Free Money!

Free money!
Digital currencies are bringing money back to the people—without interest.
Money is a problem. You know that: you never seem to have enough of it. But money isn’t just your problem. Money is the problem.
The current monetary system causes poverty, pollution and inequality. As a result of that system, people still starve to death every day in a world that’s collectively richer and more productive than ever. Henry Ford noticed this a century ago. “It is well enough that people of the nation do not understand our banking and monetary system,” he said, “for if they did, I believe there would be a revolution before tomorrow morning.”
There was no revolution, and most people—including almost all politicians—still have no idea of the pernicious effects our monetary system has on the collective and democratic interests of the community. But a radical change is under way. We’ve gotten used to the disruptive influence of the Internet, which has turned whole industries upside down. The method of disruption is always the same: decentralization and democratization. And that’s exactly what needs to happen with money—for the sake of us all (or at least 99 percent of us).
Money’s first and most important function is as a means of exchange. As long as human beings have existed, we’ve traded. We exchanged whatever we had too much of for whatever we needed—say, a crate of apples for a bale of hay. We determined for ourselves what had value. When communities got bigger and started trading with each other, they invented symbolic currency, made of stone, grain or more valuable materials like bronze. Merchants became prosperous, powerful citizens. Their work largely served our daily needs. Money was communal. It forged relationships and strengthened society.
This beneficial, nourishing “community money” has largely been lost over the past 600 years or so. (More on that in a minute.) But the Internet presents a fantastic opportunity to correct this historical error. The magic word is bitcoin, or cryptocurrency, or, less technically, digital currency. We’re not so much talking about the currency itself—which you can use to pay for goods and services and whose relative value fluctuates wildly—as about the technology: Bitcoin with a capital B. The idea behind it is more interesting than the currency itself.
That idea has the potential to put money back into the hands of those it was designed to serve: you, us and everybody. If we can rent one another rooms and car rides without involving a higher, supervisory body (see Airbnb, Uber and so on), why can’t we do business using our own currency? Why should we need to involve a government or central bank? Trust? That evidently isn’t a problem with apartments or cars—not exactly impersonal or trivial things—so why should it be with money?
Can you see the potential? This could be the biggest Internet-based upheaval yet, since money touches everyone and everything.
Money as we know it today doesn’t belong to people but to banks. The misunderstanding started in the 15th century with an influential Italian family.
In the late 14th century, the Medicis were the most powerful family in Europe. They produced four popes and several daughters who became queens in other parts of Europe. They also supported artists and scientists, including Leonardo da Vinci and Galileo Galilei. But the Medicis exerted their greatest influence through their bank, Banco Medici.
In its heyday, Banco Medici was Eu-rope’s largest and most respected financial institution. The Medicis were bankers to royal families and merchants. They also introduced the innovation of double-entry bookkeeping, in which every transaction is recorded twice, in the credited and debited accounts. Businesses had used account books to balance incomings with outgoings before, but never on such a large scale. The change allowed Banco Medici to assume a crucial intermediary role. People no longer had to do business directly with suppliers but could avail themselves of the bank, with its authority and its confidence-inspiring central administration—for which, of course, it charged a fee: interest.
The idea was brilliant. Historians agree that the Medicis’ innovation contributed not only to an increase in world trade but also to the artistic and architectural flowering of the Renaissance. The Medicis prepared Europe for an age of modernization, and money and banking were a key part of it.
They also came to occupy a central place in our lives. The banks’ mounting power put them in the position of being able to create money. Thus, they were in a sense the rulers of society. And we became slaves of money, subjects of the banks.
The system of money creation by banks is the main problem with modern currencies. Currencies come into circulation when a bank issues a new loan. Let’s say you buy a house for $200,000 and take out a mortgage for that purpose. At that moment, the bank creates that money: it adds $200,000 to the money supply by making an entry into its balance sheet and distributes that money to you. Then comes the problem: you not only have to pay back $200,000 over 30 years, but you also have to pay interest on the loan. Yet the bank never creates that money that you paid back as interest. So where does the interest come from?
Well, for example, somebody else might go bankrupt. Another’s loss could put you in a position to pay the interest you owe. Otherwise, you might take out a new loan. Our financial system is built on scarcity and debt. It doesn’t lead to a healthy exchange of goods and services—the essence of a free market—but to endless competition. That’s what causes your shortage of cash.
This is also the source of the immense debts in the world. According to a recent McKinsey report, since the Great Recession of 2007, global debt (including households, governments, corporate and financial) has increased from $57 trillion to $199 trillion last year, vastly outpacing economic growth. All that debt needs to be serviced: it requires interest payments. Governments take over debts from failing banks. The debts change hands in an ongoing, unsustainable merry-go-round. But they don’t go away, and they keep crippling economies. That’s where poverty and unemployment come from. The problem is never that there’s not enough work; it’s that there’s no money to pay for it.
A second casualty of that monetary system is the environment, since it’s tempting to convert natural resources into money that will automatically keep generating more wealth. The interests—no pun intended—of nature and society are at odds with those of the few people who have the most money. This oligarchic scenario creates undue stress and suffering for 99 percent of humanity.
Interest is so ingrained in our society that it would appear to be a natural phenomenon. It isn’t. Interest was invented. The idea was heavily criticized. And now we’re stuck with it. News stories always talk about interest rates and their fluctuations—but never about the fundamental question of whether we should have such a thing in the first place.
And that is most definitely the question. If you borrowed 10 bucks from a friend, how would you react if he asked for $11 when you paid it back two weeks later? In many cases, we don’t charge interest at all when doing business with others. If you order something from a company, they’ll send it to you in total faith that you’ll pay in the foreseeable future. And if you invoice someone for work, you don’t usually charge interest on the processing time.
There’s always been resistance to interest. All the major religions opposed it. Jews were forbidden to charge interest to other Jews. Europe legalized interest only after it detached itself from the Catholic Church. Today, only Islamic banks still eschew riba—Arabic for “interest”—on principle.
Interest fosters inequality. That’s because it rewards people who have enough extra money to lend it to those who need it badly enough to pay. Interest’s most ruinous effect is that it’s cumulative—it’s charged again and again, year after year. So the rich effortlessly become richer, while the poor have to work harder and harder to save.
That interest isn’t a natural phenomenon is evidenced by the fact that the whole idea is untenable. Put a euro in the bank today for your distant descendants, leave it there, and in 1,000 years the amount will hit 50 figures. To use an oft-cited example, if Mary and Joseph had put a penny in the bank for their son at 4 percent interest, by the mid-18th century their descendants—if any—would have had enough to buy a ball of gold the same weight as the earth. Today they could buy 10,000 golden planets. Material reality can’t possibly keep pace with interest.
Only one conclusion is possible: interest is an invention within our monetary system that makes no contribution whatsoever to money’s long-standing community-sustaining aspects.
