by Paul Krumm

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The extremely large number of money exchanges that occurs each day all over the earth form a highly complex web that is very resistant to analysis.  However it must be understood that the basic rules of money creation that govern these exchanges are quite simple, and can be readily understood by the average layman.  How money works is not complex, even tho the web of financial exchanges can become very complex indeed. 

How does money work?  What values does it reward?  Let us first review how it evolved.  As we follow this history we can trace the values that are characteristic of different money systems.

Money evolved from barter, and the limits of barter, as society grew and became anonymous, so we will start with a short history of this evolutionary process.  In barter, two traders trade equal value of their services or commodities.  There are two limitations in barter.  First, the two traders must have, and want to trade, products or services of equal value.  Second, as society grows and becomes anonymous, they must both be ready to make the trade at the same time, as the trust of the small group no longer exists.  Currency and money developed to deal with these two limitations. 

Currency came into use first.  It was a simple extension of barter.  A commodity was chosen that could be divided into pieces and held for trading at a later date.  Gold and silver have more recently been the favorite choices for currency, tho early on, livestock, grain, pieces of fired clay, beads, and even humans were used.  All these commodities proved difficult to store and carry.  Many deteriorated over time.  Even gold and silver proved to be bulky to carry for larger transactions. Another major limitation of currency was its limited supply. As more or less trading occurred in a growing economy, there was no convenient way to increase or decrease the supply of currency.

Modern money developed from the trade of goldsmithing at the end of the middle ages.  At that time people began storing their excess gold and silver with the local goldsmith for safekeeping.  When gold or silver was put in storage, a receipt was issued by the goldsmith to the owner, as a record of ownership.  The paper receipts were much easier to carry than the gold or silver, especially for larger transactions, so they began to be used instead of the precious metal itself. 

Then the enterprising goldsmiths figured out that they could loan out the gold they held for their customers, to third parties.  Or better yet, they could issue receipts instead of actually loaning the gold.  The next step was recognizing that they could print more receipts and make even more loans than they held in gold.  In the idea of loaning the value of gold they did not own, but only held in trust, and the value of gold that did not even exist, was the germ of the invention of modern money.

As long as not everyone wanted to redeem their receipts and loans for gold at one time, this system created by the goldsmith/bankers did facilitate trade when there was a shortage of the commodity, gold, which was used as currency.  The fact that the goldsmiths provided an adequate money supply made possible the industrial revolution.  Meanwhile, the goldsmith/bankers had a good thing going.  They were receiving interest by loaning the gold assets that they were being paid to hold in trust for others, and additional interest from loans based on gold that did not even exist.

However, the system was not perfect.  When economic conditions changed or trust in this shell game waned, there were bank runs, and people lost their money and their gold as a result.  If a goldsmith could not come up with enough gold to satisfy all claims to redeem receipts for gold at a given time, the system broke down.  Banks are the modern successors to the goldsmiths.  The way they operate is basically the same, although money can no longer be redeemed for gold; it is now only a token or medium of exchange.1  

A brief historical note on the role of religion:  The fact that Jews were not allowed to own land in most areas of Europe in the period of the Renaissance, an agricultural era, led members of that faith into entrepreneurial businesses.  A small minority of that group got into the goldsmithing business.  Catholics were not at that time allowed to charge interest, so these Jews found a lucrative niche in the lending of gold, and then money with interest.  They became a major force in the Industrial Revolution as they became influential bankers, with the power to bankroll, or not bankroll, any given entrepreneurial or governmental venture.  The families of these early Jewish bankers are still a major force in the banking business, which is the small kernel of truth that justifies the anti-Semitic behavior of right wing conservatives to themselves and their constituency.

So with this brief history, I will go over the definitions of some basic terms, and then explain how money is now created and extinguished.  (Yes, Dorothy, money is created and extinguished with the wave of a wand, or at least the wave of a pen, or the hand on computer keys.) 


 In this paper, I will not use the terms consumer and producer.  Rather I will use the word trader, to acknowledge the fact that we are all both consumers and producers, (or dependent on someone who is), and combine these two functions in trade--as traders.  Businesses and governments are group entity traders.

Wealth is anything valued by the economic system.  It can be traded by barter, currency or money.  When monetized, wealth becomes assets.  More on this later.

Currency is a concentrated form of wealth used in trading.  Currency is some kind of commodity that has a sufficiently universal appeal that it can be held, and traded later for whatever good or service its owner chooses. 

Money is a purely abstract accounting concept.  Pieces of paper or coins may be created to represent the value of money, but they are only tokens that represent value, not value itself. 

