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FREE GREEN MONEY ECONOMICS. ALTERNATIVE GREEN ECONOMICS PROMOTING FAIR TRADE AND ENVIRONMENTAL AWARENESS. THE PEACEFUL REVOLUTION. |
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THE AMAZING GREENBACK DOLLAR The production of money at interest, by our various banking institutions, has become the first domino in a chain reaction of global injustice. But coming up with something to replace it may at first seem like a daunting task. It was very encouraging to learn about the Colonial Script which worked as an independent system. But what is even more amazing to discover, is that there has also existed a modern independent currency that's managed to hold its value within our current system for over 100 years. That currency, is the Greenback dollar, which was produced under the instruction of American President, Abraham Lincoln. In 1863 Lincoln, needed to borrow money from the banks to finance his war effort. The banks wishing the Union to fail offered extortionate loans at 24% to 36%. Lincoln had no choice but to decline the offer. An old friend of Lincoln's, Colonel Dick Taylor of Chicago was put in charge of solving the problem of how to fund their side of the war. His solution? "Just get Congress to pass a bill authorising the printing of full legal tender treasury notes... and pay your soldiers with them and go ahead and win your war with them also." Lincoln agreed to try this solution and printed just over 450 million dollars worth of the new bills using green ink on the back to distinguish them from other notes. He later said: "The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity."1 The Greenbacks continued in circulation until 1994 and maintained their value worldwide, penny for penny, against the standard dollars issued by the Central Banks. Their withdrawal was the result of legislation which never questioned their value. Lincoln's production of tax-free, interest-free money did not cause inflation because he only produced what he would have borrowed to supply the needs of the country, so the new money entering the market was equal to what would have entered in any case. "We issue it in proper proportion to the demands of trade and industry ..." you may recall was how Benjamin Franklin described his successful issue of Colonial Script. It would appear that Lincoln also understood that the vital ingredient for launching an independent currency is sensible restraint. If he had just left the money press on and allowed his Greenbacks to be handed out on street corners, the economy would have probably collapsed. But producing 'to satisfy the spending power of the Government and the buying power of consumers' as Lincoln put it, was a wise control which insured the currency would keep its value and benefit all concerned, and the fact that the Greenbacks continued for over 100 years is proof that an alternative currency can exist and have real value within, and yet be independent from our current Central Banking system. 1. Abraham Lincoln. Senate document 23, Page 91. 1865. MAKING MONEY As we have seen, history demonstrates that bypassing the Central Banks and producing interest-free money according to need does not have to cause inflation. This is because it's not the source of needed money which is inflation's cause, but 'the way in which' it is produced and used. Here, before we more on, is one more example of a working alternative currency. This currency existed in Austria, in the 1930s, and is described by David Weston in his book, 'The Living Economy'. "The burghermaster of Worgl issued local currency in the form of 'tickets for services rendered'. They were used for paying wages to men employed on public works, who would otherwise have been unemployed. During the first month of issue these tickets are said to have circulated twenty times as a form of local currency. Taxes were paid, unemployment was reduced, and local shopkeepers prospered. Mayors of two hundred other Austrian towns decided to follow suit. But the Austrian National Bank took legal action against the experiment. The Austrian Supreme Court decided in favour of the Bank, and the innovation was squashed."1 The banking system has always been opposed to governments printing money, and is always in favour of governments borrowing money from them instead. This is not because responsible independent money production causes massive inflation; it's because the money changers can't take their pound of flesh from it. Inflation is, by bankers own admission, a recurring problem which all traditional currencies face and beyond sensible restraint there are other factors which make inflation an issue (but not for XAT). Let's take a closer look at what inflation is and show how we intend to eliminate it. 1. David Weston, The Living economy, pp.196 ff INFLATION "Inflation means that your money won't buy as much today as it did when you didn't have any" Anonymous Inflation, put simply is like the man in the restaurant who asked for a little bread to finish his soup and a little soup to finish his bread. As the story goes, he is still sitting in that same restaurant to this day, no nearer to finishing his meal than when he started. So prices go up to match rising wages and wages go up to match rising prices, or is it the other way round? No one really knows. All we do know for sure is that this process causes a constant rise in prices and wages which goes back as far as anyone can remember, and the result is that the price of a small holding with garden at the turn of the last century will now buy you a set of trainers and a can of cola (if you hurry). Under the XAT system, keeping wages and retail prices stable is a priority in order to stop the ups and downs of inflation and deflation, and in a moment we will explain how easily this can be achieved. But first let's quickly look at what the methods are at present. HOW ECONOMIST'S SEE INFLATION "Put all economists end to end and they would still not reach a conclusion." Anonymous With our assurance that we will not get bogged down in economic terms that would contribute to the confusion that already exists around the subject, we will first of all look at what economists feel are the three main causes of inflation (there are more) and their suggested solutions. We will then reply briefly in turn as to how an XAT economy would react. 