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Brian Leslie is editor of Sustainable Economics , the bi-monthly newsletter of the green economy working group of the English Green Party.
The build-up of debt caused by the way currencies such as the dollar, the euro and the pound are created threatens the global economy. Alternative currencies can only offer a partial solution. These two books, both published in , envisage an economic breakdown because of the inherent faults in the money system.
Anyone with concern for a sustainable future for humanity and for the environment on which it depends should study their message. The increasingly-desperate competition and conflicts around the world have many contributory causes, but just one common one: money and the scheming to maintain the power which the control of its creation gives to the banks.
Both authors start by faulting the current official money system but differ in their conclusions about its future. While Lietaer views its collapse as inevitable in the short term, Greco is content to list its flaws. Both propose 'alternative' or 'complementary' currencies to compensate for them. Contrary to the popular myth still fostered by many banks and politicians, banks do not lend their depositors' money.
This means that money must constantly be created to replace that being repaid to the banks. This gives the banks power to decide who will get it, and for what purposes - a point not brought out in either book. Both authors identify the interest charged on the bank loans which are the basis of virtually all modern money as a cause of the serious problems they expound. Lietaer summarises the problems with interest as follows: it indirectly encourages systematic competition; it continually fuels the need for endless economic growth; and it concentrates wealth by taxing the vast majority in favour of a small minority.
As a result, both books view the absence of interest charges as one of the strengths of the alternative currencies they suggest, although Greco nevertheless proposes to use the interest paid on investments of official money to cover the operating of some of his proposed alternative money systems.
Neither author sees the exponential growth of debt around the world as a major problem. Lietaer sees four megatrends converging in the next years: monetary instability, the 'age wave' the increasing average age of the population , climate change and extinction of biodiversity, and the information revolution. In seeing the 'age wave' as a problem of provision of needs, he ignores the huge increase in productivity over the last century and the grossly wasteful use made of it.
If better employed, this productivity would decimate the employment necessary to meet needs. He sees the information revolution as a problem because it is 'destroying jobs', but does not consider this as a benefit denied to society by its failure to distribute income better and easily solved by introducing Citizens' Incomes.
Discounting the possibility of reform, he sees complementary currencies as the means of moving to 'sustainable abundance'. He notes that climate change and the extinction of biodiversity threaten 'sustainable abundance' and that monetary instability prevents economies making the drastic changes needed to achieve it. However, he dismisses the possibility of reforming the official money system and fails to consider the effects of the debts generated by the way money gets into circulation.
Moreover, since these debts can only be repaid with official money, alternative or complementary currencies are severely limited in how far they can compensate for the problems created by official 'debt-money'. Greco is more concerned with the details of current and potential alternative currencies, devoting much of his book to descriptions of current examples and a selection of past ones, their strengths and weaknesses, and theoretical possibilities and recommendations for future systems, several of which are his own proposals.
He notes that alternative currencies start and are most successful at times and in places when the failings of official money are having the greatest impact, and mostly discontinue when conditions improve. The Swiss WIR is the only long-lived example he quotes. For those contemplating starting a local or alternative currency, his book has much to recommend it. Greco divides historical money systems into 'commodity', 'symbolic' and 'credit' money, but in declaring as an "essential fact" that "money has a beginning and an ending; it is created and it is extinguished" he exposes the limitation of his thesis.
While this is true of all the official and alternative currencies he describes - all of which are 'symbolic' or 'credit' systems - it is not true of all money, current or past - or potentially, future. Both books contain a wealth of interesting facts about, and examples of, alternative currencies plus thought-provoking ideas and proposals. Only Lietaer, however, addresses the issue of international monetary exchanges.
I believe his Terra is a promising idea for an international currency, not least because it would be independent of governments and take its value from a 'basket' of real, traded goods. I do not share Lietaer's pessimism about the possibility of achieving monetary reform - an issue Greco does not even address as he sees complementary currencies as making it unneccessary - despite the failure of its advocates to achieve it to date. His assessment of the invulnerability over the past century of the vested interests manipulating and controlling the current system is indisputable but the mounting instability of the present system and its impending collapse make the possibility of forcing reform much more realistic.
