A World Without Money?

Our Wed night/Saturday TOD:Campfire series continues. In addition to having 'practical' essays on topics our community has expertise in, the intent is also for these slots to be a home for unprovable, perhaps untestable ideas, from which (perhaps) testable and worthwhile ideas emerge. Since it is New Years Eve, meaning tomorrow marks a new mini-beginning, (and the fact that traffic will be low...;-), below the fold is a short thought experiment. Imagine what the world would look like if tomorrow morning we woke up, and all money in the world had disappeared.....

No money. Empty bank accounts. But everything else remains the same....

Let's take as given there will be general chaos for a period of time, pretty much everywhere. Just-in-time medical prescriptions would be disrupted, dog and cat food supply would stop, and all sorts of other unpleasant trajectories that would accelerate adverse feedbacks to the system. For the benefit of getting worthwhile discussion from this post however, let's avoid debating whether this temporary anarchy would be a 6 or a 9 on the 1-10 nastiness scale, and look beyond to the eventual order and type of structures that would emerge, be it in 3 days, 3 weeks, or somewhat longer.

With no money, in our pockets or in our banks, financial 'capital' would at least temporarily cease to exist. Though it exists now as an abstraction that facilitates commerce and trade, money is really only a marker representing the 4 real categories of capital: built capital (wind turbines, shovels, books, houses, lumber, tools, etc), natural capital (land, animals, trees, riparian zones, ecosystems, fresh air, sunlight, etc.), social capital (friends, trust, networks, communities, family, etc.), and human capital (knowledge, skills, social acumen, experience, etc.). The moment money disappeared, all these 'real' forms of capital would instantaneously increase in value, some more than others. The global GINI coefficient, (a measure of income/wealth disparity) would plummet (ones 'worth' would now be measured by these real assets as opposed to digits - there would be quite a shift in the Forbes 400). I suspect 'knowledge' and 'who one knows' would loom large as assets, as traditional paychecks, bribes, payments in a service based economy, etc. would no longer be denominated in paper currency or bank transfers.

The major difference between this thought experiment and the real world is the speed. With a slow decay of the financial system, the existing elected officials and businessmen will eventually construct some new Bretton Woods III. With money disappearing overnight, different organizational themes might emerge. Over time, as has always been the case, leaders would rise to the top, both locally, and regionally. A plausible scenario would be that some areas of the world would centralize around some powerful warlord (who might now be wearing a suit and tie): other areas would be communities led by committee of friends/peers - kind of a bimodal distribution somewhere between HBOs 'Deadwood' and Kunstlers "A World Made By Hand". In either environment, irrespective of whether the leaders were local or national, anarchist or top-down, basic goods would almost certainly be reasserted as top priority: food, fresh water, sanitation, heat and electricity, medicine, etc. To make things more convenient, a new 'currency' would eventually be issued. What would it be based on? Would prior claims be attempted to be 'matched' in the new currency? Would prior liabilities be 'forgiven'? Would people be happier (after the initial nastiness?)

While industrialized nations may not have directly undergone this experiment, some have come close - 2001 Argentina and 2008 Iceland come to mind. Money 'existed' but was only available to withdraw in small amounts. At the other end of the spectrum, modern day Zimbabwe has PLENTY of money - in fact, my brother enclosed a 10 billion Zimbabwean Dollar Note in my Christmas card.

The production of goods is accomplished by human and natural capital. When denominated by money, here is how our economy 'stacks' up, by industry, as a % of GDP:

(from Upside Down Economics, by Kurt Cobb)

Without money, perhaps it would look something more like this?

Money has allowed us to increase efficiency, to reduce redundancy and increase aggregate 'profit'. Trade benefits from specialization have made nations 'monetarily' better off, though without money, most of these advantages not only disappear, but become liabilities. Import substitution policies that were suppressed by the Washington Consensus now look attractive. Regions where industry and production of basic goods occurs locally will have an advantage, almost irrespective of who is in charge. Undoubtedly money will emerge again, because trading a cow for 2 computers and some skis is awkward. But what will it be based on?

Money no longer exists, and has no meaning. You are in charge. How do you structure things?

This thought experiment is not TOO far removed from present day reality...Have at it - there are no 'right' answers, and Happy New Year...;-)
* A paper worth a read Natural Capital, Human Capital, and Sustainable Economic Growth
* The concept of the 4 capitals is outlined in Chapter 5, "A Four-Capital Model of Wealth Creation", in the book, Real Life Economics, by Paul Ekins
**Thanks to my massage therapist Kathy for helping me envision a world without money

I am afraid your thought experiment is not too far removed from reality--in fact it is a real issue, as we look at a world with far more debt and derivatives than real assets.

