That’s about the extent of the “monetary theory” most of us are ever taught in state-run schools. Is it any surprise, then, that the vast majority of us go forth into the world taking both the existence and function of money for granted? Few workers bother to question money beyond this simple rule: YOU JUST NEED IT!

Many people spend their lives chasing dollars without ever stopping to question what it is they are chasing. After all, everybody else is doing it, better not get left behind – right? Well, before we get into rights and wrongs, why don’t we hit RESET and try to think like a visitor from Mars? Don’t know how a Martian thinks? Great! You’re catching on already. Now let’s take a fresh look at this weird Earth-stuff they call “money” …

WORDS: Boris Bell

“We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.”
- Robert H. Hemphill, 1936 (Credit Manager of Federal Reserve Bank, Atlanta, Ga.)

Imagine if you had all the money you wanted. Can you picture it? If your mind is conjuring up an image of a huge bank vault rammed full of high denomination bills then stop right there. You’re going to have to do better! I’m talking about the power to create money out of thin air and lend it at interest to anyone who wants, or can be persuaded, to “borrow” money. What would you do with such a power?

If this scenario seems far-fetched then you obviously weren’t born into a banking family. If you were then you’d know that’s what bankers do every day. You’d also most likely be aware that money today no longer represents gold and silver as it did in the old days. All it represents is debt. (For more information on this concept see ‘The Money Matrix’ – UGM007, pg. 79.) A dollar is worth … another dollar. It has no redeemable value in gold, silver or anything else that we regard as intrinsically precious. The bills we use to buy and sell are what we call “fiat currency” or “legal tender.” Fiat is Latin for “let it be done.” When applied to money, it means the only kind of money that the Law will enforce as “final payment” for a debt.

But beyond government enforcement, what is it that makes this fiat money acceptable to you and I in trade for our goods or services?  The answers is FAITH, faith that our “money” will continue to have value in trade for the things we really need or want, when we want them.

While legal tender laws ensure that national paper currency and coins MUST be accepted as payment, the value of this money is not guaranteed. Therefore one must have faith that, when you spend it, the $500 will still buy you something commensurate with the effort you put out to earn it.

Do we place our faith in the bills themselves? Sort of. Actually, we are placing our faith in the central bank of the country, as we depend on this institution for the availability of enough money to allow us to exchange our time and energies efficiently. Too much will make the money lose value: what we call “inflation.” Too little (deflation), and borrowers will be unable to pay off their debts.

Banks may not actually have the money they supposedly lend, but they do LOSE that imaginary money from their balance sheets if it is NOT repaid. That is when the money becomes real, you might say! Massive loan defaults cause massive bank losses and failures, leading to widespread economic collapse.

As future generations of taxpayers have just been saddled with forever unpayable PUBLIC debts to make up for these massive PRIVATE bank losses, one BIG question remains. The baker bakes bread. The fisherman catches fish. The farmer produces all manner of essential consumables, from artichokes to onions. So ….

WHAT DO BANKERS PRODUCE? $$$$

The answer is simple. DEBT. Lots and lots of it. Conjured up out of nothing more than our promises to repay with our REAL skills and energies. And, as debt is potentially limitless, so the supply of money is potentially limitless. The more money there is in circulation, the less it is worth, driving prices up and up. The bankers profit from the interest charged on bigger gobs of  “money” they never actually had while the resulting devaluation of the money unit robs everyone else of the VALUE of their savings.

So why are we all in debt to bankers who produce nothing? How long can bankers convince us that they are a necessary component of our survival? We are fast approaching a crisis of faith in our money – and many monetary reformers argue that the only way Earthlings can hope to live sustainably on this planet is to drastically rethink their monetary system.

So what would a world without banks and bankers look like?

Welcome to the REAL world. What, you may ask, is REAL? Well, why not start with the goods and services that we both produce and consume every day? For instance, you might be a grade ‘A’ veggie grower. Your produce is REAL. And the demand for your produce is REAL. So, can we create our own medium of exchange without being at the mercy of the banks or goldsmiths or any other “middlemen” to provide it?

The answer is YES! And no, we’re not regressing back to the days of barter (which is notoriously cumbersome). The concept is called “self-issued credit” and it works like this:

Let’s say you’re a baker selling your bread in a marketplace. How can you trade with other stall owners if there is a sudden shortage of currency? (Perhaps due to an “economic slowdown” or “credit crunch” or whatever voguish term you prefer.) How can you continue to trade without bank-issued currency? The answer? Issue your own bread vouchers! It’s simple! Let’s say you usually expect to sell 20 loaves of bread per day based on the historical demand and your productive capacity. You can therefore safely issue yourself 20 bread vouchers and use these to buy fish from the fishmonger and meat from the butcher, etc. The fishmonger and butcher put their faith in YOU. In short, they are stating that they believe your “bread vouchers” are as good as the bread itself – the thing of real value.

Your bread vouchers can be traded again and again, for all manner of different goods and services that have nothing to do with bread, each voucher taking its own route through the marketplace until eventually being redeemed for real bread at your bakery.

Now imagine that the scheme catches on and other market traders start issuing themselves credit based on their own real goods and services. Every trader knows on a given day what their expected sales would be. Based on this, the fishmonger issues himself fish vouchers, the vegetable grower veggie vouchers, etc.

The only thing missing to hold this system together is a commonly accepted measurement unit. Just as inches are an agreed unit of distance, we need a commonly accepted unit of “value.”

“All goods must therefore be measured by some one thing … now this unit is, in truth, demand, which holds all things together.”
- Aristotle 384 BC-322 BC

At the moment, our agreed unit of value is the national currency unit: dollar, pound euro, yen, yuan, peso etc. The value of these units is not defined by reference to gold or any other commodity. The national currency unit’s value is defined and redefined constantly by the prices of real things in general.

Once we understand that money at its root is a unit for measuring the demand for real things, money can cease to be a commodity in itself, a  scarce commodity that only comes from banks. It can, instead, become the common measurement unit for promises of payment in actual production by any entity that can deliver on those promises. That would be money being created by making something in demand. Doesn’t that sound sensible? Doesn’t it even sound a little like what you might have innocently thought money was, as a child?

Today the Internet provides us with the technological infrastructure we need to create our own digital, interest-free currency based on self-issued credit. One such proposal is called “Digital Coin,” devised by Canadian artist Paul Grignon. Just like our marketplace example, corporations can issue themselves credit based on the real demand for their goods and services, rather than going to banks who pretend to lend “money.”

There already are several alternative currency systems in use such as LETS and Time Dollars – interest free, self-issued credit backed by the real goods and services of individuals and businesses. There are also many business-to-business international barter systems carrying out large-scale transactions on similar principles of self-issued credit. Digital Coin simply provides an opportunity, using emerging technologies, to extend even further and make even more versatile, intelligent and useful, systems that are already working.

“Nobody is ever stopped from building a house because of a shortage of inches. Why should the producers of real goods and services be prevented from trading because of a shortage of some numbers a bank just types in on a computer screen?”
- Paul Grignon, creator of “Digital Coin”

To find out more about Digital Coin, please visit: www.digitalcoin.info.