An Introduction to a Society Shift

PART 1: TRANSFORMING THE MONEY SYSTEM

HALF-FREE FREE
SPIRIT LIFE SPIRIT LIFE

PRIMARY SECONDARY TERTIARY SECTOR

SECTOR SECTOR

Extraction Production STATE

Transportation

Public Servants
Programmers
INDUSTRIE

Accountants
Agriculture

Merchants

Councillors

Scientists
Teachers
Forestry

Doctors
Fishery

Mining

Artists
Crafts

Police

Merchant Economy Non-merchant Economy

Valuable Invaluable
Accountable Value Non-Accountable Value
Limited Life Cycle Unlimited Cycle de vie
Consumption Development

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Summary

Chapter 1: Getting a Clear View ----------------------------------------------p.3

Central Banks and Bretton Woods
Central Banks: A Brief Overview of the History of Money
The Real Economy and the Speculative Economy
Value Creation
The amount of rights to consume determined by the real economy
Value formation when something is extracted from nature to be exchanged

Chapter 2: First type of money: CONSUMPTION MONEY --------------p.12

Chapter 3 : Aging Money ------------------------------------------------------p.15

Money is stocked as merchandise
Influencing savings as an artificial regulator
Differentiating money into its functions
A New Function of Savings
Aging money becomes Contribution Money

Chapter 4: A Brief Look Ahead -----------------------------------------------p.20

International Monetary System for the Real Economy (IMSRE)
BANK of CONSUMPTION MONEY
INSTITUTES OF FINANCING
FUNDS OF CONTRIBUTION MONEY
International Dispositions
The International Office of Parities
Consumption Money
The Institute of Cash Money
The International Monetary Audit
The Arbitrage Commission
International Association of Monetary NGO’s

Chapter 5: Some Functionalities ----------------------------------------------p.29

In Brief: About the Exchange capacities between currencies
How to determine the Exchange rates?

Chapter 6: Financing Money and Interest Free Loans ---------------------p.31

A FUTURE ORIENTED CURRENCY
The example of the WIR

Chapter 7: A third form of Money: Contribution Money ------------------p.32

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Chapter 1: Getting a Clear View

To gain clarity amongst the current confusion, the first rule could be to look and follow
real economic phenomena, and this without the many biases and assumptions often
introduced in modern economics. This is not so easy, in the first place because what
follows from such observations might challenge accepted views and practices. It takes
therefore some time to get used to what emerges from such a study, and to discover how
these new views end up meeting our interests often far more than what many of the
current and outdated socio-economic forms have to offer.

The proof is in the pudding, and the methodology itself will emerge from the
observations and from the considerations that here will follow. It is quite an adventure to
tackle the big main systems and institutions as they exist today, but it will become
increasingly clear that such an undertaking is indeed possible, and that in the process
any kinks in our thinking will be straightened out, resulting in a capacity to think reality
as never before.
But without further ado, let's dive into it, together with our mystery author, his name will
be revealed much later, so as to avoid the many misunderstandings that could, and often
do -, arise in such a novel undertaking, and consider one of the main and most obvious
systems first, namely the money (monetary) system, considerations that will result in a
reform of the current monetary and banking systems.

It should perhaps be added his study is for all levels of expertise in economics, as it will
continually go through basics economic notions, while it is intended for all levels of
society to comprehend, (1) the current situation, (2) in what these fail, (3) how out of
such a comprehension a transformation arises, and (4) how anybody can, in any
situation, gain from an exact understanding as is displayed here, which leads to a
concrete monetary monetary and social architecture with the potential of resetting and
rebooting the various societal systems.

Central Banks and Bretton Woods

A notion for many not so well known, but important to situate for grasping the money
system, is that of the central banks and their role. Looking thoroughly at central banks
will reveal key functions of money, as well as money’s fundamental nature, then well in
pure economic terms.

So, one of the roles of the central banks is to regulate the amount of money in
circulation, so that it matches the current economic activity, within, say, its jurisdiction, -

3
central banks being national or supra-national, such as in the case of the ECB (European
Central Bank). Another well-known central bank is the Fed, also called the Federal
Reserve.

And when speaking of the "amount of money in circulation" (to match economic
activity), this refers than to the notion of monetary mass. This notion of monetary mass
however, becomes immediately challenged when indeed we look at the facts. Just the
reality of bank cards and other banking transactions show that today we deal for a large
part with scriptural money, it is to say with no actual money in the sense of anything
material such as coins or bank notes, but rather purely with accounting operations within
banking software.

The notion of monetary mass, or the amount of money in circulation becomes hereby
much less relevant. The problem resides in the fact that we are still attached to money as
a "mass", or as something else, rather than what it really is.

It is often believed that it would suffice to inject more money into the economy for it to
flourish; yet it may well be that this is a measure in last resort, and that the causes of a
dysfunctional economy lay elsewhere, it is to say much more upstream. This would
mean then challenging many of the various assumptions, conceptions and systems that
form the backbone and general framework of the current socio-economic systems. The
more we dare going upstream, and challenge the most fundamental assumptions, the
more we will gain clarity, as will be shown here.

Any societal improvement is always conceived within the same framework, it is to say,
the one we currently know. Reforms, however, that would not proceed from the globality
of the economy, would only be partial and not durable. Any changes however will occur
gradually and step by step, but they will always occur with the totality in view.

To illustrate further what is advanced here, let's consider the fact that "one of the failures
of the current system has appeared through the bank crisis in 2007, as well as in the
unambiguously high level of national debts. These failures point, amongst others, to
Bretton Woods (1944).
Bretton Woods was concerned with the establishment of a relationship between
currencies, so that the expansion of the monetary mass of each country could follow the
growth of its economy, while at the same time allow for a stability ratio between the
various currencies. The ultimate goal was that the world economy would not be hundred
by a lack of currencies on the one hand, and by instability between currencies on the
other.

4
Both objectives can be examined.
First, what allows for stability between currencies?
Therefore the following: there are certain mechanisms used by governments and Central
Banks to influence exchange rates between currencies, such as influencing the base rate
of Central Banks, it is to say the interest paid by banks to obtain money from the Central
Bank.
This mechanism shows in fact that hereby an attempt is made to “work in”, from the
outside, on money, and not on something that is inherent to it.

