Tag Archives: credit clearing

Webinar Series: Our Money System – What’s Wrong with it and How to Fix it

I recently conducted a series of three webinars for the Henry George School of Social Science. All three sessions were recorded and can be viewed at the links provided below.

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

Here is a brief description of each session as it developed and a list of References and Resources recommended for further study.
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Webinar #1 https://beyondmoney.files.wordpress.com/2021/06/our-money-system-session-1.mp4

Webinar #1 begins by laying out the “big picture,” the multi-dimensional mega-crisis that is challenging us make major changes in our various systems and meta-structures. It suggests that civilization is going through a metamorphic change that can lead us into a new “convivial” society, but that requires moving away from the old “caterpillar economics” of perpetual growth driven by our dysfunctional interest-based debt-money system, and towards a new sustainable and more equitable “butterfly economics.” It describes in detail how the present global system of money and banking is dysfunctional and destructive, how it has concentrated wealth in few hands, centralized political power, corrupted governments and given rise to a domineering “super class.” It describes how money is created based on lending at compound interest and how that causes an economic growth imperative. It shows the enormous explosion of debt that has been accelerating over time and cries out for a new more stable and equitable system of money and exchange. 

References and Resources

View videos:

Read:

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Webinar #2 https://beyondmoney.files.wordpress.com/2021/06/our-money-system-session-2-1.mp4

Webinar #2 covered money mysteries, myths, and misconceptions relating to the essence and functions of money, the way it has evolved over time, and what gives it value. It described the inflationary bias of political money which causes it to continually lose purchasing power, which stimulated a discussion about how to measure value and how to define an objective unit of account that can be applied to determine the value of any credit instrument, including political currencies. The second part of the webinar was about how we can re-empower our communities by taking control of our credit, shifting our purchasing, saving and investment decisions toward the local economy, and becoming more enterprising and less dependent upon employment in huge corporate businesses.

References and Resources

View video:

Read:

Explore: https://beyondmoney.net/

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Webinar #3 https://beyondmoney.files.wordpress.com/2021/06/our-money-system-session-3-1.mp4

Webinar 3 was the capstone of the series. It focused entirely on solutions to the problems that were discussed in the previous sessions. It described the shortcomings of the current alternative exchange prototypes, enumerated the essential principles that need to be observed in order to make exchange alternatives more scalable, and suggested the types of organizational structures and protocols that are needed to create an effective and secure network of exchange that will be locally controlled but globally useful. It also contained a short video presentation that describes Mr. Greco’s vision of a global system of exchanges that apply mutual credit clearing in which “credit is locally controlled but globally useful.” This session also included a brief summary of his thoughts about the nature of and potential applications of digital currencies, cryptocurrencies, blockchain ledgers and smart contracts in building a new credit based system of exchange. 

References and Resources

Explore: https://beyondmoney.net/

Read:

View video:

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My latest interview with Greg Magarshak

This discussion between Thomas H. Greco, Jr. and Intercoin founder Greg Magarshak covers a wide range of topics including the principles of sound currency issuance; mutual credit clearing; proper allocation of credit; the problems of centralized power, depression, and inflation; empowerment of small businesses and local communities; crypto-currencies; universal basic income (UBI), and more.  

Moneyless Exchange in One Easy Lesson

When the division of labor has been once thoroughly established, it is but a very small part of a man’s wants which the produce of his own labor can supply.  – Adam Smith, Wealth of Nations.

We have become so accustomed to using money to get the things we want and need that most people find it nearly impossible to conceive of any other possible way. Whenever I tell people that my work is about exchanging goods and services without using money they invariably ask, “Oh, you mean barter?” Then I go on to explain that barter requires a coincidence of wants between two people — I must have something you want, and you must have something I want. No, we must think beyond barter.

Through intensive study of monetary history and exchange principles extending over a long period of time I’ve come to a deeper understanding of the exchange process and the possibilities for advancing beyond our present dysfunctional and destructive monetary system.

“Mutual credit clearing” is a process that enables producers to trade goods and services directly among themselves without the need to use money. The credit clearing process is not a new invention; banks have been using it for a long time to settle accounts among themselves. But businesses can also use it to trade with one another and settle accounts among themselves, and they have been doing so for the past several decades. There are now scores of commercial “trade exchanges” operating around the world to provide credit clearing services for their tens of thousands of member businesses. While these exchanges are often referred to as “barter exchanges,” they do not do barter in the conventional meaning of the word. Rather, they utilize the collective credit of the members themselves as the internal payment medium. Members earn “trade credit” when they sell goods or services to another member, and they spend trade credit when they buy goods or services from another member. It is a simple process of accounting for value given and value received. When a member sells something their account is credited (increased) and when the buy something their account is debited (decreased). 

What enables the system to work is the fact that some trusted members who offer for sale goods and services that are in high demand are allowed to spend trade credits before they earn them. In other words, these trusted members are given a line of credit against their future sales; their account balances are allowed to be negative, up to some predetermined limit that is based mainly on the amount of value they are ready willing and able to sell to the other members.

