Become a fan of New Currency on Facebook by clicking here.

Click here to follow New Currency on Twitter.

“There is a huge research agenda for universities and think tanks,” says Garten. “A world in which the dollar has lost a good deal of its strength will have profound impact on geopolitics, the global economy, and global trade and finance. It will mark the end of the American Empire and usher in something as yet undefined. Little thinking has been done on what all this will mean, and how it is best handled. It’s time that changed.” We couldn’t agree more.

Thus, he was not only a towering figure in 20th Century economic thought, but also able to sufficiently distance himself from his own policies to foresee a world and economy wholly different from his own:

“I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virture-that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable, that those walk most truly in the paths of virtue and sane wisdom who take least thought for the morrow. We shall once more value ends above means and prefer the good to the useful. We shall honour those who can teach us how to pluck the hour and the day virtuously as well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin.”

Robert Skidelsky offers a timely reflection on Keynes’ vision. It’s well worth a read.

“[Relativism] claimed that all truth is culturally situated (except its own truth, which is for all cultures); it claimed there are no transcendental truths (except its own pronouncements, which transcend specific contexts); it claimed that all hierarchies or value rankings are oppressive and marginalizing (except its own value ranking, which is superior to the alternatives); it claimed that there are no universal truths (except its own pluralism, which is universally true for all peoples).” — Ken Wilber, A Theory of Everything

“In economic terms, relativism is clearly an absurd position, for the monetary tools and systems that we choose have profound consequences on social order and dynamics. A relativistic position that suggests barter is equally as ‘good’, ‘true’ or ‘worthwhile’ to use as, say, an international currency such as the Bancor put forth by John Maynard Keynes is utter madness when one takes into account the context of global complexities, capital flows and the instantaneity of transactions on which the international system now depends.” — Jordan MacLeod, New Currency

***

In New Currency I briefly touched on the prevalence of philosophical and moral relativism in academia and Western culture. These positions hold that there are no absolutes in the universe, only relative claims. As Wilber points out, the problem with such ideas is that they themselves are absolute claims dismissing the possibility of absolute claims. Thus, they run into the fatal error of performative contradictions.

These unreasonable positions can only be understood as intellectualized protest against the status quo. When one cannot transcend or resolve the current problems related to globalization, it is apparently in the interest of many academics and activists to attack the systems that are “causing” these problems, as if that will solve anything. Relativism can therefore be understood to have an inherently nihilistic nature that presents itself as a serious roadblock to further economic and social evolution. It simply cannot discern between the shadows of current systems and cultures and their essence and totality. The enormous and indispensable contributions of, say, capitalism are thereby tossed out with its increasingly apparent shortcomings. The baby is thrown out with the bath water.

A relativistic critique of capitalism is inherently unable to transcend its limitations and problems because it ignore the context of the values, technologies, traditions, life conditions and human capabilities that gave birth to it. It merely engages in idealized wishful thinking about how things “should” be, and deems it “oppressive” to the working classes in an act of historical revisionism that utterly ignores the fact it is one of the single-most important driving forces in the escape of slavery, rigid social control and feudalism.

Indeed, capitalism is the worst system – with the exception of all others, as Churchill used to say. It has its flaws and warts to be sure, but its imperfections are also indicative of its success. Its remarkable worldwide acceptance and integration have created entirely new sets of problems and complexities for an interconnected global village, with finite resources and diverse cultures. Its success has brought to light problems such as exponential growth in a world of limited natural resources, the concentration of wealth effect, transnational financial risks, and environmental degradation.

We urgently need new thinking to address these problems. Unfortunately, relativism falls well short in the call for new ideas, for it merely leads to malaise at best and social anarchy at worst. It erodes our capacity to develop brighter visions and greater understanding of our problems. It merely states that nothing is better or worse than anything else, which is a direct attack against not only common sense and reason, but the spiritual wisdom that is the cornerstone of Western cultures, including an authentic cultural creative subculture.

