of that as I went about my own work trying to move forward toward the development and implementation of innovative systems of exchange and finance that would embody the values and aspirations that Hock and I seemed to share. Then, in January of 2001, I wrote to Hock and was pleased when he responded a couple weeks later.  Rather than try to excerpt the essence of each letter, I think it appropriate to present each in its entirety (I don’t think Dee would mind).

Dear Dee,

I’ve been meaning to write you ever since I finished reading your book almost a year ago. I guess my procrastination is due to the fact that I was not, until now, clear about what I wanted to say to you, or how to say it so you would take it seriously.

Certainly, praise is due. The Birth of the Chaordic Age is a masterful story, but, of course, it is more than a story, it is a philosophical treatise – and a work of art, studded with gems of wisdom. (In that, your monkish, contemplative bent is evident). I’m most grateful to you for seeking out these gems and fetching them back for us to admire and use. I especially like your four ways of looking at things – how they were, how they are, how they might become, and how they ought to be. It serves me well in the research I’ve been doing, and serves to remind me of why I’m doing it.

 I am in full agreement with the testimony of your vision which appears on the back of the dust cover. I believe that, in the present era, the thing that is “trying to happen” (as Willis used to put it) is a fundamental shift from elite rule (command and control) to a more participatory, democratic, inclusive, just, equitable, and sustainable order. This means that, in addition to our own spiritual and interpersonal work, there is a need for thoroughgoing restructuring of our institutions and the emergence of networks and communities which will supplant limited liability corporations and much of the government bureaucracy.

As I approach my 65th birthday, I have a sense that my most important work is yet to be done. Despite your great accomplishments, I have a sense that that may be the case for you as well. Of particular relevance for me is the area of money, banking, and finance. This is where I think I can make a major contribution, and this is what I want you to know.

You have the distinction of having been the leader who guided the development of the world’s first global payment system. Yet, you express dissatisfaction with the outcome. It doesn’t satisfy me either. You say (on page 193),


“I could think of no way to fully realize the concept by including merchants and cardholders as owner-members. The slightest hint in that direction raised a storm of opposition. We should have included them. Perhaps, with more time, tenacity, and ingenuity we could have.”

Well, storms of opposition should be expected when those in control are asked to share power. The bankers have been a privileged class for a long time. Why should they give up such a powerful and lucrative position? There is only ever one compelling reason – because they can see that it is in their best interests to do so, and they have the courage to let go. Are you ready to show them the economic “magna carta?”

For the good of the people and the planet, the monetary system must be changed and economic power must be more widely dispersed. The key lies in the payment system. There is plenty of ingenuity being applied to the “money problem” within the current grassroots transformational movement, within the commercial “barter” business, and within the realm of emerging internet commerce. Proper leadership can draw out sufficient tenacity. And, time? Well, “carpe diem.” “The future is not about logic or reason. It’s about imagination, hope, and belief.” (p. 152).

Can you envision a federation of credit-clearing circles which include everyone who wants to be a member? Which is democratically organized and operated? Which allows each person the power to monetize some of their own resources and productive potential without having to pay interest to anyone?

It is my hope to assist in launching such a system. I believe that it is possible to assemble, right now, sufficient talent, resources, and commitment to get the job done. This could be your prototype socio-economic chaord which would demonstrate to everyone the kind of model needed for 21st century organizing.

I have no illusions about the willingness of bankers’ to accept such systems right now, but I must do what I can to harmonize how things might become, with how they ought to be. If we can create the seed crystal, the rest will take care of itself.

What do you say?

Tom Greco

About two weeks later I received this reply:

Dear Tom:

Thank you for your most kind, thoughtful letter. Indeed, people in position of privilege and power cannot be expected to surrender it to others, especially when no better alternative has emerged which the public trusts and demands, which captures the imagination of the powerful and privileged, ameliorates their fears, and which is allows them to make an orderly, safe transition. Power is never given, it is always taken. How to take it without destructive confrontation and brute force is the perpetual problem. In my view, that can only be done by creating new concepts which do not attack and destroy the old, but transcend and enfold them.

There is no doubt in my mind that more than enough intelligence, communication capacity and experimentation has already emerged to allow such new concepts to be devised and implemented. However, to transcend and enfold a system that is already global, ubiquitous, deeply entrenched in all societies and organizations and embedded in the consciousness of the whole world is not something that can be done by any one person, or even a narrow segment of them. Nor do I have any illusions about the desperate need for better means of exchanging value among all people. We have had much contact over the years with many people in emerging systems of barter, local currency, internet commerce and alternate currencies – Bernard Lietaer, Hazel Henderson, James Fierro and a host of others.

