Some excerpts from an interview with Bernard Lietaer, the author of The Future of Money:
[BL] There are lots of people who love gardening, but who can't make a living from it in the competitive world. If a gardener is unemployed, and I'm unemployed, in the normal economy we might both starve. However with complementary currencies, he can grow my salads, which I pay for in local currency earned by providing another service to someone else.
So local currencies could provide some resilience for a community that could help it survive a currency melt-down or some other international breakdown. You've also mentioned that local currencies help promote sustainability. What's the connection?To understand that, we need to see the relationship between interest rates and the ways we discount the future.
If I ask, "Do you want $100 now or $100 a year from now," most people would want the money now simply because one can deposit money risk-free in a bank account and get about $110 a year later. Another way of putting it is that if I were to offer you $100 a year from now that would be about equal to offering you $90 today. This discounting of the future is referred to as 'discounted cash flow'.
That means that under our current system it makes sense to cut down trees and put the money in the bank; the money in the bank will grow faster than trees. It makes sense to "save" money by building poorly insulated houses because the discounted cost of the extra energy over the lifetime of the house is cheaper than insulating.
We can, however, design a monetary system that does the opposite; it actually creates long-term thinking through what is called a "demurrage charge." The demurrage charge is a concept developed by Silvio Gesell about a century ago. His idea was that money is a public good - like the telephone or bus transport - and that we should charge a small fee for using it. In other words, we create a negative rather than a positive interest rate.
What would that do? If I gave you a $100 bill and told you that a month from now you're going to have to pay $1 to keep the money valid, what would you do?
I suppose I would try to invest it in something else.You got it. You know the expression, "Money is like manure; it's only good when it's spread out." In the Gesell system, people would only use money as a medium of exchange, but not as a store for value. That would create work, because it would encourage circulation, and it would invert the short-term incentive system. Instead of cutting trees down to put the money in the bank, you would want to invest your money in living trees or installing insulation in your house.
Has this ever been tried?
There are only three periods I have found: classical Egypt; about three centuries in the European Middle Ages, and a few years in the 1930s. In ancient Egypt, when you stored grain, you would receive a token, which was exchangeable and became a type of currency. If you returned a year later with 10 tokens, you would only get nine tokens worth of grain, because rats and spoilage would have reduced the quantities, and because the guards at the storage facility had to be paid. So that amounted to a demurrage charge.Egypt was the breadbasket for the ancient world, the gift of the Nile. Why? Because instead of keeping value in money, everybody invested in productive assets that would last forever - things like land improvements and irrigation systems.
Proof that the monetary system had something to do with this wealth is that it all ended abruptly as soon as the Romans replaced the Egyptian 'grain standard' currency with their own money system, with positive interest rates. After that, Egypt ceased being the grain-basket, and became a "developing country" as it is called today.
In Europe during the Middle Ages - the 10th to 13th centuries - local currencies were issued by local lords, and then periodically recalled and reissued with a tax collected in the process. Again, this was a form of demurrage that made money undesirable as a store of value. The result was the blossoming of culture and widespread well-being, corresponding exactly to the time period when these local currencies were used.
Practically all the cathedrals were built during this time period. If you think about what is required as investment for a small town to build a cathedral, it's extraordinary.
Can you move your money into a system similar to the ones that are described in the interview? Yes. Imagine a club that builds or buys quality properties around the planet that you can access. Access is based on the amount of your membership deposits and the timing of your membership deposits (while interest in not earned, those who commit early are rewarded through the design of the reservation system).