Category Archives: The Political Money System

One of my most popular posts–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, in which I’ve tried to show how we have all become slaves to money and those who control money. Using water in this little fable to represent money, I’ve also tried to show that we the people can free ourselves by thinking outside the box to overcome our fixation on the sort of money that has been provided for us and over which we have lost all control.

Every metaphor of course is limited and what I am hoping that readers/listeners will come to understand is that there are alternatives to conventional money that we can use to reduce, and eventually eliminate our dependence upon conventional political money. It is credit that 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).
Or listen here.

You are welcome to post comments.

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.

Newsletter May 2021. Upcoming podcast series on “Our Money System,” and other news

In this issue:

  • Upcoming podcast series
  • Conversation with Tim Jenkin, Edgar Cahn, et al
  • Latest post–How, Then, Shall We Live? — What we might learn from the Amish
  • Markets and finances in today’s world
  • U.S. foreign policy, the primary threat to peace
  • Travel plans

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Upcoming webinar series

I will be conducting a free three part webinar series for the Henry George School of Social Science. Here is the description and registration link:

Our Money System – What’s Wrong with it and How to Fix it
A critical look at money & credit, their political and economic implications, and innovations that are making conventional money obsolete.

About this event

HGS_WebinarIn this webinar series, renowned monetary reformer Thomas Greco Jr., will present our system of money and banking, how it has evolved, why it is problematic, and where it is trending. The series will also look into past, present, and future exchange and payment alternatives, like Depression-era script, local and private currencies, commercial trade exchanges and LETS systems that apply the “credit clearing” process, and the more recent emergence of crypto-currencies and blockchain ledgers and their potential role. It will include discussion of how these have evolved, their advantages, limitations and future potential and what needs to be done to take them to scale.

The speaker, Thomas H. Greco, Jr., is the author of The End of Money and the Future of Civilization. For more than 40 years Mr. Greco has been studying, writing and lecturing and advising on the subjects of money, exchange, and political economy. His distinctive insights into these subjects and his innovative approaches to a more equitable and sustainable economy have made him a sought after speaker and advisor worldwide. His full bio can be viewed here.

Topics

  • WHAT is money?
  • WHY do we need money?
  • WHAT is wrong with our money system?
  • Can we live without money?
  • How can business be conducted without money?
  • What are the economic, social and political implications of monetary policies and systems?
  • What is the likely impact of present day monetary innovations?

May 21 – Session 1 will provide an overview of the present system of money and banking, how it has evolved, how and why it is problematic, and where it is trending. Mr. Greco will talk about the interest-based debt-money system, how it causes the growth imperative and the politicization of finance and exchange, and the political and economic consequences of its continuation. He will outline the fundamental concepts of exchange and finance and the principles upon which sound and sustainable systems are being developed. Participants will be asked to read or listen to some specific materials in preparation of the subsequent sessions.

June 4 – Session 2 will be a more interactive webinar that will provide ample opportunity to discuss whatever questions have been evoked by the previous session and the assignments. These might include topics like inflation, depressions, asset bubbles and busts, the savings and investment functions, and government responses to shocks like the 2008 financial crisis and the more recent pandemic. This will lead into a discussion about possible solutions to the problems that the present system causes, and the role of local currencies and other alternatives for the exchange of value.

June 18 – Session 3 will concentrate upon past, present, and future exchange and payment alternatives, like Depression-era scrip, local and private currencies, commercial trade exchanges and LETS systems that apply the “credit clearing” process, and the more recent emergence of crypto-currencies and blockchain ledgers and their potential role. It will include discussion of how these have evolved, their advantages, limitations and future potential and what needs to be done to take them to scale.
Please note that each session will start at 6 PM Eastern Time (3 PM Pacific and Arizona time), and end at 7:30 PM (4:30 PM).

Register Now!

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Conversation with Edgar Cahn, Tim Jenkin, et al

I was recently the featured guest on Taking Back Our Economy, a podcast series hosted by the Community ExchangeEdgar-Cahn-photo-600x599 Alliance. In this episode I discuss principles of exchange, the various kinds of systems that have been tried, and what needs to be done to realize their full potential, with Tim Jenkin, founder of the Community Exchange System, Edgar Cahn, founder of Time Banking, Anitha Beberg, Christine Gray, and Martin Simon.