We know things could be different. In the 1920s and ’30s, hundreds of villages in Germany and Austria temporarily employed negative interest. It was a time of crisis, and unemployment was high. As ever, there was plenty of work to do—maintaining roads and the water supply and performing other public services, along with keeping up private homes—but no money. The Austrian town of Wörgl decided to issue a new, interest-free schilling. On the back of every banknote were 12 boxes the city could stamp, extending the bill’s validity from month to month, at a cost of 1 percent of its value. So after a month, a 100-schilling note was stamped and became a 99-schilling note. The villagers were thus encouraged to spend money. They were rewarded for investing rather than saving. The scheme stimulated economic activity and created work.
Unemployment in Wörgl dropped from above 30 percent to a marginal level. Houses were restored, roads repaved and the water system modernized. The Wörgl experiment—copied in numerous other towns—was recognized as a success. Yet Austria’s central bank perceived that its authority was being undermined. And the supreme court in Vienna declared the experiments with interest-free money illegal.
The genie was out of the bottle, however. Renowned economist John Maynard Keynes praised the inventor of negative interest, the German merchant Silvio Gesell, saying, “I believe that the future will learn more from Gesell’s than from Marx’s spirit.”
Recent decades have seen experiments with interest-free complementary currencies—monetary units accepted in particular communities. The local exchange trading system (LETS) may be the best-known example. Invented in Canada in the 1980s, it’s a model that can be deployed anywhere to facilitate the exchange of goods and services. For instance, a babysitter might earn 20 LETS units for an evening’s work and then use the money to hire a carpenter. Another trend is time banking, in which one member spends four hours painting walls in someone else’s house, earning “time dollars” to spend on a babysitter to come over for four hours.
Such small-scale bartering works well. It fosters community ties and contributes to local economies. Accordingly, it’s become increasingly popular over the past 10 or 15 years. Dozens of cities and regions have their own alternative currencies—sometimes more than one.
Yet something’s preventing a breakthrough by these complementary currencies. They work best on a small scale, at the local level, and the world’s gotten much bigger. To truly participate in the global economy—to supply a solution to the omnipotence of banks—you have to go beyond the local community.
You have to go out into the wider world. You have to go online.
Disruptive. That’s the word for the Internet. It turns everything on its head. Everybody thought encyclopedias had to be written by a select group of learned experts, and then suddenly there was an online encyclopedia written by thousands of amateurs. We had a music industry full of record bosses and managers getting rich off the creativity of musicians, and then suddenly there were websites and apps that gave you limitless access to virtually all the music in the world, for a song.
The Internet democratizes and decentralizes. It transfers power from the upper echelons to the masses. It operates on the basis of transparency and access, eliminating shadowy agreements and secrets, putting everything out in the open. It’s global, connecting people around the planet in one immense network.
Right now, the Internet constitutes the backbone of what’s known as the sharing economy. More and more websites and apps are enabling people to use goods and services made available by other individuals. The best-known examples are Uber, which lets drivers use their own cars as taxis, and Airbnb, which allows people to rent out rooms and homes.
The sharing economy makes it possible to look at money in a whole new way as well. Five years ago, very few would have imagined that Airbnb and Uber could be worth tens of billions of dollars today without owning a single building or car. The overnight success of these companies, which have revolutionized services delivered by institutions that once seemed eternal, allows us to imagine that the banks might lose their position of power. And that would revolutionize everything.
What’s more, if we’ve learned anything about innovation in the past 20 years, it’s that it’s highly unlikely to come from within the industry it shakes up, whether it’s publishing or the music industry or the hotel business. Instead, renewal tends to come from outside—and specifically Silicon Valley, where the world’s top techies congregate. That’s where the major disruptors are today.
The threat to big banks probably won’t come from other big banks but from the proverbial nobody sitting in a garage with a computer and an Internet connection who surprises the world, and maybe changes it dramatically.
This is where the story of digital currency begins. We’re not just talking about online banking; almost 90 percent of money is already digital. It’s been going that way for decades, and the trend is set to continue. Some countries, including the United States and France, are already making it illegal to transfer large sums of cash. No, when we talk about digital money, we’re talking about bitcoin and other cryptocurrencies, which are based on ideas and ambitions that go far beyond those of more idealistic proj-ects like LETS.
Cryptocurrencies are based on a concept that’s reflected in the earliest source of money: the IOU (“I owe you”). Historically—before money and banks—people used IOUs to trade. Farmer A would buy seeds from farmer B, and if he didn’t have cash, he’d issue a record of debt—an IOU. He would pay off his debt once he’d been able to sell his harvest. IOUs could be traded. Farmer B could use his claim on farmer A to pay for a purchase from farmer C. However, the reach of the system was limited by the size of the community. IOUs are personal debts; farmer C would never accept an IOU from an unknown farmer A.
The great promise of the cryptocurrency technology is that it provides a way to bring the IOU system—the money that works wherever people are entering value-added processes—to a global scale, with unlimited potential.
Cryptocurrency technology can finance all the transactions we need when we need them, and—as fantastical as that may sound—yes, we’re indeed talking about free money. The only thing that’s required is that you add value and express that added value in the currency. Money is there where talents are contributed and a need arises to prefinance a final product. Your contribution as a producer of goods or services is the source of your money. You create the money you need. That’s the money of the future.
Understanding bitcoin and other cryptocurrencies entirely is no simple matter. Even early adopters now seem astonished by some of the new possibilities and opportunities it presents. In this respect, digital currency resembles the Internet, which was just as hard to explain back in the ’90s.
Could its impact be as far-reaching—or more so?
In 2008, a month after the fall of Lehman Brothers, a concise nine-page document appeared on a mailing list devoted to cryptography, the art of hiding or encrypting information. Building on earlier digital currency concepts and technologies, the document proposed how a digital monetary unit called the bitcoin could work. The sender was one Satoshi Nakamoto—thought to be the pseudonym of a lone genius or a team of smart people.
The brilliant idea behind digital currency lies in what is called the “block chain”: an encrypted shared public ledger. This ledger records all transactions that have ever been executed with a cryptocurrency. Your bitcoins or other cryptocurrencies live on your computer, hidden behind a code, or key, used in every transaction. A software protocol—a set of communication rules—enables computers to talk to one another so they can send bitcoins. The most amazing thing about bitcoin—at least from the current perspective of central banks and governments—is that there’s no central administration. The system is controlled and protected by clever software and cannot be manipulated.
The technology is complex and not easy to understand, but the gist is this: Thanks to modern technology and the Internet, a block chain provides total transparency about transactions that have been executed—and thus about credibility and the value of money. That’s why cryptocurrencies hold the promise to take the ancient IOU system to a global scale, liberating all users and participants from the stranglehold of the current banking system.