At another level, money is simply information‑‑universal executive information.  Money gives its holder the power to execute whatever plans he or she desires.   It is an accounting system that allows traders to keep track of who has bought and sold how much, and whether each individual trader has put as much into the system s/he has taken out. 

Since it is purely abstract, money can be created in any amount deemed appropriate by its creators.  How it is created and extinguished is one of the issues I am attempting to clarify in this paper.  The social values built into its creation become basic social values of the economy and culture of which it is a part.  It is important to know what these values are. 

This set of definitions for money may fly in the face of common knowledge about the way money works.  The following description will show how and why it is in fact valid. 


The matter of money creation is poorly understood. There is a common misconception that banks or governments create money.  Governments only borrow money into existence from the banks.  Banks can and do manage and redistribute money and wealth.  Only people and natural resources represent potential wealth.  Only people can, by their labor, produce useful wealth, which can be traded, either 1) directly by barter, 2) thru the use of currency, or 3) thru the creation of money.  Remember, all people who buy or sell, i.e. are producers or consumers, are traders.

Money is created when a trader makes a commitment, by buying goods or services from other traders, to place goods or services in the marketplace of equal value in the future. 

In making purchases, traders borrow against their future production if they do not currently have a trading surplus.  Money is created as evidence of that debt.  Putting goods and services back on the market repays the debt, and extinguishes the money.  In other words, money is borrowed into existence, and is extinguished as the loan is repaid.  The effective lender, or guarantor of a loan is all the traders who trade with the borrower‑‑in short‑‑the community; the market. 

This is how money is created, and extinguished.  The stability of a money issue, then, is only tangentially related to any assets that might guarantee it. 

The stability of a money issue is related solely to the willingness and ability of the vast majority of the community of traders to put goods or services on the market which have equal value to what they consume.  The stability of an economy is a function of the commitment of traders to the rules of the system.  Trust, that by and large, all members of the market will produce as much as they consume and be able to trade what they produce for what they want to consume, is the only ultimate guarantee of any money issue.2 

The fact that useful wealth/assets are created by people who wish to trade has to be recognized and acknowledged by the creators and operators of banks and monetary systems, as well as all the rest of us.   While natural resources are sources of wealth, they are not themselves wealth until they are made useful, and brought into the market as commodities by the labor of traders.  For example, ore in the ground is not of value until it is mined, refined, and made into a form or object by a person or group of people, that others will trade for in the market.  Even land is not useful in economic terms until it is used in some economic way.

The appropriate function of banks, based on this understanding of how money works, is to act as clearinghouses ‑‑clerks or trustees ‑‑ who keep track of the transactions between traders.  The Local Exchange and Trading system, or LETSystem, developed in the Comox Valley of British Columbia more than 20 years ago, and duplicated with variations in communities in the US, England, Australia, new Zealand, and other countries, as well as Canada, is one prototype example of such a basic banking system.

In the LETSystem, each trader starts with a zero balance in their account.  The expectation is that the balance should stay near zero, tho it may vary above or below.  All bank income is based strictly on earned fees for book‑keeping services rendered, on a fee for service basis.  A small fee is charged to cover the bookkeeping expense of each transaction.

The money of this system is simply an exchange medium, with no secondary value. The system is functionally balanced in its operation by the traders.  The money supply automatically adjusts itself to the number and amounts of commitments that members have made to each other.  The bank balance of anyone buying is open knowledge to the seller, who can decide not to sell to someone who is not pulling their weight; buying more than they are selling (borrowing from the people with whom they trade by carrying a large negative balance). 

If a community using such a system sees that it would benefit from a project that would require a relatively large sum of money, it can commit itself as a community to one or a group of its members, giving them a line of credit (permission to temporarily operate with a large negative balance) to complete the project.  This is what banks do now in making loans.

The principle of assuring that all budgets stay balanced (all account balances remain near zero, or return to zero) must be built into the structure of any monetary system, if it hopes to be stable over time.  It is not built into our present monetary system. 


In order too understand our present economic system we first need to look at the relationship between government and economics/business.  It is not commonly recognized that governments, large or small, are businesses, companies which by definition include (are "owned" by) all the citizens of the community in which they are situated.  Governments have historically been given a number of functions (or in the case of autocratic forms, have assumed a number of functions) that are not permitted to private companies. These functions have included setting rules of behavior (laws) and enforcing these rules with judges and police, providing water and sewer services, building and maintaining roads, and education. This cannot obscure the fact that governments are businesses, but ones with special functions, rights, and responsibilities. 

Like all companies, governments must have income to pay for their expenses; the products and services they supply.  They do so with a combination of taxes and fees.  (Taxes are assessments on all citizens, and/or their property, used for services perceived as needed by all, fees are charges for products or services, based on the amount of product/service rendered.)  For instance in the US, fire and police protection, courts, education, military defense, and the building and maintenance of streets and roads are generally considered to be universal needs for which it is appropriate to levy taxes.  Fees are charged for specific products or services such as water and sewers.     

