Reinventing Money

1. Reinventing Money The emergent path toward peace, harmony, and equity. Based upon more than two decades of extensive research, I�ve reached the conclusion that �the money problem� is the greatest present obstacle to the advancement of human civilization. In this presentation I will describe the nature of the money problem and approaches to solving it. Toward more efficient, effective, and equitable means of exchange. Based upon more than two decades of extensive research, I�ve reached the conclusion that �the money problem� is the greatest present obstacle to the advancement of human civilization. In this presentation I will describe the nature of the money problem and approaches to solving it. Toward more efficient, effective, and equitable means of exchange.

2. 03/26/2007 Prepared by Thomas H. Greco, Jr. 2 Why Does Money Need to Be Reinvented? Throughout the world, money has become an instrument of political power. Money and banking are manipulated by and for limited private interests. Political money is exploitative, dysfunctional, and undemocratic.

3. 03/26/2007 Prepared by Thomas H. Greco, Jr. 3 Two Parasitic Elements of the Conventional Money System Interest Collected by the banking cartel Inflation Caused by government deficit spending

4. 03/26/2007 Prepared by Thomas H. Greco, Jr. 4 How is Political Money Dysfunctional and Exploitative? Political money is inefficient and inequitable � many needs go unmet because the supply of money is deficient. Periodic cycles of depression and inflation derive from the actions of central banks. Money concentrates power and wealth � the rich get richer; everyone else gets poorer. Who decides whose interests will be favored? Conventional political money causes social and international conflict and ecological destruction. The Great Depression of the 1930�s provides a prime example of the systemic flaws, as do the innumerable examples of hyperinflation that has occurred in various countries.The Great Depression of the 1930�s provides a prime example of the systemic flaws, as do the innumerable examples of hyperinflation that has occurred in various countries.

5. 03/26/2007 Prepared by Thomas H. Greco, Jr. 5 Roots of the Money Problem General misconceptions about the nature of money, banking, credit, and exchange. General but erroneous belief that money should be centrally issued and controlled by governments or central banks. We consider industrial monopolies to be undesirable. Why should tolerate a money monopoly? How is money any different?We consider industrial monopolies to be undesirable. Why should tolerate a money monopoly? How is money any different?

6. 03/26/2007 Prepared by Thomas H. Greco, Jr. 6 The Promise of Free Money Political democracy can go no further in freeing man until it is itself emancipated by economic democracy whose sheathed sword is money. -- E. C. Riegel Money is inherently free. When it comes, free and uncontrolled trade, stimulated by the hope of gain, will dissolve all our economic problems. -- E. C. Riegel The liberation which money will bring to mankind will transcend anything ever conveyed by the political connotation of that term. � Riegel. Quotes from The Valun Monographs.The liberation which money will bring to mankind will transcend anything ever conveyed by the political connotation of that term. � Riegel. Quotes from The Valun Monographs.

7. 03/26/2007 Prepared by Thomas H. Greco, Jr. 7 What Is Money, Anyway? There are various ways to define money. Practical Definition � its distinguishing feature Money is anything that is generally accepted in payment.

8. 03/26/2007 Prepared by Thomas H. Greco, Jr. 8 What Is Money? Functional Definition � what money does Money is a: Medium of exchange Measure of value Store of value

9. 03/26/2007 Prepared by Thomas H. Greco, Jr. 9 What Is Money? Essential Definition � what money is Money is credit that is allocated and managed through an accounting or information system

10. 03/26/2007 Prepared by Thomas H. Greco, Jr. 10 The Primary Role of Money Is to Mediate Exchange Exchange is a fundamental necessity in advanced civilizations. Most of what we need, we get by trade. 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. �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. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of other men's labour as he has occasion for. Every man thus lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society. � Adam Smith, Wealth of Nations. �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. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of other men's labour as he has occasion for. Every man thus lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society. � Adam Smith, Wealth of Nations.

11. 03/26/2007 Prepared by Thomas H. Greco, Jr. 11 How is Political Money Dysfunctional? Money is kept artificially scarce. Money is expensive because interest is charged. Money is misallocated at its source. Political money forces artificial growth.

12. 03/26/2007 Prepared by Thomas H. Greco, Jr. 12 Why is Money Scarce? Money, today, is mainly bank credit. It is created when banks make �loans.� �Borrowers� must pay interest on every dollar. Debt grows faster than the money supply.

13. 03/26/2007 Prepared by Thomas H. Greco, Jr. 13 Why Is Money Expensive? �Borrowers� must pay interest on every dollar of bank-credit money.This interest burden makes money expensive to use, and adds unnecessary costs to every stage of production and distribution.