This is how it will work. A brick manufacturer issues block chains to pay its workers to produce bricks. If you want to build a house, you buy the bricks from the brickmaker and you pay by “upgrading” the block chain with the value you are going to add. Now the block chain reflects not only the value of the bricks but also part of the to-be-built house, including cement, masonry, and so on. You issue a number of block chains that together represent the value of the house. Each block chain holds the commitment of full repayment within 30 years. Someone who has money to spare and who’s saving for his retirement may sign up for this block chain. All transactions related to the building of your house are financed through the issuing and trading of block chains in a completely transparent Web environment. With each step, additional value is created and the value of the block chain increases.
Over time, you will repay the block chains you issued through block-chain claims you receive for your work. People, organizations and companies will pay you—issuing block chains just as you did to build your house—for your services and/or for the goods you produce. In the public block-chain ledger, the amount you owe gets reduced by what you earn. Ultimately, the block chain that you issued to build your house will be canceled. The money that was once needed to build a house is no longer needed and disappears, while new money for new transactions keeps being generated.
It sounds too good to be true, but here’s why it will work. The critical ingredient for any money system is trust. Money has its value because all of us recognize it. The bills in your wallet have value only because the supermarket and the coffee shop accept them. When they don’t, your money has no value. We trust money because its value is guaranteed by the government. But behind that guarantee is a carefully designed system of collateral. Banks give loans or mortgages only when they are provided with collateral. They will finance your house because if you don’t make your payments, they get legal ownership of it.
People will trust and accept cryptocurrencies only when similar guarantees are in place. Future block chains will need to incorporate a legal title—ownership—so that the one who holds the block chain can execute his rights. That’s not going to be difficult, because ownership is well documented in our modern societies. Land, houses, cars, companies and shares are all registered in public, accessible ledgers; we need only connect those to the block-chain technology. That’s not yet happening today, but it will happen, because it’s in the interest of all of us, and clever entrepreneurs will find the ways to realize this potential. The critical issue of trust can be resolved through transparent and reliable technology.
And the best thing about all this? In the cryptocurrency system, there’s no need for interest. When there’s enough money to finance the necessary transactions, there’s no scarcity. Interest is a result of the scarcity of money. It’s a scarcity that’s carefully created and maintained by banks, because they don’t issue the amount of money necessary for interest payments when they distribute a loan. That’s their business model. That’s how banks make money for themselves: at our expense.
However, we don’t need banks if we can generate money ourselves, whenever we need it, by converting our assets—a house, a car, but also the value of the goods we are going to produce or the services we are going to provide—into block chains. Technology allows you to make assets liquid in the same way Airbnb and Uber allow you to easily make money with your possessions where you couldn’t before.
We may not pay interest on the money of the future, but depending on the reliability of the value of the collateral, there can be insurance fees to make sure the value of block chains is guaranteed. The value of a house is pretty stable over time. But the future value of goods to be manufactured can be dependent on market forces, and block chains may be accepted to finance this production only with certain additional insurance fees. When the risk of a new venture is perceived to be high and the collateral may not cover it, investors may accept a block chain only when additional insurance is offered.
Money may not be completely free, but this new money will be liberated from the crazy world of modern finance that is currently serving a few at the expense of many. Much of the pain that the current money system causes comes from the practice of making money with money. That’s an insane process that fuels the speculation bubbles that lead to the recurring financial crises that wreck our economies and societies. That’s impossible in the block-chain system. The technology prevents double use of money. Every block chain is strictly related to a certain transaction in a chain of value creation. And when the transaction is completed with full repayment, the block chain expires. That’s also why there’s no risk of inflation in a block-chain system.
Inflation happens when there’s too much money in circulation. That can’t happen in a system where money is created only to finance a specific transaction based on real value. Bitcoin hasn’t yet become such an inflation-proof system because it does not yet incorporate a link to asset ownership and is therefore still vulnerable to speculation. The money of the future is the collective value of all IOUs. That is: of all things we, as a worldwide community, are making, doing and trading. And that’s exactly what money was supposed to do—and did, until clever bankers hijacked the system centuries ago.
Will the bankers and their money system disappear at some point in the near future? Probably not. The end of the banks has been predicted, but recall that when the radio was invented, the end of the newspaper was announced. And when television came along, the end of radio; and with the arrival of the computer, the end of television. Today we use all these technologies next to one another. Similarly, cryptocurrencies won’t replace dollars, euros, pounds, francs and yen.
But they will change the playing field. Some experts predict that when 20 percent of the economy is financed with interest-free cryptocurrencies, the impact will be such that market conditions will no longer provide room for banks to earn money out of thin air, and they themselves might be forced to offer interest-free loans. After all, they operate in a competitive environment—a free market, not a money monopoly.
The cryptocurrency revolution is well under way. Young financial geniuses are eschewing Wall Street and moving to Silicon Valley instead to join the Internet initiatives that are inventing the money of the future. At the same time, big investments are being made in further development and fine-tuning of the block-chain technology. And the cryptocurrency revolution is riding the waves of the ongoing frustration with the current banking system—where, after the painful happenings of 2007 and 2008, business seems to have returned to “normal,” all the way up to the million-dollar bonuses that are once again fueling public anger.
Bitcoin is attracting interest from all sorts of corners. On the left, liberals in the Occupy movement see it as a way to get rid of an unfair and unjust financial system. On the right, libertarians in the Tea Party see it as a way of getting around government interference in private life.
But it’s not just the fringes of the political landscape that are embracing digital currencies as a much-needed solution. Even economist Larry Summers, a former Treasury secretary and Harvard University president, says, “It’s a serious mistake to write this off.”
The geeks of today have enthusiastically embraced bitcoin in the way their predecessors did video games and HTML. And they are increasingly joined by a more tech-savvy public that is building the cryptocurrency revolution. There are hundreds of YouTube videos explaining how cryptocurrencies work and how you can use them. More and more people are discovering the opportunities and starting to try them out. There are already about 100,000 bitcoin transactions taking place daily.
And it doesn’t end there: bitcoin may be the most famous, or infamous, digital currency, but it’s certainly not the only one. There are Ripple, Auroracoin, Litecoin, BlackCoin, DigiByte, BitBay, BanxShares, Unobtanium, Pangea Poker and hundreds of others. The floodgates are open.
These currencies are experiments. Some will fail; others will succeed. That’s how it goes in the laboratories of innovation. But the successful ones will have an impact. They’ll usher in improvements, new innovations and Bitcoin 2.0. That’s the way change happens.
Cryptocurrencies will deliver money back to where it belongs: the community—local as well as global. Money is a tool for realizing value—real value, not speculation. Facilitating value creation is an essential function of money. And value creation is what we do all the time—when we deliver our services and when we create our products. We need upfront money to bridge the gap between the moment we start producing our product or preparing our service and the moment of our first sale.