Given that money is what allows disconnecting sales from purchase:

1) in time (I can sell today and buy at a later time)
2) in space (I can sell here, and buy elsewhere)
3) between buyers (I sell to John and buy from Cathy)
Considered this way money is indeed a right to consume, in fact, a unit of account. Only
prices can vary. A meter stays a meter, a kilo stays a kilo, etc. So why isn't money
stable? This is one of the fundamental problems in economics, on which we will here
shed light.

Central Banks: A Brief Overview of the History of Money

When money appeared as a means of exchange to disconnect purchase from sales, a
means of payment accepted by all were several metals, amongst and above all gold.
Gold and metals however, are merchandise as much as anything else. The passage from
barter to currency consisted thus in giving privilege to one merchandise over all others.
In a general overview of the whole evolution of money, we see gold gradually being
removed from the monetary circulation. Coins contain less and less of it. Then appear
bank notes, still exchangeable for gold, at first, till about the First World War. From then
on, monetary gold only circulates between banks.

With Bretton Woods, the value of each currency is determined by the gold and currency
reserves of a country's Central Bank. But agreements were made in such a way that each
currency had to position itself according to the dollar, whose ratio to gold was fixed.
This meant that the reserves of Central Banks were, in the end, still calibrated by gold.
At least, so it seemed in 1944.

"At this point we face a strange phenomenon of human consciousness. We see it

incapable of changing paradigm and to put itself in sync with economic evolution. As it
happens in other domains, in particular in that of democracy, human beings tend to hold
on to old forms, without really noticing that they don't correspond any longer to the
needs of the moment, and even hinder a further healthy evolution."

5
While what had already to be noticed, that there was no longer any amount of gold
production to cover the totality of the world economic growth.
In other words, the amount of money needed to cover all commercial transactions would
become such, that it would be backed to a proportion of gold that would continue to
reduce.

"At Bretton Woods, money backed by gold should have appeared impossible and
belonging to a by-gone past. Events have confirmed this. Today, monetary gold only has
a figurative role within the International Monetary System."

"Convincing is the fact that in 1973, the Fed's gold reserves amounted to 8'600 tonnes
for a GDP of 1'400 billion dollars. In 2012, the GDP reached 15'600 billion dollars,
while the gold reserve only little over 8'100 tonnes. In other words, the ratio of gold
coverage to the GDP represents 8.5% of what it was in 1973."

"Money is constantly comprised within the following tension:

Merchandise Money Unit of Account

We will see how this tension can be resolved.

To begin with, it will be necessary to establish the principle distinguishing the real
economy from the speculative economy.”

The Real Economy and the Speculative Economy

Buying currencies when they are low and selling them when they are higher, allows to
make money without actually nothing being produced in the economy. On the contrary,
disturbances are created within the real exchange of goods and services.

"From the moment money is made into merchandise, by buying and selling it, we make it
penetrate in an economy which is not real, but speculative in nature. A parallel world is
created next to the real economy."

6
Buying and selling currencies causes the monetary mass of a country to vary without a
corresponding change in actual volume of the economy. "A lag happened, which comes
down to a loss in value of a currency leading to rising prices. Without other factors
intervening, prices will rise in such a way that a balance will again occur between the
monetary mass and the volume of exchange of goods and services.
In other words, it is the real economy which finances millions made in this way by the
financier who played on exchange markets."
"As such a million made this way may not mean much, but when following the course
taken by such a million, how it becomes invested in real estate for instance, the effects
will nonetheless be real and propagate to the rest of the economy. In fact, not millions
but billions are played with in this way, every day."

"A first condition, therefore, for an economy to be healthy could thus be formulated as
follows:

The amount of rights to consume should be determined by the sole needs of the real
economy, it is to say by the exchange of goods and services.

Let's clarify that we speak of rights to consume and not of monetary mass. To say it
simply, 100$ can, in a few days time transfer from a bank card of a client to that of a
restaurant, in which he dines, to that of a fruits and vegetables wholesaler, who further
pays a farmer, which in turn will buy clothes with it.
Following these exchanges, the GDP has grown without there being monetary
creation.
In classical economy, it is said that an identical monetary mass can allow a
volume of exchanges more or less important. We will further see that this is in fact
a kind of optical illusion. While only merchandise has circulated. Money being
only there to allow a differing of this circulation, in time, in space and between
parties."

"The principle formulated above says only that factors exterior to the real
economy should not interfere in determining the amount of rights to consume. This
principle excludes thus any form of monetary creation which wouldn't result
directly from a need of the real economy.
We will see what this fact implies when we will discuss capital and real estate.
While the subprime crises founds its origins in the loans granted within real
estate, by factors outside of the real economy interfering into it. This crises
propagated to the banking sector as well, through the fact that loans were granted
to capital investment funds for operations outside of the real economy. This

7
element should be taken into consideration, if we want to avoid a repetition of this
type of crises."

Value Creation
"The notion of Added Value is rather simple. It is a notion well-known through the
taxation system. There is however a way to look at it that opens up interesting
perspectives, allowing a more dynamic image of what constitutes the foundation of all
economy. It is the Austrian philosopher Rudolf Steiner who has developed it at the
beginning of the course he gave following the request of economists."

"First a distinction needs to be made between value and price. Two different objects
sold in two different locations may well represent an identical value, from an economic
perspective. But the price, for very differing reasons, will likely be different.

The simplest value formation manifests from the moment something is extracted from
nature to be exchanged."

When a fish is fished in a pond, put in a pale and exchanged with the neighbouring farm,
a value is created which enters the economy at the moment of exchange. The same fish
can also be brought to the market in the neighbouring village, bought there by a
restaurant holder; each time a different value is added to the fish. From an economic
perspective, the fish along these steps is not the same.

"We could take other elements emanating from the soil, from the underground, from the
air or from water, and follow their course within economy, through values added by
human activity. We would have than all the professions and activities directly related to
nature: farming, foresting, beekeeping, mining, fisheries, etc. This represents the
primary sector.
We have hereby described the basic economic principle of this sector:
Nature is observed through labour."

"Let's now consider the way in which labour itself has evolved, and what results from it
for the formation of values in economy. A simple example will make this clear.
Let's bring ourselves back at the time the first chainsaws appeared. A lumberjack buys
one of these machines and uses it to cut wood in a forest. From the visual point of view,
the logs will sensibly be the same when previously he used traditional tools.

