by Crystal Arnold

Imagine a world of sufficiency where needs are met through a web of local relationships, where meaningful exchanges circulate goods and services independent of the availability of national dollars.

One of society’s most common misunderstandings about money is that it is an object, when it is actually an agreement of trust. According to Lewis Lapham, author of Money and Class in America, “Money ranks as one of the primary materials with which mankind builds the architecture of civilization.” Economic textbooks describe money according to its functions—a store of value, a medium of exchange, and a standard of valuation. Money itself is actually a symbol of exchange that carries value through agreement only. What would the numbers in our bank account be worth if no one would agree to accept them in exchange for goods or services?

In my view money is a social interface of provision, a tool for engaging with others to satisfy needs. As many people uncover their own behaviors and attitudes about money, they realize the way they relate with money is often the way they relate with most everything in life. Lyn Twist, in her book Soul of Money, writes, “Money is a current, a carrier, a conduit for our intentions.”

In dozens of communities across the United States, complementary currencies (CCs) have become powerful tools that generate resilience in local economies. CCs are created in a variety of forms including time hours, mutual credit systems, precious metals, and even seed or energy-backed coupons. Like national currency these new CCs are not mere coinage, they are a whole system of value transaction, exchange of credit, and agreement of mutual trust.

Complementary currencies exist parallel to the national currency, and, by design, fulfill a different role. CCs enable relationships and behavior to develop to match unmet needs with under-utilized resources, providing a way for people to engage in the local economy that is not limited by their access to dollars. Because diversity is a key element in resilient systems, which are able to adapt to change and reorganize wisely, these new exchange mechanisms reflect an evolving economic strategy of regions to encourage trade of local goods and services. New avenues of transaction open as latent human energy is accessed. By design, complementary currencies are at the heart of a localization movement.

The Current System

Currency expert Margrit Kennedy writes, “Money can be made to serve rather than to rule, to be use- rather than profit-oriented—and to create abundance, stability, and sustainability … [Although] money is one of the most ingenious inventions of mankind …[it has] the potential to be the most destructive or most creative.”

The creation of money has more cause than justification, as demonstrated by the $700 billion bailout of the banking system by the US government in October 2008. Where does this money come from? Actually, money is created by the banking system itself. Every dime of national currency in circulation today is printed as a loan to the federal government. This federal debt is backed by the government’s capacity to tax citizens. Each social security number, and attached human’s future taxability, is collateral for the private bankers who create currency. Economist John Kenneth Galbraith wrote, “The process by which money is created is so simple that the mind is repelled.” But these physical dollar bills are only a fraction of the picture. This national currency is then multiplied many times as loans deposited as numbers in electronic bank accounts. This second type of money is created through the magic of fractional-reserve banking, the system used to issue money through loans to individuals and businesses. Federal regulations allow banks to lend out approximately nine times the actual capital (think “currency”) on deposit at the banks. The banks’ multiplication of capital is considered to be bank “credit”— this “money” has never been issued as currency, and thus there will never be enough credit in the system to repay all of the debt. The system only thrives if the credit is re-churned through more loans and increasing debt and will collapse if too many banks demand repayment of debt. Not enough currency to repay all debts in the modern fractional reserve banking system requires perpetual growth and inevitable bankruptcies, concentrating wealth.

The fractional-reserve banking system goes one step further in creating imaginary currency—interest is charged on the loans. According to currency expert Bernard Lietaer (www.lietaer.com), there are three consequences to the charging of interest on money created through lending:

1) Systemic competition is encouraged among participants;

2) Endless economic growth is required for perpetuation of the system, despite falling standards of living;

3) Wealth is accumulated in the hands of a few.

Most of the assets that are called money are not actually physical bills, but bank accounts created through lending, with interest owed. Most national currencies are fiat, which comes from the Latin term “let it be done” and means “by decree.” The dollar’s usefulness results not from any intrinsic value or guarantee that it can be converted into gold or another currency, but comes from a government’s order (fiat) that it must be accepted as a means of payment. The US government relinquished its authority of currency creation in 1913 when the Federal Reserve Act was passed. The issuance of currency was transferred to the Federal Reserve Bank, a quasi-private entity owned by commercial banks.

As taxpayers we are responsible to repay the principal and interest that the US government owes on its massive debt—taxable labor and productive assets are collateral for these treasury bonds now held by governments, businesses and individuals. The top four holders are currently China, Japan, the United Kingdom, and oil exporting countries as a group (www.ustreas.gov/tic/mfh.txt). Many economists say the American government’s outstanding debt is reaching a point where a gigantic national default is likely. Systemic banking defaults have caused massive social and economic disruption in Mexico, Argentina, Russia, and South Asia in the last several decades. Implementing diverse trading systems can alleviate this shock.

