[PDF]Money: Understanding and Creating Alternatives to Legal Tender

THOMAS H. GRECO, JR.





Understanding and Creating
Alternatives to Legal Tender

money



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With a fore word by VICKI ROBIN,
author of Your Mon&y or Yaur Lifo






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MONEY

Understanding and (reatin^
Alternatives to Legal lender

THOMASH. GRECO, JR.



Foreword by Vl(ki Robin



E-book Excerpted Version

ChelseaGreen Publishing Company
WhiteRiver Junction, Vermont



Dedicated to champions of

justice,

equity,

and freedom,

e^erywliere

Copyright 2001 ThomasH . Greco, jr.

Fore/vord copyright 2001 Vicid Robin.

Illustrations copyright 2001 Karen Kerney.

A II rights reserved. N o part of this book may be transmitted or reproduced in
any form by any means without permission in writing from the publisher.

Designed by DedeCummings Design.

Printed in United States.

First printing, October 2001.

04 03 02 01 123 45

Libraryof Congress Cata login g-in -Publication Data

Greco, ThomasH ., 1936-

M one/: understanding and creating alternatives to legal tender/

ThomasH . Greco.

p. cm.

Includes bibliographical r^erences and indeK.

ISBN 1-890132-37-3 (alk. paper)

1. M one/. 2. Legal tender. I. Title

HG221 .G77 2001

332.4'2042-dc21

2001042155

Chdsea Green Publishing Company

P.O. Box 428

WhiteRiv&Junction, VT 05001

800-639-4099

www.chdseagreen.com



E-BOOK CONTENTS



Formord xv

Pr^ace xviii

Introduction xx

Part I. Monetary Realities and Official Illusions

I. What's the Matter with Money? 3
Symptoms of Disease 4
TlireeWaysin Wliicli Conventional Mone/M alfunctions 4
How Money Is Created 4

Sidebar: An Example of M oney Creation 8

Why! herelsNe^er Enough Money 8

How M oney Is M isallocated 9

How Money Pumps Wealth from thePoortotheRich 11

Sidebar For Whom the Debt Tolls 12

4. What Is Money? 22

D^initions 23

The Essential Nature of Money 23

The Exchange Process and the Purpose of Money 24

H istorical Forms of Money 25

TheM oney Circuit 26

Bank Credit Money and the Interest Burden 29

Part II. Connplennentary Currencies, Past and Present

II. Recent M odels and Developments 101
Tucson Traders 101
ThedoMAK "Barter" Circle 106
Toronto Dollars, "MoneyThatBuildsCommunity" 107
Friendly Favors 112
Equal Dollars (=$s) 114
T heDe/eioping World Takes theLead 115

Part III. Monetary Transfornnation and Connnnunity Ennpowernnent

13. Mutual Credit: The Foundation for Community Currencies 136

WhatlsMutual Credit? 136

How a M utual Credit System Works 138

Basic Steps in Organizing a Mutual Credit System 140

Continuing Issues in Mutual Credit Systems 142
Strategies for Enhancing M utual Credit Systems

and Gaining Acceptance 144

Part IV. Currency Design, Innprovennent and Innovation

22. Youth Employment Scrip (YES) 241

TheYouth Problem 242

TheM oney Problem 244

How Does the YES Program Work? 245

Benefits of theYES Project 241

Involving Local Businesses 248

Program Participants and Agreements 249

Sidebar YES Questions and Answers 252



FOREWORD



Sometruths are harder to takethan other s. The really hard
ones are turning pointsin our maturation, our understanding of thisworld
we live in. Losing Santa but discovering that Mom and Dad are the ones bringing
you presents might bea tolerable trade of fiction for reality But learning that
M om and Dad don't love each other anymore and are getting a divorce is an
earthquake that might rock your world for life. To use another analogy learn-
ing that the earth is round was revolutionary 500 years ago but is apparently
"ho-hum" now. Yet try looking "up" at the stars and thinking of them as being
"down" (just as true) or "out" and see what your insidesdo. Try thinking about
sunrises and sun sets as the earth rolling toward or away from the sun and see if
everything changes. When truth — perhaps known but suppressed for sur-
vival — erupts, often rage, relief, sorrow, confusion, and liberation flow out like
lava from our core. Tom Greco's revelationsabout the reality of money have
this kind of power to change you forever.

