1. From monopoly to monetary diversity

1.2. Unsustainability of the monetary monopoly

1.2.1. Characteristics of conventional money

According to the perception of money as an institution of Western culture, today’s national or conventional currencies share a series of fundamental characteristics:

  • Money is dependent on a geographically demarcated nation state. The citizens of a geographical area identify with their national currency, which amounts to a shared information system. This integrates the society which identifies with it, as well as establishes a frontier against those who do not identify with it as their own.
  • Money is “fiat” (by legal order), that is to say, created “ex nihilo” (from nothing). Today, for every deposit they receive, the commercial banks issue money in the form of loans to other customers, for amounts much greater than those of the original deposit, which acts as security for a very small percentage of the loans granted to other customers. As a result, the idea of “money as bank debt” is a widely recognised concept.
  • With the end of the gold standard, money has become both “confidence and faith”, in that the receipt of money in exchange for goods or services implies confidence that that money will be able to be exchanged for other goods or services at a future date.
  • Money is scarce. In order for a monetary system based on bank debt to function, scarcity must be artificially and systematically produced and maintained. The current monetary system is not self-regulating, but requires the active intervention of the central banks if scarcity is to be maintained. The system of money in the form of debt means that every economy has to return more money than actually exists, thus generating a permanent scarcity of money.
  • Money is associated with interest. Interest is not naturally or intrinsically linked to money. Rather it is a political decision taken by the central banks, with the following repercussions:
    • Interest encourages systematic competition among the participants in the system. Loans must be repaid with interest, but the only money in market circulation comes from loans, therefore people must compete to make enough money to pay the interest. All of this takes place in a system with scarce monetary resources. Thus the winners of this competition do so at the expense of the losers.
    • The supply of money has a permanent rate of growth. Interest is fixed according to the desired amount of economic growth, which can be entirely unrelated to the standard of living of the population, which may remain unchanged. Interest may therefore create financial wealth, but this may not be fairly distributed.
    • Interest generates the continual transference of wealth from the great majority to a small minority, facilitating the concentration of wealth and social inequality.

We can therefore conclude that the characteristics of money are not natural, especially taking into account the fact that money is an agreement which can be designed to order. If these characteristics are a legacy of the industrial era, which is currently giving way to the information era, perhaps we should consider conducting alternative monetary experiments more appropriate to the age.