[P2P-F] Fwd: Submission: A money system for the people - if we want it
michel at p2pfoundation.net
Mon Jan 30 09:53:36 CET 2017
*A money system for the people - if we want it*
Money creation, like alchemy, is shrouded in ambiguous language and yields
eternal wealth! For most of history these secrets have been used to empower
sovereigns to spend money without the painful business of taxing or
borrowing. Those foolish enough to try to grasp it with their rational
minds are beffuddled by unexpected politics, propaganda and paradoxes. In
modern times this power now resides almost absolutely with banks, who lend
money which doesn't exist, and reap the interest as if it did! Are the
alchemic fumes making your head spin?
What if those proto-chemists were found to be not 'making gold' but merely
charlatans 'taking gold'? Some sovereigns managed money better than others,
but now that power resides with private corporations. The languge of
'wealth creation' masks the real intention which is extract money from
society as fast as possible, to lock it up in tax havens, and to drive the
masses, deprived of a medium of exchange, back to the bank to borrow more!
The social conseqences are increasingly acknowledged (although not by
banks) to include the rich-poor divide, short-termism, erosion of
democracy, the military industrial complex and, via the growth imperative,
climate change itself.
Users of money and financial services seem to have very little influence in
the matter. However much we disapprove of banks, boycotting them (as I do)
makes normal life impossible. Banks are part of our social DNA, that's what
Too Big To Fail means.
The problem is not that saving and lending are critical functions which
only banks can do. Indeed the idea that money is some kind of stuff which
we rent is merely a misleading metaphor. The problem is that only a bank
can underwrite your IOU so that everyone else will accept it. If all the
banks and bank accounts were taken down in some Mr Robot scenario, the only
money left would be a tiny volume of notes and coins. We wouldn't be able
to pay each other and the economy would stop dead.
Only by understanding the real function of banks, can we consider
alternatives that might work for society. You might think the alchemical
fumes are affecting me when I say the way forward is in the collective
relocating our trust. But it is worth considering just how much trust we
place in banks, not only to guard our savings from theft and bail-ins, but
to invest responsibly without the need for taxpayer bailouts, to set
interest rates such as LIBOR fairly, not to launder money for international
drug cartels, and indeed to manage the quantity of money in the economy.
And compare that trust with the trust we place in our friends, family and
So the essence of bypassing banks, at least to the extent that we don't use
money to pay interest and taxes, is understanding how IOUs work. In the <a
strikes</a> of 1970s, the whole economy ran on IOUs in the form of cheques.
Allegedly pub landlords took the role of judging creditworthiness. It
wasn't the most efficient system but it worked. Similarly in Greece before
the Euro, it was common practice for strong local businesses to pay their
bills by cheque, and for that cheque to circulate as money before returning
to the business. Both of these are examples of interest free money
creation, and taken to scale, they create stable economies (no more boom
and bust) in which credit is always available.
So how could this be instituted today? Its not enough to hope that all the
banks fail at once, (and wish for the calamity that would cause). It can't
be expected that a whole culture would participate while banks are still
omnipresent, But there are thousands of groups worldwide who practice forms
of collaborative credit - the most numerous are business barter networks
and LETS (Local Exchange Trading Systems). If only we had the collective
sense to use them, not only would the economy's liquidity problems be
solved, but economic policy would devolve much closer to us, the people who
actually back the money!
A key difference between these systems, which I call 'collaborative credit'
systems and the mainstream economy is the principle of exchange.
Conventional money is designed for saving, which means NOT exchanging. In
fact by making debts more and more unpayable it can be shown even to
prevent exchange. Many things can be used as a store of value, but a good
medium of exchange requires that social consensus which is unique to money.
Money which really facilitates exchange must be always <em>available</em>
to be earned or borrowed, and it should be less valuable than real things
to prevent its hoarding. The principle of exchange says that we should give
and receive the same amount of value; that money isn't valuable in itself,
it is just a way of tracking the balance of my giving and receiving. By
committing to give and receive favours in equal measure, we acknowledge
that being owed favours doesn't put one in a position of power, but brings
with it an obligation to spend back. Taking responsibility for our own
finances takes effort yes, but probably less than feeding a parasite! With
money no longer scarce, competition (for money) gives way to collaboration.
Collaborative credit implies that everybody's promise has equivalent value,
which in economics is called fungibility, an important property of money.
Because every credit is balanced by an equal and opposite debit, aggregate
supply and demand in the system are perfectly balanced <em>by design</em>.
The simplicity and elegance of the exchange paradigm makes neoliberal
economics look like the blind leading the blind up an alley without a
By forming what the Germans call 'exchange circles', narrow fields of
reciprocation, we reduce our personal (and aggregate) demands for money;
and within our own economic circles, we reclaim a measure of power of
credit issuance and even monetary policy.
So why isn't everybody doing it already? Even in Greece where the need is
dire, the move to alternatives forms of production and exchange is almost
imperceptible. I could list reasons all day about financial illiteracy,
breakdown of trust, atomisation of society, but instead we should look to
those who ARE doing it.
Fortunately collaborative credit does not require that 'the masses'
participate, only that the circles have sufficient density. The bigger, and
more connected exchange circles become, and the more goods and services
move within them, the more they look and behave like money systems,
spreading more risk more evenly, and allowing credit of greater quantities
for longer durations.
If we use legal money, we do so for better or for worse, under the law. But
the sentiment "I'll scratch your back if you scratch mine" needs no law, no
regulation, no taxation, and no money. Those who are serious about a fairer
economy, are the ones finding, trusting and working for each other. There
is no alchemy for creating wealth, but the obscuration of money creation is
about appropriating wealth created by others.
Matthew Slater co-authored the Money & Society massive online open course
with Professor Jem Bendell. Participation is free and it starts again on
Feb 19th. See http://ho.io/mooc
Check out the Commons Transition Plan here at: http://commonstransition.org
P2P Foundation: http://p2pfoundation.net - http://blog.p2pfoundation.net
#82 on the (En)Rich list: http://enrichlist.org/the-complete-list/
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