Here, in a minute and a half, one of the major trade exchange operators explains the processes in its utter simplicity:

Note, this is not meant to be an endorsement of Bartercard or any other company. I refer to this video only as a good description of how credit clearing works to enable producers to trade among themselves without needing to make payment with conventional money, nor the need to borrow from banks.

And in this video a member of another trade exchange describes how credit clearing works for his business:

Properly organized and managed mutual credit clearing exchanges provide an effective, stable, and sustainable means of creating interest-free local liquidity and enabling companies and individuals to enhance their opportunities for success despite the adverse policies of banks and governments.

A more complete description of the credit clearing process can be found in my book, The End of Money and the Future of Civilization, particularly Chapter 12, Credit Clearing, the UnMoney.

Addendum: This subject is further explicated in my recent conversation with Greg Magarshak, founder of Intercoin, in which we discuss the essence of money, reciprocal exchange, credit allocation and whether or not cryptocurrencies and/or blockchain have a role to play in the reciprocal exchange process. A particularly pertinent clip is here. The entire two hour conversation can be seen at https://community.intercoin.org/t/interview-with-thomas-h-greco-community-currency-economist/1341.

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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2020 May Newsletter

In this issue

  • What could be nicer than this?
  • Planet of the Humans
  • The Need to GROW
  • Trade Exchanges and Credit clearing are No Longer Experiments, They’re Mainstream Business

There is so much going on these days, and so much I want to share with you that I hardly know where to stop. Yet, I do not wish to overwhelm my readers, so I’m choosing to keep my newsletters short. Whether they also become more frequent will depend on my own state of overwhelm and how the spirit moves me in the weeks ahead. In this edition I’m starting off on a lighter note with an amusing presentation by one of my longtime favorite authors. Oh, and by the way, there’s nothing in here about Covid-19. That’s not for lack of serious concerns or important sources to share, but I think we all need to take a break from it, so I’ll leave that for next time when we’ll get into it big time.
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What could be nicer than this?

Take a few minutes to relax and be amused. Whether or not you’ve ever been a fan of Kurt Vonnegut, as I have, I’m sure you’ll enjoy this lecture he gave in 2004 on the Shape of Stories.
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Planet of the Humans

This new and controversial documentary by Jeff Gibbs and Michael Moore lays out the hard, cold facts about our energy intensive way of living and the implausibility of renewable energy sources ever being able to replace fossil fuels. The inevitable conclusions are that we humans need to reduce our energy consumption, stop the growth of our population, and start making better public policy choices regarding infrastructure and technologies.

But vested interests have refused to believe the obvious facts and are intent of continuing on the present path in order to protect their material fortunes. In Tucson, where I live, tens of millions of dollars are being wasted on road widening projects just to deliver traffic more quickly to the downtown bottlenecks, a policy that in the process has been killing off more pedestrians and bicyclists and raising noise pollution to maddening levels.

The film has been controversial because it argues that the much vaunted shift to renewable sources of energy is an illusory savior, and the mainstream environmental organizations have been largely co-opted by corporate interests.  The movie is freely available for viewing at https://planetofthehumans.com/.

Among those featured in the film is energy and climate expert, Richard Heinberg of the Postcarbon Institute. Heinberg’s review of the film provides a more nuanced picture of our energy future and I encourage everyone to read it. The bottom line for me is my long held belief that there is no techno-fix maintain that will allow us to maintain the profligate ways of our current civilization, and that is a good thing because we are presently face with a multi-dimensional mega-crisis that is forcing us to transition to a different way of living that does not promote endless economic growth. I’ve also been arguing for a long time that we need to get off this perpetual growth spiral and shift our efforts away from ever increasing consumption and toward a Butterfly Economy that is in harmony with nature. If we do not make the necessary changes in the way we live, nature will do it for us.
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The Need to GROW

Speaking of living in harmony with nature, one of the most important things that we can do is to change the way we grow our food. This award winning documentary shows that it is possible. There are viable alternatives to industrial agriculture that are not only capable of producing an abundance of more nutritious food, but of saving the planet in the process. Get it here.
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Trade Exchanges and Credit clearing are No Longer Experiments, They’re Mainstream Business

This opinion piece by Paul Brandus appeared recently on the MarketWatch website: How small businesses can stay afloat during the pandemic without government help.

While still often referred to as “barter exchanges,” the scores of commercial trade exchanges operating around the world enable their business members to transact billions of dollars worth of purchases and sales annually without using conventional money. How do they do that? As I’ve been explaining for many years, established business members are given an internal line of credit in proportion to their sales volume, thus creating a new form of liquidity within the exchange that is independent of bank borrowing and conventional money.

The proliferation of trade exchange networks is a fundamental necessity in rebuilding the economy to be more resilient, fair, and democratic, and preserving the small and medium-sized enterprises (SMEs) that are the backbone of every community economy and political democracy.
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Monday, May 25 was Memorial Day in the United States. It is a day when we remember and honor all those who have fought and died in our many wars. Let us also remember the horror and utter waste that is the essence of war, and resolve to put an end to it forever.

Thomas

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.

 

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).