In the s the movement for reform was growing rapidly until war became the solution to the depression. There is never a shortage of money for warfare! Today, again, the fundamental problems generated by the financial mechanism have grown to the point where its instability is widely recognised and the movement for reform is growing fast. This makes effective challenge much more possible as well as vital.
The history of the past few centuries can be explained in terms of the nature of the money-creation mechanism and the deliberate manipulation of that system to suit powerful companies and the banks which funded their development.
Greco regards the recent change to 'credit' or fiat money - going off 'the gold standard' - as the ultimate debasement, and as the cause of inflation. He is well aware of the power deriving from the issuance and control of the money supply but cannot accept the fact that its divorce from any commodity-base to become pure credit makes it possible for the first time in history to create and control a national currency for the benefit of society, as proposed by James Robertson and Joseph Huber in Creating New Money , among others.
The power and profit banks derive from their privilege of controlling the issue of money must be removed. The sole power to create or destroy national money should be in the hands of a credit-creation authority under democratic control and mandated to monitor society's needs and to maintain the money supply at the level needed to allow trading, saving and investment without serious inflation.
A vital point, however, is that all the money in circulation should have been spent, not lent, into circulation. This means that all new money should be credited to the Treasury's account so that the seigniorage - the profit from issuing it is gained by the nation rather than any individual or business.
What gives national monies their special advantage over complementary currencies is the fact that only they are acceptable for payment of taxes and legally recognised for the settlement of debts.
As long as they function tolerably well, they are the preferred medium of exchange. The only way to eliminate the debts that have built up as a result of the present way of issuing currencies as interest-bearing loans is by creating and issuing enough debt-free and therefore interest-free national currency to retire all the debts.
If this was combined with the payment of Citizens' Incomes and switch from income tax and VAT to land-value, pollution and resource taxation, there should be little need or demand for local or alternative currencies. However, until then, or in the absence of reform, these currencies are likely to become of increasing importance to survival.
Lietaer summarises the problems with interest as follows: it indirectly encourages systematic competition; it continually fuels the need for endless economic growth; and it concentrates wealth by taxing the vast majority in favour of a small minority As a result, both books view the absence of interest charges as one of the strengths of the alternative currencies they suggest, although Greco nevertheless proposes to use the interest paid on investments of official money to cover the operating of some of his proposed alternative money systems.
Review of “The Future of Money”, by Bernard Lietaer
In this book Lietaer defines the problem of bank created debt-money, quite well. Unfortunately, his solution is to ignore the problem and use local currencies to ameliorate the huge problems caused by allowing the private creation of fiat money with an interest charge attached. Nowhere in the book does he even suggest that fractional reserve banking should be eliminated and that the government should create its own money. Instead of proposing monetary reform, he proposes monetary supplements. Here are some quotes from the book which do help to define the problem. While these can be useful in emergencies, they are certainly not a solution to our monetary problem.
The Future of Money
It was written as an overview of how money and the financial system works, the effects of modern money paradigms, especially relating to debt and interest , and how it can work to everyone's benefit to solve a wide range of problems, especially with the use of complementary currencies. Lietaer gives examples of different currencies that have been used in the past or are being used today, and his assessment of the positive and negative effects they carry. He writes that while the modern money paradigm has both positive and negative consequences e. Lietaer writes that in order to optimally solve problems and create a healthy society, the world needs a variety of currencies in our "toolbox", and that otherwise we are "painting with a screwdriver". Following the introduction and first chapter, where Lietaer outlines five core problems people are facing worldwide, the book is divided into two parts. Following a chapter-by-chapter outline, Lietaer points to a Primer on How Money Works , which is as an appendix. He then goes on to explain the origins of our money system, and the underlying problems and benefits of it.
The Future of Money | Table of Contents | Bernard Lietaer (1999)
Brian Leslie is editor of Sustainable Economics , the bi-monthly newsletter of the green economy working group of the English Green Party. The build-up of debt caused by the way currencies such as the dollar, the euro and the pound are created threatens the global economy. Alternative currencies can only offer a partial solution. These two books, both published in , envisage an economic breakdown because of the inherent faults in the money system.