Private businesses rely similarly on fees (sales) and taxes (a case can be made that basic fees for utilities and telephone services are a tax, as the same amount is charged, no matter how much the service is used).  In addition, a significant number of private firms rely on government payments funded by taxes for income. 

Private businesses that are granted a monopoly, or which hold a virtual monopoly in a given service or industry, have two characteristics in common with government businesses.  Like government, 1) they serve all members of the community who want their good or service, and 2) they are the citizen's only recourse for their goods or services.  A number of industries operate as monopolies.  The banking system is a notable example.  Since deregulation, there is some competition for what is offered.  But what is offered is limited and channeled by the basic values and rules built into the structure of the industry, as determined by the laws regulating the industry, which were written by banking interests.3

Just like the simple exchange system described above, money in our present system is borrowed into existence, either by the commitment of traders or governments.  However in our system, money is given intrinsic value that increases over time according to market conditions.  It is created (borrowed into existence) with a "load" or tax, called interest, which must be paid to the institution that mediates its creation. 

In our present economy, the banks‑‑which have a government licensed monopoly to mediate the money creation process‑‑get the credit for creating money.4  The rules of the licensing process give these banks the right to place a charge‑‑compound interest‑‑on the process.  In our economy we have given the immediate risk in money creation to the mediator‑‑the bank‑‑in return for compound interest.  The long term risk of catastrophic failure is still held by the market; witness the bailout of savings and loans in the 80's with taxpayer money. 

The way the process works is as follows:  A commercial bank, savings and loan, or credit union can, within limits of reserves set by the Federal Reserve Bank, accept assets (goods or property) pledged by a trader as collateral, set up an account which represents a portion of the value of the assets pledged, create a sum in the trader’s account (the wave of the wand, mentioned previously), and give the money so created to the trader or the trader’s payee.  This is how the process of converting wealth to assets works in our present money system.  The trader pledges assets, and the bank permits the creation of money, which must be returned to the bank (the mediator), with interest, to free the asset pledge.  If in the meantime the borrower cannot make payments, the bank takes the assets pledged.

While banks are generally credited with the creation of money, it is still the traders who go to the bank to borrow who are making the commitment to place goods or services on the market to repay their debt.   So, as mentioned above, traders are still the functional creators of money, rather than the bank.  As these traders place their goods and services on the market, and repay their loans, the money they issued (borrowed) is extinguished. 

However as also noted above, when the loan is originated, and the money created, an additional debt, or tax is set up as interest on the loan, which must be paid to the bank mediating the money creation process.  Interest creation is a functional glitch in the system, one which must be understood.  When money is created in the current loan process, money with which to pay the interest is not created.  Interest owed is only set up as a debt to the bank.  No money is created to pay it with.  As a result of this bookkeeping system the principle put into circulation is insufficient to repay the principal and interest owed.  So either the trader uses money that someone else borrowed to pay his interest, or he does not pay all the principal and interest. 

In the first case, someone else is in a worse position to make their payments.  In the second case this trader is drawn into a downward spiral of debt.  No matter how hard we try, somebody always has to lose.  Because money is not created with which to pay interest, interest can never all be paid.  Because traders have to pay out interest, they never have enough money for all their needs.  Scarcity of money drives up prices, meaning  money becomes worth less, which we call inflation. 

Economic growth masks the inflation issue, by bringing in new wealth to borrow on (monetize), creating more money with which to pay the ever increasing interest tax load.  In the current system, the economy must continually grow so that there is sufficient money available to keep the system operating.  This system flaw caused by interest creation is the reason why economists commonly see the need for an economics of growth, rather than sustainable, dynamic steady state (homeostatic) economics.        

Total outstanding interest and total current interest due and payable increase exponentially over time.  In other words, as time goes on, outstanding debt becomes larger and larger with respect to the sum of all exchanges, what we call Gross National Product ‑‑ (GNP) the productive capacity of our nation.  Because the overall interest load grows exponentially, it inevitably grows to be a larger and larger part of GNP.  As the interest load becomes a significant portion of GNP, the system breaks down, because an ever larger portion of money is going to pay the growing interest load.  A recession or depression is necessary in which some of the debt, and its interest load, is wiped out thru unpayable debts and bankruptcies.  Sometimes smaller banks even fail, if too many of their clients are forced into losses and foreclosure.5

Bankruptcies and bad debts move control of wealth to those who control assets and the money creation process.  In the long term, inevitably all the money becomes concentrated in the hands of a very few people who control the money creation process, and the economy and culture disintegrate.  This was one of the major factors that led to the disintegration of the cultures of Mesopotamia, Egypt, Greece and Rome.6

The Federal government (remember, the business owned by all the people) has often been forced to become borrower of last resort, borrowing from the banks to bring enough money into circulation to prevent major depression and mass foreclosures.  It is called deficit spending.  But nothing has been done to prevent the systemic exponential growth of interest and debt, which is the driving mechanism, leading to the failure.  Meanwhile, Government borrowing to create money to maintain the economy has created a ballooning government debt. 

