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.
This book and Bernard Lietaer's The Future of Money, both published in 2001, 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. They create new money when they grant a loan or overdraft and now some 97% of the money in circulation was created in this way. 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.
Greco is 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.
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.
- Brian Leslie