You can tune in to the discussion on YouTube at https://youtu.be/BtIG9YLySD4.

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My latest post: How, Then, Shall We Live? — What we might learn from the Amish

While most of us have been caught up in the high-tech, consumerist, debt-ridden rat-race, there are certain groups that have been thriving on low-tech, low-consumption, earth-friendly, cooperative approaches to living. Notable randy-fath-Amish-Cramong these are the Amish communities which are characterized by their strong social bonds and mutual support. In the present chaotic times as we struggle to reinvent civilization there may be something important to be learned from the Amish. Read about it here.

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Markets and finances in today’s world

The biggest players in money and markets today are central banks and central governments. Their market interference is massive and largely overrides the effects of other market player’s actions. If you have not already done so, please read my article, Money and Finance Have Now Been Completely Collectivized.

One complicating factor that market analysts and investment advisors universally fail to mention, and probably do not even recognize, is the withdrawal of large segments of the population from the work force, and from the “old civilization.” In my view, a new civilization has been emerging for decades from the bottom upward and that process is now accelerating as people lose faith in the dominant centralized financial, economic, and political systems and structures. The new civilization is being built on relationships of trust that already exist among family members and friendship groups and within local business and political circles. As corruption, malfeasance, and errors in the dominant centralized structures become more egregious and apparent, this process is bound to accelerate further until the old systems become irrelevant. My “Walking Away…” series of articles (Part I, Part II, Part III) articulates in more detail my thoughts about that.

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U.S. foreign policy, the primary threat to peace

Two or three years ago in my efforts to gain a deeper understanding of the political dynamics of the Middle East I came across Graham E. Fuller, a Middle-east analyst and former CIA operations officer. Reading his book, Turkey and the Arab Spring, gave me an appreciation for the pivotal role the Turkey plays in the region and in the Muslim world generally. Since then I’ve been following Fuller on his website and on Facebook.

In his recent editorial, US primacy is a self-fulfilling threat generator, Fuller provides an excellent overview of US government foreign policy and the US role in the world. In it, Fuller states:

I have no wish to launch into a litany of American sins, failures, or mistakes by omission, or more often commission, that have by almost any measure been disastrous for so many foreign countries “visited” by U.S. military operations. The list is long and well known — Iraq, Afghanistan, Syria, Libya, Pakistan, Somalia, indirectly in Yemen in most recent times. He then nicely summarizes the essence of US foreign policy, saying, “…it’s hard to get off that enemy list when you actively assert your independence from Washington.”

The editorial is brief and well worth reading. You can find it on Fuller’s website.

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Travel Plans

As spring passes and summer begins, we wonder about the possibilities for travel and tourism to return to anything like normal. Will “vaccine passports,” testing, and/or masking be required to travel? If so, what form will those passports take, paper certificates, digital apps, chips embedded under the skin? Will governments impose quarantine requirements for people entering their country, as many have been doing for more than a year? If one does travel abroad, what are the chances of being stuck there and not allowed to leave?

Considering all that, it seems unlikely that I’ll be doing much traveling this year.

Stay alert, keep learning, and seek your inner peace,

Thomas

Alternative History — What If?

This Power Point slide show presentation was delivered virtually to the Alternative History Festival in Poland in September 2020. It highlights several historical turns as modern civilization has evolved that led to our present predicament and then asks how things might have been different and how they ought to be.

You can download it here.

Reclaiming the Credit Commons

The concept of the “credit commons” is something I articulated at length in my 2009 book The End of Money and the Future of Civilization, along with a thorough description of how it can be reclaimed from monopoly control. In November of 2010 I was invited to participate in the International Commons Conference: Constructing a Commons Based Policy Platform Economy, sponsored by the Heinrich Böll Foundation, in Berlin, Germany.

In my presentation there I pointed out that credit is a crucial aspect of the commons that has been generally overlooked, and that reclaiming it is crucial to any attempt to promote social justice, economic equity, democratic government and a world that works for everyone.

