What problems are hidden in our current monetary system?

Money is one of the most ingenious inventions of humanity. Yet at the same time today’s money system causes serious problems:

Redistribution of wealth Whoever has capital receives income from capital that is included as capital costs in all economic transactions. Capital costs are hidden in all prices and are paid for when purchasing products. On average we pay 30% capital costs with every purchase. These interest payments cause a systematic redistribution of wealth in favour of the wealthy.  Read more
Growth The money system demands permanent growth because the investment of capital must pay and loans must be serviced with interest payments. Without the prospect of growth, lenders do not lend, crises and slumps follow and finally social provisions and solidarity fail. Indeed growth encourages the excessive use of resources and endangers the environment and the foundations of our living standards. Read more

Debt Our money system is based on debt because money today is created mostly through the giving of loans. If the accompanying demand for interest repayments cannot be met through additional growth or redistribution of wealth, there is no other alternative than further debt. When prospects for growth are low, banks however are less willing to give credit. If the state intervenes as ‘lender of last resort’, it can cause a debt spiral – at the cost of  public expenditures and of future generations. Read more

Crises Today’s money system is not stable and causes economic, currency and financial crises, amongst other things because the expectations for growth and profit that underly the creation of credit often turn out to be exaggerated and without sufficient basis in the creation of real economic value. This is why speculative bubbles arise that must burst, why the value of wealth is volatile and why currency crises can time and again shatter whole economies. Read more

What solutions are proposed to make money serve us all?

The money system is created by humans. The system can be reformed and alternatives exist. How? There are many ideas:

Currency diversity and complementary money systems Currency diversity makes the financial and economic system more resilient and gives us choices. Complementary currencies complement the legal tender currency without replacing it. They mostly serve special purposes such as the promotion of regional economies through regional money. As well as researching the various proposals for reform, MONNETA’s strengths include much expert knowledge about complementary currencies. Read more

Money without interest Can interest rates be continually kept below zero or replaced by other instruments and rules? The theory of ‘free money’ has recently been put into practice by banks and investors in the form of ‘negative interest rates’ on demand deposits but also through ‘demurrage’, a ‘hoarding fee’ or tax on cash. The JAK Bank and „Islamic Banking“ consciously avoid income from interest and instead offer interest-free loans. Read more

State money creation Many proponents of reform criticize the powerful privilege of commercial banks to create money through credit. Easy credit is said by them to be the main cause of speculative excesses and finance crises. With a 100% Reserve System, Full Money or “Positive Money” the state should get control back.  “Modern Monetary Theory” allows for the state to have unlimited debt in order not to be subject to the dictates of private creditors. Read more

Further reform proposals Alongside proposals for monetary reform there are many other suggestions for how to reduce or remedy the disadvantages of our economic and finance systems: ethical banks and ethical investments, increased regulation of banks and financial markets, tax on wealth and financial transactions. Other promising solutions include Crowdfunding and Microcredit, Sharing Economy and Gift Economy – and the emergent “Common Good Economy”. Read more

From our blog

In Memoriam Bernard Lietaer –
Monetary reformer, innovator and pioneer of complementary currencies

We are mourning for Bernard Lietaer, who died from cancer on February 4th. He was a friend, colleague and mentor to us for many years, who blessed us with extraordinary insights and invaluable inspiration. Not only has the world now lost the person with the most far-reaching knowledge about money, but also a head and […]

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Positive Money or Positive Monies? – A plea for monetary diversity

  We talk a lot about the ‘money system’. In what sense does money form a ‘system’? Does it have a function or purpose? Does it have interconnections? Does it have identifiable elements? 1. Elements of a money system The elements of a money system include the structures and institutions that create it – governments, […]

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Events

18
Jul

Complementary Currencies for economic and social change

For more than two decades now, various forms of complementary currencies emerged all over the world, aiming at “taking back local economies” (North 2014). CCs are commonly understood as media of exchange (Hallsmith/Lietaer 2011) or accounting systems (Fare/Ould- Ahmed 2017) that are used within a particular group of users. Responding to broader debates on our […]

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20
Jul

AEMS Summer School

The summer school Alternative Economic and Monetary Systems (AEMS; 5 ECTS, completely in English) addresses the problems of the current economic and financial systems from a holistic perspective and offers an overview of innovative reform proposals. The interdisciplinary program is open to students and professionals of all fields, who learn about why a drastic systemic change is needed in order to reach the climate target of 1.5°C.

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1
Sep

Business Administration (Course) – From Barter to Bitcoin and Beyond: Re-imagining Money for a Sustainable Future

Imagine you have the possibility to re-imagine our monetary system: Where would you start? How would you build it on the new monetary technologies? How would you work to make it more conducive to just and equal societies?

Growing inequality, apocalyptic environmental damage, and the protracted effects of a global financial crisis have resulted in a discussion on the role of our monetary system for the organization of society. At the same time, new technological and financial developments are giving rise to much experimentation on new forms of money. This course looks at various attempts to “re-imagine money.” It explores opportunities for addressing big societal challenges and asks in particular how new forms of money can contribute to developing more just and equal societies.

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