In the early and mid 90’s there was an increase in individual debt, largely due to the increasing use of credit cards, taking some of the debt load off the federal government.  The entry of the former Soviet Union and China into the international market has also opened new growth markets and, more importantly, assets to be monetized and borrowed upon to temporarily sustain the appetite for growth of the international money system. 

In the late 90's private debt increased in the US to the point that the Federal Government thought it was going to be able to pay off the national debt.  But as the economy has slowed down, the government gave away its surplus, and consumer spending and debt has been insufficient to meet the demand for an increased money supply, it is becoming evident that Government debt is not going away, and on the contrary is increasing again.

Those who would balance the Federal budget and reduce the Federal deficit under the present money creation ground rules do not recognize that their goal is simply not feasible.  If the government stops its continued borrowing and balances its budget, and private borrowing does not take up the slack, the money supply will be so drastically shrunk that there will not be enough money to pay interest (or principle) on outstanding private debt, and the economy will go into a tailspin.  This happened in 1836-37 after President Andrew Jackson paid off almost all the federal debt.  The ground rules of money creation must be changed.

As noted above, our Federal Government creates money by borrowing from the Federal Reserve Bank.  The Federal Reserve Bank is an interesting institution.  Its board of governors is appointed by the President, with confirmation by the Senate.  However its stock is owned, and the governors are paid, by the banks.  Major decisions are developed by the Open Market Committee of the Federal Reserve, with concurrence of the Board of Governors.  The Open Market Committee is chosen by the Board of Governors.  The Board of Governors consists of bankers and economists who are knowledgeable of and favorable to banking interests, so the Federal Reserve is effectively controlled by the banking industry.

The Federal Reserve Bank holds, by law, a licensed monopoly from the Federal Government on money management, and can "create" money, at will, without asset backing, at whatever interest rate it deems appropriate.  It attempts to manage the money supply by central control, the function handled by individual traders in self managed systems such as the LETSystem.   Since the government does not put up any assets as collateral for its borrowing from the Federal Reserve Bank, it is trust that the government (i.e. all the citizens) will repay government loans and the interest on them that keeps the money system alive. 


The earth is an ecosystem, and the rules of economics are important rules of the human factor of ecosystem operation.  One of the major lessons to be gained from ecosystem study is that the control mechanisms of natural systems are at the individual and small group level.  Ecosystems only set limits on subsystem activities as they are incongruent with ecosystem sustainability.  Ecosystem power is not the power of setting policy and actively managing megasystems.  It is only the veto power of extinction and system breakdown if individuals, subgroups or subsystems behave in ways that are destructive to themselves and/or the larger system.

If a banking/monetary system hopes to emulate natural ecosystem function, it must leave control of policy at the individual and community levels, with only a veto function, based on criteria of ecosystem sustainability, at larger geographic levels.  As a bonus, an advantage of local policy setting is that failures are smaller, and more easily dealt with.  Failures of large systems are generally much more difficult to deal with.  Failure of megasystems is almost invariably catastrophic.  Specifically, failure of the US, and/or world banking system would be catastrophic for all the earth's citizens. 

Communities, as well as governments, are economic units or "businesses".  So communities must also balance their imports and exports, or they will go out of business.  If more money goes out of a community than comes in, it will wither and die.  The demise of small towns in rural America is a classic example of not heeding the balanced budget concept.  The demise of the Roman Empire is another, which has strong implications and parallels with our current national government's fiscal position.  Locally issued money is one method of keeping tabs on the imports and exports of a community.  Some such mechanism must be put in place if the value of community, national, and world stability is to be attained.

The organizational philosophy that drives our government business is democracy.  However a look at the organizational chart of any bank or business corporation shows that it is the same as that of a dictatorial government.  In fact banks and business corporations are operationally oligarchies, operated by and for those who control them; their large investors and top managers.  The values and atmosphere of dictatorship created by these businesses has spilled over into the political business of government, making government less democratic ‑‑ diluting democratic values. 