8
In economics, the creation of value in both cases is quite different. With the chainsaw,
labour has been transformed. It is no longer the same he applies to nature. Now, what
has actually caused this change is due to human creative capacities. The human mind,
or spirit, through inventions, creates tools and machines that modify, sometimes
radically, human labour, and transforms thus the process that leads to value creation."

"If, starting from this notion, we consider the evolution of economy in the course of time,
we see how the secondary sector formed, from crafts and trades to industry, and the role
played in it by the human spirit. Simultaneously, we notice division of labour appearing,
also through the organizing human mind. Pushing it further, we would see how other
economic values are formed through the fact that nature disappears more and more to
the background, and what increasingly come to the fore human creative capacities, it is
to say, again the human mind. Let's think thereby of a lawyer, a programmer creating a
new software, etc. It is then the tertiary sector who appears.

We hereby singled out a polarity in value creation. On the one hand, nature transformed
by labour; on the other, labour transformed by the human mind.

NATURE LABOUR

labour creative human mind

VALUE A VALUE B

EXCHANGE

We will see later on how this diagram is useful for understanding price formation.

This polarity allowed us to grasp the dynamics of the three sectors of the economy.
Schematically represented:

9
 SECTORS

PRIMARY SECONDARY TERTIARY

Nature SECTOR SECTOR Creative Human Mind
SECTOR

This diagram contains the totality of the real economy. All professions, those of the
commercial and those of the non-commercial economy are hereby represented."

"The question could still remain if speculative economy still has something to do with
value creation. In other words, the fact of making money with money, or to make money
work, can it be considered as an economic activity? In other words, being a speculator,
is it a profession?

If this were the case, it would certainly not be a profession of the primary or secondary
sector. The intelligence needed for practising this activity being preponderant to what
comes from nature, which disappears in the background, we would be finding this
activity within the tertiary sector."

"It could be considered that the speculator brings money to the table when he buys
currencies. The one selling 10 million on the exchange markets, would thus bring on a
value. But reasoning in this way, is confusing economic value with the price of
exchange."

"It has to be added here that within these considerations no moral judgment is included,
and that the intention is to remain purely within economic fact.
Economy indeed suffices itself, since it is not necessary to bring in moral principles
such as justice, equality, generosity, sharing or love of the neighbour to come to a
healthy economy. These qualities belong to each individual human being to be
developed along life's path. They belong to the domain of philosophy, psychology,
sociology, etc.

Here it is a matter, on the contrary, to show that by moving away from what is purely
inherent in economy, and by introducing foreign elements into her, that she becomes
dysfunctional, imbalanced and ill.

10
Through crises, economy shows us what we need to rectify. It suffices to be attentive and
to learn to read within socio-economic phenomena.
This could even be pushed as far as to say that economy carries health within her. Her
normal state being balance."

"One of the principal aspects of division of labour consists in creating an

interdependence between all people. Looked at it more in detail, it is obvious that an
economy based on the division of labour establishes a factual solidarity between all its
parties. If this doesn't lead to an improvement of living conditions of billions of people,
the cause should be sought within the external factors that come and hamper this
fundamental process inherent to the economy."

"We have to dive more deeply into the essence of economy itself, which in fact is based
on the win-win situation. Let's enter deeper into an economic thinking that grasps
reality and we will avoid social problems.

To talk of fair trade or of a solidarity economy, isn't that illustrating that we have left the
terrain of the real economy? It will on the other hand be a sign that we came back to the
terrain of the economy, when we won't need any longer to resort to what would then
merely be a pleonasm.

If this were well understood, we would stop using ineffective moral exhortations, there
where in fact we need a clear approach of economic phenomena. While in reality, this
"ethical" vision distracts from the real questions."

Chapter 2: First type of money: CONSUMPTION MONEY

"After Bretton Woods and the creation of the International Monetary Fund, financial
experts used the balance of payments as main tool allowing to measure the situation of

11
currencies. Publications of the IMF, were used as reference. With the implosion of the
system of fixed exchange rates and the explosion of the development of currency
markets, this instrument, alone, no longer suffices. Nonetheless, the structure of the
balance of payments, in itself, remains instructive. It contains, registered at the same
time those operations of the enterprises of a given commercial country with the rest of
the world, but also the operations of a purely financial market.

In other words, an important displacement of floating capital, for purely speculative

reasons, can destabilize a balance of payments while at the same time the commercial
balance is in equilibrium, or even in excess.

If, for instance the base rates of the Fed rise strongly, and that the perspectives on the
dollar are on the rise, capital will leave a country to come and place themselves in the
USA. The balance of payments of that country will hereby go in deficit.

In a direct way, through diminishing the foreign exchange reserves of the Central Bank,
or in an indirect way, through its sudden abundance on the currency markets, the
currency of that country will be forced to loose value through that decision of the Fed.
Imports will then become more expensive. While it will be the reverse for exports. But if
these won't balance the variation that will occur on the imports, the commercial balance
will go into deficit as well, aggravating the global deficit of the balance of payments and
the deterioration of the currency.

Scenarios of such a nature are rather frequent. They show the problem consisting in
mixing financial and commercial activities. The balance of payments is an in-adapted
tool. But she is only a symptom of a deeper issue: we have only one instrument to
measure both the investment flows and the commercial flows. The same money is issued
in both cases. It would therefore be appropriate to have two instruments well separated
from one another. The real economy needs a currency circulating in a circuit which
would have only little bridges with another circuit, namely that serving financing needs
of enterprises and loans in general.

Let us note that we don't include the floating capital into this second type of money,
since, one would have guessed it, it is about creating an economy in which speculation
has no longer any reason to be.

This organization of Financing Money will be the subject of another chapter. Let us
rather look at the first type of money. We call it Money of Consumption. This money
will only serve to account for exchanges within the real economy, it is to say the sales

12
and purchases of goods and services of enterprises and institutions amongst them, or
enterprises and institutions with individuals, or also individuals amongst them.

Consumption Money is deposited on bank accounts that we call Current Consumption

Accounts (CCA).Their functioning is, in great lines, similar to that of chequing accounts
used currently by individuals and enterprises. The same operations happen there, such
as transfers, payments, -by bank cards or cheques-, as well as retrieving of cash money.
Only transactions between Accounts of Current Consumption are possible. It will, for
instance, not be authorized to make, from such an account, a transfer towards the
account of an enterprise who wants to make a bond loan. The one wanting to make such
an operation will proceed differently, as we will see soon.