One of the concepts we think will take shape within the Terra Civitas movement is something we call, for want of a better term, the “resource commons,” a coming together of people with financial expertise of all kinds, new and old, to reconceive and bring into being new concepts of organizations and instruments that “result in more equitable distribution of power and wealth, improved health and greater compatibility with the human spirit and biosphere.” That is, I think, precisely what you refer to, albeit in other terms.

We are simply overwhelmed with response to chaordic concepts. Opportunities to create such organizations in various fields already exceeds our present resources and capacity. This is not something we can, at the moment, call into being. The initial interest and impetus would have to emerge elsewhere. We might act as a catalyst, a “strange attractor,” to put in terms of complexity theory and would gladly lend what legitimacy and expertise we could.

I have no doubt that with sufficient commitment from a design team of the right thirty or forty people and a hundred or two others to critique the work and reasonable resources, a “chaordic, fractaled organization” for the purposes you envision could be conceived, perhaps even implemented, before the end of 2002.

Again, many thanks for your thoughtful letter and kind comments about the book. With all best wishes,

Dee

Of course, 2002 came and went and twenty years later we are still seeking allies, supporters and resources, and wondering what else it will take to make this grand vision a reality, but surely its time will eventually come. That is not to say that progress has not been made. Promising innovations and improvements in exchange processes and moneyless payments have been made in both the grassroots and commercial “barter” realms, and I continue to work with several of those groups and individuals.  

Numerous Dee Hock obituaries have been published online including the VISA website and Market Watch, and you can glean much more of his wisdom from Dee Hock’s webpage which is still accessible.

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My upcoming presentation

I’ve been invited to be a keynote speaker at the 6th Biennial RAMICS International Congress in Bulgaria, October 27 to 29. RAMICS is the Research Association on Monetary Innovation and Community and Complementary Currency Systems which includes both academics and practitioners.

My illustrated presentation titled, Private and complementary currency systems: purposes, principles, practices, and performance, is slated for Thursday, October 27. It will summarize what I have learned over more than forty years of research and experimentation in this field, and describe what must be done to realize the full potential of decentralized private and community exchange mechanisms. You can see the full abstract here. For various reasons, I am planning to deliver my presentation remotely from Arizona. This congress promises to be exciting and productive, and if you wish to participate you can find program details here and register at https://ramics2022sofia.sciencesconf.org/registration.
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My Latest Article
My latest article, The Money Economy Is Not the Real Economy: “The Global Banking and Financial System is Fatally Flawed,” was published last week by Global Research, and recently republished on Medium.
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There once was a river …an allegorical tale of money and credit
One of my most popular posts has been, There once was a river …an allegorical tale of money and credit. If you missed it when I first published it, you may want to check it out. I’ve used metaphor to try to show how we have all become slaves to money and those who control money. Using water to represent money, I’ve also tried to show that we the people can free ourselves and take back control by thinking outside the box to end our fixation on political fiat money, and deploy better ways of enabling the exchange of real value that our own labor and creativity produce.

Every metaphor, of course, is limited but I am hoping that readers/listeners will come to understand that there are alternatives to conventional money that we can use to reduce, and eventually eliminate our dependence upon conventional political fiat money. Credit is the foundation of an honest system of exchange and we have the power to give credit to each other in accordance with our own values and objectives, outside of conventional banks and without charging interest. You can access the story on my website (audio with transcript) or on YouTube (audio only).  

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Will 2023 Be the Year from Hell?
Noted economic forecaster, Martin Armstrong, says it will and makes a very convincing case in this interview on Greg Hunter’s USA Watchdog podcast; and it is very instructive to see the remarkable story of Armstrong and his work in the documentary movie, “The Forecaster,” if you can get hold of it. Amazon.com says “This video is currently unavailable to watch in your location,” but you can watch the trailer on IMDb and buy the DVD here. The movie includes the story about the persecution he suffered at the hands of the US government, being imprisoned for 7 years without a trial, and eventually forced to plead guilty to regain his freedom.  

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Central Bank Digital Currency, a the Totalitarian Nightmare

If that isn’t enough to get your attention and stir you to action, this article, Just Say No to CBDCs, by N.S. Lyons clearly describes the nightmare world the technocratic oligarchy has prepared for us and will very shortly pressure us to accept. Some difficult choices are in prospect.

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Despite the gloom and doom that these present circumstances portend, I believe humanity has never been in a better position to create a world of peace, freedom, and conviviality. As Mahatma Gandhi said, “When the people lead, the leaders will follow.”