In the direct IOU system of cryptocurrencies, we will rediscover that loans are not just a hobby for someone who wants to lend money for his own benefit. Loans are vital instruments that deliver purchasing power to the community. When you build your house, you create economic opportunities for your community. That’s why loans are essential community-building instruments. That’s why money creation has to be connected to the activities—the life—of the community.
Technology and the Internet are bringing us full circle. The money of the future will be the money of the past—a past before banks. It’s not a distant future. It’s a liberation waiting to happen.
The Internet is not yet done transforming our world. Here’s our bold prediction: Ten years from now, the world of finance will be a completely different animal from what it is today.
And that interest-free mortgage may be just around the corner.
 
 
Sidebar: Big change from a small nation
The cryptocurrency revolution isn’t just coming to the West: It’s already arrived in Kenya.
Bitcoin promises democratization and decentralization. That will affect us all. But the first people to benefit will be the outcasts of today’s monetary system: poor residents of developing countries. As everyone who’s heard of microcredit knows, they face limited access to financial services. Bitcoin gives them a way to get around several challenges.
It may come as a surprise, but Kenya is the global leader in mobile payments. Nowhere else is it easier to pay a cabdriver using your cell phone. More than three-quarters of the population has phones, and 80 percent of those people use them to withdraw, deposit and transfer money through the M-Pesa mobile platform. Mobile payments in Kenya top $10 billion (€8.9 billion) annually, and M-Pesa has expanded to other countries like South Africa, India and Afghanistan.
Thanks to their unreliable landlines, poor countries have a surprising jump on developed ones. Using bitcoin will be a smaller one for people already making everyday mobile payments at markets and stores than for Westerners used to paying by cash, credit card or debit card.
You probably aren’t one of the roughly 2.5 billion people in the world who lack access to a bank. These people don’t have checking or savings accounts, much less credit cards. That’s because they live in places commercial banks don’t see as worthwhile markets. Bitcoin could truly help them, as people like Songyi Lee have discovered. Lee was working for the anti-poverty charity World Vision when she arrived in Mali in 2013. Mali is one of the world’s poorest countries; 70 percent of its citizens live below the poverty line. When Lee got there, the country had been racked by violent civil war. She met a woman named Fatima who was living in a refugee camp with her five children. Fatima’s husband was working in the Ivory Coast and sending money home to his family. But the cash didn’t always make it to its destination. Since Fatima was one of the “unbanked,” she had to rely on other people to transport it from the Ivory Coast to Mali, and they weren’t exactly reliable.
Back home in Seoul, Lee told her boyfriend about Fatima, and inspiration struck. Lee mentioned that Fatima had a cheap cell phone—not a smartphone, but one that could receive texts. And Lee’s boyfriend, Johann Barbie, had an idea. A software engineer who’d worked for IBM, he was hugely interested in bitcoin—he’d been unable to sleep for two days after discovering it. Lee and Barbie realized something: people like Fatima can use simple cell phones to connect to a computer system that can deliver bitcoins. All they have to do is start a “wallet” with 37coins, the company Lee and Barbie founded. Sending bitcoins is as easy as sending an email or a text.
37coins is far from the only company to have spied an opportunity. Other businesses that recognize bitcoin’s immense potential to help the poor include BitPesa in Kenya, BitPagos in South America and Volabit in Mexico. In The Age of Cryptocurrency, Paul Vigna and Michael Casey write: “All share the belief that they can make good money and make money good.” They share something else, too: a deeper awareness that banking as we know it is not designed to improve the lives of the majority.
Think of the money that immigrants send back to their home countries. Though Fatima’s husband had no access to banking services, most migrants do. They use companies like Western Union and MoneyGram, and they use them often. According to the World Bank, last year migrants sent more than $400 billion (€355 billion) to their native lands—three times as much as all the official development aid in every country combined.
Yet plenty of that money never makes it to the households it’s intended for. Unavoidable transaction costs at both ends can easily add up to 10 or even 20 percent of the original amount. That’s tens of billions of dollars being skimmed off for a service that costs just a few cents per transfer in the bitcoin world. Look out, Western Union. The global market leader in small international money transfers could soon go the way of Kodak. | M.V.
Our experts
These are the people we spoke with while researching this article. We thank them for their time and insights.
Henk van Arkel
CEO of Netherlands-based STRO (Social Trade Organisation), which aims to alter the very concept of money by developing “news ways of working with money” to promote sustainability and social justice. Innovative methods are tested and implemented by cooperatives, businesses and governments, mostly in Latin America but also in Italy, Spain and the UK. Van Arkel is lecturing at universities in several countries. | Find out more: socialtrade.nl
Michael J. Casey
Australian-born columnist and blogger on global finance for The Wall Street Journal. His latest book, co-authored with Paul Vigna, is The Age of Cryptocurrency, which details the impact of Bitcoin and digital money on the global economy. As a journalist, Casey has worked in Bangkok, Jakarta and Buenos Aires to cover currencies, bonds and equities. | Find out more: theageofcryptocurrency.com
Thomas H. Greco Jr.
Community economist who has become an authority on moneyless exchange systems and community currencies. Greco is the author of several books, including The End of Money and the Future of Civilization, in which he prescribes actions to “enhance economic stability and vitality.” His blog is “devoted to the liberation of money and credit, and the restoration of the commons.” | Find out more: beyondmoney.net
Arjo Klamer
A professor of the economics of art and culture at Erasmus University, in Rotterdam, the Netherlands, where he holds the world’s only chair in the field of cultural economics. An early critic of the euro, Klamer has been promoting ideas of a new economy in which quality is more important than quantity. He’s the author of several books about economics, in both Dutch and English. Last year, he became alderman in his hometown, Hilversum. | Find out more: klamer.nl
David Korten
Founder and president of the Living Economies Forum, set up to “light the path to a New Economy grounded in positive living system principles that recognize life’s extraordinary capacity for cooperative self-organization.” Korten is the author of many books, the best-known of which is When Corporations Rule the World, a fierce critique of corporate globalization. He blogs for YES! Magazine, of which he’s the co-founder and board chair. | Find out more: livingeconomiesforum.org
Bernard Lietaer
Belgian economist who has probably studied monetary systems more than anyone else in the world. While at the National Bank of Belgium, Lietaer implemented the covergence mechanism (ECU) to the single European currency system, which became the euro. Back in 1992, BusinessWeek named him “the world’s top currency trader.” He’s the author of The Future of Money, New Money for a New World and other books, mainly about alternative, local and regional currencies. | Find out more: lietaer.com
Stephen DeMeulenaere
Founder and coordinator of the Complementary Currency Resource Center, an information center for and by users and initiators of community currencies and academics. He has been working in the field of community and complementary currencies for more than 20 years, in Latin America, Asia and his native Canada. He also runs the Coin Academy, designed to educate people about bitcoin and other digital currencies. | Find out more: complementarycurrency.org

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Free Money!

