APPLYING SYSTEMS THINKING TO THE MONEY SYSTEM

Introduction

What makes up an economy?

The composition of an economic nugget

Bartering's difficulties

Overcoming the difficulties inherent in bartered exchanges

Safely de-linking the two halves of a bartered exchange or, guarding against money's pitfalls

Introducing money safely into the exchange process

The elements of an economic nugget when money becomes part of the exchange process

Preventing threats to the economic nugget's integrity

Using new issue money safely in the exchange process

The money system [Modelling the intrinsic values in an economy]

Accuracy of modelling

Maintaining the model's accuracy

Implementing a healthy money system

Necessary procedural changes

A the level of economic agents

At the collective level

The benefits of implementation of this money system

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Introduction

If we are to discuss our current money crisis in a meaningful way we first need to to accept that the essential role of any money system is that of representing the intrinsic value in the exchangeable goods and services that go to make up the real economic system. The money system is not the economy, i.e. not the real economic system. The money system endeavours to represent, as accurately as possible, the intrinsic value contained within the economy and this value, even though it is represented extrinsically by currency, is not, and cannot be, something extrinsic. It is intrinsic only to the exchangeable real goods and services that comprise the economy. These intrinsic values reside in people's heads no where else. Without the goods and services or the people there is no value to be represented and any money system established under such circumstances would be utterly meaningless.

In one sentence, a money system models, as accurately as possible, the intrinsic value in the exchangeable goods and services that lie at the heart of any economy.

We turn now to developing an understanding of what makes up an economy because in order to create a good model you first have to understand the thing that you are trying to model.

What makes up an economy?

An economy cannot be seen as just the heap of exchangeable goods and services that lie at its heart. It must also include the processes of exchanging goods and services, processes that take between the people who comprise the community to which the economy belongs

Thus an economy is the collective noun for all the voluntary exchanges of goods and services, completed, in process, and in prospect, that have, are and are about to take place between the members of a community. An economy is not a static thing, it is a living thing. If exchanges stopped there would no longer be an economy. Thus it is fair to say that the basic building blocks of an economy are the myriad of voluntary exchanges of goods and services entered into by the members of a community.

For our purpose here, which is to establish the guidelines for ensuring the creation of an accurate model of the intrinsic value of the goods and services in an economy, only the completed voluntary exchanges of goods and services are regarded as of relevance.

Exchanges in process or in prospect are just that, they have, as yet, not resulted in indisputable realisations of intrinsic values which is the case once an exchange is completed. Before an exchange is completed there is no indisputable concrete confirmation of the veracity of the intrinsic values of the items being exchanged and therefore there are no immutable values for our money system model to represent.

We shall call such completed exchanges economic nuggets and it is out of such economic nuggets that an economy is built. They are the fundamental building blocks of any economy. Without their existence there is no economy.

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The composition of an economic nugget

Economic nuggets are comprised of a number of identifiable components. They are comprised of six distinct elements, each of which is needed in order to produce a completed exchange, and thus an economic nugget.

These six elements are:

- the two parties, A & B, making the exchange

- the two items, IA & IB, to be exchanged belonging to A and B respectively

- the two simultaneous exchanges

- IA to B, and

- IB to A

Clearly the reason why A and B are happy to exchange IA and IB with one and other is because the intrinsic values [iv] that A is according to IA and to IB are equal and the same is true for B, otherwise they would not complete the exchange. Whether the intrinsic values in their respective heads are exactly the same is of no relevance.

Stated algebraically, it is sufficient for this voluntary exchange to happen if for A, IA(aiv) = IB(aiv) and for B, IB(biv) = IA(biv), and it is not necessary for IA(aiv) to be equal to IB(biv) or for IA(aiv) to be equal to IA(biv), or for IB(aiv) to be equal to IB(biv).

An exchange process not using money, as described above, is known as bartering but bartering is a process that naturally has a number of difficulties, difficulties get in the way of the exchange process ever getting started.

Bartering's difficulties

For someone wanting to complete a bartered exchange these difficulties are:

1. locating the group of people, G, who want to enter into bartered exchanges
2. finding amongst the members of G the sub-group of people, GO, who are offering things that you want
3. finding amongst the members of GO the sub-group of people, GOW, who also want what you are offering
4. finding amongst the members of GOW the sub-group of people, GOWW, who feel that what you are offering has the equivalent intrinsic value to them as what they are offering to you.

Clearly the above four difficulties present major obstacles to completing voluntary bartered exchanges, and a way needs to be found to overcome them.

Overcoming the difficulties inherent in bartered exchanges

A bartered exchange is a binary process, that is it has two equal halves to it and these two

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halves are tightly linked to one and other because the needs of the two participants have to match.

If a way of separating these two halves could be found then the whole process would become less cumbersome and more efficient in terms of the time and the energy required to complete it. This is so because by de-linking the two halves the needs of A and B would no longer have to match.

At some point in time it was discovered that the way to de-link the two halves of a bartered exchange was to externalise the intrinsic values involved in the exchange. Once this was successfully done the intrinsic values involved could be ported and used in one, or many, exchanges distinct from the original single bartered exchange.

With successful externalisation A only needs to give to B the now externalised 'intrinsic value' of IB rather than exchange IA for IB, and then B is free to find another item, IX say, that they want and for which they can give to the owner of IX the externalised 'intrinsic value' received from A.