Thomas

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Permission to reprint contents from this newsletter in whole or in part is granted on the condition that full credit is given and a link to the original source is provided. – t.h.g.
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Reprising Beyond Money Podcasts

During 2019 and 2020 we recorded a series of ten podcast interviews with leading experts and social entrepreneurs who have been working on developing and implementing improved means of exchange aimed at making the economy more equitable and ecologically sustainable. Each podcast is valuable in its own way and the series in total provides an excellent overview of what one needs to know to get a proper start to working in this field.

Among practitioners, Will Ruddick and his associates at Grassroots Economics continue to make exciting progress in developing Community Inclusion Currencies and organizing exchange circles throughout Kenya and other parts of Africa. Our September 2019 discussion with Will is a treasure trove of information about their innovative work that will be of great value to others who aim to organize similar exchange alternatives. Listen to it here.

The entire podcast series can be found here.

Shall We Have Honest Money–or Inflation, Depression, and War?

This little vignette written by Don Werkheiser remains one of the best concise explanations of inflation I’ve ever seen. It was published in the spring 1982 edition of Green Revolution, the journal of the School of Living a non-profit organization with which I was associated throughout the 1980s and into the early 1990s. The story helps to elucidate the nature of the dysfunctional political money system that has plagued the world for hundreds of years, but in its brevity and simplicity neglects to mention another feature of the money system that adds to our misery; that is the fact that the “Mayor” and his friends do more than spend counterfeit money into circulation, they have also established “banks” and require that other people who need money to do business must borrow their pseudo-money into circulation and pay interest on it. That enables the bankers to extract even more wealth from the rest of the people while creating an unending and unsustainable expansion of debt. I have articulated that “debt-growth imperative” in my paper titled, the Usury Conjecture.  

An Honest Money Would Stop Inflation by Don Werkheiser

A rural village has no money. All trade is by barter. A farmer comes to town and deposits 10 bushels of corn with a man who has a store room. This operator gives the farmer 10 receipts, each redeemable in a bushel of corn. But the farmer asks for receipts in smaller denominations. The storekeeper gives him 40 receipts for 40 pecks. The farmer trades ten of these corn-receipts for other products; they are each accepted at the value of a peck of corn. That acceptance constitutes the issue of corn notes as money.

Such receipts are generalized credit instruments. They refer to stored corn, but not to any specific peck of corn. When the seller wants a peck of corn the receipt is redeemed. Otherwise it is spent again, and ownership of a peck of corn is conveyed to the next seller. The next day the farmer returns to town and spends 10 corn notes (each of one peck of corn in value) for his wife’s birthday present. Now the farmer has doubled the money supply in circulation, but there is no inflation; there are redeemable goods back of them.

What then is inflation? We must understand “money” and the storekeeper’s actions.

The store room owner noticed that the corn notes were accepted in trade. So he made 40 more “peck-receipts” looking just like corn-receipts and then he spent them into circulation. That is inflation–counterfeit receipts passed as valid receipts. Assume that the counterfeit receipts were accepted at face value. In that case, the counterfeiter effected a robbery of commodities equal in value to 40 packs of corn, while those who accepted them received receipts which measured the extent to which they had been robbed. So long as confidence lasts, the game would continue and receipts could be spent. New sellers would be holding empty receipts. The game would collapse when all the corn in the warehouse was redeemed, and holders of the 40 counterfeit receipts found no one who would take them in trade.

Worse could happen if the counterfeiter had the skills of a politician. If, when confronted by angry holders of his counterfeit receipts he declared himself a benefactor of the community–and showed that the original issue by the farmer was too limited, and that his own issues stimulated industry and trade (he would not mention that the farmers issue was redeemable while his own was not). He noted that most people did not want corn; they wanted a medium of trade that they could use to speed up trade.
More to come.

They were told: “If the game stopped then, the holders would be losers, but if they continued, they could all buy what they wanted. In fact if they elected him Mayor he would declare pseudo-corn-notes to be legal tender, and he’d also begin a program of public works. Soon everyone would be rich.” An ignorant public agreed.

Elected Mayor, the counterfeiter issue another stock of corn-notes called “pecks” and declared them to be worth a peck of corn in the market (but not anywhere redeemable). On each note was a picture of a peck-basket, but what it contained was not specified.  Just a peck of value.

The “pecks” circulated and trade increased. Then a strange thing happened. The Mayor and his agents could outbid everybody for produce and services. They also controlled the printing presses for printing “pecks.” Prices were bid up on the things the Mayor’s group approved. Workers and businessman migrated into those industries for wages and profit. The stock of other things became short. Everyone couldn’t buy what they wanted. People threatened to recall the Mayor if he didn’t improve things. So he issued more “pecks” and then more and more.

The more money people had, the less they could buy. Only the Mayor and his friends had enough — rather too much — money. They gave expensive parties, bought votes, hired police and soldiers; and gave everyone a vested interest in continuing the game, through welfare, social security, profitable contracts, and “peck-funded” jobs.