This video is a composite of the video record that was made and the slides that I showed at that time. It can also be viewed at Credit Commons on YouTube.

Money and Finance Have Now Been Completely Collectivized

It is almost laughable to see “the powers that be” fumbling around, and bending everything they touch out of shape, as they try to maintain some semblance of life in the deeply flawed zombie system of money, banking and finance. Laughable, that is, if it were not so tragic.

This financial “Titanic” has not been ripped open by a sudden encounter with some unexpected and random “iceberg.” It was doomed from its very beginning because of its flawed design, construction, and operation, which I have repeatedly described over the past thirty plus years.[i] It has been taking on water and shaking itself apart for a very long time, but it is just within the past few years that its inevitable demise has become obvious, and is now imminent.

The Great Revelation of 2008
— more —

This article was first published on Medium

The true pathway to peace, prosperity and freedom

For the past four decades E. C. Riegel has been my primary source of insight and

E,. C. Riegel

inspiration on the concepts and mechanisms of money and exchange. Writing mainly from the 1920s thru the 1940s, his is vision is acutely penetrating and his expression clear and almost poetic. For that reason I and a few others have made every effort to make his work known to a much wider audience. His most important works are freely available to be downloaded and I have listed the web links on my website under the Library menu item at https://beyondmoney.net/library/.

I realized very early in my peace and justice work, that the primary obstacle to peace, justice, and freedom, lies in the centralization of power and the concentration of wealth. Riegel and others helped me to see that the global money and banking system is the main instrument by which that is made possible. Riegel opened my eyes to the true nature of money and the fact that we the people already have in our hands the power to create true money. He pointed out that “Heretofore, economics has located the source of production at one point and the source of money at another, with the result that synchronization and balancing of issue between wealth producing power and money power were impossible.” Riegel then laid out a way to bring those two powers together, a plan which I, in all modesty, have enhanced and adapted to present conditions.

I’ve lately been in the process of preparing a document containing excerpts from Riegel’s 1944 book, Private Enterprise Money, along with my comments, much as I did years ago with my annotated précis of his book, Flight From Inflation. That may take a while to complete but I would rather not delay in sharing with my readers a little gem from pages 106 in which Riegel presciently described our present predicament. Here it is:

THE SURPRISE WEAPON

Society is in the twilight of a passing day. The state now undertakes to finance the economy, and, since a free economy is manifestly impossible where the state assumes the responsibility of supplying the money circulation, the politician is compelled to choose between fascism and communism. Under either choice liberty is abolished and the people are enslaved. As the planners all over the world adopt their devices for a managed economy, and ideologists and sloganizers prepare their implements to condition the minds of men to their control plans, and the cause of human freedom seems defenseless, there falls into the hands of the people a surprise weapon that will turn the tide of battle and give the people mastery, not only over their private affairs, but over the would-be political planners. This weapon is the people’s money power as defined in the following pages. It will change the whole course of human events into the paths of liberty, prosperity and peace.

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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.

Is Capitalism about to crash?

Richard Wolff provides an insightful analysis and historical perspective on the present state of capitalism and democracy. Clearly, Franklin Roosevelt saved capitalism in the 1930s by yielding a bit to the masses’ demand for a share of the economic benefits. Will there be a repeat of that in the coming decade under the next President?

That is doubtful. Conditions today are much different than they were in the 1930s. Big government is no longer in vogue since governments have ceded most of their power to transnational corporations. People now are much more aware of the need for structural change in politics, economics and finance. The vogue today is decentralization of power and restoration of the commons.

I don’t know if Marx has any answers because I’ve never studied Marxist economics.

I am convinced of one thing however that no one else seems to recognize, that is the fundamental flaw in the global interest-based, debt-money, central banking regime. It is the “debt-growth imperative” that derives from the way banks create money by making loans that require the payment of interest. One need only look at the empirical evidence of global debt growth over time to see that it conforms to the exponential growth function of compound interest. Even the richest countries have exploding levels of sovereign debt because there are limits to how much debt the private sector can bear, so governments become the “borrower of last resort” to keep the money supply from collapsing. That’s the reason for bank bailouts and “quantitative easing.”