1. 'Demand-pull inflation' is thought by some economists to be the main cause of inflation. It is the activity of living beyond our means, i.e. spending more than we are producing. It is thought that when households, firms and government are collectively spending more than the country's full employment output, an inflationary gap occurs. All the country's resources are fully utilised and so as a result prices have to rise to eliminate the excess demand. However, higher prices lead workers to demand higher wages so as to maintain their standard of living and in turn this increase in wages, further pushes up demand. 1 The orthodox solution to 'Demand-pull inflation' is 'demand management' a policy of trying to damp down demand by: A. raising taxes B. increasing interest rates C. cutting public spending XAT Responds: Prices don't have to rise to eliminate excess demand, they in fact rise because suppliers charge what they believe the market will bear, and in this case they see a chance to cash in. (pure greed) The orthodox response appears to be to punish everyone for the transgression of the few who dare to take advantage. Everyone pays more tax, all borrowers pay more interest and all public services suffer. XAT has a reverse approach which is to create incentives to maintain stable prices which suppliers can't afford to risk losing. We will explore these in detail once we've covered the other two main reasons economist site as causes of inflation. 2. 'Cost-push inflation' is thought by other economists to be the main cause of inflation. This is when a country's production costs start rising faster than its output. To give an example, assume there is an increasing demand for higher wages, a rise in the cost of imported raw materials and an increase in taxes; the firms who are affected will have increased production costs which they will have to somehow cover, and of course the obvious solution is to try to pass on the expense to the consumer. 2 The orthodox solution to this one has historically been a 'prices and incomes policy' centred on decreasing the country's employment level. This has a twofold effect. It cuts demand and it also undermines the power of trade unions who may otherwise start fighting for larger wage increases. XAT Responds: Here we go again. The price of raw materials rise and the solution is to put people out of work so they can't afford to buy things and can't demand fairer pay. On paper this might look better if you don't factor in the extra benefits being paid to the resulting unemployed. But in real life there is no way this solution could be seen as acceptable after considering the individuals who are hurt by these actions. XAT is a tax free system, therefore rising taxes are not an issue. Its incentive programme, which we will explain shortly, gives everyone concerned the advantage of stable prices including that of raw materials. Those relying on foreign raw materials, with possibly fluctuating prices, are given special consideration to maintain a fair balance. (You'll find a whole chapter specifically dedicated to Import Prices.) 3. 'Supply of money'. For Monetarist's the number one cause of inflation is having too much money in the system. Like any other commodity, they assume that if supply increases then value decreases. 3 So the solution to this one seems fairly straight forward; we simply reduce the money supply? XAT Responds: Incentives to keep stable prices, attacks the problem at its source. The term 'too much money in the system' is hard to quantify. Faster velocity of circulation can allow one unit of currency to purchase several times its value in a day whereas the unit that stays in your wallet is still in the system, but not really affecting anything. It is easier for monetarists to refer to the currency in circulation as a fixed amount. In actual fact the term 'money in circulation', to be accurate, should refer to the money actually circulating at the time and this varies from second to second, although they may argue otherwise. 4 Peter Donaldson in his book 'A Question of Economics' explains further how difficult it is to pinpoint what the total money supply is. "it can be argued that bank-notes and deposits are only part of the total money supply, and that various other assets, like building society deposits, should also be included. Instead of there being a clear dividing line between 'money' and 'non-money', there is really a range of assets with different degrees of 'moneyness'. For Monetarists in particular, this creates the problem of just what it is that they should be trying to control." 5 During the postwar period governments tried to curb the money supply by stopping it at its source through regulating the loaning activities of the High Street Banks. Unfortunately this proved to be largely unsuccessful as the banks managed to find various ways around the government restrictions. Because of their failure to control the banks, Monetarists turned their attention elsewhere. Now the focus is on trying to control the demand for money, rather than the supply, by reducing the countries need to borrow. Translated into plain English this usually means a cut in public services. Not good news for the hospitals and schools then. This is a bit of, economist's slight of hand. Now you see the problem, now you don't. "There is too much money." they say. We ask how much is too much and they say " We don't really know." "Where is it?" "We can't really say." Even when making attempts to reduce the money supply the monetarist seem to have missed the point: that when trying to reduce a nation's borrowing, it's not solely government