The political significance of alternative currency

Shortly after posting an essay I wrote on this subject, I found another by the founder of a different alternative currency system.  He said some things better than I did, so here is his, slightly edited.  Mine’s still here too, down at the bottom – just scroll down until you see the colored text.


Have you ever stopped to think that the output of our collective labor and technology should improve the quality of our lives more than it has? Shouldn’t we have figured out how to eliminate poverty? Why does money always seem to cumulate into larger and larger pools rather than being allocated to where it’s most needed? Surely, the enormous disparity of wealth doesn’t parallel the contributions that an individual has made to society. Why do we find it necessary to continue to deplete our natural resources? Haven’t we taken enough? Aren’t there better alternatives?

Why do we pursue ever-increasing amounts of wealth even after our basic needs have been met rather than simply enjoying the wealth that we have? How is it possible that each laborer is more productive in the history of the world, yet two parents can work full time and still not have enough money to pay for their children’s day care and rent? Why are we becoming ever more isolated from our communities? Why do we have less free time rather than more? Shouldn’t the opposite be happening as we continue to become more efficient and produce more?

The answer to these questions lies in the nature of money itself. Not the physical money that we touch, but the monetary system. Our money system, including the way money is issued and removed from our economy, is a stronger force than even religion in the way that it influences our behavior. Think about it. How many people do you know who act more in line with their moral convictions, rather than with the culture surrounding the way we earn and spend money? Money must be a powerful influence to compete with notions of eternal life or ecstatic bliss. Money drives us to act the way we do towards each other and toward the world around us. It shapes our attitudes, defines who we are, and provides us with a measure of success relative to our neighbors.

Problems with Money

Sadly, our monetary system is poorly designed to bring about the type of world that most of us want. It has evolved to meet different needs and is atrociously inadequate to bring about the highest quality of life for those who use it. We haven’t figured out what we want from our monetary system. We haven’t analyzed the nature of our transactions and the consequences that they bring. We’ve accepted the repercussions of our own invention as if they were fundamental laws of nature. We haven’t stopped to think if there could be a better way. We’ve missed the point entirely.

One of the major problems with our monetary system is that it creates an artificially scarce money supply. Money is created when we get a loan from a bank. By the very nature of money, there isn’t enough money in circulation to cover the debt that created it.

The cycle of debt feeds on itself. A person who pays their debt in payments plus interest is doing so with money that has been created through more debt. As the money supply grows, the debt that needs to be paid grows even more—regardless of how efficiently or how much we produce, regardless of our needs, regardless of our desires. There will always be more debt than money to pay for it.

The cycle of collective debt creates feelings that we never have enough. It’s true, as a society we can never have enough because we always have more debt than money. Always. It’s no wonder than that we work longer and longer hours and turn to the extraction of earth’s natural resources to try to make more and more money.

Exacerbating the problem even further, we feel a need to collect as much money as we can in order to protect ourselves from the scarcity that we feel. Besides, if we have money, there are always people out there desperate to get it. It takes money to make money. Therefore, we hoard our money so that it can earn interest and protect ourselves.

But the need to collect money in order to make more money sets up investment decisions that are counter-productive to our collective well-being and to common sense.

Take, for example, the question of how much money to spend on a new car. I could buy a quality automobile that would last 20 years. Instead, it makes more sense to simply dispose of the car after ten years and buy a new one. My investments will double in 10 years and I should be able to afford a new car from my “savings”. Yet the consequence of this action result in my old car in a landfill and a culture that values cheap disposable items rather than high quality, long lasting ones. Only our blind acceptance of the rules of artificial scarcity could make us accept that this would be more “economical”.

Similar examples can be found in the way we relate to our environment.

Under our current system it makes sense to cut down trees and put the money in the bank; the money in the bank will grow faster than trees. It makes sense to "save" money by building poorly insulated houses because the discounted cost of the extra energy over the lifetime of the house is cheaper than insulating. [See]

We’ll continue to extract our natural resources until we’ve extrapolated all of our possible resources and maximized our human capital. Our laws, social organizations, and protests will not change this very basic fact. As long as our money is created through debt, then we will become victims of our own invention.