Confusion resulted. It is evident there are two kinds of money: honest redeemable money and inflatable unredeemable money. These keep our economy teetering between “prosperity” and “depression.” Have we any proof that those in charge of our money system intend to create an honest system? That would break their power. A sound alternative is for people to operate their own money system. American and world history have produced workable patterns; some are underway today.

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Take note that the story does not mention any need for gold or silver backing for money to be honest. As E.C. Riegel makes plain in his book, Private Enterprise Money, “When businessmen resolve to set up a money system, they agree to hold in trust for each other goods and services that are pledged against the drafts which they have issued in the form of money. These values — that are held in trust by all for any who may present a money draft therefore — constitute a vast pool, not housed at one place, but scattered throughout the trading sphere. This vast pool of goods and services is the basis or backing for the outstanding money supply. “Reserves” and metal hoards are but window dressing. Only that which is purchasable is back of money.”  

To learn more about honest and effective forms of money and how to create them, see my books, The End of Money and the Future of Civilization, and, Money: Understanding and Creating Alternatives to Legal Tender.

The Usury Conjecture on the centralized, interest-based, debt-money system

The Usury Conjecture on the centralized, interest-based, debt-money system
Revised June 2, 2022
Thomas H. Greco, Jr.

The Usury Conjecture in a nutshell
The central banking, interest-based, debt money system that is dominant around the world today is neither stable, nor sustainable, nor fair. The creation of money based on bank lending with interest creates an imperative for debt to grow exponentially with the passage of time. That debt-growth imperative drives artificial economic growth as borrowers compete with one another to acquire enough money from the always insufficient pool of money to service their “loans.”

When I first began my intensive inquiry into money, banking, and finance more than 40 years ago, it did not take long for me to discover the essential nature of money, where it comes from and how it is created, allocated, circulated, mismanaged and abused. I was astonished that this system has been allowed to become such a dominant force in the world, that it has wreaked such enormous devastation upon the world, and that it has been allowed to go on for such a long period of time. What has led me to those conclusions has been thoroughly documented in my many books, articles, and web posts.

I have long wondered why there seem to have been no serious attempts to model the monetary system that predominates today throughout the world. Then, in November 2011, I again met up with a well known economist at a conference in Michigan where we were both presenters. In his presentation he reported having conducted such a simulation in which the results showed an equilibrium state being reached. I was dubious about his conclusions but in the context of the conference there was not sufficient opportunity to raise pertinent questions or to discuss them in any depth. I later wrote to him with my questions and asked him to respond to my assertion that some of his underlying assumptions about the system that he used in his simulation might not have been realistic. That was the beginning of my attempts to more fully articulate my “usury conjecture” which over the subsequent years has gone through several revisions. I think my arguments are sufficiently well developed at this point to be useful to others in understanding the system and in designing realistic simulations and mathematical models that are able to reveal its inherent flaws. 

In my critique, I did not say that his model was “wrong,” only that some of the underlying assumptions were unrealistic and his model too limited to adequately describe the system as it presently exists. Here are the points that need to be considered:

Free banking. He stated at the beginning of his presentation that his model was a simulation of the monetary system as it existed during the “free banking” era in the United States around the mid-eighteen hundreds. But we no longer live in that world, money and banking have undergone a great many changes since that time and the free banking model does not describe today’s reality. Among the very significant changes have been:

  1. The centralization of credit allocation power in the hands of a few huge banking companies. During the free banking era, that power was greatly decentralized, there was much more competition among banks and their asset portfolios consisted mainly of loans to businesses in the bank’s own geographic region, and much less in US government bonds or loans to massive diversified corporations which did not exist at that time.
  2. The imposition of forced circulation (by means of legal tender laws) of a unitary national currency under the Federal Reserve System that ultimately decoupled the currency from any objective measure of value (like a fixed weight of gold or silver). During the “free banking” era, each bank issued its own “brand” of bank note denominated in dollars.
  3. The gradual elimination of the redeemability of currency for specie (gold or silver) obliterated the objective measure of value, disconnected the money economy from the real economy, and opened the door for extreme monopolization of credit and the abusive inflation of the currency.

What happens to a bank’s interest income? As I understood his presentation, he made the assumption that the banks spend all of their interest income back into the economy, but that is clearly not the case. While a portion of a bank’s revenues are used to pay employees, and cover other expenses like equipment and facilities, it seems that most of the bank’s interest income is added to capital or re-enters the economy, not as consumption spending but in the form of additional loans or as reserves deposited with the central bank that enable further loans to be made, or as payouts to bank owners who, rather than spending it on consumption, use it themselves to lend it out, adding a secondary layer of debt and interest to the economy which creates a further shortage of money available for debt repayment. All of that requires a further expansion of lending (debt) by the banks to keep the money supply expanding enough to prevent too many defaults and subsequent bankruptcies, unemployment and economic depression.