borrowing which increases the country's money supply. Private borrowing (money leant to both companies and individuals) is much larger and increasing all the time. If they believe the money supply is the problem then it's outrageous that governments are willing to make such massive cutbacks on public spending by sacrificing essentials like education, health, industry, etc, without first attempting to properly reduce the rapidly growing phenomena of private borrowing. This is typical of the scattergun approach which can only hit the bullseye at the expense of destroying the whole target. If you feel we deserve better than this, please read on... 1. Graham Bannock, R.E. Baxter and Evan Davis, Penguin Dictionary of Economics, sixth edition 1998, pg 98 2. Graham Bannock, R.E. Baxter and Evan Davis, Penguin Dictionary of Economics, sixth edition 1998, pg 83 3. Graham Bannock, R.E. Baxter and Evan Davis, Penguin Dictionary of Economics, sixth edition 1998, pg 278 4. Graham Bannock, R.E. Baxter and Evan Davis, Penguin Dictionary of Economics, sixth edition 1998, pg 428 5. Peter Donaldson, A Question of Economics pg 50 INCENTIVES The economic system we currently use has some problems built into it which experience has taught us to address in certain ways. It's like when a petrol engine produces polluting fumes, our usual response is to manufacture better filters. However, with a hydroelectric engine, the need for such filters is made redundant, as this alternative is a non-polluter to begin with. In a similar way XAT solves any potential problems (in this case inflation) through its basic design and not through relying on future adaptations. We have seen that economists put forward various theories on the causes of inflation, and their suggested solutions are always to manipulate the population in some way or other in order to discourage the retailer from raising their prices. But what if there was a better, less-destructive way of controlling retail prices and therefore controlling inflation? We all know that retailers are desperate for good publicity, which explains why so much is spent on advertising each year; however the right to advertise at present can also be the right to mislead. Consumers need to know about the products they're buying and good company practices need to be made easy to spot. XAT's solution for inflation has within it the added bonus of improving trading standards and of empowering the consumer. Here's how it would work. Based on the previous year's trading, companies who were able to maintain stable wages and retail prices would be awarded an Inflation Management Silver Star. Those maintaining sound environmental practices for that same period would be awarded an Eco-Friendly Green Star. Companies would be required to include their Star Rating on all their labelling and advertising. And now we are prepared to introduce the next step which is the real hay maker. Only producers and retailers awarded these Two Stars would be allowed to advertise their products! This would affect even producers who don't advertise, because retailers purchasing from companies not credited with good standard awards would do so at the risk of losing their own star ratings. Now for the basic privilege of letting the population know about your product, you have the market regulating itself. This proposed design, for inflation management, at first may seem quite radical, but it's worth bearing in mind that similar practices are already successfully being used in our economies. Meet Competition is one such practice. Here businesses advertise to consumers an offer that if prices are found to be cheaper elsewhere, they'll match the deal. This seemingly caring gesture is however a very clever and inexpensive business strategy, as it stops their competition from undercutting them. As price conscious consumer's alert the company of lower prices, any benefits gained by their competitors engaging in price war tactics is bound to be short lived. In this environment neither company is likely to lower prices and therefore the average revenue for both firms will be higher. This demonstrates effectively the power the public have as regulators, even if at present they're unaware of it and it's being used against them. Companies too can be used to regulate each other. A successful practice which is similar to our XAT inflation control method, is that of the policies designed to uncover cartel activities. Up until recently a huge amount of money was being spent on executing search warrants and carrying out surveillance procedures on businesses thought to be involved in explicit collusions; but the introduction of a leniency policy did away with all this expense. Now, any cartel member providing information to the authorities about its other cartel members, will in exchange receive total immunity in regards to legal penalties. A well known example of such a case was that of Sotheby's and Christie's. Sotheby's was fined $45 million and its former chairman now faces a prison sentence of up to 3 years. Christie's, on the other hand, being the ones who gave information first, got away scot-free. The current economic system encourages retailers to believe that they will benefit from raising their prices, so they do. XAT is different; it actively encourages stability by providing benefits for firms who keep their prices stable, whilst creating disadvantages for those who don't. Some might see this as a drastic measure and an infringement on the free market ideal, but insisting that products advertised meet certain standards is nothing new. In a free market, rules and regulations already exist. Drug manufacturers are not free to advertise drugs which have not met testing standards. Car manufacturers can't advertise unroadworthy cars. XAT is simply proposing to introduce a condition of use onto advertising that is no more of a hindrance to freedom than the highway code is a hindrance to car drivers; they can drive virtually anywhere they wish, but along the way