Free money!
Digital currencies are bringing money back to the people—without interest.
Money is a problem. You know that: you never seem to have enough of it. But money isn’t just your problem. Money is the problem.
The current monetary system causes poverty, pollution and inequality. As a result of that system, people still starve to death every day in a world that’s collectively richer and more productive than ever. Henry Ford noticed this a century ago. “It is well enough that people of the nation do not understand our banking and monetary system,” he said, “for if they did, I believe there would be a revolution before tomorrow morning.”
There was no revolution, and most people—including almost all politicians—still have no idea of the pernicious effects our monetary system has on the collective and democratic interests of the community. But a radical change is under way. We’ve gotten used to the disruptive influence of the Internet, which has turned whole industries upside down. The method of disruption is always the same: decentralization and democratization. And that’s exactly what needs to happen with money—for the sake of us all (or at least 99 percent of us).
Money’s first and most important function is as a means of exchange. As long as human beings have existed, we’ve traded. We exchanged whatever we had too much of for whatever we needed—say, a crate of apples for a bale of hay. We determined for ourselves what had value. When communities got bigger and started trading with each other, they invented symbolic currency, made of stone, grain or more valuable materials like bronze. Merchants became prosperous, powerful citizens. Their work largely served our daily needs. Money was communal. It forged relationships and strengthened society.
This beneficial, nourishing “community money” has largely been lost over the past 600 years or so. (More on that in a minute.) But the Internet presents a fantastic opportunity to correct this historical error. The magic word is bitcoin, or cryptocurrency, or, less technically, digital currency. We’re not so much talking about the currency itself—which you can use to pay for goods and services and whose relative value fluctuates wildly—as about the technology: Bitcoin with a capital B. The idea behind it is more interesting than the currency itself.
That idea has the potential to put money back into the hands of those it was designed to serve: you, us and everybody. If we can rent one another rooms and car rides without involving a higher, supervisory body (see Airbnb, Uber and so on), why can’t we do business using our own currency? Why should we need to involve a government or central bank? Trust? That evidently isn’t a problem with apartments or cars—not exactly impersonal or trivial things—so why should it be with money?
Can you see the potential? This could be the biggest Internet-based upheaval yet, since money touches everyone and everything.
Money as we know it today doesn’t belong to people but to banks. The misunderstanding started in the 15th century with an influential Italian family.
In the late 14th century, the Medicis were the most powerful family in Europe. They produced four popes and several daughters who became queens in other parts of Europe. They also supported artists and scientists, including Leonardo da Vinci and Galileo Galilei. But the Medicis exerted their greatest influence through their bank, Banco Medici.
In its heyday, Banco Medici was Eu-rope’s largest and most respected financial institution. The Medicis were bankers to royal families and merchants. They also introduced the innovation of double-entry bookkeeping, in which every transaction is recorded twice, in the credited and debited accounts. Businesses had used account books to balance incomings with outgoings before, but never on such a large scale. The change allowed Banco Medici to assume a crucial intermediary role. People no longer had to do business directly with suppliers but could avail themselves of the bank, with its authority and its confidence-inspiring central administration—for which, of course, it charged a fee: interest.
The idea was brilliant. Historians agree that the Medicis’ innovation contributed not only to an increase in world trade but also to the artistic and architectural flowering of the Renaissance. The Medicis prepared Europe for an age of modernization, and money and banking were a key part of it.
They also came to occupy a central place in our lives. The banks’ mounting power put them in the position of being able to create money. Thus, they were in a sense the rulers of society. And we became slaves of money, subjects of the banks.
The system of money creation by banks is the main problem with modern currencies. Currencies come into circulation when a bank issues a new loan. Let’s say you buy a house for $200,000 and take out a mortgage for that purpose. At that moment, the bank creates that money: it adds $200,000 to the money supply by making an entry into its balance sheet and distributes that money to you. Then comes the problem: you not only have to pay back $200,000 over 30 years, but you also have to pay interest on the loan. Yet the bank never creates that money that you paid back as interest. So where does the interest come from?
Well, for example, somebody else might go bankrupt. Another’s loss could put you in a position to pay the interest you owe. Otherwise, you might take out a new loan. Our financial system is built on scarcity and debt. It doesn’t lead to a healthy exchange of goods and services—the essence of a free market—but to endless competition. That’s what causes your shortage of cash.
This is also the source of the immense debts in the world. According to a recent McKinsey report, since the Great Recession of 2007, global debt (including households, governments, corporate and financial) has increased from $57 trillion to $199 trillion last year, vastly outpacing economic growth. All that debt needs to be serviced: it requires interest payments. Governments take over debts from failing banks. The debts change hands in an ongoing, unsustainable merry-go-round. But they don’t go away, and they keep crippling economies. That’s where poverty and unemployment come from. The problem is never that there’s not enough work; it’s that there’s no money to pay for it.
A second casualty of that monetary system is the environment, since it’s tempting to convert natural resources into money that will automatically keep generating more wealth. The interests—no pun intended—of nature and society are at odds with those of the few people who have the most money. This oligarchic scenario creates undue stress and suffering for 99 percent of humanity.
Interest is so ingrained in our society that it would appear to be a natural phenomenon. It isn’t. Interest was invented. The idea was heavily criticized. And now we’re stuck with it. News stories always talk about interest rates and their fluctuations—but never about the fundamental question of whether we should have such a thing in the first place.
And that is most definitely the question. If you borrowed 10 bucks from a friend, how would you react if he asked for $11 when you paid it back two weeks later? In many cases, we don’t charge interest at all when doing business with others. If you order something from a company, they’ll send it to you in total faith that you’ll pay in the foreseeable future. And if you invoice someone for work, you don’t usually charge interest on the processing time.
There’s always been resistance to interest. All the major religions opposed it. Jews were forbidden to charge interest to other Jews. Europe legalized interest only after it detached itself from the Catholic Church. Today, only Islamic banks still eschew riba—Arabic for “interest”—on principle.
Interest fosters inequality. That’s because it rewards people who have enough extra money to lend it to those who need it badly enough to pay. Interest’s most ruinous effect is that it’s cumulative—it’s charged again and again, year after year. So the rich effortlessly become richer, while the poor have to work harder and harder to save.
That interest isn’t a natural phenomenon is evidenced by the fact that the whole idea is untenable. Put a euro in the bank today for your distant descendants, leave it there, and in 1,000 years the amount will hit 50 figures. To use an oft-cited example, if Mary and Joseph had put a penny in the bank for their son at 4 percent interest, by the mid-18th century their descendants—if any—would have had enough to buy a ball of gold the same weight as the earth. Today they could buy 10,000 golden planets. Material reality can’t possibly keep pace with interest.
Only one conclusion is possible: interest is an invention within our monetary system that makes no contribution whatsoever to money’s long-standing community-sustaining aspects.
