Money used to be gold and silver. That was how it was defined, as a measurable weight of precious metal. In those days, not so very long ago, money was solid and durable and easy to understand. Today, the metal is gone, but its ghost lingers on and still shapes our concepts, accounting and institutions.
What is money today? Literally nothing. You can't get any gold or silver or anything of value if you take your paper dollars back to the Treasury or the Federal Reserve. All they'll give you, maybe, is some fresh bills they just printed at a cost of two cents. These are bills they've no intention of ever paying. The Federal Reserve know they're running a racket, and pretty much admit it in their educational materials. From The Story of Money, a comic book for high schoolers:
All the government currencies are worthless. All the immense wealth that circulates around the globe is imaginary, a shell game.
Now a lot of people like me have figured out that the emperor has no clothes, but it doesn't do us any good to say so. I'm as dependent on this money game as any of you are, and none of us can afford to have it collapse.
So let's cross our fingers and hope it keeps going, and meanwhile see what we can learn from this extraordinary situation.
What keeps money going long after the gold and silver were removed? Faith. Our faith and belief in the value of money. The faith of every single inhabitant of planet earth. We all believe in the value of money. We have a universal faith that binds us, a religion, literally that which binds us together, and we reinforce it with daily ritual exchanges where we affirm the value of the sacred tokens we pass from one to another.
When a religion is universal, it just gets handed down as the facts of life, and we accept it without question. But this one is rather peculiar, if we think about it.
Normally we would base our religion on some powerful god or some fundamental truth or principle of the universe. But here we're basing our religion on what? Literally nothing.
But no, we say, our money comes from on high. It is given value by those who are empowered to issue it. The church hierarchy under the Holy Father, Pope Alan Greenspan, and his duly ordained ministers, have the power of transubstantiation. Instead of turning bread and wine into the body and blood of Christ, they turn new paper and accounting entries into money.
But they'd prefer we didn't see them do this. They don't perform their holy office in front of the congregation, except when Alan Greenspan makes his incomprehensible announcements about whether he's going to make more money or less money available this quarter.
They don't want us to know how our money is made, because we might lose our faith if we knew what was really going on. And we'd rather not know. We prefer to keep it a mystery.
But it's not. The Federal Reserve and the Treasury create cash and bonds in equal amounts and exchange them. The Fed also lends money to the banks to use as reserves, which means the banks can lend up to 30 times that amount to credit-worthy businesses and individuals. So the banks create most of the money.
In addition we have the financial speculators and manipulators who are not just traders. No, they have learned to create money too, through leverage, creating all kinds of financial instruments such as junk bonds, derivatives, futures, options and stocks whose value far exceeds any underlying reality.
So this is where we place our desperate faith. We let our values be created by the banking establishment, who increasingly don't need us anymore, and a motley crew of speculators. They are all pursuing their own bottom line, and hoping like us that the game doesn't crash. Because we've given these people our faith, these are the people who are running our world, and running it into the ground.
That may seem like bad news. Our money-gods have feet of clay. Nobody's in charge. Who knows how things will turn out?
But it's also good news. We've demonstrated that we can create money out of nothing, and keep it going on faith alone, even without any values to back it up. That is a powerful achievement. That proves that we've transcended materiality, and entered a new era where the power of faith and imagination governs our worldly affairs.
But we don't know that yet. We're still following the material ghost of gold and silver, still using the old zero-sum accounting system, where money is neither created nor lost, and those who do create the money follow material ends, pursuing their bottom line.
So the question is coming down to: Who creates our money, and with what values?
At present our money is created by the rich, to support the profit economy. This is the god we serve, that cares nothing for the poor or the planet, and is dangerously unstable.
We need to add new currencies to restore some balance and avert disaster. There are at least two possibilities that come to mind.
As an immediate counterbalance to the money created by the rich for the profit economy, we need money created by the poor for the nonprofit economy. This has been expressed most eloquently by Edgar Cahn with his Time Dollars. Time Dollars are created by anybody with an hour of service, and validated and banked by a nonprofit. The nonprofit can get matching funds or channel welfare and social services into this Time Dollars economy.
As soon as there is any regular flow of funds into the Time Dollars economy, something very magical can occur: The Time Dollars can become new money. It hasn't happened yet, but the potential is there. If the nonprofits follow proper banking practices, they can create new money just like the banks. It may take a little while to realize their power, but this is where we can turn our faith to support a new currency that is based on a higher value than greed by the rich, that is based on an hour of service by anybody.
The infrastructure is already largely in place. Nonprofits are found in every community and many are national or global in scope. Volunteer hours have been recorded for years. The records just need to be beefed up, treated seriously like bank accounts.
Now I'm not going to go into the details of volunteer hours accounting. That would take another talk. It's covered on my web site at various lengths. The medium-length article is called "The Volunteer Credit Economy".. I'll just hit the high points.
Point number one: Volunteer hours are the perfect example of win-win currency creation. The Time Dollar is a credit to the volunteer and also to the organization that provided the job. There is no liability created, as in win-lose accounting.
Point two: I'm suggesting that non-profits value their Time Dollars at $100 per hour. That will make people think, and I believe this value will work as a basis for integrating Time Dollars with the economy.
Point three: How is the creation of Time Dollars regulated? The principle at work here is that we accept and support Time Dollars created by those we think deserve to make money, and reject Time Dollars issued by questionable groups.
Following that principle, we may eventually question the worthiness of the banking establishment to create our money and profit from it.
Nonprofit currency is only a small stretch for our faith and imagination. It is still issued by institutions, still handled by established banking practices. Time Dollars can bring to the nonprofit sector the accountability and efficiency it sorely needs, so that we have a real economy working for social and planetary needs.
And it's easy to do. We can start it here. Prescott is a big volunteer town. We could put ourselves on the map like Ithaca, New York, population 29,000, with its Ithaca Hours. Talk to me if you want to start something now.
As I said, we need a counterbalance, a nonprofit economy to offset the single-minded rapacity of the profit economy. The profit economy needs it too. The profit economy must keep growing or it will crash. It needs new markets (the poor) and new money (Time Dollars) to keep going.
And there's a third source of money that may bring even higher values to our world. That source is ourselves as individuals, no longer giving our faith and power to institutions. I call this money free dollars, and at first it's just a game. What if we could create our own money?
Then it's an education, as we follow the implications. What are the values behind our money? What would lead others to value our money? What does this say about our relationships? How much are we worth? What are our inner resources?
Personal currency forces us to think, and not rely on others to define our values. It makes us take responsibility for our money at last, to accept our role as a cocreator of the world's money system, and not leave that task to unknown others.
So I'd suggest introducing free dollars along with Time Dollars, or even before, so we can learn what creating new currencies is all about. Free dollars would also meet the widespread demand for a barter currency. Barter systems are much more popular than Time Dollars, because people want an alternative currency that's their own.
Barter is still rooted in the old material economy, but it's a valuable stepping stone, as it involves both trade and personal relationships. Free dollars go beyond barter, as we discover the power to create currency out of nothing, that others will value because of who we are, not what we can do for them.
Once we understand win-win currencies we can go on to create more of them for different purposes, to create different forms of wealth. Information currency is a big one, that will probably take over from the shaky old money-god, and run our computers for us. Political currency can take our power back from the politicians and spend it on what we want, in direct electronic democracy. And game currency can be a lot of fun.
And there's a point there. The money we have now is only game currency, play money, created out of nothing. We've gotten in trouble by taking it too seriously.
Let's not make that mistake again. The new money we create is much more valuable, being based on service and human values. But it's still only a game. Let's never forget that.