Currency (also known as cash) has been around for thousands of years. Currency is a generally accepted medium of exchange. Money is any currency that also stores value. I wrote about it last year on my old blog.
There are a lot of currencies in use today. The US dollar is the most common. Others include Euros, Pesos, Yen, Yuan and Lempira. Most of these currencies started out as warehouse receipts for specific assets (generally gold and silver) until a central bank took them over and gradually converted them into debt-backed instruments. The mechanism used to accomplish this is the “fractional reserve system.”
We collectively call these government-backed forms of cash Local, FIAT or Sovereign currencies. Only a small fraction of these total Local currencies are in a form you can touch. A billion dollar bills would form a stack 63 miles high – that would reach halfway to the International Space Station. The Federal Reserve created $75 billion in January 2014 alone. Most of the cash exists in electronic accounts in banks.
The key point here is that FIAT currencies are ALL issued by central banks and backed only by a government’s promise to pay. Effectively, these currencies are disasters waiting to happen. The disasters are called monetary crisis and they happen all the time but until now, they were confined to local economies like Greece or Argentina.
People of foresight (Change Agents like you) are searching for a better way. Several alternative currencies have come into existence and it is up to people to accept or reject them. We do not yet know which ones will prevail but here are a few possibilities:
- Gifting Economy – this is popularized by the Burning Man festival and Charles Eisenstien’s Sacred Economics. It is the age-old bartering system with the twist of freely sharing your Abundance with those around you.
- Time Banks – use time as a medium of exchange. The unit of currency is the hour. The banks allow members to earn time by providing a service and then spend it on the services offered by other members of the exchange. If you live in Austin, Texas, Amanda Jones will get you started with the Austin Time Exchange Network! (Note: I am proud to be a member of ATEN.) Some time exchange networks are interconnecting, allowing members to exchange thier hours throughout the United States!
- Crypto currencies – currency based on cryptographic proof instead of trust. They can be stored and exchanged on almost any digital device. There are many of them, bitcoin being the best known. Two posts on cryptos are coming in May.
- Asset-based currencies – are based on the intrinsic value of the object being used as currency. Gold and silver are the best known of these currencies. There is even evidence that some countries are preparing to make their currencies partially gold-backed.
- Some hybrid – a mashup of other currencies. I have seen a proposal to make shares of blue chip stock a form of currency. There might someday be a way to trade 150 shares of IBM for a car, for example.
Why would an individual want to participate in an Alternative currency?
- Shelter from the global currency crisis that is likely to happen. Most World FIAT currencies use the US Dollar as a “reserve”. This means they are backed by US dollars. If the dollar gets a mild cold, other currencies could get pneumonia.
- Lack of trust in the banking system and/or banking regulations
- No access to regular banking services
- Desire to focus on the local economy
Do you have any experience with Alternatives?