The Money Crunch Why Complementary Currencies Now? Bernard Lietaer

Plan Today’s Context Understanding Complementary Currencies Complementary Currencies in Practice Conclusions

Today’s Context: The “Money Crunch” We are at the beginning of a substantial “Money Crunch”, where money scarcity will result in a general squeeze in funding support for education, social services, elderly care, etc. => The “TINA” syndrome (“There Is No Alternative…”)

Today’s Context: Global Structural Shift This situation is going to accentuate over time because we are in the middle of a major structural shift of the world economy Emergence of Information Age = End of Industrial Age –Same scale and impact as shift from Agrarian Age to Industrial Revolution, except faster –Structural => no business cycle improvements will solve them => no return to 1990s likely… Japan was first economy to hit that wall with its Crash of 1990 –Japan tried all the classical solutions (e.g. tax cuts, public works) to re-launch their economy, to no avail… Germany and Europe is now going the same way –Stubborn unemployment, no recovery in sight US is currently in denial but will be third in the same sequence…

Today’s Context: US s: Devolution of many social issues from Federal to State and local level, – without providing funding – without allowing deficit spending : Crash + Economic downturn –Total Denial of Structural Issue “Unemployment problem is temporary” Monetary crashes happen only to 87 other countries… => Massive State and local deficits => 2 solutions: Cutting social and educational programs precisely when they are most needed Inventing new approach to resolve those problems Japan: after initial denial & failure of classical solutions, now regional development through complementary currencies Germany & Europe: idem… Can we afford not to learn?

Some Definitions What is Money? Economic Textbooks define money by what it does, not by what it is –e.g. Functions of Standard of Value, Medium of Exchange, Store of Value, etc.... Money is an Agreement, within a Community, to use something as a Medium of Exchange “Complementary” Currency: a currency - different from national currency - that operates in parallel with national currency  Links unmet needs with unused resources.  “I foresee new private currency markets in the 21st century.” Alan Greenspan

Today’s Situation The Japanese Precedent? Japan has already gone through 13 years of what we just begin now. –“The use of complementary currencies can bring an end to the long-lasting deflation of the Japanese economy by supplying additional monies of various types at the local level.” Japanese Minister of Economy, 2002 –Who better to resolve local issues than the local people? Example 1: Toshiharo Kato, top executive of METI, has initiated 40 different types of complementary currency “eco-money” projects –Variety of technologies (from high-tech smart card, to low tech paper) –Variety of scales (from mountain village of 800 people, to prefecture of 10 Million) –Variety of complexity of functions (from single function to 27 different functions on a single smart card: elderly or children care, local unemployment, small business loyalty schemes, disaster preparedness training, etc. –Strategy: testing to determine which models works best for what purpose, and go large scale with the best Example2: Tsutomo Hotta, “Mr. Moral Authority” in Japan implements “Fureai Kippu” complementary currency for elderly care Example 3: Next step up is “integrated regional systems” (pilots in Yamato City, Germany) Why can’t we start the same in US, in Colorado, now? –Pilot project in advanced design phase in Sonoma County, CA.

In addition to Fureai Kippu… 300 other systems…

Regional Currency / Regional Point in Yamato City Eco Money Fureai Ticket Ithaca Hours Due Bill LETS Mall Point (1) (2) (3) (4) 1) Interchanges between local currencies 2) Interchanges between citizens and regional currency 3) Interchanges between citizens 4) Interchanges inside a regional currency Yamato “Love” (Local Value Exchange) currency

Plan Two Case Studies Framework for Complementary Currencies Core Ideas Mechanism Complementary Currencies in the US Conclusions

Core Ideas 1.Contrary to prevailing economic theory, money is not value neutral. Instead, different money systems encourage different collective behaviors and emotions. Conventional money dissolves community Complementary money creates it 2.Thousands of complementary currencies experiments are on-going now around the world that provide new tools for a region to address various socio-economic problems. 3.For different types of problems, particular designs are useful !

Understanding the Mechanism Solving social problems with a Single Conventional Currency National Currency (competitive, scarce) Competitive/Global Economy (Financial Capital) Non-Profits Subsidies Tax- Deductions Taxation Commercial Transactions Community Transactions Cooperative/Regional Economy (Social Capital)

Understanding the Mechanism Solving social problems with Complementary Currencies National currencies (competitive, scarce) Complementary Currencies (cooperative, sufficient) Competitive/Global Economy Cooperative/Regional Economy Commercial Exchanges Community Exchanges Complementary Currencies are complementary to (not replacing) national currencies Complementary Currencies create ADDITIONAL Wealth, Work, and a safety net below official system

Changing the Money Paradigm by Leaving Monetary Flatland Global Economy Regional Economy

Plan Two Case Studies Framework for Complementary Currencies Complementary Currencies in Practice Conclusions

Today’s Situation Number of Complementary Currency Systems Operational in 12 countries ( )

Three Practical Findings 1.In the field of complementary currencies, practice is ahead of theory 2.Contrary to key economic theory hypothesis assumed by Adam Smith, money is not value neutral –Different types of money encourage different types of transactions, and different relationships between people 3.Complementary Currencies solve socio-economic problems Dampens impact from economic shocks => Can be useful tool to resolve social problems without creating budgetary deficits, raising taxes or bond issues.  Creates a more stable and “gentler” world  If there is no crisis, it is very useful as a community building tool  If there is a crisis, it becomes vitally useful…

Plan Two Case Studies Framework for Complementary Currencies Complementary Currencies in the US Conclusions

Conclusion We are now living in an age of fear => Disempowerment and isolation of the people We have already started a “Money Crunch” => Money scarcity feeds the TINA syndrome  Complementary currencies are a pragmatic way to: take back our power; Rebuild and strengthen community; to counteract money scarcity; and thereby find other ways to resolve the challenges we are facing.

The “Money Crunch” Weekend Unique Opportunity to… Personal contact with world-class experts –7/1 participants/presenter ratio Create a Community of Practice in Colorado Learn “Money 101” how “conventional” money really is created and managed Learn about various complementary currency system from the creators themselves There will not be another opportunity of this level in the foreseeable future…

The “Money Crunch” Weekend Key Speakers Edgar Cahn: Founder of Time Dollar Foundation, initiator of 300+ Time Dollar systems. Author “No More Throw-away People” Tom Greco: Founder of the Community Foundation. Author of “ Money: Understanding and Creating Alternatives to Legal Tender” speaks about “What is money?” Luca Fantacci, Italy: speaks about “New Findings on Historical Precedents for Complementary Currencies” Alec Tsoucatos, speaks about “Money: the Untold Story” Christina Gray, initiator of institutional complementary currencies, speaks about “Let’s get real about system change” Gilson Schwartz, Brazil: “Innovations from the field” Stefan Brunnhuber, Germany: “Money and Sustainability” (the new Report to the Club of Rome) Octavia Allis, Kathy O’Conner, Christian Izquierdo “Community Applications” Greg Barry, Sergio Lub, Randy Petersen “Business Applications” Arthur Brock, Joel Hodroff, Les Squire “New technologies for complementary currencies”.

Follow-up “Of Human Wealth: Beyond Greed and Scarcity” (new galley edition available here) Also “The Future of Money” (London: Random House, 2000) and 17 other languages Internet: – – –