Savings and investment. What does the bank do with peoples’ savings? In his reported simulation he did not describe the accounting entries that accompany the deposit of peoples’ savings, but savings and investment are two sides of the same coin. A bank, in its role as depository (as opposed to its primary role as “bank of issue”), reallocates surplus money (savings) from those who wish to save to those who need to use it now for capital formation (expansion of production capacity), or to spend on consumer goods when there are lulls in their income streams (consumer finance). The interest banks charge on these loans far exceeds the cost of providing the service and the interest they pay to savers, which creates further imbalances in income and wealth distributions.

Debt repayment. Repayment of principal on loans naturally results in the extinction of that amount of money. As old loans are repaid, new loans must be made to keep the money supply from shrinking which would cause additional defaults and economic stagnation or depression. New loans may or may not be sufficient to compensate and maintain the money supply. There must be both banks that are willing to lend and companies and people that are willing and able to borrower, but when the private sector had taken on as much debt as it can bear, government becomes the “borrower of last resort” in order to maintain or increase the money supply.

The role of a central bank. The central banks in countries around the world may or may not be a nominal part of the government. In the US, the Federal Reserve is an independent entity owned by banking corporations that pursue their own interests. There developed long ago, with the founding of the Bank of England, a collusive arrangement between banking and government. On the government side, the agreement enables perpetual deficit spending; on the banking side, the agreement enables the emergence of a banking cartel that enjoys the privilege of lending the peoples’ own credit back to them and charging interest for it. The advertised role of a central bank is to limit inflation and promote full employment. In actuality, the role of a central bank is to enable inflation sufficient to support government budget deficits while protecting and preserving the bankers’ privilege to milk the productive economy and enlarge their own wealth and political power.

Basis of issue. Besides the need to be free of interest, money needs to be issued on a proper value basis. There have been volumes written about this point, but sound principles of commercial banking have been discarded over the years because the perpetuation of the flawed system requires it, and because those who control the machinery of money use their power to promote their own narrow interests of wealth and power. Thus, some loans that banks make are legitimate while most are not. Banks should create new money to enable the production and sale of goods that are in the market or soon to arrive there. They should not make loans for speculative purposes or to monetize government debts as they commonly do today.[i] Thus, we have a stream of legalized counterfeit that dilutes the purchasing power of all the legitimate money in circulation. This currency inflation leads to price inflation, which amounts to a “hidden tax” that disproportionately harms the middle class who have substantial amounts of savings invested either directly or in pension funds which they do not control, and this “tax” hurts low income people who need to spend the bulk of their income just to survive.  

The economy. Economists and politicians speak about THE economy as if it was a unitary whole, but there are actually many economies depending on geography, social and economic class, and there are the public sector and the private sector. There may be prosperity in some sectors, while others experience recession. Distinction is commonly made between the private and the public sectors, but it is essential to also distinguish between the small and medium sized enterprises (SMEs) and entrepreneurs on one hand, and the large corporate megaliths on the other. In recent decades, banks have gotten ever larger and their lending has been directed mainly toward central governments and large corporations, while at the same time the productive small and medium sized enterprises that are the backbone of every local economy have been starved of the credit they need to finance their operations. By acting in this way, banks limit or eliminate the risks they take. In the case of lending to central government (by buying its bonds and notes), banks enjoy a guaranteed return with no risk at all. During the pandemic years the bulk of the government stimulus money went to large corporations while many small independent local enterprises were forced to close and were never able to reopen.  

“Cash” held by the banks. It is misleading to say that banks are sitting on a lot of cash instead of lending it out. In fact that “cash” has been lent out to the public sector (government) in the form of treasury bills, notes, and bonds, or to the central bank which holds it as “reserves” and on which the banks receive interest.

It seems obvious that the present global money system contains inherent in it a debt-growth imperative because of the interest burden that is attached to the bank loans that form the basis for money creation. I believe that any model that purports to simulate the actual present system of money and banking must account for most of the banks’ interest income as capital which is then loaned into circulation rather than spent, and if that were the case it would show that there can be no steady state but an endless growth in debt which leads to a general growth imperative and destruction of the Earth’s ecosystem as the real economy tries to expand in step with the overall debt.

That is in fact what the empirical data suggests. Any theory in opposition to the usury conjecture must provide an alternative explanation of why the total debt in the world continues to grow exponentially at a much faster rate than population or any measure of growth in the real economy as is show in the following charts.

