The world today is controlled by a small elite group that has been increasingly concentrating power and wealth in their own hands. There are many observable facets to this power structure, including the military security complex that President Eisenhower warned against, the fossil fuel interests, and the neoconservatives and others that are promoting US  hegemony around the world, but the most powerful and overarching force is the ‘money power’ that controls money, banking, and finance worldwide. It is clear that those who control the creation and allocation of money through the banking system are able to control virtually every other aspect of society.

What can be done to turn the tide? How can we empower ourselves to assert our desires for a more fair, humane and peaceful world order? I believe that the greatest possibility of bringing about the desired changes lies in economic and political innovation and restructuring.

The monopolization of credit.

I came to realize many years ago that the primary mechanism by which people are controlled is the system of money, banking, and finance. The power elite have long known this and have used it to enrich themselves and consolidate their grip. Though we take it for granted, money has become an utter necessity for surviving in the modern world. But unlike water, air, food, and energy, money is not a natural substance—it is a human contrivance, and it has been contrived in such a way as to centralize power and concentrate wealth.

Money today is essentially credit, and the control of our collective credit has been monopolized in the hands of a cartel comprised of huge private banks with the complicity of politicians who control central governments. This collusive arrangement between bankers and politicians disempowers people, businesses, and communities and enables the super-class to use centralized control mechanisms to their own advantage and purpose. It misallocates credit, making it both scarce and expensive for the productive private sector while enabling central governments to circumvent, by deficit spending, the natural limits imposed by its revenue streams of taxes and fees. Thus, there is virtually no limit to the amounts that are lavished on the machinery of war and domination.

In today’s world, banks get to lend our collective credit back to us and charge interest for it, while central governments get to spend more than they earn in overt tax revenues by relying on the banking system to monetize government debts as needed. These two parasitic drains on the economy—interest  and the inflationary monetization of government debts—create  a growth imperative that is destroying the environment, shredding the social fabric, and creating ever greater disparities of income and wealth.

How can money power be confronted?

Fortunately, we the people have in our hands the means of our own liberation: the power to allocate our credit directly without the use of banks or political money. How to assert that power is the theme of my most recent book, The End of Money and the Future of Civilization.

Over the years there has been a long parade of reformers who wish to take the power to create money away from banks. This is an admirable objective that I wholeheartedly endorse. But the alternatives they propose have been to revert to commodity money like gold (which has proven to be inadequate), or transfer the power to issue money to central government—what I call the “greenback solution,” which harks back to Abraham Lincoln’s scheme for financing the Civil War. That proposal calls for the federal government to bypass the Federal Reserve and the banks by issuing a national currency directly into circulation from the Treasury. At first glance this may seem like a good idea, but it has many shortcomings.

First of all, the greenback solution does not propose to end the money monopoly but merely to put it under new management: it’s a gross delusion to think that the Treasury is, or might become, independent of the interests that now control the Federal Reserve and the major banks. Consider the fact that most recent Treasury Secretaries have been former executives of Goldman Sachs, the most powerful financial establishment in the country. It is naïve to expect that they will serve the common good rather than the money power that has spawned them.

Second, central planning of complex economic factors has been shown to be unworkable. That is especially true with regard to money. Neither the Fed nor the Treasury is qualified to decide what kind of money—and how much—is necessary for the economy to function smoothly. The issuance and control of credit should be decentralized into the hands of the producers of needed goods and services so that the supply of money automatically rises and falls in accordance with the quantity of goods and services that are available to be bought and sold. If private currencies and credit clearing exchanges are allowed to grow without interference from vested interests, their superiority will quickly become apparent.

Third, the greenback solution does nothing to eliminate deficit spending and inflation, which are enabled by legal tender laws. As long as political currencies are legally forced to circulate at face value, the abusive issuance of money, the debasement of the national currency, and the centralization of power will continue. All government programs, including social programs and the military budget, ought to be funded by legitimate government revenues, not by the underhanded means of monetary debasement.