A second account will be related to the CCA. It will allow to receive savings made in
provision of subsequent purchases. We call it Differed Consumption Account (DCA).

Each year, on the 31st of December, the CCA's are put back at zero. The eventual
remaining balance is transferred, by the bank onto the DCA. This way, the rights to
consume, to meet current expenses, remain always limited. Individuals receive their
monthly revenue on their CCA's, and use it, day by day, for their purchases and the
payments of their bills. If they want to save money, say for travel or for the purchase of a
vehicle, they can make, any time, a transfer from their CCA to their DCA. At the end of
the year, if there is a left-over, banks will do this automatically. Mention be made that
the CCA will not be brought completely to zero. Indeed, must be taken into account the
revenue needed to meet the expenses of January and which, usually is paid by the
enterprise, a few days before the end of the month. A well-conceived software will be
able to include this element.

It is therefore only in principle that we speak of putting the account to zero. In practice,
there will be left the needed "treasury".

“The same will happen to enterprises. The money which will remain on their account
won't exceed expenses for the month of January. There too, a software will verify that it
will happen this way.

For enterprises who would need a treasury exceeding their expenses of January, other
mechanisms will be needed. It will be considered as if they needed a bridge loan. This
modality will be treated in the chapter on Financing Money.

The following diagram will illustrate the basic operations between accounts A and B
which may either belong to organizations or to individuals.” P79

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 Transfers, Bank
A B
Cash withdrawal Cards, Cheques Cash withdrawal

CCA CCA
Loans between Individuals

DCA DCA

Transfer of balance Transfer of balance

at year end at year end

Operations between two accounts of Consumption Money

Let us now examine the reason for a Differed Consumption Account, which will bring us
to the question of "aging" money (treated in the next chapter).”

Chapter 3 : Aging Money

Money is stocked as merchandise

We have seen that money exists in essence to delay the purchase operations. In that
sense, money is useful. Money offers a precious service, provided it is not allowed to

14
develop secondary effects which are detrimental to the economy itself. These would
appear when money, instead of circulating rapidly, starts accumulating in different
places. Then money is stocked up just as any merchandise and looses its character of
being a unit of measure.

In this tension between two poles, we will thus always seek to put the cursor towards
money being a unit of measure. But it is not always possible to do this totally, precisely
for the very reason that it allows delaying the purchase operation from that of sales. The
reason for this delaying lies in the fact that either:
- We don’t have, as yet, the financial means for the expense we project.
- Or that the moment to do so hasn’t arrived yet.
- Or also because we need to put money aside, it is to say to save.

Influencing savings as an artificial regulator

Traditionally, economists see savings as a kind of buffer element which allows
regulating the economy. When savings are too high, then consumption is insufficient. It
is then the practice to lower interest rates to make saving less attractive. The consumer
will then usually have the tendency to spend his money immediately. Although then it
can happen that there is not any longer enough money for investments. There again then,
interest rate will play an indicative role, but in the opposite direction from previously. In
each of these cases, saving is considered to be a regulating element. But in reality, it is
an artificial mechanism which hides two problems which are hereby not solved at all.

The first problem is that of money of financing. We will consider it soon. The second
one, related to too much savings, can mean several things: the level of remuneration of
certain people is too high compared with their immediate needs; or else the consumer
needs are temporarily satisfied, or also, the fear for crisis’s to come incite people to be
careful. In these three cases, it is about treating the corresponding problems for
themselves, as we ill see. While playing on interest rates to regulate savings, doesn’t
solve anything. On the other hand, money that accumulates tends to return to being a
merchandise and thus to feed speculation.

Differentiating money into its functions

It will be about limiting savings in such a way that it allows for differing the purchase
operation, without money starting to stagnate and stopping to fulfill its function of being
a unit of measure. To say it differently, money, when it tends to accumulate, must always
be brought back within active zones of the economy, there where it is needed: in helping

15
to finance enterprises on the one hand; and in the non-merchant economy on the other.
We will consider these two domains later.
For the moment, let us look at a measure which will incite the one who saves to not let
his money accumulate too much on the Differed Consumption Account. It will therefore
suffice to apply a sufficiently high devaluation to the funds, for instance of 10%, per
year. This depreciation will enter in effect the 31 st December of each year and will
concern the balance of the DCA (Differed Consumption Account) at this date. If the
saver wants to use a part of his money, in the course of the year, the amount of his
transfer on the CCA (Current Consumption Account) will be diminished by 10%.

The table below shows how the Differed Consumption Account evolves.

In that example we will suppose that Mister Smith saves, yearly, the same amount of
2,000 Euro and that in 20_6, he uses 6,000 Euro which he transfers on his CCA. That
year, he saves thus nothing. The 6,000 Euro while devaluing 10%, at the moment of the
transfer, will then amount to, in reality, 5,400 Euro. The 600 (depreciation) will come to
be added to the 137.12 deducted from the balance of the account.

In total, Mister Smith will have transferred 1,000 Euro from his CCA to his DCA and
pays 3,365.94 Euro to the depreciation account which the bank holds.

Year 20_1 20_2 20_3 20_4 20_5 20_6

Initial Amount
Jan. 01 - 1,800.00 3,420.00 4,878.00 6,190.20 7,371.18
Transfer from
CCA 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 - 10,000.00
Transfer to
CCA 5,400.00 5,400.00
Transfer to
Financing
Institute
Transfer from
Financing
Institute
Sub-total as per
Dec. 31st 2,000.00 3,800.00 5,420.00 6,878.00 8,190.20 1,371.18
Depreciation
200.00 380.00 542.00 687.80 819.02 737.12 3,365.94
Final balance as per
Dec. 31st 1,800.00 3,420.00 4,878.00 6,190.20 7,371.18 1,234.06

Depreciation of savings on a Differed Consumption Account without transfer to an Institute of

Financing

16
A New Function of Savings
Everything would happen differently if Mister Smith wouldn’t let his savings money
stagnate, and if he would put it to disposal of the economy, by lending it. When we will
take on the question of Money of Financing, we will see that, -while the other given
aspects of the scenario will remain unchanged-, depreciation would only be 600, at the
end of 20_6 (it is to say 10% of 6,000) and that he would have left 4,000 on his account
with the Institute of Financing, after having transferred 5,400 Euro on his CCA. The
table below shows the records of these operations (1).