they have to abide by certain rules which ,as a result, benefit everyone. Regulations already exist, all we're suggesting is raising the standard. Plus, our current advertising restrictions, which stop whole segments of an industry from advertising, (tobacco for instance) in turn do not produce any incentive opportunities between individual companies; because obviously, all the competition is prohibited from advertising as well. In the XAT scenario, the co-operating firm gains a very real advantage against those competing in the same market, who are not co-operating. Whilst the companies making the economy unstable and destroying the environment would risk going out of business, the vast majority would thrive from the security of knowing they were now operating in a stable economy. The ability to plan ahead is essential. Not having to worry about future economic fluctuations including changes in interest rates and taxes would enable good businesses to succeed. With the eyes of the public being employed to watch and report on companies not maintaining the Star Ratings displayed on their products; the kind of devious tactics used in Great Britain in the 1970's when companies tried to avoid a price freeze, by producing other slightly altered products at a higher price, would be a huge gamble for any business to take, as they would risk losing their right to advertise in the future. To add to our strategy for allowing the public greater information, all publications and broadcasts could be required to give up space for XAT to publish the best and worst companies in operation. The media industries, no longer required to pay company and income tax might see the providing of this space as a relative bargain. (More about advertising and the conglomerate owned media later on). IMPORT PRICES The only thing that could affect the stability of retail prices now would be the cost of imports. Genuine cases suffering from this would qualify for subsidies if they could demonstrate that it was impossible for them to meet their production or distribution needs locally. Because we are working with an improved framework, some words take on a more positive meaning and perhaps should be renamed to save confusion. Say we call this a 'stable price maintaining subsidy'. Because we envisage XAT being adopted in an area and spreading, as opposed to being adopted everywhere all at once, we must have some safeguards in place to deal with differing foreign attitudes. If the aim is to maintain stable prices, then within the society that adopts this, everyone will benefit i.e. those selling at a stable price will benefit from being able to buy raw materials from within at a stable price. Should however, it not be possible to get these materials from within the stable price maintaining society, then out of necessity, materials will need to be purchased from outside of it (imports). These foreign suppliers will not have the advertising incentives to maintain prices in the same way. If those outside the circle raise their price, producers inside will face difficulties in meeting standards. In this situation it would be unfair to penalise our home producers, by not allowing them to advertise. Given this scenario, we have two choices. One is to allow these special cases to raise their prices without penalty, which would be counter productive to our inflation maintaining aim, and the other is to subsidise the unavoidable difference in price, to allow those affected to maintain the same price level. When all alternatives have proven fruitless, as a last resort, we propose to subsidise, 'the difference', allowing our supplier to maintain business on a level playing field. Unlike the example we give at the beginning of XAT where small farmers suffer as a result of subsidies given to others, there are no victims here. Foreign exporters get to sell their goods at the price which suits their circumstance of being part of an economy which varies prices, and the home producer gets to buy at a stable price which in turn suits their needs. This sort of subsidy really does deserve a different name to distinguish it from the sometimes harmful ones. However prevention rather than cure is obviously more desirable, so to help avoid this problem in the first place, the XAT system actively promotes increased self-sufficiency whenever possible. Companies would receive favourable publicity support for making efforts in this direction. The more an area provides for itself, the easier it is on the environment. The idea of treating our villages, towns and cities as individual economic eco-system's encourages self-sufficiency which naturally results in the local recycling of wastes, water, energy and even money. This is because it is cheaper to grow what food you can for yourselves, to capture energy from your own local sources, and to produce your own materials by recycling wastes. In the same way, by encouraging the circulation of local money, businesses within the area are helped to prosper, creating jobs and maintaining the local economy. Although we are suggesting that communities should be as self-sufficient as possible, this does not mean that they should be isolated from the rest of the world. There will always be a need to share and interact with each on a wider global level and many advantages can be gained, through increased productivity, by doing so. Finding a positive combination between free trade in some activities and self-sufficiency in others, is therefore something we should be aiming for. MAXIMUM AS WELL AS MINIMUM WAGE Under the current capitalist system a footballer can earn more in a day than a nurse earns in a year and an individual businessman can own more money than an entire country. These huge inequalities in wealth are unfair and un-sustainable. It's obviously important to maintain an incentive for people to follow certain career paths (for example, careers which are highly skilled, innovative or dangerous), but these incentives should not be out of proportion with