Book review

The End of Money And the Future of Civilization

Thomas H Greco, Jr - Chelsea Green Publishing, 2009

In many ways, this is a book to be highly recommended to the general reader new to the subject of ‘money’ and its role in determining the development of society and the economy – how it is created, and the consequences and alternatives to this. It is clearly written in a ‘popular’, friendly style, with little use of economists’ jargon, some of which is then clearly defined.

The author uses many perceptive quotes – e.g. ‘Nietszche described money as “the crowbar of power”; Henry George, more than one hundred years ago, observed that, “what has destroyed every previous civilization has been the tendency to the unequal distribution of wealth and power.”’ (Page 10)

The first half of the book is devoted to the present money system, how it developed and its dire effects on society and the environment.

He notes that ‘National governments have arrogated to themselves virtually unlimited spending power, which enables them to channel wealth to favored clients, to conduct wars on a massive scale, to subvert democratic institutions and the popular will. The privileged banking establishment has manage to monopolize everyone’s credit, enabling the few to exploit the many through their partiality in allocating credit, by charging usury (disguised as “interest”) and increasingly exorbitant fees, and by rewarding politicians for their service in promoting their interests.’

His conclusion from this is that, in fact, governments are too much in the pockets of the bankers, as are also the public media, to offer any hope of a truly democratic government emerging, able and willing to use its mandate to take back from the banks their privilege of money-creation.

The second half of the book is thus devoted to promoting and describing ‘complementary’ money systems. He describes their history, and successes (noting that those becoming too successful in the 1930s were outlawed under pressure from the banks), and is hopeful of the development of a global network of local systems, with the potential to eventually replace national money. He describes his vision of this global network of local systems, replacing official national money systems. He proposes that a standard of value based on a basket of commonly traded commodities should be adopted as the basis for valuing currencies, much as Bernard Lietaer has proposed for the basis for an international currency.

I applaud this promotion of alternatives, and recognize their value in the event of the breakdown of the official money system, as happened a few years ago in Argentina, for example, and is a distinct possibility in the near future in many parts of the world. However, barring such breakdown, the debts created by the official system cannot be ‘serviced’, or taxes paid, with any alternative money.

He concludes from the historical record that ‘Money needs to be depoliticized, and the time has come for the separation of money and state to be accomplished.’ He argues that legal tender laws should be repealed, to place national monies on a par with local alternative currencies. He describes the historical competition between rival bank-notes, and between coins of differing origin, and argues that this could become the norm in the future, assisted by internet and computer technology.
What is clear is that radical change in the money system is urgent. Tom hopes not to alienate money reformers who hope to change the national money systems by his offering of alternatives. I share that hope. Alternative currencies may become a ‘lifeline’, wherever the official system collapses.

My view is that the better and simpler option is reform of the official systems; these are better understood and preferred by most people as long as they work tolerably well, as is demonstrated by the decline of alternatives when the crises which encouraged them subsided.

It is true that the political problems of overcoming the bankers’ power are immense, but the potential of alternative media, notably the internet, give hope of developing popular pressure enough to achieve this. The number of sites advocating reform (including my own) is growing fast, as is the number of viewers of them. (The problem of achieving Tom’s aim of getting legal tender laws abolished is no less severe.)

I have one serious problem with his thesis:
He accepts ‘that the debts of central government will never be repaid’, without questioning the reality of these ‘debts’. He views all money as necessarily existing in the form of repayable ‘credit’. This is necessarily so in LETSystems and similar ‘complementary’ currencies, and the systems he advocates for the future, but was never so with commodity money, and need not be so with fiat money issued by governments. National money can and should be simply a continuously circulating medium of exchange.

Tom writes that ‘ There should be no monopoly of credit, no central authority with exclusive power to issue money, and no forced circulation of any currency.’ Though he devotes a section on ‘A Confusion of Language’, noting the anachronisms of such words as deposit, reserve, redemption, and credit, he fails to distinguish clearly between ‘credit’ and ‘money’ – something which is a common cause of confusion of thought on the subject: the bank-created money in circulation is commonly called ‘credit’ (Tom refers to it alternatively as ‘credit money’), though it actually performs simply as money, leaving the borrower with the outstanding, interest-bearing debt.

Precious metal and other commodity currencies created and spent into circulation by governments continue to circulate as a medium of exchange (i.e. money), without having a debt created to chase them for repayment. The problem with them is that the quantity available is not easily matched to society’s needs. This was eased by the introduction banknotes redeemable in them, but while they remained not ‘legal tender’, problems remained, which Tom describes. However, he sees the demand that government should create and spend the money into circulation as a failure “to recognize the insidious nature of elite power’, correctly recognizing that the present monopolization of credit (money)is a fundamental cause of our severe problems, but failing to recognize that that power, of the private banking system, stems from its ownership of the debt-repayment obligations, and the interest burden it imposes on the rest of society, including the governments. Money created and spent by the State gives the initial benefit of its issue to society, and since there is no debt-repayment obligation, no power over its use in circulation.

Thus his conclusion, that ‘the time has come for the separation of money and state to be accomplished’, and so for legal tender laws to be rescinded, I believe to be mistaken. The issue and, when needed, withdrawal from circulation of the official national money should be in the hands of a State body, responsible for maintaining the optimum total value of money in circulation, but independent of the Government, just as is the judiciary – and as is proposed by James Robertson and the American Monetary Institute, among others. The money created should be granted to the government to be spent into circulation for the benefit of society; and this system would remove the power of the banks over the governments, freeing them to act in the interests of the people who elect them. There is then no reason to outlaw alternative currencies, to operate alongside the official ones, though in my view, given an official currency reformed as above, there would be little demand for them.

Brian Leslie

(See also James Robertson’s review in the last issue of ‘SustEc’.)