How is this externalisation of intrinsic values historically done?

It is done by rendering intrinsic values into generic, visible forms the veracity, the accuracy, the integrity etc., of which forms is generally accepted by the community.

Over the centuries the externalisations have involved many different types of physical objects but now-a-days the externalisations are mainly rendered in the form of physical notes and coins, generally known as money or currency, and now-a-days also in the more abstract less physical form of the recording of currency values in writing or electronically.

The use of money might have removed the difficulties associated with bartered exchanges but it does not removed the need for the formation of economic nuggets. Now money does bring with it some changes to the processes that form economic nuggets and thus some threats to their integrity and these threats need to be guarded against if the two halves of a bartered exchange are to be safely de-linked. Safely here means de-linking the two halves of the bartering process without in anyway damaging the integrity of the resulting economic nugget.

Introducing money safely into the exchange process

By introducing money into the exchange process we are enabling the separation of the two halves of the binary exchange process from one and other with each half becoming a distinct sales and purchase operation in its own right. But when considered together these two halves must still be able to fully substitute for the original bartered exchange, that is, from the point of view of the integrity of the original intrinsic value, otherwise the economic nugget will not be formed.

It is necessary at this point to recognise two distinct categories of money, old issue money and new issue money.

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Old issue money is money the value of which has already been uniquely and honestly linked to the intrinsic value of a particular item, or group of items, be they goods and/or services, and it is therefore representing actual, i.e. real, intrinsic value and as a consequence its introduction into the exchange process cannot damage the integrity of an economic nugget in any way.

New issue money is money the value of which has not yet been linked to the intrinsic value in

any specific goods and/or services. Thus it has no real value and the value stated on it is illusory. Clearly the introduction of such money into the exchange process undermines the value accuracy of the money system model.

The elements of an economic nugget when money becomes part of the exchange process

In order for an exchange involving money to still yield the economic nugget, that would have resulted had it been a bartered exchange, the exchange must meet two criteria

1. include the following nine elements

• party A who both buys and sells
• party B selling IB to A
• party C buying IA from A
• two items to be sold, IA & IB, belonging to A and B respectively
• two equal sets of money, MA & MC, to the value of IA ,or IB, belonging to A & C
  respectively and to be used for purchasing IB and IA
• two completed purchase processes where A buys IB from B using MA and C buys IA from A using MC

2. MA and MC must be comprised of old issue money.

Preventing threats to the economic nugget's integrity

Threat to the intrinsic value integrity of economic nuggets only arises if the money introduced into the exchange process is new issue money, and continues to remain new issue money into the future. That is this new issue money never becomes old issue money in an honest manner.

When new issue money remains a fictitious externalisation of intrinsic value such new money is fraudulent and if it is put into circulation it remains quite unrecognisable as fraudulent, unless it is in the form counterfeit notes and coins of poor quality. Then its fraudulent nature being unseen, it has, by default, to steal for itself some of the intrinsic value of the money already in circulation. This damages the accuracy of the model of the intrinsic value in an

economy, i.e. the money system, by debasing, or devaluing, the building blocks of the money system, i.e. the currency, giving rise to general price inreases. These increases are commonly referred to as inflation.

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The issuing of new money is a necessity however. The question is, can new money be issued without the risk of creating inflation?

If the volume of exchangeable goods and services in the economy has increased then there is a genuine need for an amount of new money of equivalent intrinsic value to the increase in goods and services and the issuing of such new money will not be inflationary.

If however the new money is being put into circulation before there are in existence, actual exchangeable goods and services the intrinsic value of which the money can represent, the new money will be inflationary until such time as these exchangeable goods and services come into existence and then the money can represent the intrinsic value of these goods and services. Because of this it is essential to keep a tight control on the amount of new money issued in order to be able ensure that it uniquely represents the intrinsic value of newly developed goods and services.

Using new issue money safely in the exchange process

Now the possibility exists that either one, or both, of MA, and MC in the above specification 'The elements of an economic nugget when money becomes part of the exchange process' involve new issue money, in which case

Criteria 2 is replaced by the following over-arching rule:

• The person who first puts new issue money into circulation has to recognise that the new issue money is actually a commitment on their parts to supply goods and/or services, to the value of the new issue money, into the community and to do so as soon as possible. Failure to do so will inevitably be inflationary and the entity concerned should then be prevented from issuing any new money into circulation until they meet their outstanding new issue money commitment(s).

Meeting their commitments is probably best done by the transfer of the intrinsic value attached to old issue money, presently in their possession, equivalent in value to the new issue money, by withdrawing the old issue money from circulation at which point the new issue money becomes old issue money.

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The money system [modelling the intrinsic values in an economy]

Money is so effective in its facilitation of the exchange process that bartering has, to all intents and purposes, ceased to be practised. Consequently the use of money has become integral to virtually all economic activity. In other words the modelling of the intrinsic values of the goods and services that comprise an economy has become an integral part of that economy, shaping virtually all economic decisions and actions .This means that the accuracy of the modelling of the intrinsic values in an economy, which is what the money system does, is of critical importance to maintaining a healthy economy. Once money is introduced into an economy its health can only be maintained if the modelling accuracy of the money system is maintained.

