The End of Money: Take Power Back From the Money and Banking Monopoly

The dysfunctional nature of the dominant global system of money and banking has for a long time been apparent to anyone who has cared to look at it. Now, in light of the present financial meltdown, it has become painfully obvious to virtually everyone. What most people have failed to recognize is that, regardless of the nominal form of their government, their political power has been neutralized and exhausted by the privatization and misallocation of credit money.

The political money and banking system disempowers communities and enables a small elite to use the present centralized control mechanisms to their own advantage and purpose. It misallocates credit, making it both scarce and expensive for the productive private sector while enabling central governments to circumvent, by deficit spending, the natural limits imposed by its above-board revenue streams.

These are the main flaws inherent in the system:

  1. The issuance of money on improper bases, mainly government debt that is created by virtually unlimited deficit spending, but also on the basis of real estate and assets of questionable value.
  2. Legal tender laws that force acceptance at face value of the consequently debased political currencies.
  3. The charging of interest on credit money that is created by the banks as “loans,” even though the banks have surrendered nothing of value.

There has been over the years no shortage of would-be monetary reformers who have been warning that the system is broken and needs to be fixed. Some of these have even had some good ideas about how to fix it, but their voices have mostly been ignored or drowned out by the vested interests who have promoted an orthodox doctrine that works to their own advantage. During periods of severe financial or economic distress, such as the present one, some reformers are able to get their views reported in the mainstream media, so today we are hearing calls for a variety of political solutions—abolition of the Fed, direct issuance of money by the government, a return to the gold standard, tighter regulation of banks and financial institutions, etc.

Some of these actions might have a short-run salutary effect, if they could be gotten through Congress. But statist and political approaches are at best futile and at worst inclined to take us further in the wrong direction toward more centralized control and still greater concentration of wealth. They are futile in that the political process in most countries of the world, despite the trappings of democracy, has long since been removed beyond the grasp of ordinary people. If the people are to regain political control, we will first need to assert our economic power, especially our “money power,” by organizing ourselves to control our own credit and to mediate the exchange process apart from the banking cartel and without the use of politicized national currencies. Putting the money monopoly under new management will not solve the fundamental dysfunctions that are inherent in it.

What about the “Greenback solution?”

Many influential present day reformers (including William Greider, Rep. Dennis Kucinich, and Ellen Brown) are promoting what has been called the “greenback solution.” Harking back to Abraham Lincoln’s scheme for financing the Civil War, they are calling for the federal government to bypass the Federal Reserve and the banks and to issue a national currency directly into circulation.

There are many flies in this ointment. First of all, the greenback solution merely seeks to put the money monopoly under new management. Placing the money issuing power into the hands of the Treasury does nominally achieve this, but it is a gross delusion to think that the Treasury is, or might become, independent of the banking interests that now control the Fed. One indication of this is the fact that both the present and former Treasury secretaries have been executives of Goldman Sachs, the most powerful financial establishment in the country. Whose interests have they served?

Secondly, the greenback solution does nothing to eliminate deficit spending and inflation, which are enabled by legal tender laws. So long as political currencies, however issued, are legally forced to circulate at face value, the abusive issuance of money, the debasement of national currencies, and the centralization of power will continue. All government programs, including social programs, need to be funded by legitimate state revenues, not by the underhanded means of monetary debasement. Centralized control of credit money and the imposition of legal tender laws enable the hidden tax called inflation. Salmon P. Chase, who as Lincoln’s Treasury secretary presided over the issuance of greenbacks, later on as Chief Justice of the Supreme Court, argued that they unconstitutionally exceeded the powers of the federal government and that “the legal tender quality is only valuable for the purposes of dishonesty.

In recent years we have seen widespread efforts by communities and businesses around the globe to cope with the general breakdown of institutions and a deepening multidimensional crisis involving resource depletion, pollution, climate change, and increasing disparities of power and wealth. But these efforts toward relocalization, community empowerment, and the shift to a steady-state economy will continue to be thwarted, unless a different approach to money and exchange is taken.

The Empowering Solution

As in times past, like the populist era of the late nineteenth century, the business people, farmers, and others engaged in productive enterprise are clamoring to gain access to credit—credit which they fail to recognize is already theirs. Under the present arrangements, we give our credit to the banks then beg them to lend some of it back to us—at interest. The real solution lies in creating new structures for allocating credit based on the legitimate needs of businesses, workers, and state and local governments.

Is there any practical possibility of organizing on a sufficiently large scale to achieve this? I maintain that there is; that in fact, it is far more practical, likely, and empowering than any political reform of money and banking currently on offer. America’s greatness has always stemmed from the creativity, industriousness, and goodwill of its people. Ours is a cooperative, compassionate, “can do” society. I believe that we can create exchange alternatives based on voluntary, free-market and community-based initiatives that enable people to transcend the money monopoly and the “war machine.” Socially responsible businesses and social entrepreneurs have a crucial role to play in organizing these parallel systems that can shift enough power to achieve greater measures of independence and self-determination and bring enormous benefits across the board—social, political, economic, environmental, and cultural.

The primary objective of an exchange alternative should be to utilize the credit of local producers to mediate the exchange of goods and services locally. The bottom line is that non-bank exchange system credits and community currencies must be issued in ways that monetize the value inherent in goods and services being exchanged. This means they must be “spent” into circulation, not “sold” into circulation. With regard to the various alternative exchange systems and community currencies that have been tried so far, almost all have been designed to solve secondary problems, or have been lacking in scalability.

Reciprocal exchange and finance are necessary aspects of any developed economy. As I explained above, money today is nothing but credit. It is our common or collective credit that supports any generally used payment medium, including political money. We have allowed the “credit commons” to be privatized. What I advocate is the reclamation of the credit commons from the money and banking monopoly. We have seen how that can be, and is being done within cashless trading systems like LETS and the commercial “barter” exchanges that provide credit clearing services. Of the existing examples, the Swiss WIR cooperative trading circle (now called the WIR Bank) has been the most impressive for its longstanding success. Since 1934, WIR has been providing its members with a way to use their sales to pay for their purchases without the use of official money. Recent figures show a membership of more than 60,000 and annual transactions of more than $1.3 billion.

Such systems involve the allocation of credit, but they do not require the use of money as we have known it. The collective credit balances in the accounts of these systems can be thought of as a kind of internal currency, however, it is one that is not “loaned” into existence; it comes into being in the course of trade among the members. If properly organized, it provides credit on a more honest, transparent, and democratic basis—and without a usurious penalty.

The story of power in modern history has been pretty much the same throughout the world. The central banking, political money system has been established in virtually every country. If we desire to have a peaceful world that can provide a dignified life for all, power must devolve to the people and their communities. That cannot happen so long as we allow credit to be monopolized and undemocratically allocated. Fortunately, we the people have in our hands the means of our own liberation. It is the power to allocate our credit directly without the use of banks or political forms of money. How to effectively assert that power is the main theme of my latest book, The End of Money and the Future of Civilization.

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