A mature understanding of economics and money, however, holds a powerful key for breaking through narcissistic and anarchic beliefs that anything goes on a fragile, interconnected planet. When we account for the context of global life conditions, for the emergence of green and holistic values, for the yearning for deeper meaning, and the means to actually solve our problems without placing an impossible burden on our children and grandchildren, then we have to acknowledge the need for economic innovation rather than mere relativism.

Many of those involved in the alternative or complementary currencies are some of the best positioned to help lead a positive and grounded transformation of the global economy, because they inherently understand the critical importance of monetary design in determining the qualities and propensities of the economic system(s) that we use.

Once we have acknowledged that only specific qualities in money and economic systems are conducive to resolving global (and local) problems, ranging from unemployment to environmental degradation then we have no choice but to reject monetary relativism and then stand up for innovations - the means - that actually work.

What is Monetary Relativism?

Monetary relativism is not an official position or theory propagated in the world of academia like its moral and philosophical counterparts; but it is every bit as dangerous. It is not perhaps a conscious strand within the complementary currency movement but it is nevertheless prevalent within it.

I define monetary relativism as the belief that all forms of currency are equally valid or appropriate; and that no monetary design can be deemed better than another. As a consequence of this belief, the notion emerges that money can be arbitrarily created at the whims of an individual or group, that anyone and everyone should have the right to create money according to their personal desires and impulses.

As we have seen above, the problem with this position is that it ignores the context of economic, social and environmental life conditions and the impact of currency design on our ability to address what we deem the most critical and relevant challenges of our times.

I would suggest that monetary relativism emerges as a consequence of reacting against national fiat currencies, which are inherently monopolistic, arbitrary and concentrated forms of power that are also widely recognized, at least in the alternative currency movement, as imperfect (if not fatally flawed) for solving the challenges we face. Yet, rather than firmly state that only specific and more conscious monetary tools can address the complexity of global life conditions, monetary relativists react against this reality by stating that everyone should be able to produce the kinds of currencies that they see fit.

This position, unfortunately, does not lead to liberation and the good life, but rather to economic anarchy and the dominance of ego in social affairs. Why? Because it abdicates the responsibility for, and denies the possibility of, making value judgements about money and the context of life conditions on our planet. Further, I would argue that it is precisely because today’s individual is not held accountable for the welfare and integrity of the whole system that we’re in the deep mess we are. Consequently, it is very difficult, if not impossible, to systemically discern ego from individualism, impulsiveness from reason, and myopic greed from constructive self-interest.

An Example of Monetary Relativism

Not long ago, I came across this excellent video by the Wall Street Journal’s Andy Jordan on the coming currency revolution. In it, Jordan introduces Stan Stalnaker, the founder of Hub Culture and its digitized social currency, Ven.

Hub Culture is a brilliant social enterprise and the Ven is a solid example of how complementary currencies are performing important functions where traditional, national currencies are not. Stalnaker rightly compared the emergence of new digital currencies as part of a process where money is shifting its qualities, comparable in its nature to a shift from stone to pebbles and now to sand. What he essentially means by that is money is becoming increasingly accessible, liquid and decentralized. It’s increasingly including more people into an integrated economy in new and innovative ways. Sand can seep into the cracks that stones cannot. His conclusion, however, of where this sand-like currency was taking us almost jolted me out of my seat:

“So we think at some point there will be millions of different currencies, essentially everyone will have their own virtual, personalized currency, and we’ll trade on some sort of, you know, NASDAQ for personal currencies.”

Here, Stalnaker makes a significant error in understanding how money really works. He is literally missing the beach for the sand, the forest for the trees, the ocean for the raindrop. Why? Because he is reducing currency to the idiosyncratic whims of personal taste, and thus overlooks the critical importance of a currency’s relationship to, and appropriateness within, the context in which it operates. It also misses how a single currency creates its own interconnected ecosystem, an ecosystem with unique and distinct properties, that could only possibly function when several people come together to co-create a shared vision of reality.