Centralized control of credit money and the imposition of legal tender laws enable the hidden tax that is called inflation. Salmon P. Chase, who as Lincoln’s Treasury Secretary presided over the issuance of greenbacks, argued later as Chief Justice of the Supreme Court that the issuance of greenback currency was unconstitutional and exceeded the powers of the federal government.  “The legal tender quality is only valuable for the purposes of dishonesty” as he put it. Finally, the political process has been so thoroughly corrupted and taken over by the power elite that political approaches to solving the money problem have virtually no chance of success. 

Towards more effective means of empowerment.

Business people, farmers, professionals, and others who are engaged in productive enterprise are clamoring to gain access to credit, but they fail to recognize that it’s already in their collective hands. Under present arrangements we give our credit to the banks, and then beg them to lend some of it back to us and pay them interest for the ‘privilege.’ But there is no good reason for credit to be monopolized in this way. Businesses routinely offer credit to one another when they deliver goods and services and allow some period of time for payment to be made. This practice can be extended and organized on a multilateral basis.

The real solution to the problem lies in creating new structures for allocating credit that are based on the legitimate needs and the resources of businesses, workers, and state and local governments. Competition in currency can transcend the dysfunctions inherent in the present centralized system and ensure that there will be sufficient amounts of different media of exchange to enable all desirable trades. Competing currencies will also ensure that political currencies like the dollar cannot be abused without losing patronage in the market. We need to promote the separation of money from the state by deploying exchange mechanisms that decentralize and democratize the control of credit.

Money is first and foremost a medium for facilitating the exchange of goods and services and other forms of real value, but the exchange function can be effectively and efficiently provided outside the banking system and without the use of conventional political money. This is already being done through credit clearing exchanges and through the issuance of private currencies or vouchers by businesses that produce valuable goods and services. Both approaches have the capacity to provide exchange media that can also be used by the general public to mediate all manner of transactions.

Is there any practical possibility of organizing producers on a sufficiently large scale to achieve this? Yes, because this approach is far more practical and empowering than any other currently on offer. Improvements in the human condition have always stemmed from the creativity, industriousness, and goodwill of people. A cooperative and compassionate, society can emerge from the creation of exchange alternatives that are based on voluntary, free-market, and community-based initiatives that enable people to transcend the money monopoly and the war machine.

This process begins at the local level by utilizing the credit of local producers to mediate the exchange of goods and services that are locally produced or sold. There are many examples of successful private currencies that have been circulated in various times and places. Whatever they are called—vouchersscripcreditscertificates or coupons—sound private and community currencies can be spent  into circulation by any trusted producer or reseller who is ready, willing, and able to reciprocate by redeeming the equivalent amount as payment for real value, i.e. the goods or services that are their normal stock in trade and are in regular demand. There is nothing mysterious or complicated about this process.

The exchange of goods and services is also enabled on a moneyless basis by using a process of direct ‘credit clearing’ among buyers and sellers. This is already being done by scores of commercial trade exchanges (sometimes called ‘barter’ exchanges) that have been operating successfully around the world for more than 40 years. These commercial credit circles, comprised of thousands of businesses of all kinds, presently mediate an estimated 20 to 30 billion dollars’ worth of trades annually, and these numbers continue to grow.

As operational improvements are made and credit management procedures become standardized, these exchanges could be networked together to realize the vast potential of moneyless credit clearing arrangements. In this emerging worldwide web of exchange, members of each local circle or node are known and allocate credit to one another based on their reputation and ability to provide valuable goods and services. Thus we can eventually have an independent system of non-monetary payment in which credit is locally controlled but globally useful.

It is essential and entirely feasible that we reduce our dependence on the banking system and conventional political monies. Through the deployment of innovative mechanisms of exchange like private currencies and credit clearing networks, individuals, businesses and communities can empower themselves economically and politically to build a society that is free, fair, prosperous and peaceful.

A longer version of this article is available here.