By George Monbiot
The Guardian.co.uk
In Russell Hoban’s novel Riddley Walker, the descendants of nuclear holocaust survivors seek amid the rubble the key to recovering their lost civilisation. They end up believing that the answer is to re-invent the atom bomb. I was reminded of this when I read the government’s new plans to save us from the credit crunch. It intends – at gobsmacking public expense – to persuade the banks to start lending again, at levels similar to those of 2007. Isn’t this what caused the problem in the first place? Are insane levels of lending really the solution to a crisis caused by insane levels of lending?
Yes, I know that without money there’s no business, and without business there are no jobs. I also know that most of the money in circulation is issued, through fractional reserve banking, in the form of debt. This means that you can’t solve one problem (a lack of money) without causing another (a mountain of debt). There must be a better way than this.
This isn’t my subject and I am venturing way beyond my pay grade. But I want to introduce you to another way of negotiating a credit crunch, which requires no moral hazard, no hair of the dog and no public spending. I’m relying, in explaining it, on the former currency trader and central banker Bernard Lietaer.
In his book The Future of Money, Lietaer points out – as the government did yesterday – that in situations like ours everything grinds to a halt for want of money. But he also explains that there is no reason why this money should take the form of sterling or be issued by the banks. Money consists only of “an agreement within a community to use something as a medium of exchange”. The medium of exchange could be anything, as long as everyone who uses it trusts that everyone else will recognise its value.
rest of article: Original Article