the actual value of the work to our society. It follows that at the same time as having a set spectrum of wages to differentiate between careers, there should also be a maximum and a minimum wage bracket in place in order to prevent the obscenely huge wage gaps which are currently occurring between the rich and the poor under today's economic system. Not only would this proposal be fair to people, it would also be kind to the economy, as stable wages are part of the recipe for economic stability. Some people would argue that not allowing wages to fluctuate enough could risk putting some companies out of business, if demand for their product went down too much. This is because lowering wages, under our present system, is a main way for companies to keep down their costs; but they forget that also, under the present system, businesses can be wiped out by rising interest rates or rising taxes (neither of these is a concern with the XAT economy). Besides, wage reductions or hikes would go against the inflation management scheme we earlier talked about, so an action like this that benefits businesses today, gets turned on its head under the XAT system. A FOREIGN INVESTOR'S VIEW The XAT economy having no interest rates and no taxes alongside having stable wages and stable retail prices would make it an attractive economy to invest in, even for those outside of its system. This is because any country using the XAT system would immediately become a tax free haven, with a stable currency free from inflationary and deflationary risks. Investors love that. There is no reason why investment and trade with others shouldn't continue as normal and may even be improved as public spending, unlike now, would not be drained by national debt and economic uncertainties. This in turn would mean more investment in health, transport and education, etc, allowing a more skilled, productive and creative society to flourish. So long as people within the country accept the currency for products and services, the currency will have value for anyone who holds it. That is all it comes down to. The green back dollar had no problem being accepted worldwide despite the fact that it was produced on a whim, backed by absolutely nothing. Americans accepted it. Anyone from outside the country could count on that. You could spend it in America therefore it had value. GREEN MONEY Now that we have explored the many advantages of producing a new currency, some might be thinking, it sounds good, but is it legal? While there are severe penalties for counterfeiting the established currency, there is nothing to stop us from creating our own currency, and indeed there are more than 40,000 people in the UK alone who partake in some 450 local currency schemes. Here is an explanation from LETSLINK UK on how LETS systems work. "LETS - Local Exchange Trading Schemes - are local community-based mutual aid networks in which people exchange all kinds of goods and services with one another, without the need for money. LETS are revitalising communities throughout Britain. As grassroots initiatives they are open to everyone - people of all ages, skills and abilities; local clubs and associations; voluntary groups, charities, community initiatives; co-ops, small businesses and local services - helping everyone to give and take, connect to new resources, and find a genuine community identity. LETS offer equal opportunities to all - whether employed or unemployed, financially secure or on low income, black or white. LETS use a system of community credits, so that direct exchanges do not have to be made. People earn LETS credits by providing a service, and can then spend the credits on whatever is offered by others on the scheme: for example childcare, transport, food, home repairs or the hire of tools and equipment." These schemes which now exist all over the world are designed to work on a local level along side the established currency. The basis of how they work has been expanded and adapted in XAT in order to create our own independent currency which can function not only locally but nationally and globally as well. Free of interest and not reliant on tax, XAT has the potential to become the currency of choice as more and more people see the advantages of using it. A CHANCE FOR CHANGE Already, thanks to the participation of XAT members, we now have a working independent computer trading system in operation, which can be accessed from any touch tone phone. Anyone who opens either a Standard or Bonus Account, is given a PIN number and Account number which they can then use to trade with. Agree your transaction with another member, then transfer the credits. They can then instantly verify it's been done by calling the system to check their balance. This process costs no more than a regular phone call and whilst it is still in its infancy we are regularly making upgrades to the service. You can have your own XAT Standard account for the asking. It's totally FREE! This includes £200 worth of XAT credits to get you started. With this you can begin to trade with other members and take advantage of offers listed in the growing XAT Classified Ads specialising in Fair Trade, Earth Saving Cruelty Free Products. You'll find the 'JOIN XAT FOR FREE' link at the bottom of this page. A SHARING ECONOMY Because our current governing system with central banking values at its core is not suited to the kind of sharing economy which is evolving out of everyones global awareness, it is natural that we should also switch from a government system maintained by a few, to a maintenance system we could all take part in. Similar methods to the kind we will be suggesting already exist in the world today and have proven to be very successful, especially that of Switzerland. But before we go straight into a discussion on how best to run a proper democracy in which we all could have an equal and qualified say, let's first take a look at the morality and sensibility of what we all subscribe to now. Please read on... |