Specifically, the decision making “value filter” of business and banking is presently marketability for a profit for those who control the business.  A more democratic filter would be ecological sustainability and human fulfillment.  The latter filter can be built into the function of a monetary and business system, but will require major restructuring of banking laws, and laws governing the formation and operation of businesses.  Attempts to regulate non-democratic institutions are destined for failure.  Only by requiring that economic institutions be democratic, do we have a chance for political democracy to continue.  While this is a most politically contentious issue, we must deal with it if our culture is to survive.   


The only way to reduce total debt and the federal debt is to recognize the instability of our money system, and change it in such a way that there is no load on the creation of money; that money managers work on a competitive fee for service basis, on earned income only, and that the money supply is self regulated at the local level by traders who are aware of the balances of other traders, including government and business entities, with whom they trade.   

To understand why this is necessary we must bring up another value issue.  A portion of the interest charged by the bank is used to pay its operating expenses. This portion is functionally earned income.  The remainder is paid as profit to the bank owners.  This portion is functionally unearned income.  In the case of traders lending to each other, the principal is not created, however interest is charged, and often with a large portion of interest being functionally unearned income.  Thus interest creation constitutes an energy transfer system from those who produce to those who control money, which complicates economics both politically and morally.

The unearned portion of interest is a “tax” on borrowing, paid to the lender.  As such, a secondary function of money creation--and all borrowing under the present rules--is that of a private social security or welfare system, funded by the “tax” (interest) on traders who have a negative balance in their accounts, and paid to those who have positive balances and those who mediate the money creation process. 

The operation of the system systematically increases positive balances and bank assets at the expense of those who have negative balances.   These ground rules make the economic playing field tilted in favor of those who create money or have built up positive money balances, and against those with negative account balances.  The greater the balance, or money creating potential, the greater the tilt.  Generally, the productive sector is where negative balances are held, so the monetary system systematically taxes the productive sector and moves this money to the non‑productive sector living on the interest tax.

While we quite rightly value savings, to pay interest on savings and investments is a practice that must be questioned.  

However in taking such action we must concurrently deal with the issue of a safety net for those who depend on the tax derived from the present money system.  We need to ask anew questions about our system of social security, welfare, and insurance.  At present we have two welfare systems, one public, the other private.  The interest paid on the use of money constitutes a vast privately operated and controlled welfare system.  Anyone can, by controlling a quantity of money or wealth, or by becoming an owner of a bank, provide themselves with unearned income, without work, and without diminishing their assets. 

When interest is removed as an aspect of the definition of money creation, these people will be limited in their spending ability to the assets they have accumulated and products or services they currently produce.  Especially in the case of retired lower and middle class savers, this would have a serious adverse effect on their living standard.  An alternate retirement income system for current savers/investors is a legitimate issue that must be dealt with in any transition to a non‑taxing monetary system.  On the other hand, because governments (and productive businesses) will have no interest load to pay, enormous amounts of money will become available for such human centered problems. 

Every community and country will have to deal with how it wishes to work out the social welfare issue, within the confines of community sustainability.  There is no right answer for all communities and cultures. 

There are a number of possible ways to deal with this issue. One would be to offer open ended reverse mortgages  (based on capital value only). Another would be to expand the public tax based social security network.  A third would be to offer retirement income insurance.  A fourth would be to expect every family or community to take care of its own (as was done by all cultures before anonymity and individuality became the norm).  Some mix of savings (private welfare, utilizing principal, rather than interest), public taxation (social security), private taxation (retirement insurance), and/or self care, can, I believe, be agreed upon.  The insurance industry will be as fundamentally effected as the banking industry, and will require major restructuring. 

The values that drive our basic money and economic institutions, must be studied publicly, and made consistent with our democratic political values if we wish to continue as a democratic culture.  As a part of this analysis, all sources of private unearned income must be analyzed for their effect on the economy.  They must all be recognized as taxes on the transactions of which they are a part.  In addition, we must recognize, as a practical matter, that as long as the present system continues, money will migrate to whatever person or institution maximizes unearned income, concentrating ownership in the hands of those who already control quantities of it, an anti‑democratic function. 

That unearned income is an income redistribution mechanism is a reality.  That this redistribution is unhealthy for our economy is a value judgment, based on a knowledge of its antidemocratic effects.  If we do not make such value judgments consciously, we make them without conscious thought by continuing with the status quo.  The results are becoming disastrous.  Democracy cannot survive under the present conditions.  Our economy cannot survive either.

A major step in dealing with the present reality is to acknowledge that the present system systematically redistributes money, based on possession of money and/or control of the money creation process. 

There is reason to be upbeat in terms of approaching those who control the present system with respect to the necessity for positive change.  Members of the wealthy elite value stability, and they can be shown that the present system is inherently unstable, and that it is in their best interest to promote change to a more stable system for them, their children and grandchildren.  They, and we all, have two options; change or economic chaos.  The status quo is not long for this world.