It is possible, however, to create a monetary system that addresses these problems.

For example, the demurrage charge is a concept developed by Silvio Gesell about a century ago. His idea was that money is a public good -- like the telephone or bus transport -- and that we should charge a small fee for using it. In other words, we create a negative rather than a positive interest rate.

Rational people would find ways to invest their resources in the things that hold their value over the greatest period of time. They would invest in products and resources that would produce the greatest value over a given time. Rather than buying a cheap car or computer to be replaced in two years for a small amount, and invest the rest, people would invest in the BEST vehicle that would be easiest to maintain and hold its value the longest. Rather than producing more that would end up in the dump, we would produce less.

Another example. The lack of available capital to the working poor is widely accepted as one of the greatest impediments to economic progress in much of the developing world. A currency that focuses on credit-worthiness of its participants and allows business to extend credit to one another through information about their neighbors and the products and services they provide could be a far better currency.  Many developing countries are rich in social capital. People know whom to contact in the case of any situation and nobody goes homeless because people are profoundly intertwined and attached to their community.

In the United States, however, we are becoming ever more isolated from our neighbors. A local currency that encourages neighborhood interaction would provide value beyond the scope of the mere transaction.

My point is that the world has many needs. Each need represents a market and should be addressed with its own solution; it’s own tool. I’ve cited these examples, not as comprehensive evaluation of alternative currencies, but to demonstrate how our monetary system affects our values and drives our actions.

There are only two principles required to bring about massive social change. It starts with an awareness of the problems inherent in our money system. The solution follows naturally.

Two Principles

1. We must recognize the role that a monetary system plays in our society in how it creates and distributes wealth and reinforces values. The consequences of the system of money should be understood and its function transparent.

2. Currencies should be free to compete in the marketplace so that the currency that brings the greatest value to its users, both individually and collectively, will be adopted, challenged, changed, and improved.

Our monetary system is deeply embedded in our collective psychology. By continuing to operate under the principles of our established monetary system, we unconsciously reinforce the unsustainable practices and values of this system.

Ironically, the path out of our cycle of debt and scarcity doesn’t require sacrifice. Change won’t come from protests, wars or conflict. Change will come simply from a realization that there are alternatives and our desire to act in the interest of our communities and ourselves.

Complementary currencies, to be effective, must provide value that our current monetary system doesn’t provide. They should be created to solve problems and to fulfill needs of those who use it. As we begin to realize the cost and benefits derived from the currency they use, we will naturally choose the currency that provides the most value.

The ability to address needs and fulfill them is something that our market economy has taught us to do very well. Enormous time and resources have been placed in figuring out how to recognize and address our needs. It’s remarkable that business hasn’t identified money itself as a product that can be used to bring greater value to its customers. We need to use business practices, and the force of the market economy, to create a currency that effectively addresses the problems with out current monetary system and provides a viable alternative.

It is possible to unleash a virus into the system. It is possible to show that a few people can bring about a new age of positive social values and increased wealth. A heightened awareness about the role of money in our society has the potential to fundamentally change the world that we live in.

It is possible that a new age of increased prosperity for all, greater trust and cooperation, respect for all people, and the appreciation of our environment can be collectively realized. We only need to see it.




By Fred Kittelmann, founder of hOURS…


December 5th, 2002; a small private plane flies into the Federal Reserve building in Miami.  Was it an accident, or was the pilot mimicking Al Qaeda, hellbent on attacking another agent of American imperialism?  Perhaps you pondered that question at the time.  But did you give any thought as to how repairs to the building would be paid for?  What?  Stupid question, right?  Actually it’s quite significant…


You might say “with money”.  That much is obvious – the interesting part comes when you get into how it is that the Federal Reserve has so much money.  Well, they’re the creators of the stuff, that’s why.  They can will it into existence, with the stroke of a pen, or nowadays, a computer keyboard.  That’s some serious power.  Think what you could do if you had such power, even for a couple minutes.  They’ve had it day in and day out since 1913.  People say the government prints the money, and that’s literally true.  But 75% of all U.S. dollars don’t exist in the form of those familiar paper notes found in people’s wallets.  They’re just numbers in bank accounts.  And what’s so good about being a printer anyway?  Do you know any rich printers?  The Bureau of Engraving and Printing is actually hired by the Federal Reserve to print the money.  The authority for its creation (even for those dollars that get manifested as bills) resides with the Fed.  They paid the building contractor by turning on their computer and adding a number to the balance of the contractor’s account.  They didn’t subtract the same from any other account(s).  They literally just created additional money out of thin air.  And in doing so they got to say that the money belonged to them, to spend on their own purposes.