14. 03/26/2007 Prepared by Thomas H. Greco, Jr. 14 Why and How Is Money Misallocated? The allocation of money is done by banks making �loans.� Some are given access to credit while others are denied. Some receive favorable terms (low interest; minimal collateral), while others are not. The political money system starves productive enterprise but finances lavishly the destructive activities of war. -- E. C Riegel

15. 03/26/2007 Prepared by Thomas H. Greco, Jr. 15 How Does Political money Destabilize the Economy? Compound interest causes debts to grow with the passage of time, but the money supply can be expanded only by banks making additional loans, so the amount of money available to repay bank loans is always deficient. Manipulation of interest rates upsets the natural adjustment mechanisms. Monetization of government debt by banks dilutes the value of all money.

16. 03/26/2007 Prepared by Thomas H. Greco, Jr. 16 Debt Grows Exponentially

17. 03/26/2007 Prepared by Thomas H. Greco, Jr. 17 The Political Money System Banks, in effect, monetize the value of the collateral assets. They call this practice, �making a loan,� even though nothing is loaned. Banks charge interest on these �loans.� That turns �credit money� into interest-bearing �debt money,� Which results in a growth imperative and destabilizes the entire economy.

18. 03/26/2007 Prepared by Thomas H. Greco, Jr. 18 The Creation of Bank Debt-Money as Deposits Any cash (Federal Reserve notes) drawn out from banks is charged against your account balance, so cash is merely a physical representation of bank debt money. �Under the politico-financial scheme of things the business man must go to the banker and pay a lending fee for what is merely a clearance service. The government even subjects itself to this tribute-taking device by "borrowing" from banks whereas it could create deposits just as well by non-interest bearing currency or other notes.� � Riegel, Valun Monograph 2. Any cash (Federal Reserve notes) drawn out from banks is charged against your account balance, so cash is merely a physical representation of bank debt money. �Under the politico-financial scheme of things the business man must go to the banker and pay a lending fee for what is merely a clearance service. The government even subjects itself to this tribute-taking device by "borrowing" from banks whereas it could create deposits just as well by non-interest bearing currency or other notes.� � Riegel, Valun Monograph 2.

19. 03/26/2007 Prepared by Thomas H. Greco, Jr. 19 What Is the Answer to the Money Problem? The exchange process can and must be liberated. Sound and credible exchange media can emerge from a variety of sources. There is no need for the exchange process to be limited by centralized power, i.e., governments or banks.

20. 03/26/2007 Prepared by Thomas H. Greco, Jr. 20 Guiding Principles Justice requires free exchange. Free exchange is more efficient in distributing goods and services. Free exchange requires markets and money that are free from monopoly control. Government involvement in money almost always establishes privilege not freedom.

21. 03/26/2007 Prepared by Thomas H. Greco, Jr. 21 Toward an Independent Payment System Free credit clearing bypasses the dysfunctions of conventional political money and enables: Free exchange, Full employment, Avoidance of economic crises, inflation, and deflation.

22. 03/26/2007 Prepared by Thomas H. Greco, Jr. 22 Alternatives to Debt Money Mutual credit clearing associations and private currencies can reduce the need for conventional, bank-created, debt-money. Private exchange systems and complementary currencies are simply expressions of the right of contract, and are perfectly legal.

23. 03/26/2007 Prepared by Thomas H. Greco, Jr. 23 Money is Being Reinvented at All Levels The grassroots level LETSystems and local currencies The business level Trade exchanges, or �barter� exchanges, and countertrade The governmental level Circulating provincial bonds and local tax credit certificates

24. 03/26/2007 Prepared by Thomas H. Greco, Jr. 24 Private Community Currencies Have Many Direct Benefits Can be created interest-free and spent into circulation as a substitute for bank financing. Are independent of outside manipulation of interest rates and money supply. Can be democratically allocated to benefit the needs of the community. Because they recirculate locally, they promote the health of the entire local economy. Reduced need to borrow working capital can save significant interest costs. Risk of default on a promise to deliver goods or services under your control is less than the risk of default on a promise to deliver money, which you do not control. Official money can be spent outside the community so it quickly flees; local currency stays close to home so it is available to enable many trades within the community. Reduced need to borrow working capital can save significant interest costs. Risk of default on a promise to deliver goods or services under your control is less than the risk of default on a promise to deliver money, which you do not control. Official money can be spent outside the community so it quickly flees; local currency stays close to home so it is available to enable many trades within the community.

25. 03/26/2007 Prepared by Thomas H. Greco, Jr. 25 Advantages of Complementary Currencies Abundant supply Created as needed, they supplement the supply of scarce official currency. Low cost, no interest Democratically allocated Gives local suppliers preference over imports Reduced risk of default � A promise to deliver goods or services is less speculative than a promise to repay a loan of money. Reduced need to borrow working capital can save significant interest costs. Risk of default on a promise to deliver goods or services under your control is less than the risk of default on a promise to deliver money, which you do not control. Official money can be spent outside the community so it quickly flees; local currency stays close to home so it is available to enable many trades within the community. Reduced need to borrow working capital can save significant interest costs. Risk of default on a promise to deliver goods or services under your control is less than the risk of default on a promise to deliver money, which you do not control. Official money can be spent outside the community so it quickly flees; local currency stays close to home so it is available to enable many trades within the community.

