The Money Crunch

Why Complementary Currencies Now?

Bernard Lietaer
blietaer@earthlink.net

Plan
Todays Context Understanding Complementary Currencies Complementary Currencies in Practice Conclusions

Todays Context: The Money Crunch

We are at the beginning of a substantial Money Crunch, where money scarcity will result in a general squeeze in funding support for education, social services, elderly care, etc. => The TINA syndrome (There Is No Alternative)

Todays Context:
Global Structural Shift

This situation is going to accentuate over time because we are in the middle of a major structural shift of the world economy Emergence of Information Age = End of Industrial Age
Same scale and impact as shift from Agrarian Age to Industrial Revolution, except faster Structural => no business cycle improvements will solve them => no return to 1990s likely

Japan was first economy to hit that wall with its Crash of 1990
Japan tried all the classical solutions (e.g. tax cuts, public works) to re-launch their economy, to no avail

Germany and Europe is now going the same way

Stubborn unemployment, no recovery in sight

US is currently in denial but will be third in the same sequence

Todays Context: US
1980-1990s: Devolution of many social issues from Federal to State and local level,
without providing funding without allowing deficit spending

2000-2003: Crash + Economic downturn

Total Denial of Structural Issue
Unemployment problem is temporary Monetary crashes happen only to 87 other countries

=> Massive State and local deficits => 2 solutions:

Cutting social and educational programs precisely when they are most needed Inventing new approach to resolve those problems

Japan: after initial denial & failure of classical solutions, now regional development through complementary currencies Germany & Europe: idem Can we afford not to learn?

Some Definitions
What is Money?
Economic Textbooks define money by what it does, not by what it is e.g. Functions of Standard of Value, Medium of Exchange, Store of Value, etc.... Money is an Agreement, within a Community, to use something as a Medium of Exchange
Complementary Currency: a currency - different from national currency - that operates in parallel with national currency  Links unmet needs with unused resources.  I foresee new private currency markets in the 21st century. Alan Greenspan

Todays Situation
The Japanese Precedent?
Japan has already gone through 13 years of what we just begin now.
The use of complementary currencies can bring an end to the long-lasting deflation of the Japanese economy by supplying additional monies of various types at the local level. Japanese Minister of Economy, 2002 Who better to resolve local issues than the local people?

Example 1: Toshiharo Kato, top executive of METI, has initiated 40 different types of complementary currency eco-money projects
Variety of technologies (from high-tech smart card, to low tech paper) Variety of scales (from mountain village of 800 people, to prefecture of 10 Million) Variety of complexity of functions (from single function to 27 different functions on a single smart card: elderly or children care, local unemployment, small business loyalty schemes, disaster preparedness training, etc. Strategy: testing to determine which models works best for what purpose, and go large scale with the best

Example2: Tsutomo Hotta, Mr. Moral Authority in Japan implements Fureai Kippu complementary currency for elderly care Example 3: Next step up is integrated regional systems (pilots in Yamato City, Germany) Why cant we start the same in US, in Colorado, now?
Pilot project in advanced design phase in Sonoma County, CA.

In addition to Fureai Kippu 300 other systems

Yamato Love (Local Value Exchange) currency

1) Interchanges between local currencies 2) Interchanges between citizens and regional currency 3) Interchanges between citizens
Eco Money

(1)

(2)

(3)

4) Interchanges inside a regional currency

Ithaca Hours
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0DOO3RLQW

Regional Currency / Regional Point

Fureai Ticket Due Bill LETS

(4)

Plan
Two Case Studies Framework for Complementary Currencies
Core Ideas Mechanism

Complementary Currencies in the US Conclusions

Core Ideas
1. Contrary to prevailing economic theory, money is not value neutral. Instead, different money systems encourage different collective behaviors and emotions. Conventional money dissolves community Complementary money creates it 2. Thousands of complementary currencies experiments are on-going now around the world that provide new tools for a region to address various socio-economic problems. 3. For different types of problems, particular designs are useful !

