Towards a Multi-Currency Eurozone

The New Scientist magazine has published my views on the creation, in Greece ,of parallel currencies to the Euro, at both local and national levels. Unfortunately the mainstream financial press continue to mislead the public about the potential for a multi-currency system.

Even the basics are poorly reported, such as how the major bailouts for Greece were for the creditors, mostly German and French banks, not for the Greek government or citizens (as even the IMF recognises). But when it comes to the possibility of governments issuing their own parallel currencies, mainstream journalists move into a mode of lampooning and scaremongering.

Typically we see reports of banking analysts scoffing at proposals for new Government-issued currencies as ‘extreme measures’ of ‘money printing’ that are ‘liable to devaluation.’ It is only possible for such views to sound credible because most of us do not understand the way the banks currently create our money. In advanced economies, well over 90 percent of money is issued by commercial banks when they make loans. As the Bank of England had to correct economists last year: new loans are effectively new money. This process is difficult to justify when a bank’s privilege to create money from nothing and lend it to government for a nice profit starts to clash with democracy, as it may now be doing, given the protests against austerity. The mainstream media continues to avoid representing the informed views of those who completely reject a system where banks create money from nothing and use it to buy government bonds and charge interest on them, even at a 44% interest rate, as happened in 2012. It is why in 2011 at a European Broadcasting Union organised TEDx event I called on over 300 people in media to offer more insight on monetary issues.

In the last few years, the fame of the digital currency Bitcoin has helped people to see that there are alternatives to official money. However, the answer for Greece and other countries facing austerity is not Bitcoin, or any currency that the average citizen has to buy with their scarce funds of official money. Instead, what is needed are new currencies that turn the future value that citizens can produce into a form of IOU today: the types I mention in the New Scientist article. There are many such innovations around the world, with particularly exciting initiatives in Kenya, as I explained at the United Nations recently.

The former finance minister of Greece, Yanis Varoufakis, is aware of some of these innovations. He told the Telegraph “If necessary, we will issue parallel liquidity and California-style IOU’s, in an electronic form. We should have done it a week ago.” Better still, he should have done that on Day 1 in office. But it seems the mainstream financial press cant deal with such imaginative ideas. Immediately the Wall Street Journal reported various unnamed sources as guessing the government sacked him for that idea. That’s strange, when previous (less left-wing) Greek governments DID EXACTLY THAT IN 2010, when they issued IOUs for payments of medical supplies as I explain in the New Scientist article. Instead, it seems he stepped aside for the reasons he implied, to stop personality issues being the cause for, or excuse for, a lack of agreement.

Why are the mainstream media so allergic to currency innovation, especially if led by a government? Is it

a) they haven’t got a clue about monetary economics or the history of currency

b) they are so immersed in the delusion that money is wealth that to consider how communities and governments can create their own money threatens their whole world view of how society should function

c) they are deliberately trying to undermine government and community currency innovation in order to please some in the banking sector who do not want nations to escape the debt-enforced transfer of wealth to the few, via austerity and privatisation

d) all of the above

I hope Yannis now has some more time to work on alternative currencies. It is important way beyond the borders of Greece. As I say in the New Scientist:

“Although people are focused on what to do in Greece and the Eurozone now, the implications are far wider, inviting all of us to think about the kind of monetary systems we want in a 21st century where humanity seeks to transition to a fairer, more sustainable world….

…Once the Greek government joins their citizens and entrepreneurs in creating alternative currencies that can exist alongside the euro, we will see the emergence of truly multi-currency societies. It would be apt as the birthplace of money, with the drachma over 2500 years ago, for Greece to lead the way into this future.”

In preparing the article I’m indebted to my friend and colleague Tom Greco, who has been in Greece for the past month working with communities, business networks, local governments and some members of the national administration to create a circulating exchange medium on the basis of future tax revenues. He calls them “Tax Anticipation Warrants” but I prefer to dub them The Greco, The idea is this currency:

1. Be spent into circulation by the government,

2. In a form that can be circulated,

3. As payment at par with the euro,

4. To employees, pensioners, contractors, and suppliers,

5. In amounts no greater than anticipated tax and other revenues in a six month period.

6. That they not be given legal tender status,

7. Nor be redeemable for euros,

8. But only in payment to the government for any taxes and dues, at par.

9. That they carry an expiration date to be one or two years after their first issuance.

10. But be exchangeable at par, prior to expiration, for any new warrants that the government might issue in the future.

Godspeed to Tom and other volunteer alternative currency designers in Greece and elsewhere.

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