We know things could be different. In the 1920s and ’30s, hundreds of villages in Germany and Austria temporarily employed negative interest. It was a time of crisis, and unemployment was high. As ever, there was plenty of work to do—maintaining roads and the water supply and performing other public services, along with keeping up private homes—but no money. The Austrian town of Wörgl decided to issue a new, interest-free schilling. On the back of every banknote were 12 boxes the city could stamp, extending the bill’s validity from month to month, at a cost of 1 percent of its value. So after a month, a 100-schilling note was stamped and became a 99-schilling note. The villagers were thus encouraged to spend money. They were rewarded for investing rather than saving. The scheme stimulated economic activity and created work.
Unemployment in Wörgl dropped from above 30 percent to a marginal level. Houses were restored, roads repaved and the water system modernized. The Wörgl experiment—copied in numerous other towns—was recognized as a success. Yet Austria’s central bank perceived that its authority was being undermined. And the supreme court in Vienna declared the experiments with interest-free money illegal.
The genie was out of the bottle, however. Renowned economist John Maynard Keynes praised the inventor of negative interest, the German merchant Silvio Gesell, saying, “I believe that the future will learn more from Gesell’s than from Marx’s spirit.”
Recent decades have seen experiments with interest-free complementary currencies—monetary units accepted in particular communities. The local exchange trading system (LETS) may be the best-known example. Invented in Canada in the 1980s, it’s a model that can be deployed anywhere to facilitate the exchange of goods and services. For instance, a babysitter might earn 20 LETS units for an evening’s work and then use the money to hire a carpenter. Another trend is time banking, in which one member spends four hours painting walls in someone else’s house, earning “time dollars” to spend on a babysitter to come over for four hours.
Such small-scale bartering works well. It fosters community ties and contributes to local economies. Accordingly, it’s become increasingly popular over the past 10 or 15 years. Dozens of cities and regions have their own alternative currencies—sometimes more than one.
Yet something’s preventing a breakthrough by these complementary currencies. They work best on a small scale, at the local level, and the world’s gotten much bigger. To truly participate in the global economy—to supply a solution to the omnipotence of banks—you have to go beyond the local community.
You have to go out into the wider world. You have to go online.
Disruptive. That’s the word for the Internet. It turns everything on its head. Everybody thought encyclopedias had to be written by a select group of learned experts, and then suddenly there was an online encyclopedia written by thousands of amateurs. We had a music industry full of record bosses and managers getting rich off the creativity of musicians, and then suddenly there were websites and apps that gave you limitless access to virtually all the music in the world, for a song.
The Internet democratizes and decentralizes. It transfers power from the upper echelons to the masses. It operates on the basis of transparency and access, eliminating shadowy agreements and secrets, putting everything out in the open. It’s global, connecting people around the planet in one immense network.
Right now, the Internet constitutes the backbone of what’s known as the sharing economy. More and more websites and apps are enabling people to use goods and services made available by other individuals. The best-known examples are Uber, which lets drivers use their own cars as taxis, and Airbnb, which allows people to rent out rooms and homes.
The sharing economy makes it possible to look at money in a whole new way as well. Five years ago, very few would have imagined that Airbnb and Uber could be worth tens of billions of dollars today without owning a single building or car. The overnight success of these companies, which have revolutionized services delivered by institutions that once seemed eternal, allows us to imagine that the banks might lose their position of power. And that would revolutionize everything.
What’s more, if we’ve learned anything about innovation in the past 20 years, it’s that it’s highly unlikely to come from within the industry it shakes up, whether it’s publishing or the music industry or the hotel business. Instead, renewal tends to come from outside—and specifically Silicon Valley, where the world’s top techies congregate. That’s where the major disruptors are today.
The threat to big banks probably won’t come from other big banks but from the proverbial nobody sitting in a garage with a computer and an Internet connection who surprises the world, and maybe changes it dramatically.
This is where the story of digital currency begins. We’re not just talking about online banking; almost 90 percent of money is already digital. It’s been going that way for decades, and the trend is set to continue. Some countries, including the United States and France, are already making it illegal to transfer large sums of cash. No, when we talk about digital money, we’re talking about bitcoin and other cryptocurrencies, which are based on ideas and ambitions that go far beyond those of more idealistic proj-ects like LETS.
Cryptocurrencies are based on a concept that’s reflected in the earliest source of money: the IOU (“I owe you”). Historically—before money and banks—people used IOUs to trade. Farmer A would buy seeds from farmer B, and if he didn’t have cash, he’d issue a record of debt—an IOU. He would pay off his debt once he’d been able to sell his harvest. IOUs could be traded. Farmer B could use his claim on farmer A to pay for a purchase from farmer C. However, the reach of the system was limited by the size of the community. IOUs are personal debts; farmer C would never accept an IOU from an unknown farmer A.
The great promise of the cryptocurrency technology is that it provides a way to bring the IOU system—the money that works wherever people are entering value-added processes—to a global scale, with unlimited potential.
Cryptocurrency technology can finance all the transactions we need when we need them, and—as fantastical as that may sound—yes, we’re indeed talking about free money. The only thing that’s required is that you add value and express that added value in the currency. Money is there where talents are contributed and a need arises to prefinance a final product. Your contribution as a producer of goods or services is the source of your money. You create the money you need. That’s the money of the future.
Understanding bitcoin and other cryptocurrencies entirely is no simple matter. Even early adopters now seem astonished by some of the new possibilities and opportunities it presents. In this respect, digital currency resembles the Internet, which was just as hard to explain back in the ’90s.
Could its impact be as far-reaching—or more so?
In 2008, a month after the fall of Lehman Brothers, a concise nine-page document appeared on a mailing list devoted to cryptography, the art of hiding or encrypting information. Building on earlier digital currency concepts and technologies, the document proposed how a digital monetary unit called the bitcoin could work. The sender was one Satoshi Nakamoto—thought to be the pseudonym of a lone genius or a team of smart people.
The brilliant idea behind digital currency lies in what is called the “block chain”: an encrypted shared public ledger. This ledger records all transactions that have ever been executed with a cryptocurrency. Your bitcoins or other cryptocurrencies live on your computer, hidden behind a code, or key, used in every transaction. A software protocol—a set of communication rules—enables computers to talk to one another so they can send bitcoins. The most amazing thing about bitcoin—at least from the current perspective of central banks and governments—is that there’s no central administration. The system is controlled and protected by clever software and cannot be manipulated.
The technology is complex and not easy to understand, but the gist is this: Thanks to modern technology and the Internet, a block chain provides total transparency about transactions that have been executed—and thus about credibility and the value of money. That’s why cryptocurrencies hold the promise to take the ancient IOU system to a global scale, liberating all users and participants from the stranglehold of the current banking system.
