Forget the IMF, all real money is local

Hazel Henderson
The East African, 29 May to 4 June 2006

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The word is out that economics, never a science, has always been politics in disguise. Civic action with local currencies, barter, community credit and the more dubious rash of digital cyber-money all reveal the politics of money.

Economics is now widely seen as the faulty source-code deep in societies' hard drives, replicating unsustainability: booms, busts, bubbles, recessions, energy crises, resource depletion, poverty, trade wars, pollution, disruption of communities, and the loss of cultural and biological diversity.

Citizens all over the world are rejecting this malfunctioning code and its operating systems: the World Bank, the International Monetary Fund (IMF), the World Trade Organisation (WTO), and imperious central banks.

Its hard-wired programme, the now derided Washington Consensus recipe for hyping GDP growth, is challenged by the Human Development Index (HDI), the Ecological Footprint Analysis, the Living Planet Index, the Calvert-Henderson Quality of Life indicators and other indices.

As with politics, all real money is local, created by people to facilitate exchange and based on trust. The story of how this useful invention, money grew into abstract national fiat currencies backed only by the promises of rulers and central bankers is being told anew. We witness how information technology and deregulation of banking and finance in the 1980s helped create today's monstrous global casino where $1.15 trillion worth of fiat currencies slosh around the planet daily via electronic exchanges, 90 percent in purely speculative trading.

US President George W Bush embraced the opinion of the new US Federal Reserve Bank Chairman Benernanke that the mystery of low bond yields and interest rates was due to a "global savings glut".

Former US Federal Reserve Bank Chairman Greenspan, whose zero interest rates flooded the US economy with excess liquidity and helped create the dot-com, housing, and global asset bubbles, declared himself "perplexed". The anomaly involves the global economic imbalances between the US, the world's largest debtor - borrowing the lion's share of global capital - and the developing countries of Asia and those exporting oil as the world's new lenders.

I doubt there is a "global savings glut" or a "Shift of Thrift" from indebted US household' zero saving rates to thrifty Asian savers as claimed in The Economist editorial of September 24, 2005.

My view is that there's a global flood of fiat paper money - mostly trillions of US dollars amplified by the pyramiding of financial "innovations" such as derivatives, hedge funds, off-shore "special purpose entities", currency speculation, and tax havens - vis-à-vis real production of goods and services in the real world.

Today we see worldwide experimentation with local exchange, barter and swap clubs, such as Deli-Dollars, LETS, Ithaca Hours, and other scrip currencies in the US and Canada. Billions of people still live in traditional non-money societies and the world's mostly female voluntary sectors.

As local groups and communities created their own local scrip currencies and exchange systems, they learned about economists' deepest secret: money and information are equivalent - and neither is scarce! Barter, dismissed in economic textbooks as a primitive relic, went hi-tech. eBay, the world's largest garage sale, is an example of how to bypass existing markets.

People began to see how central banks and national money-systems control populations by macroeconomic managing of scarcity, employment levels, availability of mortgages and car loans, via the money-supply, credit, interest rates, and all the secretive levers and spigots used by central bankers.

In spite of such mechanisms, the defrocking of economics, the deconstructing of money systems, and the growth of all the healthy local, real world alternatives is propagating widely.

Before we fall into "either/or" errors, we should avoid doctrinaire "smallness", ideological localism, and knee-jerk libertarianism. None of these can protect local communities from the ravages of market fundamentalist-driven globalisation. Like it or not, we are all "global" now. In today's information-saturated world, communities need to understand anew which elements to reject and which elements to embrace.

Wholesale rejection can lead to rigidity, xenophobia and misreading of history. Wholesale acceptance of the current unsustainable economic global trends will surely lead to loss of local culture, biodiversity, and resource-depletion.

We humans have been adept at creating new scenarios and technologies that mirror our lack of systematic knowledge and foresight. From such social changes and unanticipated consequences, we must learn and evolve - or suffer ecological collapse.

Hazel Henderson, author of Creating Alternative Futures, is co-creator of the Calvert Group, and the Calvert-Henderson Quality of Life Indicators. For further information visit: www.calvert-henderson.com  

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