Year 20_1 20_2 20_3 20_4 20_5 20_6

Initial Amount
Jan. 01 - - - - - -
Transfer from
CCA 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 - 10,000.00
Transfer to
CCA 5,400.00 5,400.00
Transfer to
Financing 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 -
Institute
Transfer from
Financing 6,000.00
Institute
Sub-total as per
Dec. 31st - - - - - -

Depreciation
600.00 600.00
Final balance as per
Dec. 31st - - - - - -

Depreciation of savings on a Differed Consumption Account with transfer to an Institute of

Financing

What happens with the 3,365.94 Euro corresponding to the depreciation of the first
situation or the 600 Euro, in the second case? They are not destroyed. They are made
available to the non-merchant economy, as it will be shown further. They will contribute
to generate the third kind of money, the one that appears in the economy when there is a
form of gift.

At this stage, we see to what an extend all notions in economy are related to oneother
and that it is difficult to treat them separately. However, it can’t be but so. It is only bit
by bit that an overall picture will arise and that one will understand how each piece
articulates with the others and integrates into the whole. The reader will therefore need

17
to have further patience while persevering in the study of the Economy with Added
Human Value.

Certain readers will not have this patience and will be revolted by this idea of
depreciation of money. Maybe they have a savings account which allows them, each
year, a certain nests egg. Therefore, the one who only considers his very own situation
can only react with antipathy to such proposals. This is well understandable. However, if
he looks at the entirety of the economy, his judgment could get modified.

The notion of depreciation, which we have just seen, is a kind of aging of money.
Several economic thinkers have shown the necessity for a currency to stick, as much as
possible, to the ex-change of goods and services, it is to say which serves the present and
which thus looses its power the more it moves away from this present 2.

Aging money becomes Contribution Money

In different locations, there have even been experiments with aging money, often with
success. Descriptions of this research in the book by Marie-Louise Duboin, But where
does money go? (Mais où va l’argent?) 3 and in the one by Philippe Derudder, Give the
creation of money back to civil society 4.

The aging of money corresponds to a vision of the economy that is centred on reality.
But its foundation fits into a global approach of life. And this, precisely by the fact that
in nature, all life is associated with death. Nothing, on earth, is in an unlimited process
of growth and into a duration without ending. The only thing that one pretends to tear off
from death is money. Be it by capitalization of interest or by stock market and real estate
speculation, the attempt is made to provide money with capacities of infinite growth and
longevity. This is not natural. Situations within nature, within social life and within the
economy show this more and more clearly.

It is thus justified to search for methods which allow money to age so as to avoid its life
to be lengthened in speculative spheres. The aging of money allows going against its
tendency to turn into merchandise.

Generally, aging money is considered to be a form of disappearance of money. For

instance, there will be stamped, with indelible ink, the number 90 on a bill of 100. The
bill will thus have lost 10% of its value. But what happens with the remaining 10 Euro?
They are plain and simply cancelled.

A power of nuisance has thus been removed from money, by weakening its tendency to
accumulate. But, at the same time, a virtue has been removed from it: the one that

18
consists in delaying the right to consume. By removing money from the speculative
sphere, it has at the same time been removed from the sphere of the real economy. In
other words, there has been removed from this sphere a certain quantity of buying
power. If the one who possessed it does not use it, why not, in stead of cancelling it,
transfer it to the one who can use it in a way (that is) fruitful to the economy?

Money would hereby acquire a second life which would profit to the whole of the
economy. But we see here appear a third kind of money, which can play a role as useful
as those of consumption and of financing.

To my knowledge, the Austrian philosopher Rudolf Steiner is the one who has
discovered this kind of aging of money which makes it into a dynamic process. His
discovery of the three types of monies seems to me to be an essential contribution to the
science of economy.

To tackle the Money of Consumption, we have looked at the Current Consumption

Account and the Differed Consumption Account, without talking about the organism
which manages them. We are thus going to approach the Bank of Consumption Money.

1. While orienting his savings towards an Institute of Financing, Mister Smith has avoided 2,765.94 Euro of depreciation (it
is to say 3,365.94 – 600). Reported to the sum of 10,000 that were saved, this non-depreciation represents 27.65% in 5
years. Insofar as the notion of aging currency/money would be accepted, one could estimate that its participation in the
financing of the economy will have been taken into consideration to a reasonable degree.
2. See amongst others Silvio Gesell, The natural economic order, …. And Rudolf Steiner, Cours d’économie et
séminaire….
3. Marie-Louise Duboin, Mais où va l’argent?, Editions du Sextant
4. Philippe Derudder, Rendre la création monétaire à la société civile. Editions Yves Michel

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Chapter 4: A Brief Look Ahead

International Monetary System for the Real Economy (IMSRE)

A short extract of its general operating principles:
- The IMSRE has as its goal to develop an ECONOMY with HUMAN ADDED
VALUE.
- The monetary tools of the IMSRE allow for a triple monetary circulation: (1)
Consumption Money, (2) Financing Money and (3) Contribution Money.
- These three currencies are a public service of civil society favouring the Real
Economy.
- Countries member of the IMSRE organize the three currencies according to
principles of civil society and to national and international dispositions.

A) BANK of CONSUMPTION MONEY

This bank only operates as a ledger that records transactions of deposits and transfers of
Consumption Money, mostly scriptural, although, national Institutes of Cash Money
provide the needed cash. It can receive Financing Money from Financing Institutes,
when loans are granted to individuals or organizations; Financing Money then
immediately becomes Consumption Money.

Consumption Money serves for exchanges of goods and services between suppliers,
producers, distributors and consumers.
1) The Current Consumption Account (CCA):
- it contains the (monthly) rights to consume
- gets automatically set to zero each 31st of December
- except an amount for consumption needs for January
- the rest goes to the Differed Consumption Account (DCA)
- it is for current expenses of enterprises, organizations and individuals

2) The Differed Consumption Account (DCA):

- functions as a savings account
- each 31st of December, 10% of the amount in the account is reduced automatically
- this 10% goes to Contribution Money Funds, either chosen by the account holder, or
determined by the bank
- the account holder can also choose to transfer his money into this account to a
Financing Institute, where it will constitute a part of a loan granted, either to the choice
of the account holder or not
Example 1:

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 C. National Dispositions

C.1. Consumption Money

Consumption Money is that which serves for the exchanges of goods and services
between suppliers, producers, distributors and consumers.

