The End of Money and the
Liberation of Exchange
A path toward social harmony and
universal prosperity
Thomas H. Greco, Jr.
What I Will Cover
1.
Fundamentals of Exchange.

2.
3.
Stages of evolution of money.
The abuses of money

4.
Enabled by centralized control of credit.
Decentralized credit clearing

5.
The Necessary functions of money
An honest and efficient system of exchange
Escaping dollar dominance

A multi-stage plan.
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Exchange Requires
Three Fundamental Elements

A marketplace


A measure of value


Where buyers and sellers come together
For expressing prices
A means of payment

For concluding a transaction
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Basic Kinds of Economic Interaction



Gifts -- Transfer of value without
any particular expectation of
anything in return.
Involuntary Transfers – e.g., theft,
robbery, extortion, taxes.
Reciprocal Exchange – equal
exchange of value between two
parties by voluntary agreement.
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Money Plays Its Role Within the
Realm of Reciprocal Exchange
The sole function of money is to serve as a
medium of exchange (means of payment).
The other traditional roles of money:
• Measure of value, and
• Savings medium,
Must be achieved by other means.
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The Evolution of Money

Commodity money


Symbolic money


Redeemable paper, warehouse receipts
Credit money - current state


Tobacco, hides, gold, silver, etc.
Bank credit, central bank notes, private
credit and notes
Direct Credit Clearing - Beyond political
money
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Why Reinvent Money?



Throughout the world, money has
become an instrument of political
power.
Money and banking are manipulated
by and for limited private interests.
Political money is exploitative,
dysfunctional, and undemocratic.
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How is Political Money
Dysfunctional and Exploitative?
Money created as bank “loans:”
 Is kept artificially scarce.
 Is expensive, because interest is
charged.
 Is misallocated at its source, serving
to concentrate power and wealth.
 Forces artificial growth.
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“Legal Tender” Serves to Centralize Power




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Legal tender laws are an abuse of monetary
authority.
Provides governments and banks with a
way to avoid the discipline of the market.
Improper and excessive issuance of money
would normally be punished by discounting
or refusal of the currency.
The obliteration of the value standard by
legal tender enables abuse to continue.
“Inflation” is the result.

Example: the definition of the U.S. dollar
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Credit Makes the World Go Round
Modern money is Credit and
Credit is the Life Blood of Business
Two distinct credit functions:

Exchange

Short-term credit (turnover credit or working
capital) –
Money

Finance

Long-term investment and savings (value
storage) in the form of debt or equity –
Not Money
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Credo = Belief > Credit





All credit derives from belief in a
promise.
Credit is based on trust and
contractual obligation.
Who or what do you trust?
Who deserves credit?
Whose promise will you accept as
payment?
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Sources of Credit

Banks


Customers

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Loans
Prepayments / gift cards & certificates
Suppliers and Employees


Vouchers, complementary currencies
Direct credit clearing
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The Credit
Commons
The Organization and Allocation of Credit is a
Fundamental Feature of Civilized Society
How should it be done?
The Credit
Commons
“Loans”
Banks
Central Government
“Loans”
“Loans”
The Credit Commons can now be accessed only through banks!
Privatization of the Credit
Commons
Access to credit is controlled by the banking
system in collaboration with central
governments.




Banks decide who gets access and on what terms.
Banks collect interest on all loans.
Favored clients get credit on easy terms.
National governments have extraordinary access.
By their arrangement with the banking
system, governments can “borrow” as much
as they wish and never repay.
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Two Parasitic Elements of the
Conventional Money System

Interest
Collected by the banking cartel

Inflation
Caused by government deficit spending
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Direct Access to Credit is Possible
and Desirable





It is our collective credit that supports the
monetary system.
We have the power to use our credit as we
wish.
People are free to decide who they will
trust and to allocate their credit directly
to one another.
Whom or what will you trust?
Are you trustworthy?
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Conventional Payment Process
Using Bank Credit Money
Bravo
Company
$
$
$ Interest
Alpha
Company
$
$
Charlie
Company
Bank
$
Delta
Company
Bank credit borrowed into circulation and used to clear
debts amongst companies.
Interest must be paid on credit borrowed from a bank.
The Clearing Process Without Bank Credit
Bravo
Company
Alpha’s
i.o.u.
Charlie
Company
Alpha’s
i.o.u.
Alpha
Company
Alpha’s
i.o.u.
Delta
Company
Alpha’s
i.o.u.
A common measure of value is used for pricing but no need to borrow
currency. Mutual credit is used to clear debts among companies.
No interest paid.
Direct Credit Clearing