Currencies are inherently social and cultural creations. Ironically, Ven is a perfect example of the redundancy and pointlessness of individualized, personalized currencies.

Transcending Monetary Relativism

In order to cut through the dangers of gross error via relativistic and idiosyncratic money design, we must ask a simple yet powerful question: What currency (or currencies) is most appropriate within a given set of life conditions?

By first identifying life conditions — the environmental factors, values, technologies, problems, cultural dynamics and so on at a given point in time — we are from the start required to contextualize our monetary design for a specific purpose. After identifying the set of presenting challenges and opportunities, we can then begin to adequately evaluate and judge the appropriateness of specific currencies for a specific job. It might be how well X, Y and Z currencies complement national currencies (and help to compensate for their limitations) or, more importantly, how well a currency is able to transcend the national economic paradigm altogether.

Indeed, for humanity to effectively build the capacity to collectively confront the enormous global challenges of our times, a new economic paradigm is now required. We can’t simply continue to try to impose “solutions” on top of an unsustainable system. The 2,000 page health care and cap and trade bills currently under consideration in the US will saddle this and future generations with higher taxes, energy costs and debt. While they may be well intended, if they pass they will ultimately only accelerate the failure of an already overburdened and overwhelmed system. The sooner the delegates meeting in Copenhagen next month realize this, the better.

At some point, and I believe that time is now, alternative currency thinkers and doers, along with others who are serious about developing new economic capacities, will have to dedicate their energy primarily towards demonstrating how real world economic problems can be solved using specific designs.

While diversity and experimentation has its value, we live in a time when we can no longer afford to be distracted solely by peripheral currencies that have marginal impact on the global economy as a whole. A central emphasis must be placed on making qualitative judgments about which monetary systems are most appropriate in the context of solving our most pressing problems. The more the alternative currency community as a whole is able to coalesce and integrate new ideas and collectively focus their energy like a laser beam on the challenge of transcending national fiat currencies, the more powerful and lasting impact it will have.

+

Updated: 8:50AM AT November 27, 2009

This is a place where we will try to make sense of all of this. Naturally, we will be exploring the economy through the lens of New Currency. If you haven’t read the book and intend to follow this blog, I’d highly recommend that you do so. We’ll be applying innovative economic tools to our current financial and global problems, and as I argue in the book, these tools sometimes can only be properly understood by taking a leap into a new economic paradigm or mindset. This blog is an attempt to make this thinking even more solid, but the book remains an essential foundation.

Please email or post your questions and comments as they come up. I’ll do my best to weave answers into posts.

Beyond Bailouts: How a Circulation Charge Can Help Save and Transform Global Finance

By Jordan Bruce MacLeod

An Earth Shaking Wake-up Call

The global financial crisis has created tremendous uncertainty about the future prospects of human society. Very few people saw it coming and even fewer, if any, can say with much degree of certainty what will happen next. National governments are currently injecting trillions of dollars into their financial systems and the broader economy simply to cushion the fall of equity prices, home values and employment rates. Several countries have already sought emergency support from the IMF and World Bank and several more may require extensive assistance down the road. Yet these international institutions were neither designed nor equipped to deal with crises of this magnitude.

Adding to our woes are the persistence of monumental global challenges such as terrorism, environmental degradation and climate change, which all must be confronted head on in the very near future. Given their worsening trajectory, one may now look back and realize that these problems were never going to be resolved from within the parameters of a financial system so conducive to myopic decision-making and growth for growth’s sake. Considering the awesome complexity of global challenges and the urgency with which scientists proclaim that humanity must change course immediately, then perhaps we will come to view this financial crisis as an Earth-shaking wake-up call and timely opportunity to align global systems and institutions with global challenges and complexities for the first time.

