That dream, however, has turned into a nightmare. We now have scientific proof that the monoculture of a single type of currency is a root cause of the repeated monetary and financial instabilities that have manifested throughout modern history. According to the International Monetary Fund, in the four decades between 1970 and 2010, there were no fewer than 145 banking crises, 208 monetary crashes, and 72 sovereign debt crises. This adds up to an astounding total of 425 systemic crises—an average of more than 10 countries in crises each and every year!2
One of the much touted remedies is the Chicago Plan. Essentially this would make bank-debt money illegal and government instead would issue a new currency. While this reform would eliminate the risk of bank crashes and sovereign debt crises, there would still be monetary crises.3
These stark statistics don’t begin to tell the personal and individual stories of struggle and hardship. The extraordinary chasm that has emerged between the superwealthy and the expanding ranks of the working poor is demonstrated by the fact that the combined assets of the family that owns Wal-Mart equal those of America’s bottom 150 million people.4
All of this begs the question, “Why do we not examine our money system?” Throughout the history of our world, with all its wars, political upheavals, and periods of civil unrest, and with the emergence of political models including capitalism, socialism, and communism in all their variations and adaptations, still the money system was left unexamined. The portraits on or colors of the paper bills may have changed, but the fundamentals of its core structure have not.
The answer is this: Money is the last great taboo. The topic of sex was opened up in the 1960s and 1970s, and death and dying during the AIDS pandemic and natural disasters of the 1980s and 1990s. But the subject of money is still shrouded in darkness, assumed by many to be untouchable.
An even deeper obstacle to examining our system of money resides in the recesses of our collective psyche: We are motivated both by a fear of scarcity and by greed. Fear of scarcity often carries with it a tendency to avoid facing the reality of our finances, and greed brings an obsessive focus on money. The conflict between these two forces leads to a state of approach-avoidance in relation to money—an inner struggle that further exacerbates the trickiness of the inquiry. Money itself becomes highly emotionally charged.
Ironically, financial markets portray themselves as bastions of cool rationalism. Although economists frequently present their work as neutral, objective, and based on irrefutable science, sometimes crucial underlying epistemological or conceptual orientations and presuppositions remain unstated and are thereby kept shrouded from view.
As we begin to lift the shroud in this book, we will see that it’s not the structure of the economy or the hue of the political solution, per se, that are the real problems. The real problems are money and the monetary system itself, and not in the way one might first suspect. We will see that since money is a human invention, it can be changed. We’ll see that there is not only another way, but a multiplicity of ways, to rethink money. And we’ll learn that already a quiet evolution is underway, in which people and their communities are helping themselves through a new understanding of money.
Currently, in thousands of communities globally, there are networks of businesses that span a country or a continent and groups of netizens who are reassessing and reengineering money with astonishing results. Individuals, entrepreneurs, businesses, communities, and governments in many countries around the world have already created new cooperative money systems that link unmet needs with resources that remain unused by the dominant competitive currency of each country. These new strategies do not replace the conventional monetary systems but rather work in tandem, shifting the predominant features of scarcity and hypercompetitiveness to ones that provide new options and additional resources for everyone.
Regular people have discovered not only that it is possible to create money in sufficiency for their needs but also that it is simultaneously possible to build their societies with greater cooperation, care, and collaboration. In other words, they are proving not only that it is possible to redesign money but also that doing so fosters very different and highly desirable outcomes.
In fact, the past 30 years has seen a tremendous growth of cooperative currencies around the world—from fewer than a handful in 1980 to more than 4,000 today. These cooperative currencies are often called complementary currencies. Examples include community or local currencies such as time dollars in the United States, long-established business-to-business systems like the WIR in Switzerland, and newer currencies like the regio and the terra. There is also a huge potential for more scalable cooperative currencies. In other words, the emergent cooperative currency movement now has behind it enough proven successes to grow up and start tackling the core challenges of the 21st century.
This book provides the road map for this to happen. You will read real-world stories of ordinary people making an extraordinary difference by pulling themselves up by their own boot straps. There are reports of communities going from high unemployment, despair, and high crime rates to self-sufficiency, mutual support, and sustainable abundance. In these pages, businesses, communities, and governments, as well as individual citizens and entrepreneurs, will find actions that they can take right now to create currencies that connect unused resources to unmet needs, moving their participants from scarcity to sufficiency.
This new approach makes possible a potentially radical transubstantiation, a profound shift from a postindustrial era to an Age of Wisdom. Perhaps even a Diamond Age of unprecedented technological breakthroughs may emerge, where the universe becomes malleable in our hands with unparalleled and exceptional advances.