Figure 1 the Institute of International Finance

Finally, the inherent inequity of this money system is obvious and is becoming ever more extreme year by year. The increasing inequalities in income and wealth are not natural phenomena; they are artifacts of the system architecture and management. Mere policy tweaks cannot correct that. The creation of money as interest-bearing debt by a banking cartel pumps virtually all of the benefits of productivity increases into the hands of the top level bankers and their minions whom we naively trust to operate the system in the interests of the common good.

History is replete with stories of collapse of societies resulting from exponential growth of debts and extreme inequalities among the various classes of the population. I have long argued that since money throughout the world today is based on “loans” made by banks at interest, the exponential growth of debt is required to keep the system going. That is clearly evident in the empirical evidence of debt growth over the past 100 years and especially since 1971 when the last link of money to anything real was severed by President Nixon’s announcement that US dollars would no longer be redeemable for gold.

The global economy is a complex adaptive system, but collapse happens when a system fails to adapt in an effective way. Jubilee or periodic resets have been common throughout history going back before Biblical times. Economist Michael Hudson has had much to say about that in his various writings especially in his latest book, …and forgive them their debts. I have been arguing for “debt triage” and a long term shift of finance away from interest-bearing debt financing and toward shared equity financing but because of the concentration of political power in the hands of the vested interests, and the general lack of understanding and concern about the flaws inherent in the present systems, I see little likelihood that these measures will be implemented soon enough to avoid major economic disruptions and social and political turmoil. That leaves innovative private and community initiatives as the most promising approach to avoiding disaster.

I have taken a functional approach to solving the problems that are inherent in the present global system of money, banking and finance and argued that the supposed functions of money–means of exchange, savings medium, and measure of value, are in fact distinct from one another and must be handled separately. The exchange function which is the essential function of money should be mediated by the use of interest-free short-term credit allocated to producers in proportion to the value of goods and services they are ready, willing and able to sell within the next few months. The savings function and the investment function on the other hand are two sides of the same coin and should be provided for by the temporary assignment of savers’ funds to enterprises that will use them to expand production capacity or develop new capacity. The measure of value function needs to be provided by defining a standard of value and unit of account in terms of some selected commodity or group of commodities.

I have described numerous alternative structures and systems to serve the exchange function, including private, local, and community currencies, and decentralized credit clearing networks of buyers and sellers and have cited numerous historical and current examples. I’ve also described financing arrangements that shift the capital formation function from interest-based debt financing to shared-equity financing that shares both the rewards and the risks of business investment. These are the actions that I am confident have the ability to prevent the disastrous collapse of civilization while enabling the necessary transformation to a peaceful, healthy and regenerative society. All of this has been thoroughly articulated in my books, The End of Money and the Future of Civilization, Money: Understanding and Creating Alternatives to Legal Tender (excerpted here), and in my various articles, presentations, and interviews which can be accessed at https://beyondmoney.net/.

Addendum of Tuesday, June 28, 2022:

One of my correspondents recently asked if the interest that banks charge when they create money by making loans causes inflation. Perhaps this response will help to clarify the picture of our current monetary and economic predicament, and add some precision to my usury conjecture.

First of all let me make clear that, while the money needed to pay the interest on a particular loan is not created when the loan is made, the banks must create sufficient money (by making additional loans) to enable the aggregate money supply to stay ahead of loan principal repayments, otherwise the money supply will contract and cause economic depression (defaults, business failures, unemployment, etc.). Thus, the creation of money by banks on the basis of interest-bearing loans biases the entire system towards deflation (too little money), as I described in my Usury Conjecture document, https://beyondmoney.net/2022/06/03/the-usury-conjecture-on-the-centralized-interest-based-debt-money-system/.

To compensate for that, banks push hard to induce private borrowers (corporations and individuals) to take on additional debt. But there is a limit to their willingness to borrow more and to their ability to repay, therefore the national government steps in to play the role of “borrower of last resort.” From the banks’ perspective that is ideal because when a bank lends to the government (by buying government bonds, notes, or bills) it gets a guaranteed return and takes no risk of default. Politicians are all too willing to go into debt to dole out money to their corporate patrons (especially weapons and drugs makers) who fund their election campaigns, and to curry favor with the voters by throwing a few crumbs their way. The government therefore goes way beyond borrowing the amount needed to keep the money supply sufficiently pumped up to avoid deflation, and thus creates inflation by funding many things that are pure waste from a consumption and environmental standpoint. So, does interest on bank loans cause inflation? No, not directly, but indirectly as I’ve just explained.