While many financial experts and politicians are focused on bailouts and the mainstream media is widely locked in to asking experts mundane questions about when the economy will recover, it’s time for global leaders and citizens to start asking the tough questions about what’s next for global finance. What’s beyond the bailouts and efforts to keep the global economy in one piece? Where do we go from here, not only to get credit flowing, but also to create a financial system that works in the service of all of humanity towards the effective resolution of global problems?

New solutions will require new values and new financial instruments to ground these values into the economic system. Without a practical means to change financial wisdom and shift the logic of investment and decision-making processes, new values are bound to remain peripheral and idealistically oriented, rather than central and integrated operating principles. One tool with the power to literally transform the economy and help restore lending emerged prior to another economic crisis, the Great Depression. Its inventor, Silvio Gesell, called it demurrage, a French term borrowed from the shipping industry. We will simply call it a circulation charge and explore its potential within the context that matters most: our need to save and transform global finance.

In 1932, the town of Wörgl, Austria, was suffering from a 35% unemployment rate. The town’s mayor had a long list of projects and only 40,000 Austrian schillings in the bank to pay for them. Rather than spend the money on what would amount to only a fraction of the work that needed to be done, he used the schillings to back the creation of local currency with a unique feature. The money was designed so that its holder would pay a small fee each month to keep it valid for circulation. Once the fee was paid, a stamp was placed on the back of the paper note to certify it for exchange.

After printing these notes, the mayor of Wörgl then used this currency to begin paying for public projects, thereby introducing it into the town’s circulation. Yet, it was only after this money was spent that the dramatic effects began to take hold. In less than two years from the start of the circulation charge, Wörgl became the first town in Austria to reach full employment. With the equivalent of a modest number of Austrian shillings in circulation, money expert Bernard Lietaer reported, “Water distribution was generalized throughout…. the town was repaved, most houses were repaired and repainted, taxes were being paid early, and forests around the city were replanted.” Clearly, when a town begins to experience full employment during a depression and citizens voluntarily decide to pay their taxes early, people will talk. Within a short period of time, the town’s revitalization garnered international attention and was branded the ‘miracle of Wörgl.’

A Circulation Charge

While a part of this marked turnaround came from the town’s revenues in collecting fees from the circulation charge, this was not the most significant force behind the dramatic transformation. Of greater importance were the extraordinary contributions from Wörgl’s increasingly engaged citizens. They were enabled to transform their community and do what was previously thought economically unfeasible after the average velocity of money throughout the town increased fourteen-fold because of the monthly expiration date.

In other words, with the introduction of a circulation charge, money changed hands fourteen times more frequently in the same period of time than did the national currency, the Austrian shilling. An increase in trade and activity of this magnitude represents a dramatic leap in economic activity and confidence that simply cannot be replicated by central governments through spending programs or tax cuts. The achievement truly was a miracle, yet backed by solid innovation and grounded economic strategy. Rather than rely on municipal governments or centralized powers, the people of Wörgl had created the means to take power into their own hands and directly accomplish things that would never have occurred solely through the meddling of relatively arbitrary and inefficient centralized bureaucracies. In a time of financial gridlock such as ours, a circulation charge also presents itself as an ideal economic tool to begin catalyzing lending and thereby melt frozen credit markets.

The Science behind the Miracle

In his opus The Natural Economic Order, Silvio Gesell introduced the concept as an economic tool to effectively solve the problems of hoarding, interest and inflation. It was his original thinking that served as the basis for the successful stamp scrip currencies in Germany, Austria and America during the Great Depression. His work garnered notable recognition and approval from many of his contemporaries, including some of the most acclaimed economists of the 20^th century, including John Maynard Keynes and Irving Fisher.

Today, as members of the G20 and architects of the global Bretton Woods II convene to consider new financial instruments for building the 21^st century economy, a circulation charge should be at the top of their list. A validation fee of this sort addresses the essential design flaws of the current economy that make it utterly impossible to reconcile finance with environmental sustainability and the alleviation of poverty. These flaws include compulsive exponential economic growth in a world of finite resources, the myopic discounting of the future and a regressive redistribution of wealth into the hands of the world’s wealthiest via the interest on money.