In Your M on e/ or Your Life \Ne examined certain truthsabout money that could
liberatepeoplefromconsumer hypnosis. Weasked, "What isthe reality of money
to you?" Without understanding our economic system, people could use the tools
in thebooktoseewhetheror not their relationship with moneywas buying them
the life theywanted. Without understanding markets and trade, peoplecould see
that money was something for which theytraded their most preciousgood: their
lifeenergy Without anypolitical or scientific sophistication about how the world
does— or should — ^work, people became naturally good resource managers, nat-
ural ecologists, natural buildersof stronger communitiesof sharing. They did
so because they had tools to evaluate the flow of money and stuff through their
lives in termsof the amount of happiness and meaning that flow produced. It
was, and still isfor hundreds of thousands around the world, a transformative
process. It didn't involve new knowledge, but a clearer way of seeing that more
accurately tracked with reality Stepping into alignment with the way things are
gave people the capacity to invent, in their own life circumstances, ways to save
money and liberate themselves from mindless consumption. Their behavior,
from the old mindset, might have looked like sacrifice or deprivation — but they
all reported being happier and more able to live the life of their dreams.

These dreams, however, happen in a larger context. Personal transforma-
tion merely enables the individual to ultimately encounter "the rules of the
bigger game."



6 MONEY

Tom Greco bringsthe force of years of Study and practical application to
explaining a lynchpin in thisbigger game: how money is created and thecon-
sequencesof that choice. Like Dorothy in the Wizard of Oz, he heals us by
whisking back the curtain that reveals a small and very human device behind
a grand illusion.

A wise person once said, "It is the sign of true intelligence to look at what
everyone else thinks is normal and to find it very strange indeed." If this is
the case, Tom Greco is truly intelligent.

Part 1 is where Greco turns our world upside down. He explains, clearly
that just as presents don't come from Santa, money isn't a simple, wholesome,
and value-neutral artifact. It is no longer backed by real wealth, and it isn't
created bythe government or by people but rather by banks, when they make
newloansand the interest on these loans requires the very growth economy
that is transgressing the limitsof human communities and the natural world.
Fully 95 percent of money is based on interest-bearing bank loans. He says:
"How money is brought into being has everything to do with the kind of soci-
ety we bring into being and that society's impact on the natural systems we
rely on."

How money is created, by whom, and on what terms actually creates an
artificial world of winners and losers, a world where abundantly creative
humans are pitted against one another for scarce money while all around
them — and in them — is the real wealth to create a rich life. Again and again,
Greco tells us: "By issuing money to unproductive or privileged clients of the
money monopoly at more favorable terms, and by demanding higher interest
rates from the rest, the banking system redistributes wealth from producers
to privileged nonproducers."

From the foundations of money creation, Greco shows us how money
banking, and finance interlock with our institutionalized agreements about
property ownership, corporate power, taxation, and the like. This perspective
allows us to see how the seeming cacophony of issues being lifted up on the
streets at every meeting of the World Bank, the World Trade Organization,
the International Monetary Fund, and the World Economic Forum all spring
from the same source. This protest isn't, as the media would have us think, just
sour grapes on the part of underdogs with nothing better to do than bite the
hand that feeds them miracles like antibiotics and telecommunications and
the Green Revolution. It is making visible and audible the partsof the com-
munity of life on Earth that are getting the short end of the stick— a stick that
could be a very different sort of artifact.

The hope Money holds out is that there are other ways to create money
that support social justice, community self-reliance, economic democracy
and personal freedom. Money it turnsout, isnotthe root of all evil; nor isthe
loveof it, though institutionalized greed as practiced among some of the privi-



FOREWORD 7

leged is surely a travesty. Money— in theformof complementary currency— can
be a very creative and life-serving medium of exchange. Greco isnotadvocating
a rupture with the past. While this book is revolutionary hecallsfora slow rev-
olution. He suggests that we step out humbly by providing local communities
with a way to buy and sell some goods and services using a self-created means
of exchange that isn't based on debt, interest, and distant financial decisions
made solely for economic gain. Make no mistake, however. The impact of this
local trading ability if developed in an intelligent and sophisticated way could
shift our society away from dependence upon unsustainable and ignoble ways
of meeting our needs.

In Part 2 Greco teaches us the fascinating history of complementary cur-
rencies. It's a story filled with both surprise and asenseof familiarity. Trading
stamps, store coupons, discount matinees, entertainment books, and air miles
are all formsof complementary currency. You pay part of the price of an item
in something other than dollars. Volunteering and "house work" (washing
the dishes, cooking, shopping) arealso activities that fulfil I human needs with
no exchange of money I ndeed, these are all strategies that individualsdiscover
through doing the9-step program in Your Money or Your Life. To maximize
the value of each dollar, people quickly learn that developing do-it-yourself
skills, creating sharing networks, being smart shoppers, and keeping posses-
sionsfor a longtime can yield a low-cost yet high-quality life. Greco shows
that by making these choices systemic rather than individual, communities and
the Earth can prosper.