What do you and I want?  What can we do to work for an economic and monetary system that is more representative of democratic values?

Recommendations - Conclusions

We need to move (very carefully and deliberately) toward a time when at least three aspects of our economy are based on sustainable - and democratic - values.  The first is a conversion to the creation of money on a fee for service basis, rather than with the current interest load.  This will get rid of the present situation where there is never enough money in the creative sector because of the constant money migration to the finance sector inherent in interest-based money. 

Freeing the productive sector to be productive, and be paid fully for its productivity has the potential to unleash a great deal of economic creativity.  An additional advantage of fee for service money is that the economy is not forced to constantly grow in order to remain viable.  Also with the recognition that traders - citizens - create money, and are the appropriate arbiters of who should be allowed to create how much money, will come a recognition of community responsibility in determining the directions of community development. 

A second requirement for sustainability is to stabilize the value of the monetary unit.  The basic engine of the economy is that traders are willing to spend their time and effort producing products and/or services for others in return for the services and products produced by the time and effort of others.  So a unit of time and effort is the logical choice for the unit of economic value.  The hour is the standard measuring unit of time. The hour of effort is therefore a logical choice for the monetary unit.  It is already used by some alternative money systems.  The hour gives both the buyer and seller an intuitive measure of the worth - the value - of a transaction.  And an hour never changes in size.  It is therefore not prone to inflation. 

There will inevitably be some variation in the value of an hour’s work based on effort, skill, education, special abilities, cost of equipment, and the hazardous or undesirable nature of some tasks, among other things.  On the other hand, it is doubtful that the great discrepancies that occur today would continue under a more democratic economic system.   As an example, the special status of those whose task is coordination of activities (management in current terms) will probably become much less, as business is democratized, and coordination becomes more diffuse.  It will be interesting to watch what happens in monopoly businesses, such as medicine, where the number of practitioners is presently limited by the medical education system to maintain a high income level for those practitioners.

A third sustainability value is that the stewardship responsibility of ownership of any asset must be seen as at least as important as the right to exploit that asset.  Again, how to codify this rights/responsibility equation in the case of the ownership of assets must be worked out at the community and country levels, within the limits of ecosystem and community viability.  Small scale experiments and innovations can be watched and analyzed by other communities to see if they apply to their situation. 

The value of ones unlimited right to the use of personal property is deeply ingrained in our culture.  Some will say that land and resources have value without man's labor and that therefore some aspects of the above definitions and theories of money are misplaced or invalid.  This brings up a basic value question.  Bluntly, the question reduces to "Does the Earth belong to us?" or "Do we belong to the earth?"  In the first case, the earth is appropriately divided up and used for the satisfaction of the owner of each portion.  In the second case, the earth is a gift or legacy to be respected and used but preserved in the process for future generations and times. 

This question can be answered either way.  I can only give my reasoning for taking the stand I take; that we belong to the earth.  There are at least two basic kinds of arguments, one practical, the other philosophical. 

The practical argument is that the idea of dividing up the earth is no longer serving the survival of the earth or our species.  Anyone who persists in believing that the earth belongs to us must deal with the fact that this belief has been the value base for money and economic systems that have led to the downfall of all the major western cultures.  (See again 6) It has led to an ethic in which the removal of resources from the earth has become a personal right of the owner of that piece of the earth, with no thought as to the social or ecological ramifications of that removal either now or for succeeding generations.  This ethic has led, in all the major historic western cultures, to degradation of air and water and erosion and salt buildup in the soil, to a point where these resources could no longer support a healthy human population, leading to the demise of the string of world cultures listed earlier here.   All these cultures broke down as a result of this environmental stress, coupled with the unrest created when wealth was concentrated, and the majority of citizens had only debt, and no stake in the future of the culture. 

The philosophical argument is one of anthropocentrism ‑‑ the idea that humans are the end all and be all of creation, and that we have power and dominion over that creation.  This idea is increasingly being questioned as we see how small a part of the created universe we are.  This small planet called Earth, circling an average star, which is only one of a billion stars that make up one of a billion galaxies isn't the control center of the universe.  It is hard to imagine us little creatures, living on the thin solid shell of this molten glob, as the “end all” of the scheme of the whole cosmos, or the power that controls it all -- or even our own planet. 

Following the value that we belong to the Earth will require rethinking the rules of ownership, stewardship, responsibility, and control.  As earth citizens we need to consider the Lockean proviso which states that everyone has a right to take of the earth so long as there is enough and as good left for the others (and I would add both now and in the future to accentuate ecosystem sustainability over time) and the Papal proviso that a person has a right to own only that which s/he personally uses. 