26. 03/26/2007 Prepared by Thomas H. Greco, Jr. 26 What People Can Do Organize mutual credit clearing associations and networks. Collectively issue local currencies or trading coupons to supplement official money. Mutual aid and barter amongst themselves. Form trading clubs and hold trading �fairs.�

27. 03/26/2007 Prepared by Thomas H. Greco, Jr. 27 The Business Community Form mutual credit associations for clearing payments due to one another. Issue �purchasing certificates� or community currency to the general public, backed by their ability to provide goods and services. At a minimum, a group of local businesses can form an association to clear sales and purchases among themselves. This will enable them to acquire some of their needed goods and services without the use of cash, which is both scarce and expensive. Better yet, they can pay their suppliers and employees partly with their own currency or credits that will recirculate within the community, giving a boost to the entire local economy. How about a �double pine� note issue that would be jointly issued by associated coops?At a minimum, a group of local businesses can form an association to clear sales and purchases among themselves. This will enable them to acquire some of their needed goods and services without the use of cash, which is both scarce and expensive. Better yet, they can pay their suppliers and employees partly with their own currency or credits that will recirculate within the community, giving a boost to the entire local economy. How about a �double pine� note issue that would be jointly issued by associated coops?

28. 03/26/2007 Prepared by Thomas H. Greco, Jr. 28 Local and Regional Governments Issue �tax credit certificates� or �tax anticipation warrants� to finance operations. Issue �community improvement bonds� to finance infrastructure developments. Governments at all levels have revenues from taxes and service fees. Those revenues provide the means of paying for all of the budget items. Rather than borrowing at interest to finance its operations, a municipal government can pay what it owes using its own vouchers that it accepts back as payment for taxes and fees. Governments at all levels have revenues from taxes and service fees. Those revenues provide the means of paying for all of the budget items. Rather than borrowing at interest to finance its operations, a municipal government can pay what it owes using its own vouchers that it accepts back as payment for taxes and fees.

29. 03/26/2007 Prepared by Thomas H. Greco, Jr. 29 National Governments Renounce legal tender laws. Repeal laws that give privileged status to particular banks and currencies. Do not interfere with private exchange systems or privately issued currencies. At some point even some national governments will become enlightened enough to see the damage they have done by forcing people to accept particular forms of payment, and by limiting exchange alternatives. Here are some steps they should take to correct the problem.At some point even some national governments will become enlightened enough to see the damage they have done by forcing people to accept particular forms of payment, and by limiting exchange alternatives. Here are some steps they should take to correct the problem.

30. 03/26/2007 Prepared by Thomas H. Greco, Jr. 30 National Governments A national government can issue its own currency, but in amounts limited to its anticipated revenues over a one year period. It should issue its currency directly from the treasury (by spending it into circulation). It should be required to accept its currency back, at par, in payment of fees and taxes. But no one else should be required to accept it at par. The market should be free to refuse it or discount it.

31. 03/26/2007 Prepared by Thomas H. Greco, Jr. 31 Basic Requirements of Any Currency System Transparent operation and open records. Properly issued on the basis of value being exchanged, in amounts proportionate to the goods and services produced and ready to be sold. Clear agreement about the rights and responsibilities of the issuers and users. Anyone who emits a currency must be willing to accept it back in payment, at par.

32. 03/26/2007 Prepared by Thomas H. Greco, Jr. 32 Benefits of Free Money and Banking Multiple competing exchange alternatives lead to more efficient, lower cost exchange. When exchange media are abundant, no real needs are left unsatisfied because of lack of money. More equitable access to credit. More equitable distribution of production. Reduced unemployment. The end of boom and bust cycles.

33. 03/26/2007 Prepared by Thomas H. Greco, Jr. 33 What can You do? Learn about money and the exchange process. Join or start a mutual credit or community currency group. Promote exchange alternatives among the local business community and municipal or provincial governments. Lobby higher levels of government to eliminate special privileges in money and banking, and to remove legal impediments, if any, to private exchange alternatives.

34. 03/26/2007 Prepared by Thomas H. Greco, Jr. 34 To Learn More and Keep Up-to-date on Developments Explore the websites: ReinventingMoney.com circ2.home.mindspring.com Read, Money: Understanding and Creating Alternatives to Legal Tender, by Thomas H. Greco, Jr. Subscribe to one of the many related listserves.