Consumption Money is a unit of measure which translates a right to consume.

Organisms of monetary surveillance take all the necessary measures so that it

doesn’t tend to accumulate in one location within the monetary circuit.

C1.1. Consumption Money circulates principally in scriptural form, through

transfers, bank cards, electronic wallet, eventually cheques, etc/

C.1.2. The Banks of Consumption Money are not for profit institutes who manage
deposits, transfers and withdrawals of Consumption Money.

C.1.3. The Banks of Consumption Money hold two types of accounts

for their depositors: the Accounts of Current Consumption and the
Accounts of Differed Consumption.

C.1.4. The transfers between depositors can only happen between Accounts
of Current Consumption.

C.1.5. Each Account of Current Consumption is closed the 31st December of

each year. The account balance corresponding to 1/12th of the yearly total
income could be conserved on the account. The rest is transferred to the
Account of Differed Consumption of the depositor.

C.1.6. From an Account of Differed Consumption, a depositor can make a

transfer to a Financing Institute or towards its own Account of Current
Consumption. In this case, 10% of the value of his transfer would be
discounted.

C.1.7. The money which remains on an Account of Differed Consumption

losses, each year at the 31st of December 10% of its value.

C.1.8. The discounts mentioned at paragraphs C.1.6 and C.1.7. are

transferred by the Bank of Consumption Money towards Funds of

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 Contribution Money chosen by the depositor, or by default by the bank its
self.

C.1.9. The money which is transferred from an Account of Differed

Consumption towards an Institute of Financing, with the goal of financing
enterprises, doesn’t receive a discount of its value, for the entire time of the
loan. When it comes back to the Account of Differed Consumption from
which it originated, the discount rules of paragraphs C.1.6. and C.1.7.
apply.

C.2. The Institute of Cash Money

C.2.1. Each member of the IMSRE has an Institute of Cash Money

that is charged to put at the disposition of banks coins and bank notes that
are needed for the circulation of Consumption Money.

C.2.2. Each Bank of Consumption Money has an account with the Institute
of Cash Money. This Institute provides the banks with coins and bank notes
in exchange of a written bank transfer, of the same amount, in scriptural
money. When a Bank of Consumption Money has too much cash in stock, it
makes the reverse operation towards the Institute of Cash Money.

C.2.3. The principles of Public Service of Civil Society apply to the

Institutes of Cash Money.

B) INSTITUTES OF FINANCING
Financing Money corresponds to a monetary circulation in complement to Consumption
Money and uses the same unit of account.
It is a currency destined to financing needs of enterprises, institutions and individuals.
It is emitted by Financing Institutes. Its monetary creation can be total, or partial when
an individual participates to a project through his savings (from a Differed Consumption
Account).
Destruction of emitted Financing Money occurs through reimbursement of the loans.
Loans are granted based on estimated viability of the project. They are not back by
accumulated capital nor by any caution or form of mortgage.
The loans are interest free.

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C) FUNDS OF CONTRIBUTION MONEY
Contribution Money is Consumption Money oriented towards institutions of the non-
commercial economy, with the goal of allowing their functioning. It uses therefore the
same unit of account.

It comes from taxes, of profits generated by enterprises of the commercial economy,

from amounts generated by the 10% cut on Consumption Money, as well as from gifts
by physical parties.
In each country, a National Office of Contribution Money, together with Regional
Offices determine annual ratios for redistribution of Contribution Money, by sector of
activity of the non-commercial economy.

These Offices are subjected to the rules and regulations of Public Service by Civil
Society.

The organisms entitled to collect and to distribute Contribution Money are Funds of
Contribution Money.

Besides sovereign activities of the State, each domain of the non-commercial economy
will be comprised of several Funds of Consumption Money, created on initiative of
citizen and civil society.

Each citizen orient their part of Contribution Money he must pay to Funds of
Contribution Money in proportion to redistribution ratios defined by the Offices of
Contribution Money. For each sector, he or she can determine the associations and
institutions towards which his contributions will go.
It belongs to employees of the commercial enterprises to affect taxes and contributions
towards the Funds of Contribution Money of their choice.
Employees will be able to do so individually or collectively.
This affectation will also happen according to ratios determined by the Offices of
Contribution Money.

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Example2:
D. International Dispositions

D.1. Between countries that are members of the IMSRE, Consumption Money
circulates from Current Consumption Account to Current Consumption
Account.

Money of Contribution circulates from Fund of Contribution Money to

Fund of Contribution Money.

Money of Financing doesn’t circulate between members States.

D.2. During an international transfer of Consumption Money, the Bank of

Consumption Money which receives the rights to consume, registers these within
its own currency and erases the counterpart which was expressed in the currency
of the country from which it originates. This operation happens in the official
exchange rate of the IMSRE.

D.3. The international transfers of Contribution Money happen in an identical way as

those of the Money of Consumption, as defined in the preceding paragraph.

D.4. The IMSRE organization comprises four International Monetary Institutions

(IMI):

 The International Office of Parities.

 The organ of control called International Monetary Audit.
 The Arbitrage Commission.
 The International Association of Monetary NGO’s.

D.5. The IMI are each administered by a Surveillance Council composed of

representatives of not for profit NGO’s which emanate from civil society, and
which are active on an international level and who are members of the
International Association of Monetary NGO’s.

D.6 The Surveillance Council of each IMI names the directors of each of these
institutions. These directors are experts in one of the three monetary domains.

D.7. The IMI are subjected to a system of quality control.

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D.8. The IMI have an office in each member country. The board of directors of these
offices is composed for two thirds of personnel foreign to the country in which it
is located.

D.9. The resources of the IMI come from the Contribution Money provided by each
member country, as per a quote-part that is proportional to its GDP.

D.10. The International Office of Parities

D.10.1 The International Office of Parities has as a

mission to define, each month, the parity between the currencies.

D.10.2 The objective of the IMSRE is to allow a

harmonization, between the different countries, on the conditions of
their wages, their social services, their work and environmental
conditions. Calculation of the parities will happen in such a way that
these will get closer as these factors will do so too.

D.10.3 The tool for determining the parities is the

Consumer Basket, which is composed of most products (needed for
the consumption of one month?) which are regularly consumed in the
world. It is identical for all countries.

D.10.4 The Pondered Price of the Consumer Basket

(PPCB), in a country, is the price that needs to be paid to buy there
the entirety of the products it constitutes. It is expressed in the
currency of that country.

