Local currencies can help create sustainable growth and healthy communities.
Communities have long needed a more sensible means to create money. To date, debt has been the only way to catalyze purchasing power, and only through a national currency. Yet the essential process of monetization can be addressed locally.
When market demand falters and fiscal conditions worsen, the first outlays that feel the pinch are education and health care, the two largest budget items for communities worldwide. With debt the sole means of stimulating purchasing power, economies periodically stall. Who’s to blame? We are—all of us.
When it comes to money, we’ve all been educated in the same “Washington consensus.” This widely shared perspective regards financial freedom as a proxy for personal freedom. That point of view, in turn, has become our primary tool of perception with which—and through which—we do our seeing. From inside this mental framework, we can’t see monetization possibilities. It’s akin to trying to see your eyeballs or bite your teeth.
Most people have only a vague idea how money is created. They know the Federal Reserve plays a role in the U.S., but its machinations are obscure. That leaves us feeling helpless.
Here’s a tip. When you’re short of money, join with others to create your own. That’s legal, provided the currency can’t be confused with the Federal Reserve note a.k.a. counterfeiting. And provided any taxes owed can be paid in the national currency.
Here’s the recipe for healthy money. To maintain its value, back it with productive assets able to deliver real value in the form of goods or services. That’s how today’s economic troubles offer an opportunity for social entrepreneurs.
During the Great Depression of the 1930s, some 5,000 local monetary systems were used to catalyze demand. Those complementary currencies were secured by capital ranging from livestock to lumber. The physical nature of that security created confidence that these monies would retain their value. To secure money with precious metals misses the point. Gold and silver don’t produce goods and services. U.S. money morphed from gold to silver certificates en route to a motto that’s now on the dollar: “In God We Trust.” As confidence wanes, so does economic exchange.
Healthy communities need monies backed by the physical capital required to provide locally useful goods and services reliably. As yet, we’ve seen no alternative to debt—proven by a series of deficit-financed stimulus packages. As national currencies grow burdened by more debt, the need grows for more local currencies.
Healthy currencies must be secured by the physical capital essential to sustainability. That capital must include not only facilities to deliver education and health care, but the capacity to supply clean energy, safe water and nutritious food. To monetize the real wealth—well-being—relevant to communities requires practical means for matching local productivity to locally accessible purchasing power. With national policymaking mired in a flawed mental framework, that task falls to us.
Thriving communities need money backed by the capacity to deliver healthy goods and services. Which is healthier: money secured with debt or money backed by energy created by solar powered hydrogen reformers? The physical technologies required for healthy communities are known, proven and available. The missing piece is financial technology—the means to monetize.
What if a monetization strategy were adapted abroad to fund clean energy, literacy and health care in areas being destroyed by war? If monetization tackled those needs, could we redirect defense outlays to our own human needs? Seen through a consensus framework, defense outlays enjoy a perverse logic. Military spending creates jobs and purchasing power without needing to make goods that are useful to consumers and services able to compete for purchasing power.
There’s no one right way to monetize. The only wrong way is to pretend that today’s one-size-fits-all currency can meet all our needs all the time. Our leaders may wake up. They and we may yet realize we’re viewing our world through a flawed prism that denies us the possibilities we most need.
Decentralized and localized monetization must complement today’s centralized and nationalized currencies with their dependence on interest-bearing debt. As monetization adapts to the real needs of communities, currencies can be hardened, development revived and peace brought within our reach.
Jeff Gates, former counsel to the U.S. Senate Committee on Finance, is the author of Guilt By Association, The Ownership Solution and Democracy at Risk: Rescuing Main Street from Wall Street. Find out more: criminalstate.com.