This is how it will work. A brick manufacturer issues block chains to pay its workers to produce bricks. If you want to build a house, you buy the bricks from the brickmaker and you pay by “upgrading” the block chain with the value you are going to add. Now the block chain reflects not only the value of the bricks but also part of the to-be-built house, including cement, masonry, and so on. You issue a number of block chains that together represent the value of the house. Each block chain holds the commitment of full repayment within 30 years. Someone who has money to spare and who’s saving for his retirement may sign up for this block chain. All transactions related to the building of your house are financed through the issuing and trading of block chains in a completely transparent Web environment. With each step, additional value is created and the value of the block chain increases.
Over time, you will repay the block chains you issued through block-chain claims you receive for your work. People, organizations and companies will pay you—issuing block chains just as you did to build your house—for your services and/or for the goods you produce. In the public block-chain ledger, the amount you owe gets reduced by what you earn. Ultimately, the block chain that you issued to build your house will be canceled. The money that was once needed to build a house is no longer needed and disappears, while new money for new transactions keeps being generated.
It sounds too good to be true, but here’s why it will work. The critical ingredient for any money system is trust. Money has its value because all of us recognize it. The bills in your wallet have value only because the supermarket and the coffee shop accept them. When they don’t, your money has no value. We trust money because its value is guaranteed by the government. But behind that guarantee is a carefully designed system of collateral. Banks give loans or mortgages only when they are provided with collateral. They will finance your house because if you don’t make your payments, they get legal ownership of it.
People will trust and accept cryptocurrencies only when similar guarantees are in place. Future block chains will need to incorporate a legal title—ownership—so that the one who holds the block chain can execute his rights. That’s not going to be difficult, because ownership is well documented in our modern societies. Land, houses, cars, companies and shares are all registered in public, accessible ledgers; we need only connect those to the block-chain technology. That’s not yet happening today, but it will happen, because it’s in the interest of all of us, and clever entrepreneurs will find the ways to realize this potential. The critical issue of trust can be resolved through transparent and reliable technology.
And the best thing about all this? In the cryptocurrency system, there’s no need for interest. When there’s enough money to finance the necessary transactions, there’s no scarcity. Interest is a result of the scarcity of money. It’s a scarcity that’s carefully created and maintained by banks, because they don’t issue the amount of money necessary for interest payments when they distribute a loan. That’s their business model. That’s how banks make money for themselves: at our expense.
However, we don’t need banks if we can generate money ourselves, whenever we need it, by converting our assets—a house, a car, but also the value of the goods we are going to produce or the services we are going to provide—into block chains. Technology allows you to make assets liquid in the same way Airbnb and Uber allow you to easily make money with your possessions where you couldn’t before.
We may not pay interest on the money of the future, but depending on the reliability of the value of the collateral, there can be insurance fees to make sure the value of block chains is guaranteed. The value of a house is pretty stable over time. But the future value of goods to be manufactured can be dependent on market forces, and block chains may be accepted to finance this production only with certain additional insurance fees. When the risk of a new venture is perceived to be high and the collateral may not cover it, investors may accept a block chain only when additional insurance is offered.
Money may not be completely free, but this new money will be liberated from the crazy world of modern finance that is currently serving a few at the expense of many. Much of the pain that the current money system causes comes from the practice of making money with money. That’s an insane process that fuels the speculation bubbles that lead to the recurring financial crises that wreck our economies and societies. That’s impossible in the block-chain system. The technology prevents double use of money. Every block chain is strictly related to a certain transaction in a chain of value creation. And when the transaction is completed with full repayment, the block chain expires. That’s also why there’s no risk of inflation in a block-chain system.
Inflation happens when there’s too much money in circulation. That can’t happen in a system where money is created only to finance a specific transaction based on real value. Bitcoin hasn’t yet become such an inflation-proof system because it does not yet incorporate a link to asset ownership and is therefore still vulnerable to speculation. The money of the future is the collective value of all IOUs. That is: of all things we, as a worldwide community, are making, doing and trading. And that’s exactly what money was supposed to do—and did, until clever bankers hijacked the system centuries ago.
Will the bankers and their money system disappear at some point in the near future? Probably not. The end of the banks has been predicted, but recall that when the radio was invented, the end of the newspaper was announced. And when television came along, the end of radio; and with the arrival of the computer, the end of television. Today we use all these technologies next to one another. Similarly, cryptocurrencies won’t replace dollars, euros, pounds, francs and yen.
But they will change the playing field. Some experts predict that when 20 percent of the economy is financed with interest-free cryptocurrencies, the impact will be such that market conditions will no longer provide room for banks to earn money out of thin air, and they themselves might be forced to offer interest-free loans. After all, they operate in a competitive environment—a free market, not a money monopoly.
The cryptocurrency revolution is well under way. Young financial geniuses are eschewing Wall Street and moving to Silicon Valley instead to join the Internet initiatives that are inventing the money of the future. At the same time, big investments are being made in further development and fine-tuning of the block-chain technology. And the cryptocurrency revolution is riding the waves of the ongoing frustration with the current banking system—where, after the painful happenings of 2007 and 2008, business seems to have returned to “normal,” all the way up to the million-dollar bonuses that are once again fueling public anger.
Bitcoin is attracting interest from all sorts of corners. On the left, liberals in the Occupy movement see it as a way to get rid of an unfair and unjust financial system. On the right, libertarians in the Tea Party see it as a way of getting around government interference in private life.
But it’s not just the fringes of the political landscape that are embracing digital currencies as a much-needed solution. Even economist Larry Summers, a former Treasury secretary and Harvard University president, says, “It’s a serious mistake to write this off.”
The geeks of today have enthusiastically embraced bitcoin in the way their predecessors did video games and HTML. And they are increasingly joined by a more tech-savvy public that is building the cryptocurrency revolution. There are hundreds of YouTube videos explaining how cryptocurrencies work and how you can use them. More and more people are discovering the opportunities and starting to try them out. There are already about 100,000 bitcoin transactions taking place daily.
And it doesn’t end there: bitcoin may be the most famous, or infamous, digital currency, but it’s certainly not the only one. There are Ripple, Auroracoin, Litecoin, BlackCoin, DigiByte, BitBay, BanxShares, Unobtanium, Pangea Poker and hundreds of others. The floodgates are open.
These currencies are experiments. Some will fail; others will succeed. That’s how it goes in the laboratories of innovation. But the successful ones will have an impact. They’ll usher in improvements, new innovations and Bitcoin 2.0. That’s the way change happens.
Cryptocurrencies will deliver money back to where it belongs: the community—local as well as global. Money is a tool for realizing value—real value, not speculation. Facilitating value creation is an essential function of money. And value creation is what we do all the time—when we deliver our services and when we create our products. We need upfront money to bridge the gap between the moment we start producing our product or preparing our service and the moment of our first sale.