Accuracy of modelling

The accuracy of representation achievable by a model is determined by the granularity of the representation, i.e. the more fine the detail being represented the more accurate the model is likely to be. In the case of the intrinsic values of exchangeable goods and services their range is truly unbounded so the logical thing to do when establishing extrinsic representations of these values is to have something that represents the smallest possible intrinsic value as the basic building block of the model. Historically this is what has been done and usually 1/100 of the unit of the currency represents the lowest intrinsic value and these

units, or fractions thereof, can be accumulated as needed to represent any desired intrinsic value. This has meant that the granularity of the money system is such that it can be used to represent from the smallest intrinsic value to the greatest.

In any economy the vast majority of exchangeable goods and services have intrinsic values that are greater than a single unit of currency. Now there is no sense in seeking to match each unit of currency with the intrinsic value of a particular fraction of a good or service rather the intrinsic values of goods and services need to be matched with their own particular accumulations of the units of currency. In other words each accumulation of currency has to have an unseen umbilical cord which connects it , and only it, irrevocably to the good or service the intrinsic value of which it is representing. Otherwise the accumulation is representing nothing and is therefore meaningless. Such empty representations degrade the model because it to loses its accuracy.

Maintaining the model's accuracy

The model's accuracy is maintained if any accumulation of currency uniquely represents the intrinsic value in a particular exchangeable good or service, otherwise not. How then do we establish a mechanism which will ensure that that accuracy, that integrity, is maintained?

In order to ensure this the use of new issue money in the exchange process has to abide by certain rules as explained above in, Introducing money safely into the exchange process, If these rules are observed then the currency will not be debased, i.e. the model will retain its accuracy.

Implementing a healthy money system

Money's primary purpose is to facilitate the voluntary exchange of goods and services between the members of a community. Therefore as the issuing of money is essential to the existence of any modern economy its issuance should be at no cost to its first recipients, any associated issuance costs should be borne by the whole community.

The most socially healthy way for new issue money to come into existence is for it to only be produced at the point where a purchaser has need of it because they have zero or insufficient old issue money to complete a purchase.

Now provided that, the new issue money recipient, i.e. the purchaser, goes on to meet the associated commitment to supply into the community goods and/or services of itrinsic value equal to the value of the new issue money, the integrity of the economic nugget, that they are party to creating through this transaction, is preserved and secondly the accuracy of the model, i.e. the money system, is maintained.

Prior to the advent of computers and IT, notes and coins had of necessity to be in a physical form which meant that issuing new money in response to such individual demands as outlined above was really not practicable. As a consequence of this physical limitation our current

dysfunctional money system evolved. It is dysfunctional because new money is issued without it being umbilically linked to the intrinsic values in specfic goods and/or services. Consequently the model of intrinsic value, i.e. the money system, loses its accuracy. To add insult to injury the recipients of the new issue money are charged interest on it as though it was old issue money which is fraudulent.

However with the advent of infomation technology, notes and coins no longer need to be in a physical form, they can, and are, already kept in the form of electronic records. Thus in conjunction with mobile phone technology this situation holds out the possibility of new money being issued electronically on demand to any individual anywhere provided that they have a phone and are within the reach of the mobile phone network.

Thus as money's primary purpose is to facilitate voluntary exchanges of goods and/or services between the members of a community it makes good moral sense, and it is now technically feasible, for this to be done, free of charge to the individual by a central, publicly funded, currency authority, the Hational Currency Authority [NCA]

How might this work in practice?

Firstly there is already a very successful worldwide alternative money system issuing its currency in this way, it can be found at www.ces.org.za , and there is no reason why such a system could not be adapted to serve an NCA. The rest of current monetary facilities such as banks etc., etc. would remain in place but they would only handle old issue money.. In order to control the accuracy of the model, i.e. the money system, a necessary procedural change would be that any transaction involving money would, as its first port of call, have to pass through the NCA's national currency system [NCS].

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Necessary procedural changes

A the level of economic agents

Every economic agent in the country would need to be registered with the NCA as an Account Holder[AH]. For people it would probably be simplest to use their Id numbers for this purpose.

Every AH would have a record in the NCS.and every AH would have a limit on the amount of unredeemed new issue money that it could hold at any point in time. AH's would probably need to be categorised for the allocation of limits according to some yet to be defined criterion. Ideally these limits would be set periodically in a national democratic referendum on the matter.

For each AH the NCA would keep a record of the amount of unredeemed new issue money issued to the AH. This is so that the NCA can both issue and control the amount of unredeemed new issue money in circulation.

Every AH would also need to have a specified bank account [SBA] accessible to the NCA. The SBA would only hold old issue money. Because of the controls on new issue money when such money is paid into an AH's SBA it can be safely regarded as old issue money.

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When a payment is to be made by an AH then it would have to start with a request to the NCA for an amount to be paid from its SBA into another AH's SBA.

The NCA would first check to see if there were sufficient funds in the SBA to make the payment.

If that was the case then the NCA would do the transfer and that would be it.

If that was NOT the case then the NCA would check in its records to see if the amount of new issue money required by the AH was within the specified limit for unredeemed new issue money.

If that was the case then the NCA would issue the necessary new issue money, add it to the AHs unredeemed amount of new issue money and do the transfer and that would be the that.