Since some individuals, communities and regions are blessed with more than their share of earth and/or personal assets, there is also a need to consider how, in at least some voluntary way, those who are blessed with more, have a stewardship and sharing responsibility toward those whose ecosystems and social systems are less blessed.  Such aid must be given with great respect toward the integrity of the individuals, the social systems and the ecosystems that receive them, as well as those which give.   

The alternatives before us are basic change or failure to survive.  The quicker we recognize this basic equation, the easier it will be to make the transition.  The longer we take, the more limited and difficult will our choices be.  What can I do, and what can you do to make the transition?  Check and read the following bibliography for ideas, and have at it!


Blain, Robert, Toward World Cooperative Community, with a Proposal for a World Monetary System published by Southern Illinois University at Edwardsville (out of print) and Making Money a More Accurate Measure of Value available from the author at the Department of Sociology and Social Work, Southern Illinois University at Edwardsville, Edwardsville, Illinois, 62026   Blain is the only author I Have read whose proposals are totally consistent with his analysis. 

Greco, Thomas, Money and Debt, and New Money for Healthy Communities, published by the author, P. O. Box 42663, Tucson, AZ  85733, ISBN #: 0‑9625208‑1‑0 and 0‑9625208‑2‑9 Greco proposes money backed by commodities.

Greider, William, Secrets of the Temple-How the Federal Reserve Runs the Country, Simon and Shuster, New York, ISBN#: 0 671 47989 X

Jaikaran, Jacques M.D.,  Debt Virus, Glenbridge Publishing, Ltd., Lakewood CO., ISBN # 0‑944435‑13‑0.  Jaikaran proposes that the government should issue non-interest bearing money to pay for its activities, but leaves in place the present system for private traders.

Kennedy, Margrit, Interest and Inflation Free Money, Permakultur Publikationen, Ginsterweg 5, D‑ 307 Steyerberg, West Germany, ISBN #: 3‑9802184‑0‑6;

Lietaer, Bernard, The Future of Money, Century, The Random House Group Limited, London, England, 2001, ISBN #:0 7126 8399 2   Most contemporary analysis.  Lietaer, an insider in the banking business, has a very astute  analysis of the difficulties in the present system, but promotes alternative money systems as complementary to the present system, rather than a replacement.  This may be an appropriate  transitional tactic, but must be seen as such.  He also promotes money that gets worth less with time, a strategy that may be of value in some circumstances.  Visit his web site, to learn more. has  his comparison of various money systems. 

Linton, Michael, and Angus Soutar, LETSystems,  www.gmlets.u‑ Web site of LETSystems, with information on how they work, and on forming your own. 

Mullins, Eustice, The Secrets of the Federal Reserve, John McLaughlin; ISBN: 0965649210 

E. C. Reigel, Flight from Inflation, the Monetary Alternative The Heather Foundation, Box 48, San Pedro, CA, 1978,  ISBN #:   0‑900300‑8‑5; Written about fifty years ago, but still very relevant.  Like many others, he promoted government issue of non-interest bearing money, but left private traders with the present banking system.


1.  For longer descriptions of the history of money, see E. C. Reigel, Margrit Kennedy, Jacques Jaikaran, and Bernard Lietaer.

2.  For a longer descriptions of how money is created, see  Bernard Lietaer, Robert Blain, Thomas Greco, Margrit Kennedy, and Jacques Jaikaran,

3.  See Eustice Mullins, and William Greider

4.  The basic difference between a bank and a savings and loan institution used to be this power of money creation.  Since bank deregulation, savings and loan institutions and credit unions can also create money.

5.  See especially E. C. Reigel, Margrit Kennedy and J. Jaikaran.

6. “When ancient Egypt fell, only 4 percent of the population held all the wealth. 

When the Babylonian civilization collapsed, only 3 percent of the people owned all the wealth.    When ancient Persia was destroyed, 2 percent of the people owned all the wealth.    

When ancient Greece sank into ruin, only 0.5 percent of the people held all the wealth.    

When the Roman Empire collapsed into ruin, only about two thousand people owned all the wealth in the known civilized world, and this debacle ushered in the period of history known as the Dark Ages.”  Quoted from page 24 of Jaikaran.

In the present system, money begets money, and stuff begets stuff.  They become ends in themselves.  In a hopeful future system, money and stuff serve the humans who use them, and have no intrinsic value other than their usefulness, and the pleasure their use gives.         P.K.


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Paul Krumm



10 BB

A global intention event

10 Billion Beats is a grassroots effort to affect the uncertain times we sense and benefit every life on the planet. We invite you to be a part of it Sept. 21-22, 2012.