In the direct IOU system of cryptocurrencies, we will rediscover that loans are not just a hobby for someone who wants to lend money for his own benefit. Loans are vital instruments that deliver purchasing power to the community. When you build your house, you create economic opportunities for your community. That’s why loans are essential community-building instruments. That’s why money creation has to be connected to the activities—the life—of the community.
Technology and the Internet are bringing us full circle. The money of the future will be the money of the past—a past before banks. It’s not a distant future. It’s a liberation waiting to happen.
The Internet is not yet done transforming our world. Here’s our bold prediction: Ten years from now, the world of finance will be a completely different animal from what it is today.
And that interest-free mortgage may be just around the corner.
 
 
Sidebar: Big change from a small nation
The cryptocurrency revolution isn’t just coming to the West: It’s already arrived in Kenya.
Bitcoin promises democratization and decentralization. That will affect us all. But the first people to benefit will be the outcasts of today’s monetary system: poor residents of developing countries. As everyone who’s heard of microcredit knows, they face limited access to financial services. Bitcoin gives them a way to get around several challenges.
It may come as a surprise, but Kenya is the global leader in mobile payments. Nowhere else is it easier to pay a cabdriver using your cell phone. More than three-quarters of the population has phones, and 80 percent of those people use them to withdraw, deposit and transfer money through the M-Pesa mobile platform. Mobile payments in Kenya top $10 billion (€8.9 billion) annually, and M-Pesa has expanded to other countries like South Africa, India and Afghanistan.
Thanks to their unreliable landlines, poor countries have a surprising jump on developed ones. Using bitcoin will be a smaller one for people already making everyday mobile payments at markets and stores than for Westerners used to paying by cash, credit card or debit card.
You probably aren’t one of the roughly 2.5 billion people in the world who lack access to a bank. These people don’t have checking or savings accounts, much less credit cards. That’s because they live in places commercial banks don’t see as worthwhile markets. Bitcoin could truly help them, as people like Songyi Lee have discovered. Lee was working for the anti-poverty charity World Vision when she arrived in Mali in 2013. Mali is one of the world’s poorest countries; 70 percent of its citizens live below the poverty line. When Lee got there, the country had been racked by violent civil war. She met a woman named Fatima who was living in a refugee camp with her five children. Fatima’s husband was working in the Ivory Coast and sending money home to his family. But the cash didn’t always make it to its destination. Since Fatima was one of the “unbanked,” she had to rely on other people to transport it from the Ivory Coast to Mali, and they weren’t exactly reliable.
Back home in Seoul, Lee told her boyfriend about Fatima, and inspiration struck. Lee mentioned that Fatima had a cheap cell phone—not a smartphone, but one that could receive texts. And Lee’s boyfriend, Johann Barbie, had an idea. A software engineer who’d worked for IBM, he was hugely interested in bitcoin—he’d been unable to sleep for two days after discovering it. Lee and Barbie realized something: people like Fatima can use simple cell phones to connect to a computer system that can deliver bitcoins. All they have to do is start a “wallet” with 37coins, the company Lee and Barbie founded. Sending bitcoins is as easy as sending an email or a text.
37coins is far from the only company to have spied an opportunity. Other businesses that recognize bitcoin’s immense potential to help the poor include BitPesa in Kenya, BitPagos in South America and Volabit in Mexico. In The Age of Cryptocurrency, Paul Vigna and Michael Casey write: “All share the belief that they can make good money and make money good.” They share something else, too: a deeper awareness that banking as we know it is not designed to improve the lives of the majority.
Think of the money that immigrants send back to their home countries. Though Fatima’s husband had no access to banking services, most migrants do. They use companies like Western Union and MoneyGram, and they use them often. According to the World Bank, last year migrants sent more than $400 billion (€355 billion) to their native lands—three times as much as all the official development aid in every country combined.
Yet plenty of that money never makes it to the households it’s intended for. Unavoidable transaction costs at both ends can easily add up to 10 or even 20 percent of the original amount. That’s tens of billions of dollars being skimmed off for a service that costs just a few cents per transfer in the bitcoin world. Look out, Western Union. The global market leader in small international money transfers could soon go the way of Kodak. | M.V.
Our experts
These are the people we spoke with while researching this article. We thank them for their time and insights.
Henk van Arkel
CEO of Netherlands-based STRO (Social Trade Organisation), which aims to alter the very concept of money by developing “news ways of working with money” to promote sustainability and social justice. Innovative methods are tested and implemented by cooperatives, businesses and governments, mostly in Latin America but also in Italy, Spain and the UK. Van Arkel is lecturing at universities in several countries. | Find out more: socialtrade.nl
Michael J. Casey
Australian-born columnist and blogger on global finance for The Wall Street Journal. His latest book, co-authored with Paul Vigna, is The Age of Cryptocurrency, which details the impact of Bitcoin and digital money on the global economy. As a journalist, Casey has worked in Bangkok, Jakarta and Buenos Aires to cover currencies, bonds and equities. | Find out more: theageofcryptocurrency.com
Thomas H. Greco Jr.
Community economist who has become an authority on moneyless exchange systems and community currencies. Greco is the author of several books, including The End of Money and the Future of Civilization, in which he prescribes actions to “enhance economic stability and vitality.” His blog is “devoted to the liberation of money and credit, and the restoration of the commons.” | Find out more: beyondmoney.net
Arjo Klamer
A professor of the economics of art and culture at Erasmus University, in Rotterdam, the Netherlands, where he holds the world’s only chair in the field of cultural economics. An early critic of the euro, Klamer has been promoting ideas of a new economy in which quality is more important than quantity. He’s the author of several books about economics, in both Dutch and English. Last year, he became alderman in his hometown, Hilversum. | Find out more: klamer.nl
David Korten
Founder and president of the Living Economies Forum, set up to “light the path to a New Economy grounded in positive living system principles that recognize life’s extraordinary capacity for cooperative self-organization.” Korten is the author of many books, the best-known of which is When Corporations Rule the World, a fierce critique of corporate globalization. He blogs for YES! Magazine, of which he’s the co-founder and board chair. | Find out more: livingeconomiesforum.org
Bernard Lietaer
Belgian economist who has probably studied monetary systems more than anyone else in the world. While at the National Bank of Belgium, Lietaer implemented the covergence mechanism (ECU) to the single European currency system, which became the euro. Back in 1992, BusinessWeek named him “the world’s top currency trader.” He’s the author of The Future of Money, New Money for a New World and other books, mainly about alternative, local and regional currencies. | Find out more: lietaer.com
Stephen DeMeulenaere
Founder and coordinator of the Complementary Currency Resource Center, an information center for and by users and initiators of community currencies and academics. He has been working in the field of community and complementary currencies for more than 20 years, in Latin America, Asia and his native Canada. He also runs the Coin Academy, designed to educate people about bitcoin and other digital currencies. | Find out more: complementarycurrency.org

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