That’s a shocking degree of privilege for a private institution to hold.  There has been some small, not very vocal opposition to the Federal Reserve System since the 1913 legislation that brought it into existence, by some folks who would rather see the money-issuing prerogative in the hands of the government.  *Yawn*  The part about taking it from the Fed is good.  The problem lies in believing the government to be some benign, neutral embodiment of the interests of the general public.  We need to get over junior high school social studies class.  Just as elections do not mean “the people” run the government, transferring monetary authority to the government doesn’t make it no longer a privilege or a tool for domination.  We need further options.


Ultimately we don’t need money at all.  True reciprocity, a gift economy, would be even better, and where such exists, that’s terrific.  But that being light-years away from our present mess, alternative currency can be a useful stepping stone, with a greater ability to undermine the present state of affairs.  If we are to have money, that privilege, currently held by the Federal Reserve System, has to be held by someone.  All currencies have to be created at some point, and that will always entail power – for it’s not a matter of printing, but a question of to whom does the new money belong, and why.  One possible way to do this in a socially just manner would be to democratize the money-issuing capacity, make it the province of every individual.  Diffused and shared like that, no one could use it to dominate others.  It would cease to really be a privilege at all if everyone had it.  hOURS is constituted on this basis.  This is known as a ‘mutual credit’ system, and these exist in thousands of communities throughout the world, though relatively rare in the U.S.


Another way to handle the money-issuing power would be to marshal it for social justice purposes.  The Federal Reserve could issue dollars for things like public transit, battered women’s shelters, solar energy...  They could pay people to recycle.  You could probably think of 100 other great ways for dollars to enter into circulation.  What do they do in reality?  Oil and gas exploration, cutting down the rainforest, pesticide manufacture…  A lot of money goes to the government.  In other words, they fund war.  (Interestingly, the Fed is loathe to fund peacetime government deficits, but in wartime they gladly pump out all the necessary funds.)  hOURS on the other hand, at one time, (to give an interesting example of one possibility) toyed with the notion of putting out a sister currency known as CASHours.  Its purpose was to bolster “the commons”; any form thereof.  To those unfamiliar with it, ‘the commons’ is a concept that highlights the fact that for the most part, wealth just sort of exists, naturally.  Until privately appropriated, the commons can provide for all.  Air is currently an example of a commons.  What people need to breathe may be freely taken, without thereby leaving less for others.  Up until now we’ve been lucky no one has figured out a way to put a fence around it.  Someday that may no longer be true.  Perhaps the air will become too polluted, and people will have to be supplied by an air corporation, for a price.  That would be great for the economy, bad for human beings.  Other forms of the commons have already been privatized - the broadcast airwaves for example.  That’s a valuable public good currently being privately hoarded.  Nestle, with it’s infant formula, has stolen the commons of breastfeeding.  The genetic richness of species we use for food is a commons: It’s something that simply is, that enriches us all.  Monsanto is trying to change that with genetic engineering.  They want to hold a patent on what you need to eat.  What’ll they try next; taking a whiz in the ocean, and claiming it now belongs to them as a value-added product, so they can charge people to swim?  Basically, the stronger the commons, the less people need to kiss the ass of any ‘boss’ in order to provide for themselves.  Expropriation of the commons creates dependency and the ability for the expropriators to dominate others.  CASHours would have been issued for efforts that defend the commons and fight its privatization.  Pirate radio, La Leche League, much environmental activism; these were all eligible candidates, as were many more.  The type of money that the public uses has a great impact on our lives.  That’s what gives value to a currency.  That’s what conveys power to the act of its issuance.  Therefore, when commerce takes place with the US dollar as a medium, the banking industry and everything promoted by it grows.  Were commerce to take place in CASHours (Commons-Advancement Support Hours) the commons and its defenders would be bolstered.  Which would you rather?