The questions I have are, "How much of current commerce would be able to continue? How does one operate an electric utility without money? Do you call (assuming telephones are available) Wyoming, and promise to send a trainload of Georgia wood back if Wyoming will send you coal for your power plant? (A hydro-electric power plant might do better, as long as long as a part isn't broken, the river isn't frozen over, and it still has enough oil for lubrication.) How could gas stations operate, if electricity for pumping fuel (in pipelines and at the gas station) is not available? Without oil and gas, and with very little electricity, how could a big business like a telephone company, or a refrigerator manufacturer, continue to operate?"

I am afraid we would have only the food that is locally in storage, or currently growing. Clothing would be just what is in our closets. Golden Retrievers would only be helpful, if they could find their own food, and provide some services in additional. Medicine would be whatever is in our medicine cabinet.

The new currency would most likely be local. It could be based on some quantity of food or labor. It probably wouldn't be tradable at any distance. We would go back to the days before oil and gas, and mostly to the days before electricity.

Well, thinking "new currency" seems to me to be thinking too much inside the box.

The best example is the fall of the Soviet Union. The monetary "system" (along with everything else) fell apart. What remained? Bartering.

And a new, rising system of "power". The warlords, or better "godfathers" surfaced. When "the Russian Mafia" was mentioned around the world, people got scared.

These were the people who got things done or hurt you 'cause you didn't do your part.

Money is the anonymizion of power. If the money system falls apart, then suddenly the system gets very personal.

Power personal. Mafia. Godfather. I'll take care of you here. But you have to support me with your life..

Feudalism is a complicated (advanced) form of the Mafia economy.

Cheers, Dom

Well, let's see....

Assuming no money, at least for some period of time, barter becomes the economic "coin" of the realm.

No money, most current jobs disappear. Most current jobs exist primarily so people can earn money to consume stuff. In a world without money most of the existing systems have come to a screeching halt. After the smoke clears, work will be centered on two things: growing/obtaining food and making things/providing services that can be bartered for food.

Anybody with land, climate, ability, etc. to grow food will probably be doing so, bartering any excess for additional labor, supplies, etc. Depending on location, people with hunting/gathering skills should be able to gather sufficient stocks to survive and barter.

The remaining folks will have to come up with skills that are useful in the new society. Primarily, these will be skills that provide goods and services used in the production and delivery of food, or that provide the other basic necessities of life. Depending on their specific skill sets some veterinarians, doctors, nurses, and teachers may be able to parlay those skills into food. Actually, I'm not sure about teachers. I suspect that all adults and most teenagers will need to be working at sustaining themselves and their families. Maybe grade school/high school teachers might be necessary, but I'm not entirely convinced, at least at first. People with woodworking or craft skills may be able to create enough business to survive. People who can repair things, carpenters, mechanics, plumbers, and other mechanical/creative types will probably have plenty of work as things break down and must be repaired (as they can no longer be easily replaced).

Eventually, some kind of local money will evolve, if only to grease the wheels of barter. Depending on the availability of transportation and communication, perhaps regional or national currencies will come back into existence. I would be shocked if any of these were not tied directly to some underlying asset. It could be gold, energy, food, livestock, timber, land or something completely different. I just don't see much likelihood of some kind of fiat fractional-reserve money system reappearing.

If money were to disappear, I think you end up with a very different society. Different professions. Different relationships. Different social, political, and security structures. I think almost everything ends up focused on the exchange of physical goods or services directly or indirectly tied to the core task of obtaining the basic necessities of life (food, water, shelter, basic medical care, etc.). People with skills or resources that support that task will be in a good position, relatively speaking. Those that cannot will need to learn quickly or get used to some probably unpleasant alternatives.



Some very interesting comments. However, one thing for the group to think about (and I will apologize in advance if this has already been brought up but I missed it because I have not read all the comments) is the issue of population and die-off. My very superficial appreciation of the population I come into contact with on a daily basis is that there are many many many individuals who have none of the right skills and would be hard pressed to come up with any other abilities to survive than those of functioning as a parasite. My fear,should money ever 'disappear' is that the parasites of society, i.e. drug dealers, criminals of every other ilk, etc. would find themselves in a tight spot, having no abilities other than the inclination to suck off of the rest of society. I fear there would be a period of absolute chaos with much loss of life and suffering. aBarter would be one way to survive, but what if you hve nothing to barter?

rdorrett - Those who know how to use a gun will have power of death. Those who know how to grow food will have power of life. The former need the latter, whereas the latter don't need the former. There will be many unskilled etc who are totally knocked out by the shock and/or go beserk. But for the most part, those demonstrating vital skills such as farming and mending will be respected rather than persecuted. About time too!

Clearly in a situation like this precious metals would become the only way to transact large international deals. Gold and silver would once again take their rightful place as the only real form of money.

If you look at how gold is on the climb again right now, you'll see that this is happening as we speak.
Gold Rises, Caps Eighth Straight Annual Gain, on Haven Demand

You say "clearly", but it's far from clear.

