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You are here: Home >> Economy & Law >> A growing call for free currency worldwide. By Sulaiman Wilms
19.08.2009 A growing call for free currency worldwide. By Sulaiman Wilms
The end of coercion?
(gm). The symptoms of the global predicament are well known. From the struggle to dominate contested regions and their energy routes, to the anarchic privatisation of violence, and the blatant crisis of the current financial order – all these are frequently evoked. But beyond all that, on a quite different plane, alternative models are appearing and gaining wider recognition. And at their heart, however differently formulated, is the desire for monetary freedom.
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What do financial executives, Muslim jurists, small retailers and the leading Eurasian politicians all have in common? On the face of it, nothing at all. And yet through this unlikely cross-section there is a growing awareness of the defectiveness of the dominant financial order, coupled with a desire for new reserve currencies, local money-flows, and the freedom to choose a preferred mode of payment. Admittedly this is not a subject which can claim any kind of global consistency; the context and motivations involved are too diverse. A representative of traditional monetary liberalism cannot consider himself in the same boat as a traditional Muslim jurist. Yet the question of money affects everybody on a daily basis.
The key question is one of freedom. No matter which system or culture you find yourself in, the contemporary discourse on freedom nearly always pertains to the political or private realm; only seldom is a connection perceived between freedom and the individual’s ability to choose the means of payment he or she uses. While “civil rights and liberties” are supposedly being defended vigorously (or imposed by force) in the Hindu Kush, in the chaotic suburbs of Baghdad and Falluja, in the Horn of Africa and elsewhere, the personal and social right to choose a means of payment is severely limited wherever you are in the world.
Think globally, act locally Confronted by a financial economy which has made ecological destruction and profit-driven growth its raison d’être, people in North America and Western Europe – and elsewhere – began to experiment with alternative currencies long ago. Their interest has not been of an academic nature, rather they have wanted to strengthen local, ecologically sustainable money circulations designed to counteract the capital drainage brought about by globalisation. Even functionaries in local banks consider complementary currencies as one means of tackling the problems faced by local communities and the way their money circulates.
According to the E.F. Schumacher Society, regional currencies existing in the USA include the Humboldt Community Currency in Eureka, Berkshare in the Berkshire Region, Ithaca Hourse in Ithaca, and many others. Canadian local currencies are to be found in Calgary, Salt Spring Island, Tamworth and Madawaska Valley. Across the Atlantic there are similar projects in the United Kingdom, Switzerland, Germany and France. In Germany, the largest regional currency is known as the Chiemgauer, which is used successfully in parts of the country’s south. This currency gets its name from the region around Chiemsee lake, and it has played a pioneering role in Germany.
The Chiemgauer is already well developed and has proven itself in practice. Many producers and service providers have joined in the Chiemgauer scheme, and two agricultural economic cycles have emerged. These include a cheese dairy which pays the shepherds who supply it in Chiemgauers, which these shepherds use in turn to pay for the goods they purchase from local retailers; the retailers then pay their suppliers using the Chiemgauer.
Werner Zimmermann and his funding association in the east German town of Ludwigsfelde are also involved in a local currency. This Christian group is looking for a gate through which they can escape the financial collapse which appears imminent. To them the way out of the dilemma is quite clear. “The solution is called Regiogeld, one-to-one with the Euro,” explains Zimmermann, “anyone who is a member of a Regionalgeld funding association can make payments to other members with it.” All that has to happen is for the principle to be accepted more widely.
Inhabitants of the American town of Berkshire can purchase a Berkshare for 95 cents at any of five participating banks – and in return they receive a five per cent discount over the dollar by spending their Berkshares at any of 400 participating local businesses instead of using dollars. For every transaction they make, they save five per cent. Shop-owners may lose five cents whenever they have to exchange their Berkshares for dollars at the bank (which they may have to do if they want to buy something which is not produced locally), but nevertheless they are normally happy to be able to retain their loyal local customers, whom they might otherwise lose to chains like Wal-Mart, Starbucks and Barnes & Noble.
“Local currencies help educate people on the importance of independent businesses. They bring people away from the Internet and back on to the high street,” explains Susan Witt, the founder of Berkshares.
Common to all these currencies is the attempt to provide an answer to the pressure of globalisation – part of which is the domination of retail chains over local traders.
“Regional currencies allow the regions concerned to solve many of their problems themselves,” believes regional money expert, Professor Margrit Kennedy. Proponents of Regiogeld do not want to abolish their national currency, but, as economist Professor Scheiper points out, “The Euro is a world currency and does not take account of regional specifics nor of the general wellbeing of the region.” Kennedy advises anyone who intends to set up a new complementary currency: “Don’t promise too much – explain the pros and cons clearly in advance. It is a good idea to have the whole experiment evaluated by a scientific institution. Regional currencies are after all a new approach, and certain prejudices must first be overcome in people’s minds in order to earn the necessary credibility.”
SCO wants a new reserve currency To look at the matter from a completely different perspective, the search for alternatives to the spiralling dollar as a reserve currency is well underway at a Eurasian level. The current shift of power towards Asian power blocs has of course given life to a critique of the existing reserve currency. While typically distancing themselves from the foreign policies of Washington, the big Eurasian powers have now also begun to criticise the existing dollar-dominated financial order. Russia and China especially are interested in an alternative to the existing system. They, after all, have so far never benefited from fluctuations in the value of the dollar and the quantity of dollars in circulation.