The book is divided into three sections: Part One, Scarcity, comprises the first three chapters. This part unfurls the strands of money’s DNA, explaining how each constituent component impacts everyone in some very surprising, sometimes devastating, ways. These chapters also show how it is now possible to tweak and make changes to the money system that result in a completely different set of outcomes. It is written in lay terms to give the reader a better understanding of what’s really going on with the financial meltdown. This will enable greater discourse and debate and, hopefully, grounded action.
Prosperity, the second part, Chapters 4 through 9, chronicles the pioneers and implementers of cooperative currencies both in the United States and abroad. It reports on their stories of inspiration and transformation under the categories of banking, entrepreneurship, government and NGOs, and we, the citizens.
The third and final part of the book, titled Rethinking Money, projects into an available future and shows how a truly cooperative society would function with both competitive and cooperative currencies working in tandem. It then reaches back into recent history and reveals the lessons learned from modern history and how various missteps can be avoided now. With the vital lessons from the past and a clear vision of a desired future, you and your community, whatever its size or structure, can become empowered and grow prosperous.
This book will take you on a journey into some rather unexpected areas. The value of exploring this uncharted territory, usually not associated with finance and money, is to give you insight, by packing your imaginary knapsack with new monetary tools and additional knowledge. When we get to the end of the journey, like reaching the top of a mountain, you can take in the 360-degree vista and see the financial system though a new understanding. From there, it is possible to realize that there is another way, in fact, thousands of other ways to escape the existing financial morass.
So rather than saying, as in the opening story, that there aren’t enough inches to build the world we want for ourselves and our children, we could, equipped with a new understanding, create new currencies that link unused resources with unmet needs. We could build vibrant communities. Not only can we attain sufficiency but also we can reach the inherent human goals of cooperation, community, and even contentment. New cooperative curre
ncies would stimulate learning and entrepreneurship. New ideas for banking would create cooperative housing loans and financial support for emergent technologies and businesses. These are constructs that support local businesses, creating prosperity in local communities.
So, let’s buckle our safety belts and hang on for an unusual ride.
PART ONE
SCARCITY
Most of us assume that there is only one type of money possible, even imaginable: dollars for Americans; pounds for the English, Welsh, Scots and Northern Irish; pesos for the Mexicans; yen for the Japanese; and so on. Furthermore, most believe that such currencies are simply a medium of exchange, facilitating transactions that would otherwise take place less efficiently, through barter or other forms of exchange. Thus, money is assumed to be value neutral, not affecting the type of exchanges made, the kind of relationships among its users, or the time horizon of investments. In this book, we will explore all of these hidden assumptions and show them to be invalid.
We will see that the process by which money is actually created, through bank debt, is wrapped in a veil that even many economists, the experts in the field, haven’t seen through. As a result, we are largely oblivious to the devastating consequences of our limitations regarding money, as well as the vast human potential it has failed.
Our current monetary system generates scarcity and competition. The rivalry and contest are so pervasive that we have become inured to its impact in our daily lives in all levels of society—even for those we imagine would have no problems, given the size of their bank accounts and portfolios.
We all suffer. And before something can be changed, it first needs to be understood.
Chapter One
THE FAILURE OF MONEY
The Competitive Society
What need you, being come to sense,
But fumble in a greasy till
And add the halfpence to the pence
And prayer to shivering prayer, until
You have dried the marrow from the bone?
WILLIAM BUTLER YEATS,
Irish poet and Nobel laureate
It’s a cold Tuesday morning, and already the line is forming outside the David Ellis Pawn Shop in the upscale neighborhood of Cherry Creek, Denver, bordering the foothills of the Colorado Rockies. It will be another 10 minutes before the doors open. A woman in a fur coat sits in her parked car with its license tags about to expire. She runs the engine to keep warm while others shuffle around in silence, dodging any direct eye contact.
Denver, the Mile High city, is one of the country’s top 10 metropolitan areas where people are saddled with the highest levels of personal debt. This is a result of high housing prices, a steep cost of living, and a culture of spending—a hangover from better days.1 The David Ellis Pawn Shop has been in business in the same location for over 25 years and during this time has seesawed through multiple financial highs and lows. Trade, however, has never been so brisk or with such a dramatically broadened demographic as it is now.
This scramble for money is playing out globally in towns and rural areas alike. Record unemployment, or underemployment, has triggered a vicious cycle of lack of demand for goods and services that leads to more layoffs in key industries. The mood, to put it mildly, grows dark and defaults into despair, sometimes even abdication, as next steps are unclear.