If that was NOT the case then the NCA would refuse to issue the new issue money or do the transfer and report the situation to the AH.

If an AH was to receive a payment into it's SBA from another AH's SBA the payment would first be passed to the NCA and the NCA would check to see if the AH had any unredeemed new issue money.

If that was the case then the NCA would use the payment to redeem the AH's unredeemed new issue money by writing off, i.e. permanently withdrawing from circulation, the equivalent amount of old issue money received. The consequence of this redemption is

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that the money received in payment rightly goes out of circulation being replaced by the now redeemed new issue money. Any excess could rightly be transferred to the AH's SBA. If there was no excess then no transfer to the AH's SBA could be done.

If that was NOT the case then the NCA would transfer the payment as is to the AH's SBA and that would be that.

Procedure at the collective level

The NCA would need to constantly monitor whether the amount of money in circulation corresponded with the intrinsic value of the economy. In other words that there was neither deflation nor inflation. This is a difficult balancing act requiring the perusal of a variety of national statistical reports before issuing planned amounts of new money into circulation. The NCA should probably aim for a 1 to 2 percent inflation rate.

With the NCS there are a variety of ways that new money could be issued ranging from to the Treasury to every citizen.

Implementation of this money system, the benefits

Monetary stability The immediate major benefit of the implementation of the above procedures for dealing with new issue money is that the accuracy of the model, i.e. the money system, could be largely maintained and currency induced inflation in prices could be minimised.

The NCS would not only keep control of the amount of unredeemed new issue money held by a AH it would also keep a unique record of every unit of currency issued into circulation and the successive AH holders of it.

This would enable other valuable benefits to arise from this money system. They are as follows:

• Democratisation of money:
  Should any AH need extra money to complete a purchase the NCA would produce for them as much new issue money as they needed for the purchase, provided that the amount of unredeemed new issue money already given to them did not exceed the limit allowed. Thus shortages of cash would not block any person from entry into the economy,
• Money with a built-in moral history:
  Each unit of currency would have a unique digital identity and a history of its holders starting from when it was first issued into circulation would be kept in the NCS. Thus there would be an accessible moral history available to all AHs.
  Thus any AH who wanted to view the transaction history of a unit of currency in order to see if the currency was acceptable to themselves would be able to do so. 11
  This is equivalent to the level of information that a purchaser would have had were they in a bartering situation. In a bartering situation if the purchaser did not like the source of the goods being offered for exchange they would not enter into the exchange. Similarly if money being proffered is money that has passed through transactions that the seller does not approve of, like drug dealing, arms trading, or environmental destruction for example they can refuse to accept it. In other words the units of currency would carry a moral colour instead of, as at present, being morally colourless.
  Money laundering would no longer be possible.
• Tax system simplification:
  The current Tax system could be radically simplified by reducing it to the collection of a percentage on every transaction made through the NCS.

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THE MONEY SYSTEM

INTRODUCTION

Exchanges with the world outside of the organism are an essential feature of life and in this regard human life is no different to all other life forms.

The only difference is that humans have distinguished some of these exchanges from the rest and created a conceptual label for this grouping of exchanges. The conceptual label for these exchanges is; economic exchanges.

We here are only interested in healthy exchanges, that is exchanges that benefit the life form concerned. Thus from here on, unless stated otherwise, any reference to an exchange presumes that it is a healthy one.

Economic exchanges embrace some, but not all, of the exchanges that take place between human beings. Economic exchanges that are healthy involve mutually acceptable exchanges of goods and/or services between parties. When these exchanges are considered as a whole they are referred to as an economy.

We distinguish these particular exchanges from other exchanges because we want to organise and manage them in a way that benefits us. In other words we want to try to ensure that the exchanges enhance our lives rather than threaten or degrade them in some way.

For us to be able to do this management thing, in any sphere of life including this one, we need to be able to think meaningfully about the sphere and for this we need to be able to construct mental models of the sphere, models that mirror aspects of the sphere concerned. In order to achieve this we have to identify and then label, with concepts, the relevant features of the sphere concerned.

The life sphere we are concerned with here is that of economic exchanges and what follows hereunder is an in depth exploration of that sphere and the only proper, the only honest, role that money can play within it.

ENSURING HONEST MONEY

What is honest money?

Money is only usable if all members of the community in which it is used share the experience that it is exchangeable, at any point in time for real goods and/or services to the value that the money reflects. One could justifiably call the money of such a currency honest money. In short it could be said that members of such a community have, gained through personal experience, faith in the stability and trustworthiness of their currency.

Unfortunately this cannot be said with any conviction for many currencies around the world today including our own. Is it possible to have honest money? How do we ensure that our money is honest? Is it possible to achieve this?

In order to be able to ensure that we can answer these questions in the affirmative we need to reacquaint ourselves with the basics of our economic lives.

The basics of our economic lives

Voluntary exchanges of real goods and/or services

Economies come into existence only because some of the real goods and/or services existing within a community are exchangeable within that community. That means that community members are freely able to exchange such goods and/or services with one and other. Such completed exchanges are the fundamental building blocks, or indivisible atomic units, out of which any economy is built.

It is worth noting here that these indivisible atomic units of an economy do not include money as one of their components. This is because money is just a very useful conceptual addition to economic life but not the basis of it. Exchange, without the use of money, is known as bartering.

