3 thoughts on “Avoiding central money”

1. julius 25 August 2007 at 2:58 am

   Hi Paolo, remember me? we had some mail exchange about Helpalot a year ago or something. The site is now up and running (we’re still improving on it, but the main thing is there), so check it out and take a profile :):

   http://www.helpalot.org
2. paolo Post author28 August 2007 at 2:11 am

   Hi julius! Sure I remember you! I think I created a profile on helpalot, I’ll try to find it now ;-)
3. Keith Post author30 August 2007 at 6:44 am

   Keith agreed that I post his reply to my message on http://distributedcreativity.org/ here.

   The reply is at https://lists.thing.net/pipermail/idc/2007-August/002785.html
   and pasted below.

   Paolo,

   Thanks for the links. I have spent some time with the film, Money as debt
   and recently wrote this about it.

   The film, Money as Debt — an underground hit in activist circles — seeks
   to explain where money comes from. Most people probably imagine that the
   government issues the money they use and that, under its surveillance,
   banks lend amounts that are covered by assets such as gold and property or
   at least by cash deposits. In fact, over 95% of the money in circulation is
   issued by banks whenever they make a loan. The ‘fractional reserve system’
   traditionally constrained them to lend up to nine times the value of
   deposits with the central bank; but this ratio has since increased and in
   some cases no longer exists. The real basis of money, the film points out,
   is thus our signature whenever we promise to repay a loan. The banks create
   that money by a stroke of the pen and the promise is then bought and sold
   in increasingly complex ways. The total debt incurred by government,
   corporations, small businesses and consumers spirals continuously upwards
   since interest must be paid on it all. The film briefly mentions some
   possible remedies, including local currencies.

   This attempt to demystify money is admirable, but the message is
   misleading. Debt and credit are two sides of the same coin, the one
   evoking passivity in the face of power, the other individual empowerment.
   The origin of money in France and Germany is thought to be debt, whereas in
   the USA and Britain it is traditionally conceived of as credit. Either term
   alone is loaded, missing the dialectical character of the relations
   involved. The role of state-sanctioned banks in creating money involves
   some sleight of hand; but they are also subject to the same financial
   constraints as ordinary businesses. The film demonizes the banks and
   interest in particular, letting the audience off the hook by not showing
   the active role each of us plays in sustaining the system. Money today is
   issued by a dispersed global network of economic institutions of many
   kinds; and the idea of economic growth is fed by our own norm of getting
   ahead, not just by bank interest.

   Money as debt is a fable that never moves beyond the nationalist
   assumptions of twentieth-century North American society. It says nothing
   about the current world economic crisis. This has features that are well
   enough advertised in the media. The huge trade and budget deficits of the
   US economy are financed principally by Japan, China, the Gulf States and
   Britain (but not the US banks). The dollar’s slide seems to be limited only
   by its role as the world currency and unit of account for the oil trade and
   by its creditors’ desire to retain the value of their Treasury paper. The
   interests at stake in the global energy economy are manifested in the war
   for Middle East oil; the trade imbalances reflect the transfer of
   manufacturing production and many services from the West to Asia.

   Moreover, since the invention of money futures in 1975, world money flows,
   fuelled by bets on the future prices of notional assets such as stock
   market indices (‘derivatives’), now dwarf the volume of international trade
   and national budgets. The US housing market is a major part of all this
   paper debt, especially the dodgy loans known as ‘sub-prime mortgages’ now
   suffering massive default. The faith of the British middle classes in
   consumerism financed by ever rising housing prices hovers on the brink of
   the financial crisis. Reference is occasionally made to the Great
   Depression of the 1930s, but rarely to more recent demonstrations of the
   system’s fragility: the global slump induced by the oil price hikes of the
   1970s or the crash of 1987. We could be entering a new stage of capitalism
   where markets have been rationalized and risk is managed efficiently; or,
   more likely, we are heading for a deflationary crisis of unprecedented
   severity. In either case, a lot more political education is needed before
   people can begin to reduce their dependence on an impersonal economic
   system and develop a more personally meaningful relationship to money.

   Cheers,

   Keith

   Original Message:
   —————–
   From: paolo massa
   Date: Thu, 30 Aug 2007 11:54:59 +0200
   To: keith at thememorybank.co.uk, playethical at gmail.com, idc at mailman.thing.net
   Subject: Re: [iDC] Don Tapscott’s Wikinomics: A Dismal Netology?

   I would like to suggest two resources that I think are relevant for this
   thread.
   They are linked from this blog post
   http://www.gnuband.org/2007/08/22/avoiding_central_money/

   1) The video “Money as debt”
   http://www.gnuband.org/2007/04/09/money_as_debt/

   2) And the ripple project. Ripple is an open-source software project
   for developing and implementing a protocol for an open decentralized
   payment network.
   http://ripple.sourceforge.net/
   In particular check the paper “Money as IOUs in Social Trust Networks
   & A Proposal for a Decentralized Currency Network Protocol”
   If you are interested, let me know your email address and I’ll
   probably open a little line of credit (trust!) for you on ripplepay
   ;-)

   P.