On 16 June 2009 the leaders of the countries belonging to the Shanghai Cooperation Organisation put their weight behind a Russian proposal involving the use of national currencies for international settlements, as well as introducing a common currency for the region. This means of payment is to be the equivalent of the ECU (European Currency Unit) which the European Community used before the Euro was introduced. At the summit, Russia’s president, Dimitri Medvedev, said, that “The current structure of reserve currencies and the most important reserve currency – the US dollar – have not worked as they were supposed to,” and that the Russian rouble “would hopefully become a reserve currency in the foreseeable future.”
German journalist, Ralf Streck, believes that China’s and Russia’s strategy is aimed at a “gradual disempowerment of the dollar.” Arkadi Dvorkovitch, financial advisor to the Russian President, has announced that Moscow will be investing a proportion of its reserves in Brazil, China and India, and that Moscow is “expecting its partners to invest in Russian portfolios.”
G8 nations remain uninterested As it happens, Russia and China (and also, at the last minute, France) wanted to put the issue of new reserve currencies onto the agenda of this year’s G8 summit which was held from 8 to 10 July in Italy. French Finance Minister Lagarde declared prior to the summit: “We ought to discuss a better coordination of exchange rate policies.” Also in this context, at a meeting in Aix-en-Provence, France, the minister said that the membercountries should talk about the roles and weighting of the various currencies, since these have changed as a result of the crisis.
Observers were hardly surprised when the summit organisers risked a spat with Moscow and Peking in the run-up to the event, by not placing the explosive theme on the agenda. Aside from generalised formulations like “global imbalance”, the paper presented to Reuters in advance of the event contained no reference to the subject at all.
In a review of the goings-on at the Summit, Gerald Celente, founder and director of the Trend Research Institute, told Russian TV station Russia Today that new reserve currencies represent a threat to the American economy. He explained how the USA would lose with a new reserve currency, since at the present moment most of the world’s trade is conducted in dollars. If parts of the world were to stop using the dollar, this would cause the currency to lose value steadily. In de facto terms, he says, US consumers are “borrowing” money from foreign suppliers like China, who in turn would like to free themselves from dependency on the dollar. US journalist Nicole Kardell described the G8 statements on the subject as “very weak.” Kardell believes it highly likely that the proposal tabled by the Russian President and supported by the presidents of Brazil, India and China (who together with Russia constitute what is known as the BRIC nations) has genuine prospects of success in the future.
Most observers must by now realise, according to Ralf Streck, that there is no getting around the BRIC countries any more. With around 40 per cent of the world’s population, they generate approximately 15 per cent of global output, and own almost half of the world’s foreign currency reserves.
For the “privatisation” of money Many people now recognise that the foundational reality of modern economics is that we transact and pay using easily reproducible paper money. Recent extreme monetary policies – especially in the USA and Western Europe – have taught us that the amount of paper money in circulation basically knows no limits. This leads to the recurrence of dangerous “bubbles”. And yet only by increasing the quantity of money can bankrupt banks be kept alive at all.
The question which has to be asked is quite obvious: What can be done about this Bubble Economy? In a society which prides itself on its freedoms, it is inevitable that sooner or later people will begin to question the state’s monopoly on money. In a ground-breaking article in the Frankfurter Allgemeine Zeitung on 12 June 2009, authors Thorsten Polleit, Michael von Prollius and the liberal Bundestag member, Frank Schäffler, asked openly and without any ideological blinkering: “What if money were a private commodity which had to assert itself among rivals just like any other kind of goods?”
“The first financial crisis of the 21st century was caused by bad money.” However, “today’s methods of counterfeiting money are much more sophisticated than those of the 14th century.” To make things more complicated, commercial banks are allowed to “carry on the counterfeiting of money in the form of the creation of money and credit,” claim Polleit, Von Prollius and Schäffler, “and indeed are encouraged to continue doing so in order to stimulate the economy and growth as the state demands.” The consequences of all of this are quite obvious: “The loss of trust in money as a means of exchange, and the destruction of the global pricing system by bad money, lead to a decline in economic cooperation, a decline in individual transactions, and therefore a reduction in global social prosperity.”
The solution, they say, is to privatise money. “The privilege of corrupting the creation of money and credit must be taken away from central and commercial banks.” And part of this process, they explain, should be to assess whether gold might be helpful in overcoming the crisis and creating “good money”. The German authors espouse a system of “free banking” in which a “free market currency” would offer an alternative to the means of payment proliferated coercively by the state’s monopoly on money, and which, they say, are “adrift” and “unsecured”. No-one will choose bad money willingly if they can get good money on the market, say the authors.
The first step, as also proposed by the economist, Murray N. Rothbard, would be to bind banks’ liabilities to money at a fixed rate of exchange. Simultaneously – and this would affect people directly – the banks’ deposits ought to be convertible into a corresponding quantity of gold.
In a second “decisive step”, the monetary system could then be privatised, say the authors of the FAZ article. People in the market would then have “a free choice as to their means of payment.” But, as well as gold it would be conceivable that other goods such as silver, copper, platinum, wheat and shares in property could acquire the status of money. In such a system, the clear-sighted analysis states commercial banks could still issue credit in relation to their deposits, yet they would no longer be allowed to create money and credit out of nothing.
“Free Banking promises not only better money than the paper money issued by the state and effectively based on coercion, it could also ensure that the economy is less prone to fluctuation, since free-market currency counteracts mis-investment and therefore economic crisis. (...) Good money would in the end come out on top in a free market.”
A dialogue of facts Contrary to the notion of a Clash of Civilisations, it would seem that, even if only subconsciously, an awareness is developing at different levels not only of the importance of monetary issues but also of the necessity for new solutions.
The fact that criticism is coming from so many sides – as with the desire for alternatives – is testimony to the boundary-breaking, connective nature of the question of money. It may sound sloganesque, but it does come down to a question of sustainability and freedom – not the freedom we might have imagined, but a new, exciting kind.
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