Now historically gold has always been regarded ,almost universally, as the good that can be guaranteed to be exchangeable for any other good and/or service on offer. Thus psychologically it will be useful for us to regard such bartered exchanges as the real gold out of which any healthy economy is built and in order to enshrine this evocative metaphor in our economic discourse we will refer to a completed, a bartered, economic exchange as an 'economic nugget'.

The problem with bartering

However bartering is a very time and effort consuming business. This is because of the difficulty of finding someone who has for exchange something that you want and who in turn wants something of equivalent value to themselves that you are wiling to exchange. This major difficulty hampers the frequency with which bartered exchanges are entered into within any community where the economy is based on bartering, thus drastically reducing the amount of economic activity that takes place.

Money, the way out of the bartering problem

Basically when arranging a bartered exchange of goods and/or services the parties involved would have to accord relative values to the goods and/or services involved. Having done that the parties involved are then in a position to determine whether they were suitably equivalent in value. If they were the exchange would proceed otherwise it would not. Now these relative values are obviously only existant in the heads of the parties concerned and it was only once it was realised that these values could be stated in some external form. Then money was created in order to reflect, these internal values, in the external world.

The acceptance of the externalisation of the values of real goods and/or services in the form of money transformed the bartering process because it enabled the two halves of the exchange process to be separated from one and other in time, in location, and in the matching of needs Money offered the possibility of the involvement of one, or more, additional parties and their offerings in the initial exchange process enabling it to be completed. 

Note Full completion of the initial exchange process, even though involving more parties, is still necessary for the honest creation of an 'economic nugget'.

Money does this by enabling one party to an initial exchange, A, to give, not real goods and/or services to the other party to the exchange, B, but money in exchange for the real goods and/or services supplied by B to A.

Money is acting here as a temporary surrogate for the real goods and/or services that still need to be supplied into the community by A in order to complete the initial exchange and thus create an 'economic nugget'.

Comparing bartered exchanges with exchanges where money is used

In a bartering exchange process, the completion of which results in an 'economic nugget', the two parties to the process are simultaneously both givers and receivers. Thus in bartering, i.e. when no money is involved, a completed exchange process has the following four elements:

1. Two exchanging parties A and B
2. Two sets of exchangeable goods and/or services, GSa and GSb

and the process works to completion as follows:

1. A and B exchange GSa and GSb with one and other.

However when money becomes involved and the two halves of the process are separated from one and other both halves still need to achieve completion in order for the exchange process to become an 'economic nugget'. Thus with the use of money as facilitator of exchange a completed exchange process necessarily has the following seven elements:

1. Three exchanging parties A,B and C
2. Two sets of exchangeable goods and/or services, GSa and GSb, supplied by A and by B respectively
3. Two sets of money, Ma and Mc, used by A and by C respectively, the money being to the value of the goods and/or services involved in the exchange process

and the process works as follows:

1. In exchange for receipt of GSb A pays B with Ma
2. In exchange for receipt of GSa C pays A with Mc.

It is essential however for the completion of any exchange using money that the money involved is honest money. In this instance for example both monies, Ma and Mc, need to be comprised of honest money if the exchange is to result in an 'economic nugget'.

Now if it was always the case that honest money was involved in exchanges there would be no problems for the health of any economy. Ensuring that this is the case, that Ma and Mc are comprised of honest money, is however under our current money system not a foregone conclusion.

Ensuring the honesty of money

What is counterfeit money?

As already explained above money is a material representation of the value accorded to real goods and/or services. Now for the money to be honest each unit of currency must be representing the values in a definite set of of real goods and/or services otherwise, in the purist sense of this word, the money is counterfeit. Counterfeit items being items that appear to observers to be something that they are not.

Thus in purist terms counterfeit money means that the money states that it represents the values in an actual set of real goods and/or services but in reality there are actually no real goods and or services for the money to represent the values of, consequently the money is just a sham.

Unfortunately because money is a totally human creation a dis-connection between money and the values of real goods and/or services that it is supposed to represent has been accepted into the money system. This is shown by the definition of counterfeit money given in Wikipedia,

Counterfeit money is currency that is produced without the legal sanction of the state or government to resemble some official form of currency closely enough that it may be confused for genuine currency. Producing or using counterfeit money is a form of fraud or forgery.

In other words counterfeit money is money which simulates legally authorised money whilst not in fact being authorised.

This is a very weak definition of counterfeit money because it relies on the State to ensure that, in its production of money, it maintains the integrity of the link between actual goods and/or services and their value represented by the officially sanctioned money. This, as we all know, is honoured by the State and its agents more in the breach than in practice.

A more rigorous definition of counterfeit money would read as follows:

Counterfeit money is currency that has no backing in real goods and or services to the value that it purports to represent.

This is the definition of 'counterfeit money' that is intended in all uses of this phrase here.

What is honest money?

Honest money is currency that has the backing of, the value attached to, actual goods and/or services.

This definition of honest money is what is intended in all uses of the phrase here.

To maintain a healthy economy the challenge is to produce and put into circulation only honest money.

Producing and putting into circulation honest money

The concept of money was invented for the purpose of facilitating voluntary exchanges of real goods and/or services between members of a community.