D.10.5 The pondering of the price happens by integrating

the productivity which results from an improvement of production
capacities and of know-how, as well as the country’s natural
resources, and in such a way that it won’t be penalized, on the level of
parity, by one or the other of those factors it could improve.

D.10.6 The parity between two currencies Mα and Mβ is

equal to the inverse relation between the Pondered Price of the
Consumer Baskets in these two countries, or:
Mα PPCβ

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 ----- = ------
Mβ PPCα

D.11. The International Monetary Audit

D.11.1 The International Monetary Audit has as its mission

to controlling the application of operating rules of the IMSRE in each
member country and on the level of the IMI.

D.11.2 To fulfill its mission, the International Monetary

Audit bases itself on the procedures of control of each financial
institution: Councils of Monetary Coordination of each currency and
the Institutes of Monetary Audit, as defined in paragraphs B.8 and
B.9.

D.11.3 The International Monetary Audit evaluates in

permanence the proper functioning of these two types of institutions.

In case of dysfunction, the International Monetary Audit

addresses remarks and warnings to the concerned organism, together
with a delay for bringing order back.

In case of grave fault or of the non-respect of the delay to

bring order back, the International Monetary Audit revokes the
accreditation license of this institution.

D.11.4 The International Monetary Audit can request a

Council of Monetary Coordination to revoke the license of a monetary
institution of which it is part of.

D.11.5 The International Monetary Audit can request an

International Association of Monetary NGO’s to exclude a member
country of the IMSRE, in case of repeated of the rules of the IMSRE
or of grave faults.

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D.12 The Arbitrage Commission

D.12.1 The Arbitrage Commission has as its mission to

judge and to handle disputes arising between actors of the IMSRE.

D.12.2 May refer to the Arbitrage Commission;

 In first instance, the International Monetary Institutions

 In second instance, the Institutes of Monetary Audit, the
Councils of Monetary Coordination, the NGO’s and the user
associations that are active in the monetary domain.

D.12.3 The decisions of the Arbitrage Commission are sovereign.

D.13. International Association of Monetary NGO’s

D.13.1 The International Association of Monetary NGO’s

is composed of representatives of the active NGO’s, on an
international level, within the monetary and the not for profit
domains.

D.13.2 The International Association of Monetary NGO’s

designates, at a general assembly, the representatives of the NGO’s
which will have a seat within the Surveillance Councils of the IMI.

D.13.3 The International Association of Monetary NGO’s

controls/checks the activity of the International Office of Parities as
well as of the International Monetary Audit.

D.13.4 The International Association of Monetary NGO’s

accepts or excludes countries or monetary zones within the IMSRE.

D.13.5 The International Association of Monetary NGO’s

has an arbitrage commission which treats, in first instance, the
complaints and disputes emanating from the NGO’s or from citizens

27
 concerning the functioning of an NGO that is involved in (with) a
monetary institution.

The schema on the next page presents a synthesis of the relationships between the
different IMSRE organs.

Chapter 5: Some Functionalities

A) In Brief: About the Exchange capacities between currencies:

Example:
- Country A
- Country B
- A buys merchandise at B
-Payed in currency A
-Quantity QMA is thus at B
-B will convert QMA into a certain amount of QMB
-simplified, B would hereby have twice the amount, once in QMA and once in
QMA in Consumption Money
-The Bank registers QMA on the CCA of the exporter, but directly in money MB
-The exporter has hereby right to consume in country B
-In the Bank’s Movement of Scriptural Money Account, there are three options:
1) MA
2) QMA
3) Exchange rate, f.ex.: 1.5

“MA money is only indicated. It does not enter in the bookkeeping part as such. It
doesn’t exist any longer as a right to consume in country A, since the exporter decided

28
to use that right in his or her own country. The currency he will use to consume will be
MB.

Conceived in this way, the currency conversion sticks to the reality of the real economy.
No distortion is introduced in the monetary mass MB by this conversion. It does not
constrain the central bank of country A to buy back a quantity of QMA which
corresponds to nothing in this country, since the right to consume indicated by QMA
isn’t used in that country.

Proceeding this way, Consumption Money looses totally its merchandise character.”

B) How to determine the Exchange rates?

“Since the implosion of the Bretton Woods system, the ratio between currencies is
determined by supply and demand. If a currency is in excess, its course will drop; and
conversely. Many factors intervene in the quantity of currency supplied or demanded.
Some are related to commercial exchanges, but those who have the most influence come
from the financial speculative sphere.

In Consumption Money, the parity between currencies would result from the
consumption potential of each. If thus currency MA allows buying 1.5 times more
merchandise in country A than in country B, we would have 1MA = 1.5MB. It is thus the
real price of merchandise and only this which would give the parity between currencies.

It would therefore be necessary that countries agree on the products that should enter
into a “consumer basket”, so that the reference basis becomes identical.

In this domain, it wouldn’t be possible to attain a mathematical precision since a

product can be more expensive in one country and cheaper in another. It will therefore
be about having a kind of average reflecting a general tendency of the buying power of
each country’s currency. But this will in any case be closer to economic reality than
when relying solely on speculation on currencies and on manipulations of the base rates
by central banks.

We have hereby shown that there exists an answer to the above question. In
Consumption Money, a country can participate in the global economy while being solely
importer. The requirement for an equilibrium in the balance of payments is here
extinguished. And it is good it be like this, since such a country would contribute by
imports to the well-being of other countries, by buying goods and services from them.

29
World economy would gain much from considering such a money type. For export
countries, it would eliminate the problem of imported inflation which is present, even in
very small degrees, each time a currency enters into a country. For poor countries in
development, the gain would be enormous. They could revert to an economy
corresponding to their climate, their traditions and life-style.”

Chapter 6: Financing Money and Interest Free Loans

A FUTURE ORIENTED CURRENCY

“The entirety of the current system rests on the fact that financing of a building, of an
enterprise, or of a State deficit results from capital accumulated in a more or less near
past. It is on the basis of preexisting funds that a financing operation can be started,
either by collecting the totality of the needed amount, such as in constituting an
enterprise’s capital; or either by bringing on a fraction, for example 20% while
borrowing the rest, such as in the case of mortgages. These 20% have been created over
time, through savings. The 80% left, if they provide from a bank loan, result from a
monetary creation. There will thus be a tendency to not consider these as a past
accumulation of capital. But this is only in appearance so. Since the possibility, for a
bank to create this money rests, amongst others, on the funds proper it has, which is
money brought together over time. In both cases, -100% of fund input or only a
fraction-, this financing rests on a stocking up of money over time.