If money allows us to transcend the limitations
of barter, credit clearing allows us to
transcend the limitations of money.
An association of traders can agree to offset purchases
against sales amongst one another.
In effect, goods and services are used to pay for other
goods and services.
Another way to describe it is:
Accounts Receivable (A/R) are used to offset Accounts
Payable (A/P)
The same process can be applied by countries within
an international trading union.
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How Does Credit Clearing Work?
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
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When you sell something,
your account balance is
credited (increased);
When you buy something,
your account balance is
debited (decreased).
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How Does Credit Clearing Work? (2)




Ultimately, goods and services pay
for other goods and services.
Money is just an intermediary device
that is supposed to facilitate the
process,
But money can be dispensed with.
Remaining balances may be settled at
periodic intervals, or may be carried
over indefinitely.
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Mutual Credit Issuance and Circulation
Member - Issuers
Mutual credit
clearing association
Member - Non-Issuers
Issuing members begin the process by
buying from other members.
An Example
Suppose $1 million worth of clearing
credits are created and spent into
circulation by the associated businesses.
That means that their collective cash
expenditures have been reduced by $1
million.
That $1 million remains within the
association instead of flowing out to pay
for imports.
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An Example - continued
If the turnover is 10 times a year,
that means $10 million in
additional local sales.
If the rate of profit on sales is
20%, that will result in additional
yearly profits of $2 million.
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An Example - conclusion
Further, the issuance of clearing credits
allows some interest-bearing debt to be
retired.
If the interest rate on debt is 10%, the
businesses will together save cash interest
costs of $100,000 each year.
Every dollar’s worth of clearing credit
issued means:
one less dollar that needs to be borrowed,
one less dollar that needs to be spent,
one less dollar that needs to be repaid with
interest.
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A Successful Example



Established in 1934, the
WIR Bank has continued
to thrive.
The WIR Bank clearing
system now serves more
than 60,000 small and
medium sized business
members.
Credits cleared: $1.35
billion (2004)
A Likely Scenario



Stage one: Independent Trading Blocs (already underway)
Many Islamic countries, under the leadership of Malaysia, form
an Islamic trading bloc. Other trading blocs are emerging in
Latin America and elsewhere.
Stage two: Payment offset (already underway)
These nations begin trading with one another under bilateral and
multilateral agreements that utilize credit clearing intermediaries
that offset payments for imports against receipts for exports and
settle accounts at periodic intervals using some mutually agreed
currency (dollars or euros).
Stage three: Use of Gold Dinar (being considered)
Member nations adopt the gold dinar as the common value
standard and the settlement currency.
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A Likely Scenario - continued
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Stage four: Clearing union
Member nations form a clearing union in which sales to members
offset purchases from members. They abandon gold as the payment
medium and utilize the gold dinar only as a measure of value and
pricing unit.
Stage five: Settlement suspended
Member nations begin to realize that the period between settlements
can be increased without adverse consequences, so they gradually
lengthen the period more and more, but as balance of payment
difficulties become evident, limits are set on clearing account balances
to prevent payment deficits from becoming chronic for any nation.
Stage six: Mutual finance
Associated countries create mutual assistance programs that provide
development finance on a shared risk basis, using temporary equityinvestment to help countries with adverse balance of payments
problems to become more productive.
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A Likely Scenario - concluded
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
Stage seven: Adoption of a composite commodity
standard
Realizing that because the gold market is easily manipulated
by the central banks and governments of the developed
countries, the Islamic trading bloc countries abandon the
gold dinar as the value standard and adopt a common
pricing unit based on a “market basket” that is composed of
a handful of freely traded basic commodities.
Stage eight
Non-Islamic countries, seeing the benefits of this system,
seek to join the Islamic trading union, or form clearing
unions of their own, all of which are ultimately networked
together, creating a global association for fair trade and
mutual assistance.
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Conclusions

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
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
Political money is credit money that is used to
concentrate power and wealth.
Private initiative and enlightened government
action can evolve credit money into credit
clearing to serve the common good.
With credit clearing as the means of exchange,
gold can be the pricing unit.
True Islamic prosperity can be achieved
through the organization of direct credit
clearing associations.
Dollar hegemony can be transcended by
organizing trading blocs that use credit clearing
instead of international currencies for payment.
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Suggested Sources



Explore the website:
http://www.ReinventingMoney.com
Monitor the blog:
http://beyondmoney.wordpress.com
Read, Money: Understanding and Creating
Alternatives to Legal Tender, and
Money and Debt: A Solution to the Global
Crisis by Thomas H. Greco, Jr.
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