Clearly if money is to function to the optimum in its role as a facilitator of voluntary exchanges it needs to be equally accessible to everyone in a community. It is thus a public good. Not only does it hinder money's purpose but it is morally wrong for money and the system which controls its distribution in society to become the income generating possession of any group within society. In a growing and changing economy however there is a constant need for 'new money' to be issued, how is this to be fairly and justly done?

The reality is that all new money is, at the point of issue, counterfeit because it has not yet been connected to the equivalent value actual real goods and/or services that it is serving as a surrogate for.

How is this connection to be achieved then?

It is best achieved when new money is issued to one party in an exchange who needs some money and who then goes on to complete the exchange in full by supplying, equivalent in value to the money, real goods and/or services to a third party and thus ensuring the exchange is turned into an 'economic nugget'.

If the issued money is not responded to in this manner by the person to whom it was issued then the money remains counterfeit, or dishonest.

Have a look at www.ces.org.za for a working alternative currency system that successfully operates according to this principle.

The production and circulation of dishonest money

The consequences of the production and circulation of dishonest money are wide ranging and destructive of both individuals and the community at large, as well as of the whole economy.

The biggest problem in modern economies is that dishonest money is legally part and parcel of their fabric. This is because there are official producers of 'new money ' who have no intention of themselves ever supplying goods and/or services of equivalent value into the community. These producers are the State and the banks who, these days, are in fact the major suppliers of new money into the economy. The banks do so under the Fractional Reserve Banking [FRB] rules which authorise them to issue new money provided that the quantity of new money issued falls within a stipulated multiple of the quantity of  fully accessible deposits of honest money that they hold.

The negative implications of FRB

Firstly because banks issue new money as though it was honest money, even though they accept no obligation to supply equivalent value real goods and/or services into the community thus making the money counterfeit.

They use this newly issued money to make loans to people on which they charge interest, profiting from it as though it was honest money. This although legal is quite clearly fraudulent. In any event the costs of issuing new money should be borne by the fiscus not by its initial recipients, newly issued money should be free to the first recipients.

Secondly people who live in cash poor communities and who have real goods and/or services to exchange are prevented from doing so by the lack of money in their communities. This has the effect of constraining the growth of the economy and keeping people in poverty.

Thirdly counterfeit money in circulation debases the value of the already existing honest money by stealing some of the honest money's value. In this way its issuers, i.e. the banks, are pocketing this stolen value for themselves whilst ordinary citizens' wealth is constantly eroded. Citizens experience this as continuous price escalation, known as inflation.

THE NEED TO EDUCATE FOR LONG TERM SUSTAINABILITY

One thing that humankind is continually faced with is decisions, taken by individuals or groups of individuals, that have ecologically destructive consequences. In the past the reaction by ecologically concerned people to these decisions has varied from resignation to setting up organisations, e.g. Green
Peace, to actively oppose the decisions or to try to ameliorate the destructive consequences of the decisions.

This is well and good but if we step back a little and look at what has been happening since such organisations begun to be formed the volume of decisions needing to be opposed, from an ecological point of view, has continued to increase rather than decrease. In other words reactive opposition to already taken decisions is in no way curing the problem. Clearly we need to develop another approach.

The ecological problems we are talking of here arise because of decisions taken by human beings so surely the best place to start is with a reform of human decision making.

This is however not a simple matter because decision makers are naturally guided in their decision making by the perceived benefits that will accrue to themselves and/or others who support them in their decision, for convenience termed – the Interested Parties [IP], and the difficulty is that immediate and short term consequences of ecologically harmful decisions are usually experienced by the IP's as beneficial to themselves whereas the ecologically damaging consequences of the decisions tend to arise in the medium to long term and are often more diffuse in their impact than the impact of the perceived benefits on the IP's.

The reality is however that the longer term ecologically damaging impacts damage the IP's interests as well as everybody else's interests. Global warming being a case in point. This is something that needs to be brought home to human beings whilst they are still children. It is some thing that should definitely be taught in schools in an effort to produce generations of people that do not make decisions purely based in their short term interests.

TALK ON THE ENVIRONMENT GIVEN TO QUAKERS

On the fourth Sunday of every month my Quaker Meeting organises for someone, usually a member, to give us a brief talk on a topic which obviously is of interest to the speaker and of interest to others.

This past Sunday I gave the talk and here it is in textual form:

Let me start by saying that I do not intend to talk about humanity’s destructive impact on the rest of creation and the particular things that we can do about it. Although such things are important I want to focus instead on what seems to me to be at the root of the problem.

Ever since my childhood, during which I grew up on a dairy farm in KZN, I have always been very conscious of the rest of creation and of our dependence on it.

As I have grown older this consciousness has been expanded through gathering more and more bits of knowledge.

This has been particularly so in recent years as humankind’s unthinking destruction of the rest of creation has become more public and thus more environmental knowledge, particularly about environmental destruction, has been absorbed by me.

A recent knowledge gathering event left me particularly disturbed about the possible future of life on earth as we know it. This came from attending the SAFCEI AGM and Conference in April. Much of what I learnt there was about humankind’s persistent and ever increasing destruction of the environment right here in South Africa.

As I struggled with this knowledge often discussing the whole issue with others the following understandings begun to emerge into my consciousness and I would like to share them with you.

Firstly the rest of creation is responding appropriately to what humanity is doing to our planet. It can do no other.

