Your Money and Your Life

This article first appeared in Conscious Choice.


Right now, our economic system is teetering as the crash of the subprime mortgage market reveals deeper faults in the banking and insurance industries. Operating with little oversight in the last years, bankers devised complex instruments to make massive loans between financial institutions, generating short-term profits. As liquidity dries up, the banks and insurers are struggling to pay off these debts, forcing the central banks and the Federal Reserve to pump larger and larger sums – hundreds of billions of dollars – into the financial sector.

While this crisis is severe, such paroxysms happen periodically. While some believe this to be a natural process through which the global market corrects itself, others argue that the financial system has underlying design flaws that need to be addressed. Faced with dire consequences of inaction, the financial institutions and government regulators will work together to create a settlement that preserves the illusion of propriety – most likely at great cost to taxpayers and mortgage holders. However they resolve it, this meltdown is an opening for a deeper discussion on how money functions in our society. We have the chance to propose real options that could make the financial system more equitable, as well as sustainable.

We tend to forget that money is, fundamentally, a social agreement, not something natural or elemental. In fact, since the U.S. dollar went off the gold standard in 1971, it is hard to pin down what money actually means, beside virtual bits spinning in the global casinos of the world's financial markets. Bernard Lietaer, a former currency trader and one of the principle architects of the Euro, believes that the economic logic inscribed in our currency is the basic cause of unhealthy and predatory aspects of our social system.

In The Future of Money and other works, Lietaer analyzes the historical evolution of monetary systems, making a distinction between "Yang" currencies that foster competition and individual wealth and "Yin" currencies that are future-oriented and support the health of communities. Many cultures used both at the same time, but our currency is purely Yang, inciting cutthroat behavior. It is interesting to consider that "Wall Street" takes its name from the original barrier built by Dutch settlers to keep out Native Americans, whose primary form of exchange was the gift, rather than the market. We have maintained that wall ever since.

Lietaer has proposed a complementary currency, the Terra, that he believes could be used as a global standard for making trades. The value of the Terra is linked to a "basket" of commodities sold on the stock market, and therefore does not float in an abstract void, like today's currencies. Use of the Terra also involves a "demurrage" charge - in essence, negative interest - which increases over time. In other words, the Terra would depreciate in value the longer it was held, and therefore would naturally lead to less hoarding, encouraging capitalists to spread wealth. (More information about the Terra can be found here: Ideally, the Terra would be combined with local currency initiatives, such as Time Dollars or LETTS, which keep value circulating within communities.

That the monetary system needs a serious redesign becomes evident when you spend some time pondering the matter. "By controlling the creation and allocation of money, the ruling class maintains near total control over the lives of ordinary people and the resources of the planet," writes David Korten in The Great Turning. The basic system by which banks loan money and collect interest on the loans creates artificial scarcity, as the individuals who take the loans have to compete against each other for the extra money, which the banks do not create, to pay back what is owed.

The inherent logic of short-term gain inscribed in our currency system refutes any hope of attaining long-term sustainability. Liberal proponents of globalization, such as the economist Jeffrey Sachs, blinded by a limited model of "progress," fail to see that the form of money we use determines the types of behavior that succeed. What Lietaer offers is an elegant design science approach to this problem. Most likely, such a far-reaching proposal will only be taken seriously as the flaws in our current system become visible to all – which may be only a matter of time.

The visionary design scientist Buckminster Fuller argued, "All who are really dedicated to the earliest possible attainment of economic and physical success for all humanity" should "shift their efforts from the political arena to participation in the design revolution." These days, we seem to be learning that the design revolution and the political struggle are ultimately the same thing. The realization that human behavior is more or less invariant means that economic and social systems can be redesigned in such a way that collaborative and cooperative behavior is rewarded over selfish action.


Image by waI.ti, used via a Creative Commons license.