1.4. Sustainability of monetary diversity
1.4.2. The shift from monopoly to monetary diversity
As with all monopolies, the current monetary system has its defects: use of the currency, though less than satisfactory, is obligatory; and, at the same time, endeavours to find better ways of satisfying existing needs are obstructed.
The solution to this requires, among other things, the diversification of institutions and types of currency, and the introduction of others designed specifically to increase the supply of money in its primary function as a medium of exchange, rather than for savings or speculation. Complementary currencies of this type are designed purely to connect what would otherwise remain unused resources and unmet needs within a community, region or country. Monetary innovations exist to solve each and every sustainability challenge we face. And the time is now or never, with all the technological advances taking place today.
As we have mentioned elsewhere in this COURSE, legal-tender money promotes the use of its three different functions, but with excessive emphasis on the store-of-value function, with all the associated implications. Complementary currencies, on the other hand, seek exclusively to fulfil the first two functions, never the third. The introduction and use of complementary currencies can therefore solve, in part, the five structural failings also mentioned earlier:
- Complementary monetary systems increase the number of transactions when the official economy enters in recession, and vice versa, acting as a complement to conventional banking and easing the pro-cyclical tendency of money creation.
- Silvio Gesell’s theory proposed the launch of a decaying currency that progressively loses its value to prevent hoarding. A decaying or negative-interest currency, from the financial point of view, completely transforms the panorama, since it increases future values instead of reducing them, and therefore encourages long-term thinking.
- Complementary currencies typically overcome the dilemma of the continuous growth obligation, since they charge no interest and therefore do not generate the effects of compounding. The management entities of complementary currencies tend to be associations and cooperatives which, in contrast to the commercial banks, do not lend money to maximize their own profit and therefore do not depend on continuous growth to survive.
- The abolition of interest rates also prevents the unfair redistribution of wealth. Where complementary currency systems do charge a rate of interest, the function of the interest is purely to cover operating costs, not to generate profit.
- Complementary currencies are designed to foster cooperation among their users, and their limited use discourages hoarding, thereby promoting social cohesion.