Parts 3 and 4 are the recipe book for those who would relish giving the
creation of a complementary currency a try Will you be the one? Social inno-
vations require champions to turn good ideas into living realities. Social inno-
vators willingly buck systems, tinker, make adjustments, maintain the faith,
solicit feedback, and — as a reward — have meaningful lives and even, some-
times, great success. While few readers will have the will or time to set up full-
scale complementary currency systems, these sections round out the picture.
No reader can henceforth blindly accept that there is no alternative to the
sorry rules of the conventional money system.

Having new road mapsfor healthymoneyin ahealthyworld isas vital to our
souls as food, air, and water are to our bodies. Tom Greco has given us a
grounded, well-researched, comprehensive, and fascinating account of how
money and commerce could work for our deeper values of justice, caring,
community and the Earth.

— ViCKI RO BIN



PREFACE



For morethan twenty years, I have been intrigued and engaged by
"the money problem." Prior to that I didn't even lproblem, despite the fact that my profession as an educator in business admin-
istration placed me in the midst of business, finance, money economics, and
the "science" of management. Like the vast majority of my colleagues, I had
been schooled in the orthodox theories and views, but, more important, we
had taken our monetary system as a given.

ur job was to teach students how to "play the game" within the context of
the rules as they were defined for us, and the rulesof money banking, and
finance were fundamental in definingthatgame. Who was! to question them?
It was not until after I had experienced a personal crisis and emotional cathar-
sis that my mind was opened and I began to look more deeply into the ways
of the world. There was too much that did not make sense; too much that was
unjust; too much inequity, violence, repression, hunger, disease, and needless
suffering. Why I asked, must it be like this?

1 began an earnest inquiry as I attempted to discover the root causes of such
pervasive problems. As I embarked on my self -directed program of reeduca-
tion, I realized that I first needed to prepare myself for the journey by work-
ingon myown faults, limitations, and inadequacies. I wasfortunate to be living
in a time when there was a burgeoning of activity related to "personal growth,"
"self-awareness," and "consciousness raising." I took advantage of many of the
available opportunities.

About the same time, I began intensive exploration into a wide variety of
subjects. Having had my values, attitudes, and core beliefs shaken, my mind
was open to consider anewthefoundationsof our social, political, and eco-
nomic institutions. As my quest for root causes progressed, I began to focus
much of my attention on the institutions of money, banking, and finance. I
soon came to realize that, despite all my education and degrees, my under-
standing of money was rudimentary at best. I came to understand that the kind
of money we use today and the mechanisms by which it is created and con-
trolled are fundamental determinantsof the distribution of power and wealth
in the world and are, in fact, among the major structural obstacles to peace,
freedom, harmony and a healthy environment.

My first book on the subject, M one/ and Dd)t: A Solution to theGlobal Crisis,
explained the nature of money identified fundamental flaws in the current



PREFACE 9

monetary and financial system, and suggested an approach to resolving the
problem of exploding debt and the social and environmental degradation that
it causes. That book also laid out the foundation principles necessary for the
creation of both a more rational means of value measurement and more
humane and equitable forms of money (or other structures enabling the
exchange of goods and services).

The second book, New Money for H ealthyCommun i ties, was written to com-
plement that earlier work. While Moneyancf Debt focused on highlighting the
nature of the problem and outlining general principles and global prescrip-
tions, New M one/ for H edithy Communities proy'ided more specific detailsabout
exchange alternatives: their essential design elements, howtheywork, and how
theyare able to empower ordinary people and local communities. It described
exchange mechanisms that have worked in the past as well as some of the
contemporary local currency and exchange efforts. It was intended to serve
asa how-to manual. It identified pitfallsto be avoided, and it proposed specific
methodsfor transforming the exchange process— methods that are rational,
equitable, and empowering and that can be easily implemented at the com-
munity level by small voluntary groups.

This present work continues those earlier efforts in a more complete and
better way focusing on what can and is being done, not only at the local grass-
roots level, but also at the levels of business, government, and global trade.
Whilethecommunity currency and private exchange movement hascontinued
to develop and mature, I have, through additional reading and experimenta-
tion, both broadened and deepened myunderstandingof theissuesinvolved in
the process of economic exchange. This book includes many new insights and
understandingsand describes several ofthe more important developments that
have occurred in the intervening years since my other books were written.
Chapters 1 and 4 provide a good example. These two chapters together com-
prise, I think, a clear and complete, yet concise exposition of money Theyare
adistillation of many volumes and reveal thesimpleessenceof money Another
example is chapter 14. It provides a classification scheme for the basic types of
currencythat have been developed and tried. Thisis, to my knowledge, the only
completetaxonomyofcommunitycurrenciesdeveloped to date. Other sections
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