Secondly the environmental problems being generated by human beings are so complex, so vast and so overwhelming that I am sure that the very best thing that we can do is to turn in to the Light, humbly seeking its guidance on actions that we can each take in respect of this destruction. The Light knows what is right for us individually even if we do not.

For Friends this is nothing new it is how we understand that we need to live our lives anyway. It is therefore not a strange or unusual approach to all matters that deeply concern us. It is just that now we need to recognise the severity of the ongoing environmental destruction by ourselves and actively seek to include it in our prayers for guidance from the Light.

Thirdly the main reason why I think that humanity has got itself into this dreadful pickle is that Western Culture has triumphed over the other cultures on earth. Now all of humankind is striving, through the same means as the West used, to achieve the same levels of material wealth as those reached in the West.

The striving is not a problem it is the means that are the problem. Why is this?

Historically and up until this point in time the West’s attitude to the rest of creation has been fundamentally and arrogantly exploitative rather than humbly cooperative. We have seen ourselves as somehow above the rest of creation which we perceive as being there for us to exploit as we please.

The reality is that we are just a part of creation like everything else and are therefore equally subject to its rules and regulations. Where we perhaps differ from the rest of creation is that we have consciousness and can therefore, if we so desire, enter into a conscious relationship with the ‘All’, the ‘Spirit’ the ‘Light’, whatever you might want to call it, and can therefore be guided in a good way in our relating to the rest of creation.

For this to happen however we have each got to humbly seek the guidance of the Light in all our relating with the rest of creation.

For millennia we in the West have not done any such thing as was so clearly perceived by an Amerindian, Chief Seattle [1786-1866] of the Squamish, when he said with respect to the European settlers in Washington State USA:

--- What is the white man without beasts? If all the beasts were gone, men would die from a great loneliness of spirit. For whatever happens to the beasts soon happens to man. All things are connected.

You must teach your children that the ground beneath their feet is the ashes of our grandfathers. So that they will respect the land, tell your children that the earth is rich with the lives of our kin. Teach your children what we have taught our children, that the earth is our mother. Whatever befalls the earth befalls the sons of the earth.

If men spit on the ground, they spit on themselves.

This we know: The earth does not belong to man; man belongs to the earth.

This we know: All things are connected like the blood which unites one family. All things are connected.

Whatever befalls the earth befalls the sons of the earth. Man did not weave the web of life, he is merely a strand in it. Whatever he does to the web, he does to himself. --

TWO COURSES OF ACTION FOR ENVIRONMENTALISTS

HOW AND WHY WE GOT TO WHERE WE ARE

The Western way of living with the rest of creation has, for millennia probably, been basically exploitative. Before the industrial revolution, for example, Europeans had used up much of Europe’s tree cover. The Dutch continued this exploitative tradition when they arrived at the Cape. Hout bay was called that by them because of the indigenous forests on its shores, now only the name remains. As we found ways to use things to our advantage we have simply set about doing so with never a thought for the consequences of our actions, if any, for the rest of creation. We have basically seen it as our God given right to do so and we have exercised it. Perhaps because of our brain power we have seen ourselves as Lords over the rest of creation. This is a delusion of grandeur. We are just a part of creation like everything else that has been created and we need to recognise this and to work cooperatively rather than exploitatively with the rest of creation.

An exploitative way of relating to the other often appears to yield gains for the exploiter. The time span during which this can occur depends on the situation. An exploitative relationship with another person might appear to work to the exploiter’s advantage but this will only last until the exploited cottons on to what is happening to them then the relationship will collapse. When we are considering the consequences of the West’s exploitative relationship with the rest of creation we are dealing with much longer time spans during which there appear to be gains for the exploiter.

The industrial revolution was based on the exploitation of fossil fuels, namely coal, to supply energy. The revolution started in England in the mid-eighteenth century but it was only toward the end of the 20th century that we in the West began to become aware of the very serious environmental damage that our use of fossil fuels was causing. During those two hundred years however, on the back of the use of coal for energy, England rose to world dominance only to be superseded in its turn during the 20th century by oil burning America.

The rest of the world in the form of China and India have now woken up to the apparent advantages of a fossil fuel based economy and are pursuing such economies whilst the environmental damage is growing exponentially and the limited supplies of crude oil are being ever more rapidly depleted. The environmental chickens of the West’s exploitative relationship with the rest of creation are rapidly coming home to roost but sadly not soon enough to prevent others from taking up this same disastrous road in search of the apparent benefits that it has to offer.


MOVING FORWARD

As I see it the only way out of the environmental mess that we have and are creating is a path grounded in a full acceptance of ourselves as just part of creation and consequently desirous of working cooperatively in every way with the rest of creation, rather than exploitatively.

What does this mean in practice?

I will try to answer this question from my Quaker understanding and experience.

Traditionally, through their individual experience, Quakers have been able to teach with confidence, from one generation to the next, that the there is that of God within every person, also called the ’Light within’ or the ‘Spirit within’ or the ‘Light of Christ within’ and that by consciously seeking to subject oneself to its guidance on how to conduct one’s life one will then be better able to lead a spiritually rewarding life.