Understanding the Mechanism

Solving social problems with a Single Conventional Currency

National Currency (competitive, scarce)

Competitive/Global Economy (Financial Capital) Commercial Transactions

Cooperative/Regional Economy (Social Capital) TaxDeductions Non-Profits Subsidies Community Transactions

Taxation

Understanding the Mechanism

Solving social problems with Complementary Currencies

National currencies (competitive, scarce)

Complementary Currencies (cooperative, sufficient)

Competitive/Global Economy

Cooperative/Regional Economy

Commercial Exchanges

Community Exchanges

Complementary Currencies are complementary to (not replacing) national currencies Complementary Currencies create ADDITIONAL Wealth, Work, and a safety net below official system

Changing the Money Paradigm by Leaving Monetary Flatland

Regional Economy

Global Economy

Plan
Two Case Studies Framework for Complementary Currencies Complementary Currencies in Practice Conclusions

Todays Situation
Number of Complementary Currency Systems Operational in 12 countries (1984-2003)

4500
Ar e ntina lsew ere

3500 3000 2500 2000 1500

Benelu Ot er urope

Japan Ot er urope Italy

Germ any + Austria

Germ any + Austria France Benelu UK Australia New Zealand

1000 500

UK

USA + Canada

USA + Canada

0
85 87 86 95 96 97 89 91 84 88 90 92 93 94 98 99 20 00 20 01 20 02 20 03

4000

Three Practical Findings

1. In the field of complementary currencies, practice is ahead of theory 2. Contrary to key economic theory hypothesis assumed by Adam Smith, money is not value neutral
Different types of money encourage different types of transactions, and different relationships between people

3. Complementary Currencies solve socio-economic problems

Dampens impact from economic shocks => Can be useful tool to resolve social problems without creating budgetary deficits, raising taxes or bond issues. Creates a more stable and gentler world  If there is no crisis, it is very useful as a community building tool  If there is a crisis, it becomes vitally useful

Plan
Two Case Studies Framework for Complementary Currencies Complementary Currencies in the US Conclusions

Conclusion
We are now living in an age of fear
=> Disempowerment and isolation of the people

We have already started a Money Crunch

=> Money scarcity feeds the TINA syndrome

Complementary currencies are a pragmatic way to:

take back our power; Rebuild and strengthen community; to counteract money scarcity; and thereby find other ways to resolve the challenges we are facing.

The Money Crunch Weekend Unique Opportunity to

Personal contact with world-class experts
7/1 participants/presenter ratio

Create a Community of Practice in Colorado Learn Money 101 how conventional money really is created and managed Learn about various complementary currency system from the creators themselves There will not be another opportunity of this level in the foreseeable future

The Money Crunch Weekend Key Speakers

Edgar Cahn: Founder of Time Dollar Foundation, initiator of 300+ Time Dollar systems. Author No More Thro -a ay People Tom Greco: Founder of the Community Foundation. Author of Money: Understanding and Creating Alternatives to Legal Tender speaks about What is money? Luca Fantacci, Italy: speaks about New Findings on Historical Precedents for Complementary Currencies Alec Tsoucatos, speaks about Money: the Untold Story Christina Gray, initiator of institutional complementary currencies, speaks about Lets get real about system change Gilson Schwartz, Brazil: Innovations from the field Stefan Brunnhuber, Germany: Money and Sustainability (the new Report to the Club of Rome) Octavia Allis, Kathy OConner, Christian Izquierdo Community Applications Greg Barry, Sergio Lub, Randy Petersen Business Applications Arthur Brock, Joel Hodroff, Les Squire New technologies for complementary currencies.

Follow-up
Of Human Wealth: Beyond Greed and Scarcity (new galley edition available here) Also The Future of Money (London: Random House, 2000) and 17 other languages Internet:
www.accessfoundation.org www.transaction.net/money Email: bernard@accessfoundation.org