It seems to me this obvious injustice surrounding the issuance of dollars is the main reason for the great disparities of wealth that we have.  Other things contribute too, of course, e.g. the ‘surplus value’ Marx wrote about, how workers are paid less than the value of what they produce, corporate welfare, yadda yadda...  And one can’t really measure the relative contribution of different factors like this.  But the monetary system strikes me like the proverbial elephant in the room that no one’s talking about.  It’s actually worse than I’ve described so far.  If you think the way the dollar gets spent into circulation (say with repairs to the building, or Alan Greenspan’s salary) is arrogant, you should know that most dollars are loaned into circulation.  That’s worse because they charge interest.  In other words the Federal Reserve banks assert a right to own even more than the money they ‘create’.  Say a Federal Reserve bank creates a million dollars: They own it, and they can spend it and receive a million dollars worth of goods/services.  Well that sort of thing isn’t enough for them.  It’s much more common for them to loan it at interest.  That means the next day the bank claims it’s owed a million ten, then a million twenty, a million thirty, or whatever the interest rate is.  But they’re not creating these extra dollars.  (The amount spent into circulation is far less than the interest, which accumulates relentlessly.)  So where do the loan recipients get the extra to pay it all back?  From other loan recipients.  Now we have a dog-eat-dog sort of society, where some, many in fact, have to lose.  Bankruptcies are a mathematical certainty.  And what happens during bankruptcy?  Banks seize collateral.  Wealth accumulates and accumulates and accumulates.  Now, actually, there is some room to fiddle here, by making additional loans.  And they have to, because if the banks stopped making new loans, and called in the outstanding ones, the economy would grind to a halt.  There would no longer be any money (no exchange medium, it having gone back whence it came) and the banks would own most everything.  That’s not really in their interests (no pun intended) – better to keep milking it.  So they keep making more and more loans in a frantic race to keep the level of bankruptcy from getting out of hand.  This causes another difficulty though: inflation, that being (in the big picture) simply a function of the amount of money in circulation with respect to the amount of commerce conducted in the currency.  When the amount of money is relatively high, and the level of commerce relatively low, then prices are high.  Turns out there’s a safety valve for this too: Increase the amount of commerce conducted in the currency.  If that sounds nice, sorry to inform you that’s just a euphemistic way of saying imperialism.  Actually, in addition to imperialism, this can be done through consumerism and purposeful waste, like planned obsolescence and purposefully making goods less durable.  The thing to note about bankruptcy, inflation, imperialism, consumerism and waste is this: They all suck!  If you thought that as we went from A cured by B cured by C cured by D cured… we would come to something that was a decent way for human beings to live/behave, you were, unfortunately, mistaken.  The whole system has to go.  We’re never going to get anywhere with that yoke around our necks.  Wouldn’t the human race be better off if we made goods more durable and didn’t design them to become obsolete, continually having to replace them, whilst simultaneously building up great mountains of trash – all as part of a complicated scheme by which we all continually “tithe” to the banking establishment?  [By the way, the religious connotations of ‘tithe’ are totally apropos.  Greenspan is regarded and acts like a sort of shaman or pope, privy to secret, sacred knowledge shrouded in mystery.  The keeper of the magic interest rates.]  All these things that suck, and more, flow inexorably from the aggressive act of creating money in the form of loans.  (It’s also bad for the environment to “discount the future” like that.)  The interest is a sort of slow, relentless, ever growing pressure on the human race.  Of course if we didn’t care about the dollar, the particular form of smack pushed by the Fed, if we had some alternative currency, constructed on a fundamentally different basis…


There are two types of activist work.  One is to struggle on this issue or that, trying to win particular battles.  The other is to change the rules of the game, maybe even the very playing field.  Success there is no victory in and of itself, and that might make it less attractive.  But the possibility of making thousands of other battles more winnable is very compelling.  It’s time to challenge the dollar, and thereby challenge those who have lots of dollars.


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