The fundamental need is for a deep restructuring of money, banking, and finance to decentralize control of credit and eliminate the “debt-growth imperative.” Such an idea may seem radical in the extreme and will not be welcomed by the powers that be, but alternative approaches are already in the works and will be ready to save the day when the capitalist train crashes off the rails.

I was right about “quantitative tightening”

I was right about “quantitative tightening”
by Thomas H. Greco, Jr.

Just about two years ago, someone sent me a link to an article titled, Why America’s Federal Reserve might make money disappear, that appeared in The Economist on April 17, 2017. The gist of the article was the predicted move by the Fed to unwind quantitative easing, that is, to sell off some of the securities that it bought in the wake of the 2008 financial crisis. The expansion of Fed holdings from the $850 billion it held just prior to the crisis, to the $4.5 trillion it held at the time the Economist article was written, was a desperate move that was taken to keep a flawed financial system from crashing down.

After I read that article, this is what I wrote to my correspondent on April 25, 2017:

Dear…,
Thanks for alerting me to that article in the Economist. Interesting.
The sub-head reads, “The Fed has signalled that it will soon reduce the size of its balance-sheet,” yet the article says nothing about how it signalled that move. It seems to be the author’s own speculation based on the Fed’s recent small interest rate increase. To wit, “Today, however, the Fed, now led by Janet Yellen (pictured), is raising short-term rates, as it tries to keep a lid on inflation. So—the logic goes—it should also shrink its balance-sheet, to push up long-term rates.”

You need to ask, why did the Fed load up on government bonds to begin with?

I am reminded of a story about a man who wanted to invest in the stock market. He opened an account with a broker who immediately steered him into some penny stock.

The dialog went something like this:
Broker: Welcome aboard. I can get you in on the ground floor of this new company. Their stock is really hot right now and it’s only four dollars a share.
Customer: Fine, buy me 1000 shares.

The next day the broker calls and says,
Broker: Hey, that stock is now up to eight dollars a share.
Customer: Wow, that’s great, buy me 2000 more shares.

A couple days later, the broker calls again and says,
Broker: Amazing, that stock is now up to 12 dollars a share.
Customer: Fantastic, sell all my shares.
Broker: To whom??

In other words, the Fed is locked in to their position, it’s a one way street and there’s no going back.

The answer is that there was not nearly enough available capital in private hands to fund the government budget deficits, at least not at interest rates that would not make the deficits even more gigantic than they have been.

As I’ve written in my books, there is a collusive arrangement between bankers and politicians that goes back more than 300 years. Governments get to spend more than their revenues, while banks get to lend money into circulation by making interest bearing loans. Yes, open market operations by the central banks do distort financial markets as QE critics claim, but that is the fundamental role of central banks, to manipulate financial markets. It’s the biggest scam in history. The central bank is the lender of last resort, and the government is the borrower of last resort to keep the money supply pumped up as bankers suck interest earnings into their capital account.

The Fed will be lucky to get away with small interest rate increases, but unloading their holdings of government bonds will not happen.

The entire article seems disingenuous, suggesting the possibility of actions that cannot be taken without severely unbalancing government budgets and contracting the money supply which will send the economy back into recession.

Real inflation rates are much greater than government figures indicate.  See the Chapwood index, http://www.chapwoodindex.com/, and Shadow Stats, http://www.shadowstats.com/alternate_data/inflation-charts.

Also, follow Chris Martenson, https://www.peakprosperity.com/.
This interview is particularly pertinent, Oil, Gold, & The Collapse of Central Banking ~ Interview with Chris Martenson.

Regards,
Thomas

Now, on March 20, 2019, this Bloomberg article, Powell Signals Prolonged Fed Pause as Inflation Lags, Risks Loom, acknowledged that the Fed has thrown in the towel on tightening, saying, “Federal Reserve Chairman Jerome Powell said interest rates could be on hold for “some time” as global risks weigh on the economic outlook and inflation remains muted. … Officials also decided to slow the drawdown of the U.S. central bank’s bond holdings starting in May, then end them in September. Together, the moves complete the Fed’s 2019 pivot away from policy tightening and toward a markedly cautious stance.”

Surprise, surprise!

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