In the history of the United States, this is the first time when the younger generation of people will be poorer and less educated than their parents.2 In a country that claims to be one of the richest in the world, some 100 million people—one in three Americans—either lives in poverty or in the distressed zone hovering just above the official poverty threshold.3 More than one in three Americans lived in households that received Medicaid, food stamps, or other means-based government assistance in mid-2010, according to an analysis of the 2010 census. And when Social Security, Medicare, and unemployment benefits are included, nearly half of the nation lived in a household that received a government check.4
According to the New York Times, “Demographically, they look more like ‘The Brady Bunch’ than ‘The Wire.’ Half live in households headed by a married couple; 49 percent live in the suburbs. Nearly half are non-Hispanic white, 18 percent are black, and 26 percent are Latino. Perhaps the most surprising finding is that 28 percent work full-time, year round. These estimates defy the stereotypes of low-income families.”5
The squeeze for cash has gotten more acute recently. Today, 80 percent of Americans report that they are living paycheck to paycheck. This is nearly double the figure in 2007, just before the banking crisis. One in five individuals earning over $100,000 per year report that they, too, are living from month to month.6 Savings are at an all-time low.7 Consequently, the need for credit is on an upswing while banks are not lending.
The money system really isn’t serving humanity. The world’s population could hit 10 billion by 2050.8 Money is too scarce for many of Earth’s human inhabitants. Even those who have enough of it are obliged to deal with its vicissitudes: crashes, devaluations, inflation, whatever the financial crisis du jour may be.
As the stories of financial stress and uncertainty continue to play out in the United States and around the globe, there’s plenty of blame to go around. We can point to rampant cronyism in government on all levels, slack or nonexistent enforcement of regulations, and good old-fashioned greed, from corporate avarice to the covetousness of innumerate plebs who got in over their heads in the real estate market.
Clearly, however, on the flip side of the coin, we do live in a world of unparalleled achievements, facilitated through competitive markets driven by a competitive financial system. The best and the brightest are rewarded at stratospheric levels, which in turn, has spurred on even greater striving for more innovation, ingenuity, and originality.
Yet, the commonly trotted-out explanations for all that ails the financial systems, or conversely what is working, just don’t provide the complete picture. There is a yearning to put into language something that still remains elusive, lingering in the shadows of awareness just out of reach. It’s that gnawing feeling in the pit of the stomach that something deeper is going on, something that can’t quite be brought to consciousness, let alone expressed in words.
That is what this book offers to illuminate. It is not about how to invest, save, spend, hide, keep, or give away money. Rather, the aim is to unmask the true nature of money and the monetary system that we have inherited. Money is merely a human construct, as will be shown, that was designed in and for another age. By understanding how money really works, we might then create a different system that supports the kind of society we desire for ourselves and for future generations. This is about how to make a sustainably abundant future a reality.
And while money is the culprit, it is not guilty in the way one would suspect.
A much deeper systemic issue is at work. Before anything can be changed, it must be understood. To understand, it has to be taken apart, investigated, and questioned before it can be put back together again in a new configuration that would support a truly functioning system. Although many feel we are fast approaching an apocalypse, we might remember that the word comes from the Greek apokálypsis, meaning an “uncovering,” a “lifting of the veil,” or “the disclosure of something hidden,” a “surprise,” 9 if you will.
There are both a general lack of awareness and widely held erroneous assumptions as to how money drives trillions of daily transactions and influences every aspect of daily life.
At the core of these assumptions is the false belief that it is merely the lack of money that is the problem. If there were more to go around, everything could be put to rights. However, what you’ll discover in the following pages is this: It is not the amount of money in circulation that is the root cause of this current malaise. It’s the type of money that is being used.
The good news is that the know-how and gumption needed to bring about a transformation are already here. We’re not talking abou
t conventional “solutions” such as the redistribution of wealth, increased conventional taxation, bond measures, or enlightened self-interest from corporate entities. Rather, we’re talking about the stories of ordinary people who are jumping outside the prescribed monetary boundaries, rethinking and reengineering money itself.
Recognizing that transformation is possible, emboldened by new monetary innovations, we can realize a brighter future for everyone. In this future, meaningful work would be available to all; the sick and elderly would be cared for, and children would have adequate shelter, health care, nutrition, and education; threats to our environment would end; unstable urban and rural areas would evolve into viable, sustainable communities; and seemingly insurmountable social chasms would be bridged. In short, life and all living systems would flourish.
This is not an idealistic dream, but rather a pragmatic goal, achievable within one generation.
Currently, we stand at an extraordinary inflection point in human history. Several intergenerational, even millennial cycles are coming to a close, including the end of the Cold War (50 years), of the Industrial Age (250 years), of Modernism (500 years), of hyperrationalism (2,500 years), and of patriarchy (5,000 years). The universe is now more malleable, given advances in science and technology, yet nothing of true value and longevity will materialize until money is mastered and humanity is no longer its slave. Just as computer operating systems become obsolete, incapable of performing the functions needed, so do our systems of money.
Rethinking Money Page 2