Article Summaries

Transcendental Creative Systems:

An Exploration Using General Living Systems Theory

Creativity is the merger of matter/energy with new information.  The process of bringing something new into existence, is an inherent characteristic of life.  To live is to create whether we do so unconsciously, or with full awareness.  This essay is an academic approach to the creative process using James Miller's General Living Systems Theory to model the course from non-being to created work.

A Comparative View of Creativity Theories:
Psychoanalytic, Behaviorist, & Humanistic

Three streams of thought in contemporary psychology view our humanness is distinctly different ways.  This is nowhere more evident than in their efforts to explain creativity.  This essay explores and compares these divergent views and provides a foundation from which to develop a new transpersonal theory of creativity.

Dancing With The Whole:
A Theory of Creative Entrainment

The holistic theory models entrainment as a communicative occurrence. Examples are given from several disciplines and four stages of entrainment are delimited. The essay compares theoretical quantum physicist David Bohm's notions of order with the realms of spirit, mind, and body. It proposes stages of entrainment operant throughout these realms and suggests that they perform cumulatively in the creative or unfolding process. The systems perspective develops the thesis that humankind is an iteration of a larger system and that entrainment is a central factor in the transduction of information between individuals and across system levels.

Doorways In Consciousness:
An Exploration of Resonant Being

Many cultures around the globe embrace sound in their exoteric and esoteric traditions. This essay reviews the role sound plays in the religions, creation myths, and sacred technologies of various peoples. This review connects creativity with healing which is considered an act of regeneration thus creating health in the body. Several varieties of healing through sound are discussed including music, drumming, toning, chant, instruments, Kabballah, and prayer. The essay proposes that techniques of sound healing and therapy currently rely on the intuitive ability of individual practitioners. Acknowledging the need for effective healing modalities, it calls for research that can qualify the elemental effects of existing sounds, tones and prayers. Such categorization may help construct an applied holistic healing technology.

Building A Better Thought Trap:
Nutrition for Colossal Creativity & Peak Performance

Colossal creativity is a state of balance amongst the mind, the body, and the spirit that actuates human potential. This article concentrates on the vitamin and nutritional components of our system so that they resonate more clearly. The focus is on the brain which rests at the focal point of our physical, mental, and spiritual worlds. It traps and interprets inspiration that comes from deep within, transforming it from one world to another. Colossal creativity unfolds when we nourish every part of our being. Digest new thoughts and ideas to nourish your mind. Develop a daily practice -- whatever your faith -- that invites active participation from your Spiritual-Self.

Accessing Your Inner Creator

An essay for general audiences that explores the creative process comparing it with the duality described in many philosophical and spiritual traditions. Techniques are given to apply these strategies to ones individual work.

Creativity, Healing, & Shamanism

An academic, yet deeply personal essay about exceptional encounters in Brazil with alternative healing and spiritual tradition. It details a dynamical systems (chaos theory) model of creativity: at "The Valley of The Dawn" a spiritual healing community; in Amyr, a physical medium; and in my experience using Ayahuasca with "The Santo Daime Doctrine" in Rio de Janeiro.

Guest Articles

How Money is Created

by Paul Krumm

Toward an Economy Based on Curiosity and Caring Instead of Greed

by Paul Krumm


  • While the network of money transactions around the world is very complex, the way money works is really rather simple, and is understandable by the ordinary person.

  • The study of the operation of money is pivotal to any discussion of cultural values and social justice, as money is the basic language of economic relationships, and the values built into this language impact all social relationships.

In this paper we will describe how the present money game is structured.  We will show that the idea that money is value neutral is not correct, and go on to describe how money functions to promote greed.

Some preliminary suggestions will be given, based on theory and what has worked in the past, to change the values built into our money to ones that are more congruent with a curiosity and caring driven economy.

We will also show how the present money game is not sustainable, note that the same changes that lead to a curiosity and caring based system are the same changes that make money and our economy sustainable.

Transforming Reality Through The Arts

by Coni Ciongoli-Koepfinger

Could this be the key to CREATIVE EVOLUTION?  Is the creation of a society that questions the reality of its fiction and the fiction of its reality be but a page turn away. Conceivably it is no longer a question of controlling what is real; instead, is it a question of controlling the market analysis that controls what the individual assumes to be real? Perhaps then, we will able to give birth to the new science that is no longer bipolar in its relations of the art and the social – a new science that is born out of a culture that was modified to be the perfect blend of both fact and fiction.

Staying Centered in Peace
by Lisa Hepner

An essay written in the wake of events on September 11, 2001.  This piece addresses the struggles we experience to see beyond the pain.  The author draws together the thoughts of many personal growth writers into an inspiring tonic for our wounded souls.