So Quakers, and I would guess all spiritually oriented people, are used to seeking to bring the conduct of their lives under the guidance of the Spirit. The trouble is that, up until now, along with the rest of humanity, Quakers in general have not really allowed much space in their consciousness for guidance on environmental matters. This can change of course and given our current environmental situation needs to do so.

Historically Quakers as individuals, and as a community, have been gripped by various social concerns which have then manifested in considered actions to address the issues of concern. What is now needed is that in our seeking for spiritual guidance from the ‘Light within’ we recognise that the rest of nature and how we relate to it is also of vital spiritual concern to us. With this scenario we would actively seek guidance on decision-making for matters environmental.


SOME ENVIRONMENTAL ISSUES

Because we were born into the midst of a culture which is founded upon an exploitative attitude toward the rest of creation there are many aspects, of conducting what could be regarded as just plain ordinary daily life, which are actually environmentally harmful, so from an environmental perspective by just living we are living in sin.

Accepting that this is so and having developed as a consequence a firm purpose of amendment we can then investigate our way of living to discover those aspects of our daily living which give rise to environmental crimes. The criminal import of these will differ from person to person so this is where we will each need the ‘Light’ to guide us in our amendment actions.

Examples of areas where some immediate amendment is possible, our use of fossil fuels for example and our generation of waste which ends up in municipal land fills, all these can be reduced if we set our minds to doing it.

Such things are just a start on the road to adopting an ecologically sustainable life style which life style will be the one that is being followed by the humans, in any, who survive into the middle of this century.


COURSES OF ACTION

On thinking about what I can do in the face of the reality of what humanity, as a whole, is doing to our nest, the world we live in, the following seemed to me to be two actions that I could, nay should, take.

Firstly if we humans want to survive into the foreseeable future as a species on this planet we have simply got to live in an ecologically sound and self sustaining manner and the time to start adapting our lives in this direction is right now. Ultimately those who survive will be living in Ecovillages.

Secondly as the bulk of humanity is not living in this way and without pushing by activists will continue to pursue their environmentally disastrous course those of us who are aware of the approaching environmental catastrophe should never cease in our efforts to try to get our fellows to change their direction.

ACTIVISM AND THE EVOLUTION OF COMMUNITIES

Anyone who is even slightly awake will have noticed that it is the social activist element in any society that shapes its evolution. In the nature of things this element is only a small proportion of any society; the remainder of a society only becomes actively concerned when the activities of the activists impact upon them in a way that they experience as negative to their interests.

We here, for example, are living in a society that was brought into being in 1994 by anti-Apartheid activists. This does not mean that these activists were not in evidence before that time; they were of course, but that in 1994 they were finally given legitimate access to our society’s levers of power through an openly conducted democratic election. This would not have happened to them had they not been active long, long before 1994.

But activists are not all the same. I am sure that activists can be categorised in all sorts of ways but the categorisation that I want to draw my readers’ attention to is, the categorisation of activists according to their degree of genuine social concern. As I see it there are basically two categories of interest here.

There are those social activists who are genuinely concerned about the members of the broader society and how they will be impacted upon by what the activists are proposing, and ultimately doing, and how they, these members of the broader society, will experience and feel about this.

Then there is the other category of activists who are not really concerned about anybody outside of themselves, perhaps this might extend out at least to some of their fellow activists but no further.

In the interests of everybody in a society it is members of the first category of activists that the majority, and generally non-activist members, of that society would like to give access to the levers of societal power. They certainly do not want to give this access to members of the other category of activists because they are only self serving.

Unfortunately because of the rewards, potential and actual, available to those who gain access to the levers of social power activists from both these categories seek to win this access. It is incumbent, therefore, on the non-activist members of society to do everything within their means to ensure that the second category of activists is weeded out before they can gain access to the levers of power.

Zimbabwe is a good illustration of what happens to a society when activists belonging to the second category gain ascendancy.

Weeding out second category activists is not easy to do, particularly where they have been involved in a liberation struggle such as here in South Africa and in Zimbabwe. In addition the rhetoric that they use in promoting their causes, but actually their own interests, is much the same as that used by the first category activists. A much greater awareness and understanding of the subtleties of human nature is required if the non-activist members of a society are not to be duped when electing people to positions of power within that society.

Thus over the years it has been recognised that all the members of a state, and thus activists and non-activists alike, need the entrenchment of the separation of powers within that state, i.e. the separation of executive, legislative and judicial powers. This is in order for ordinary citizens to be able to use the legal system to keep activists of the second category in check should they gain access to the levers of state power.

This does not suit second category activists at all so one of the things that they soon strive to do in pursuit of their personal objectives is to endeavour to corrupt and if possible to disable the legal and justice systems in areas where, in execution of their mandates, these systems could adversely effect them. This is what happened in Zimbabwe and it appears to be happening here with the determined efforts of the now ruling clique in the ANC to close down the Scorpions. After this they will probably turn their attention to interfering in the functioning of the judiciary.

The press can also be a thorn in the flesh of second category activists. Thus already the new ruling clique in the ANC is turning its efforts towards increasing government control of the press. The same happened in Zimbabwe.

In essence second category activists assume that their personal interests are indistinguishable from those of the society in which they are personally embedded and thus when their personal interests conflict with the institutions needed to look after the interests of all the citizens then it is not their interests that need to be questioned it is rather these institutions that must be brought under their control or closed.