In other words, money serving financing is oriented on what resulted from past,
completed actions.

The question that can be asked then is: which link is there between these results of past
actions and that which is going to start through the new activity that seeks to finance
itself.”

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“We will see how the passage in the other directions is operated, at each reimbursement
of a loan. The rights to consume created at the moment a loan was granted will be
removed from the economic circuit. They will have become useless since the enterprise,
by its development, makes new rights to consume appear corresponding to the level of
the economy at that moment. This allows for the system to remain balanced. This
exchange, in both directions, between both monetary circulations contains no principle
nor technical problems.”

The FINANCING INSTITUTES

“From the moment where we operate the turn-around consisting in basing the value of
Financing Money on the future and not on accumulation of funds resulting of past
actions, we can see a new organizational form for money to come about. This form will
be much simpler than that which rests on a central bank’s system. In what we propose,
this last function won’t have any longer any reason to be. We won’t have a unique,
monolithic organism, with a heavy and thus costly functioning.

The Financing Institutes are organizations with a light structure, but practising a
“deep” task within society. They have the responsibility to allow innovation and the
evolution of economy, in service of which they are entirely dedicated.

They are not an element of the commercial economy, in the sense that they don’t offer a
service in the same sense as a merchant or as a licensed accounting cabinet. The service
they provide is of a non-commercial nature. We can thus deduce that their legal
structure will indicate clearly that they are not-for-profit. In a next chapter, we will see
in what they can be the model for a different type of public service.”

The example of the WIR

A currency exists in Switzerland since 1934 which functions in giving loans to

companies without passing through a central bank. It is an 80 years old experience
which today groups a circle of 60,000 SME’s.
It started from a lack of money in circulation through the Crash in 1929 between 15
entrepreneurs. For the first operations, each enterprise opened a line of credit with the
“Economic Circle”, which thus created the WIR, in function of the estimated potential
of the enterprise. This enterprise would sell goods and services of which parts would be
payed in WIR. This allowed to cover the loan in WIR.

In Other words, the WIR allowed to finance the treasury of the members of the
Economic Circle. They hereby responded to insufficient bank credit in 1934. After two

31
years of operation, the WIR counted 3,500 SME’s using that currency. Very soon they
acquired a bank license and became the WIR bank.

It was in the interest of each member that the system be healthy.

They put thus in place control and re-balancing procedures, notably when an enterprise
of the Circle would go bankrupt.

Since it is the WIR bank who gives the line of credit, it absorbs the losses of a failing
debtor. It does so by charging 1% on insufficient finds and 1% per transaction in WIR
(payed by the merchant or seller), allowing to cover operation costs as well as eventual
losses through bankruptcies.
This means that payment in-capacities are mutualized, through the intermediate of the
WIR bank,
Such payment failures didn’t exceed 0.05% in 2012.

Chapter 7: A third form of Money: Contribution Money

“On the other hand, we see an insufficient regeneration of our models and behavioural
modes. From many sides we hear calls for new social forms for a post-industrial society.
But we function in closed circuits, with the same stereotypes. We sense that our societies
run out of breath, but do we let go of old schemes to breath in new air?

One could be surprised that we bring up this situation when considering the third type
of money. And even more so, when mentioning that it is about a Contribution Money,
which in the end, contains a gift character within the current functioning of the
economy. The notion of gift is little associated with current financial practices often
rather showing the opposite while being more into the optics of “always more”.

“By the fact that we have taxes, be they direct or indirect, we signify that we consider it
normal and necessary that a part of the surplus of the economy leaves the commercial
circuit, to finance the non-commercial economy. We clearly don’t add a foreign element
to the current economy. It is rather about giving this circulation the full dimension it
requires. To succeed in this, we have to point out what is understood by non-merchant
economy.

Let us take the diagram that was presented in relation to the three sectors of the
economy (1).

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 SECTORS

PRIMARY SECONDARY TERTIARY Creative Human Mind

Nature SECTOR SECTOR SECTOR

We have seen that in the tertiary sector, nature tended to move to the background of the
production of an economic deed. The services by a lawyer have only in a marginal
degree a connection to nature. His material is the body of laws which are a human
creation.

If we examine this tertiary sector more closely, we see a progressive transformation

coming about. Let us take some examples. The goal is not to look in detail at all
professions which make up this sector. Firstly, it will be a matter of noticing at which
point the non-merchant economy appears, then to see how this can be divided in two
well distinct parts.

STATE CULTURE
Town Counsellor
Police Officer
Programmer
Transporter

Accountant
Merchant

Scientist
Teacher
Doctor

Artist

Commercial Services Non-commercial Services

Valuable Invaluable
Consumable, limited Unlimited growth
lifecycle

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At first glance, it can seem strange to talk about economic services for, for instance, a
police officer or a teacher. However, the contribution of each of these professions is
essential to a good functioning of the economy. Let us imagine the chaos which would
result from the fact that there would be nobody to make sure that the law is respected.
The economic consequences would then soon appear.

In the same way, a teacher brings elements to a child which allows this child to grow.
Without entering into the nuances which would be needed, we can say that, for instance,
the creativity which somebody could display in his professional life finds often its source
in the pedagogical opportunities which it had experienced, or not, in its childhood.
Here, the service rendered by the educator or the teacher is visible over a period which
can be quite long.

In both cases, that of the police officer and that of the teacher, we are in front of a
“production” which is not directly measurable. The economic value they create can
not receive a direct transcription in terms of a price.

In the merchant economy, the production of a good or a service can be measured within
a socio-economic context of the location where it is formed. We are not implying that
this is an easy question. On the contrary, after removing from the economy the four
elements which should not be part of it, then the question that appears at the centre of
the economy is the formation of prices. It is towards this aspect that should converge the
energy of the different actors. We are not entering here, now, into the details of this
question. We have treated in Democracy in Evolution (1) and will take it up again in
Volume 2.”

Based on M. Laloux and his remarkable “Detoxify the Economy: A Revolution in Thinking About
Money.

Copyright 2018 An Introduction to a Society Shift by Philippe Lheureux

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