As economist Milton Friedman has famously said, “Inflation is always and everywhere a monetary phenomenon,” and on that point, I agree with him. It’s not just the amount of money that causes inflation; it’s the basis upon which the money is issued. Price inflation is mainly caused by money debasement, which is the creation of money on an improper basis. An improper basis is any loan that is not made to enable the sale of goods and services that are readily available in the market in the near term. Thus, improper money creation is based on loans that are made to finance speculation, or to finance long term capital improvements that create consumer goods only in the far distant future, or to purchase debt instruments of the government. None of those put additional goods or services into the market for purchase in the near term; therefore you have “more money chasing the same amount of goods and services,” or money being put into circulation faster than goods and services are being produced.

It is possible for some price inflation to be caused by reductions in supplies, but that is usually limited to particular products. However, in today’s global economy there are various factors that are affecting supplies more generally, so that has become a contributing cause of the inflation that is being experienced at this time.

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My reply to, Prof. Richard Werner on “the central banking system and how to start regional alternatives.”

Earlier this month Prof. Richard Werner posted a video on YouTube, which I thought was quite good in explaining the way banks create money, but I felt moved to post a response to it that provides some fundamental concepts and clarifies what is required to start regional alternatives  to dominant centralized banking system and political fiat monies. I recommend that you watch Werner’s 10 minute video, and then contemplate my responses.

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Thomas H Greco Jr

Prof. Werner makes many good and important points in this lecture, about how money is created and allocated by huge banking institutions which gives them enormous power over governments, people and the economy. Yes, control of money needs to be decentralized and democratized. Public and community banks are important elements in achieving that but they exist within the current dominant paradigm of creating money by making loans at interest, which is a fundamental flaw that forces a growth imperative. Debt grows exponentially as time passes so there is never enough money to enable all borrowers to pay what they owe. A distinction must be made between “exchange credit” and “investment credit.” The former should be allocated without interest to producers based on the value of goods and services each is able to sell immediately or in the near-term; the latter should be the reallocation of existing money from savers to entrepreneurs. The exchange function can best be organized as credit clearing circles, like the original WIR cooperative circle that Werner mentioned, then these various circles can be networked together into a global system of exchange. I have been articulating these points and more for the past several decades, most recently in a webinar I conducted for the University of Hertfordshire in November 2021: 2021-11 Transcending the present political money system–the urgent need and the way to do it. (https://beyondmoney.files.wordpress.com/2021/11/2021-11-hertfordshire-preso.mp4).  The Q&A that followed is at https://beyondmoney.files.wordpress.com/2021/12/herts-qa.mp4.  
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Vox Libertatis

Thank you for the insightful comment, Thomas. What are your thoughts on the concept of interest in general? Is a interest-based financial system doomed to always end with enormous inflation culminating in financial collapse?
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Thomas H Greco Jr

That’s a very good question. One must distinguish between primary interest that banks impose on “borrowers” in the process of creating debt-money, and secondary interest that is demanded by those who hold existing money when they lend it to others for whatever purpose.

The primary interest causes debts to banks to grow exponentially because the interest payments do not, for the most part, go toward consumption expenditures but to ever expanding pools of capital held by “capitalists.” Thus, the money supply available for repayment to the banks is always deficient unless the banks create more money by making more “loans” to stay ahead of the extinction of money that occurs when principal payments are made. The empirical evidence of debt growth over time clearly supports this; I call it the ‘usury conjecture,” which I hope will eventually be proven mathematically and/or through some realistic model of the system.

The so-called “business cycle” that oscillates between inflation and depression is natural result of that inherent flaw in the centralized, interest-based debt-money regime. The interest must be paid, one way or the other. Quantitative easing by the various central banks amounts to life support for that failing system. It is essential that the new system be ready to take over before the plug is pulled on the old one or it dies in a chaotic collapses.

Capital can dominate only when exchange media are scarce, either naturally (commodity money like gold and silver) or artificially (centrally controlled debt money). When exchange media are abundant there is no basis for demanding interest. That abundance derives from reconnecting to the real economy of valuable goods and services. As E. C. Riegel clearly showed, only producers are qualified to issue (credit) money. That is money that producers SPEND into circulation and is accepted by others as payment based on the issuer’s credible promise to accept it back as payment for their own goods and services that they are ready, willing and able to deliver immediately or in the near term. That credit money can take the form of currency vouchers (physical or digital) issued interest-free by individual producers, or more effectively, issued jointly by the members of credit clearing circles. Those circles can then be combined into a global network of exchange in which trade credits are allocated and controlled locally but are globally useful as payment. I outline that system toward the end of my previously mentioned webinar (https://beyondmoney.files.wordpress.com/2021/11/2021-11-hertfordshire-preso.mp4). Once that system is in place, interest on secondary “loans” will give way to returns on equity shares as a way of funding capital formation.