A circulation charge effectively goes to the root of these problems by changing the qualitative nature of how we hold money. It inherently shifts financial thinking towards longer time frames. It creates a natural incentive to lend money without the need for interest, which would mitigate compulsive exponential growth, lessen the costs associated with borrowing and investment and reduce social disparities. It is precisely by shifting these central financial dynamics that markets can naturally begin reversing the inequalities between the rich and poor, facilitate investments in alternative energy infrastructure and create a more resilient financial system.

Going Global

The implementation of a circulation charge in the global financial system will require profound, unprecedented cooperation between nations. Much like any other global instrument, it will rely on widespread adoption and integration to take hold and succeed. It is for this reason that the G20, as a relatively broad and diverse group of nations, is an excellent starting point for considering this tool. In addition to serving as a catalyst for restoring lending and confidence in markets, it would simultaneously enable a pragmatic shift within the financial system towards achieving the 21^st century objectives of sustainable development and the alleviation of poverty.

A circulation charge could be integrated into the financial system through its simultaneous adoption by several nations for their currencies. The tool itself, however, is more naturally predisposed to function as an integral part of a global currency. In fact, it could enable the realization of a global currency by transcending the present weaknesses in monetary policy that arise out of current national fiat currencies and policies. These limitations characteristic of today’s national economies include exponential growth, interest rates, hoarding and inflation. The diverse economic conditions of nation-states within the current economic paradigm mean that national monetary policies are often divergent and frequently irreconcilable. It is therefore only when a global currency is realized that the problems inherent to national currencies are likely to be resolved.

A fully digital currency would also strongly support the efficient and stable adoption of a circulation charge within a relatively short time period. If digitized, the currency could be programmed to automatically deduct the circulation charge instantly, at the time of its expiry date, from anywhere in the world. A digital currency would also enable a faster velocity of money in circulation, greater control and oversight of the money supply and the real-time monitoring of demand. The currency itself, as we saw in the case of Wörgl, also carries the power to quickly restore full employment and effectively decentralize wealth and power into the hands of citizens.

A circulation charge enables the adoption of a monetary policy of zero interest and the creation of a money supply equal to demand. Under such conditions, a global currency could transcend the limitations of national currencies and the arbitrary power and problems that emerge when a national currency, such as the US Dollar, functions as the international reserve currency. A digital global currency with the above characteristics could be far more effectively regulated by global institutions, such as a United Nations agency designated to oversee international currency stability.

While the parameters of this article can merely serve as an introduction to a very broad and important subject, it brings to light the urgent need to recognize that our relationship with money is at the very heart of our global crisis. The consideration and implementation of the requisite financial tools will require the world’s leading nations to forge a common vision for a global economy. Integrating global values and instruments such as a circulation charge into the heart of their monetary policies can help ensure the constant circulation of money and thereby help restore economic activity, lending and the opportunity to catalyze a free market system far more aligned with solving planetary challenges. These are precisely the qualities that will help enable global cooperation and insulate the international community from the inherent dangers that are destined to emerge in the midst of worsening global economic conditions.

A circulation charge also reveals the very real potential to align and reconcile global finance with global values and visionary thinking. Getting there, however, will require bold new approaches in economics and a broader understanding that money is a social creation of the utmost power and importance in our lives. Its understanding and control can no longer be left in the dark corners of arbitrary or centralized power. The true value of money in our lives must be consciously recognized and mastered by all engaged global citizens as a precondition for successfully enabling global transformation. When we do this much-needed work, we will truly hold in our hands the power to change the world.

Jordan Bruce MacLeod is author of New Currency: How Money Changes the World as We Know It. He is a partner at the consulting firm Cornerstone Global Associates and co-founder of Elevator Software Corporation. Jordan also serves as Co-Chair for the Club of Rome’s tt30 and is the founder of www.NewCurrency.org.