Introduction

Shifting the global economy towards sustainability

Making Money Our Servant Rather Than Our Master

Right Livelihood

Social enterprise

Legal and Financial Issues

“Money has become a ring we wear through the nose, which allows us to be led around by those who control it” – Mark Kinney

What Money Is and How It Works

Money is one of the core technologies at the heart of human societies.  It is the means by which we trade among ourselves and is the central element around which many human relationships are organised. 

To ask what money is may seem a trivial question that is barely worth asking.  After all, we make constant use of it in our day-to-day lives and, for the most part, pay it no attention whatever – other than to occasionally worry whether we have enough of it.  Our unquestioned assumption, for the most part, is that it is a neutral lubricant for the economic system that in no way influences how that system works.  We also tend to assume that money works today the way it has always worked.

This and most other common assumptions about money, in fact, are mistaken.  Today’s unitary money systems covering nations and regions are very much the exception in historical terms.  While empires at various stages of history have had currencies covering large areas, locally-based money systems – sometimes working alongside the imperial currency, often alone and in the absence of an imperial currency – have been much more the norm.

Many of the currencies used over the ages have not taken the form of notes and coins.  Systems of exchange have included beads, cowrie shells, cattle, cocoa beans, grain, wool, precious metals and many other materials and resources.  Even today, the great majority of ‘money’ – typically over 90 per cent – is made up not of notes and coins, but rather never leaves the digitalised columns of the bank’s computer databases.

Nor, as most people imagine, is money today generally created by governments. Today over 90 per cent of money is created by commercial banks in the form of debt, though the amount of debt is limited by the reserve requirements set by central banks. Nor even is most money in circulation used to buy goods and services; around 96 per cent of the $3.2 trillion traded in the foreign exchange markets every day is purely speculative – money in search of a profit through gambling on currency exchange rates in the international money markets.

So money, it begins to become clear, is rather more surprising and complicated than we generally imagine it to be.  One of the most significant misapprehensions around money and bank loans is that these have always been associated with the payment of interest.  In fact, until relatively recently, all of the great monotheistic religions have made the charging of interest, usury, a mortal sin.  While Christianity and Judaism now accept the charging of interest, Islamic banking institutions continue to work without interest to this day.

Many of the ‘currencies’ listed above that take the form of natural commodities – grain, cocoa beans, wool and so on – actually lose value over time.  Some money systems have adopted this feature – called demurrage – whereby a charge is made on each note or coin at the end of every month or year, resulting in its progressive devaluation over time.  This encourages spending rather than hoarding and several glorious periods of history – including the early European renaissance of the twelfth and thirteenth centuries, when most of Europe's great Gothic cathedrals were built – coincided with, and appear to be to some degree connected with, the existence of money systems based on demurrage.

• Impacts of our current money system
• Reforming money to make it work for people and planet

Cowries
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Money map - Click on image to enlarge

Construction of many great cathedrals is associated with ‘demurrage’ money systems
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