Riegel remains obscure but there is more to be learned from his legacy works that from any other source I know of. My annotated précis of his, Private Enterprise Money, can be found at https://beyondmoney.files.wordpress.com/2021/10/thg_precis-of-pem-1.pdf, and his main works can be downloaded from my website at https://beyondmoney.net/library/.    

My latest appearance on the Intercoin show

I appeared on today’s Intercoin show in conversation with crypto entrepreneurs that covered a range of interesting topics including cryptocurrencies, NFTs, exchange alternatives, and digital savings mechanisms. View and listen on YouTube, https://youtu.be/6FXsuBMG2VY.

A new paper on my Solar Dollar proposal has been published.

On July 12, 2021, I presented my Solar Dollar proposal as part of a two day virtual conference titled Pathways to Resilient Zero Carbon Cities, organized by Zero Carbon Lab, School of Creative Arts, University of Hertfordshire (UK). Following that presentation, I was invited to submit a paper describing my proposal for publication in an academic journal. That paper titled, Solar Dollars: A Complementary Currency that Incentivizes Renewable Energy, has now been published and can be read or downloaded at https://doi.org/10.3389/fbuil.2021.785145.

Transcending the present political money system–the urgent need and the way to do it.

In case you missed my webinar and would like to see the presentation, here is the recording that was made. The first part is a specially prepared slide show presentation titled, A World Without Money, Interest, and Debt: A Pathway Toward Economic Equity, Social Justice, Freedom, and Peace. The webinar concludes with a short video titled, VITA: A worldwide web of exchange, Locally controlled but globally useful, in which I describe my vision of a new decentralized, peer-to-peer, system of exchange.
The question and answer portion is not include.

Updates:
A PDF file of the slide show plus some added pertinent slides can be viewed here.
I’ve recently added an edited recording of the discussion that followed my presentation. You can view it at Q&A Discussion.

Upcoming webinar: Transcending the present political money system–the urgent need and the way to do it.

Jefferson_EndOfDemocracy2
This Wednesday, Nov 24, 2021, I will be presenting one of the most important webinars I’ve ever done. It is being organized by Prof. Lubo Jankovic of the Centre for Future Societies Research at the University of Hertfordshire in the UK.

Here is the description and link.
Transcending the present political money system-the urgent need and the way to do it, by Thomas H. Greco, Jr.

Date and Time: Nov 24, 2021
at 4:00 PM London [11:00 AM New York, 09:00 AM Arizona, 08:00 AM Pacific time]
Join Zoom Meeting
https://herts-ac-uk.zoom.us/j/96844432493?pwd=VXZZN0dSblVxUDJMZXdlNU4zcDR2Zz09

Meeting ID: 968 4443 2493
Passcode: 099266

Abstract
This presentation describes the fundamental role of the global system of money, banking and finance in generating social injustice, economic inequity, environmental despoliation and violent conflict.  It outlines the collusive arrangement that exists between finance and politics that has created the global central banking regime to centralize power and concentrate wealth in ever fewer hands and explains how the creation of money by banks as interest-bearing debt causes a growth imperative that is destructive to the environment, democratic government, and the social fabric. But more importantly, it describes the positive developments that are emerging to create a new “butterfly economy” and a civilization in which everyone can live a dignified life.

Thomas H. Greco, Jr. is a preeminent scholar, author, educator, and community economist. He is widely regarded as a leading authority on moneyless exchange systems, community currencies, and financial innovation, and is a sought after speaker internationally. He has conducted workshops and lectured in 15 countries on five continents and has been an advisor to currency and reciprocal exchange projects around the world. He has authored numerous articles and books including, The End of Money and the Future of Civilization (https://beyondmoney.net/the-end-of-money-and-the-future-of-civilization/).

E. C. Riegel and Private Enterprise Money

Announcing,  The Monetary Wisdom of E. C. Riegel: An annotated précis of Private Enterprise Money, with commentary compiled by Thomas H. Greco, Jr.

I have long credited E. C. Riegel as the foremost authority in shaping my understanding of money and the process of reciprocal PEMexchange. His penetrating insights and proposals for a new independent system for the exchange of value have provided a solid foundation for my own work of developing improved exchange mechanisms that I consider to be crucial to the future of civilization.

Riegel’s book, Private Enterprise Money, published in 1944, is perhaps the most complete and concise statement of his insights and proposals. For that reason I have undertaken the task to extract what I consider to be Riegel’s most important insights, interpret for the contemporary reader the passages that seem difficult to understand, and articulate the few points on which I disagree with Riegel. With that said, I urge every serious student of money and exchange to read Riegel’s book, Private Enterprise Money, in its entirety, as well as Riegel’s other works which are available to be freely downloaded from my website, BeyondMoney.net.