National currencies and monetary systems sustain competition and perpetuate the diplomatic culture of international domination and economic oppression. Lietaer said, “Greed and fear of scarcity are, in fact, being continuously created and amplified as a direct result of the kind of money we are using.” Divide and conquer is the strategy of the ruling class. For the banksters to continue their game there must be competition to distract the masses. Fear, racism, and separation have driven much of humanity to search for happiness and meaning in a dollar. Through this misery of scarcity there shines a deep desire to unite and connect with each other in a meaningful way, and to harmonize human actions with the earth.

Monetary systems shape social behavior. The transformation being implemented in CCs is not about taking away from the haves to give to the have-nots, but rather giving everyone an equal opportunity to generate new wealth in a new monetary system.

Cooperation and Relationships

Natural ecosystems thrive because of diverse elements interacting cooperatively in a balanced, healthy competition. This harmony of forces generates integrity for the whole and supports the component integrity of individuals. When basic needs are met, there is cohesion and rest, and humans dance together in a nourishing rhythm of life, trading with each other and with the earth. Born from this beat is creative generosity.

Real value is not in currency itself, but in the relationship formed through exchange of currency. The word “community” comes from the Latin cum (which means “together, among each other”) and munus (which means “gift”). That dollar bill in your pocket is only worth what others are willing to trade—it is a score-keeping representation of exchangeable worth.

Money as debt has been used as a tool by banks to extract resources and energy, both from land and people. Catherine Austin Fitts (www.solari.com) describes this as a “tapeworm economy.” This evocative metaphor illustrates the parasitic relationships created by the dominant financial system in which desire to consume more is infused in Americans through advertising, much like a tapeworm which injects its host with a chemical to make the person crave sugars that it then feeds on. Modern society is saturated with marketing images that create an insatiable hunger for consumption. Humanity is awakening from the spell of a centralized currency system that perpetuates scarcity, competition and hyper-consumption.

Intelligent Design and Trust

Financial permaculture (www.finalcialpermaculture.org) is an exciting and evolving field of interest. An economic system reflects patterns observed in a natural ecosystem, where communities of contributors take what they need and generate value for the entire network. Financial permaculture—a model that takes a whole ecosystem approach to economics—is guided by principles that can give a positive net return to investments, not only to individuals but also the entire system.

The velocity of money, or speed at which it is exchanged in a given period of time, is the primary indicator of the health of the local currency system. By watching this flow and ensuring that there is a diversity of goods and services exchanged, the managers can keep the system stable and vital. Lietaer writes, “Local currency creates work, and I make a distinction between work and jobs. A job is what you do for a living; work is what you do because you like to do it. I expect jobs to increasingly become obsolete, but there is still an almost infinite amount of fascinating work to be done.”

Mapping the species and their behaviors in an economic ecosystem is an important part of the design process. By encouraging local sourcing of business needs, local supply and distribution channels that reduce dependence on imports into a region can be secured, and the exchange system becomes a self-reflective mechanism for values. Author and currency designer Tom Greco explains “When properly designed and managed, [complementary currencies] can provide a strong component in building economic equity and participatory democracy.”

The sacred responsibility of stewarding the earth through human relationships has been discouraged by the nature of modern currency design. Feelings of betrayal, anger, and grieving are a result of the current financial manipulation. Transparency cultivates trust, and in many online CC systems reputation is built through reviews and recommendations (like eBay.) Each “bank” account is on display, but instead of being respected for having large amounts of credits stored, merit is based on the number of transactions each business or individual makes and the quality of goods and services that are supplied. This incorporates qualitative measurement into transactional decisions, instead of relying upon the stark quantitative analysis of conventional currency based upon the false assumption that more is better.

In essence, a free-market economy will facilitate exchange at a fair price based on the opposing forces of supply and demand. The indigenous market culture develops relationships through negotiation of prices. This wisdom heals the sterile consumption loop of price tags and self-check outs as the fabric of community is rebuilt through meaningful exchange using CCs.

Currency creation is shrouded by mystique and power. Using CCs, many pockets of humanity are discovering a river of treasure that flows when exchange is independent of national currency. Mutually beneficial relationships are cultivated through trade of local goods and services, while equitable designs of the governance, funding and structure of currency system are emerging.

In this time of global financial transformation, the concept of money is evolving. This illusive shadow of social interface is being exposed, and the old agreements and structures that do not serve the collective are changing. Simultaneously, complementary currency projects are emerging as a powerful tool to develop community resilience.

Crystal Arnold earned a BS in International Economics from Southern Oregon University in 2007, has completed the Conscious Bookkeeping course, and is creator of the Money Metamorphosis workshop series. She is dedicated to creating a resilient local economy, both through business consulting and the development of a complementary currency. Contact her at This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or (541) 227-3577, or read more at http://moneymetamorphosis.us/