Historically people have used all sorts of things as currency. They've used,

- cocoa
- cowrie shells
- wooden sticks with marks on them
- gold
- silver
- iron
- cigarettes
- salt
- clay tablets representing a declining amount of grain
- electronic impulses

and zillions of other things.

What I found interesting was that during the Soviet colapse people traded things on their value compared to a snickers bar and shops paid out change in chewing gum. One man who was there said he went to one particular shop most often because they always paid change in the flavour of chewing gum he liked best.

I remember clearly a story from that time about a Soviet Union factory that paid its workers in sanitary napkins.

- cocoa
- cowrie shells
- wooden sticks with marks on them
- gold
- silver
- iron
- cigarettes
- salt
- clay tablets representing a declining amount of grain
- electronic impulses

I can just see people doing huge international transactions in cowrie shells or salt. Pah-lease. And as for "electronic impulses", they are what are causing the problem right now — fiat rubbish — so it's hardly the best option for the future.

I also don't imagine huge international transactions in gold or silver. We only have about 160,000 tonnes of gold in the world, total - 0.024kg or less than one ounce of gold for each of the 6.7 billion people on Earth. Or if we consider silver, about 43 billion ounces have been produced ever, about 6 ounces each. The medieval silver penny had a bit over a gram of silver, so that 6 ounces would allow some 170 pennies.

Would this really be enough currency for all the transactions people want to make?

My point was not that any particular way of having currency was the best, but that there were very many different ways of doing things throughout history - not just silver and gold.

Would this really be enough currency for all the transactions people want to make?

Yes! Let's say 1 dollar = 1 yoctogram. Plenty for everyone.

In absence of money there won't be any international anything anyway.

Beyond their industrial demand, precious metals are fiat currencies just like anything else.

Who does not understand this, has not read his history of money. Gold bugs can argue what they want, their arguments are not based on history or reality.

As such, if the thought game calls for a breakdown of not just the first line of money (national fiat paper currencies), but all forms of money, then it's back to barter we go. You have fish, I have grains. Let's barter.

However, before we would get there even in an imaginary scenario like that, I do believe we'd go through some other form of currency first. Maybe precious metals, maybe something else.

But let's not make the mistake of saying that any 'money' has inherent value, when it's all based on a social 'fiat' contract.

But barter with this many people would HAVE to have a new currency. Otherwise it would be too cumbersome -so the question is - how would society be organized and what would the rules be for the new currency? An energy backed one like Hubbert and the Technocrats suggested? Or a basket of basic commodities? I agree however, that gold will not play a long term role. Yes it represents embodied materials, but so does a car, or a barbecue grill. I think future currency backing (on a full planet) will have stronger links to real resources (energy, food, water, etc.)

How it will be done - that I don't know. But I figure starting from scratch we could at least tease out what principles would be involved...

Some of the community-based and/or intentional community barter systems use a time system. You work or trade an hour for a set amount of value. A key point is that all work has equal value. An hour of lawyering is equal to an hour of babysitting. (This has implications for education, of course, but again, if all education is given equal value and/or is merit-based - say, highest achievers getting their choice of major - then it might not matter.)

The starting value would be arbitrarily set, I imagine, but from that point on, there wouldn't be much need to adjust it up or down. If some resource isn't available, then that resource is doled out at a fraction of the set value. Anything that there's plenty of, well, there's just plenty of it.

Just thinking by the seat of my pants again, so blast away, folks.



But barter with this many people would HAVE to have a new currency. Otherwise it would be too cumbersome -so the question is

But I HAVE to have a Mercedes convertible by next week, so the money WILL be coming from your account, etc...
In the real (hypothetical!) world, barter with this many people will fail to have a new currency for some time (due to lack of confidence even after one is organised). And consequently people will be forced to try to cope with a hopelessly cumbersome barter system.

An hour of lawyering is equal to an hour of babysitting.

More like a year of lawyering is already becoming equal to jack shat. Ask the 40 lawyers already disposed of by the top firm in this city.

I think the cumbersomeness of barter gets overstated a lot.

Whereas I think you'll regret those words a lot.
With a failure of money there would be such a breakdown of the life-support system that a great dependence on local personal relations would take over. It would be much more to do with work exchange than things exchange.

I think the cumbersomeness of barter gets overstated a lot. That's not to say that money wouldn't re-emerge, if only because we live in a society heavily adapted and accustomed to fiat currency, but I do think it is important to recognize that barter systems can be very complex and sophisticated, and that monetary exchanges don't always *replace* - that is, barter offers refinements over and above monetary systems in tight-knit communities, among people where money is short (ie, the poor who never have a lot of access to currency), and it operates, when frequently used, to enmesh people in relationships with one another - often permanent ties, since nothing ever comes out "even" in bartering.

We tend to view economic history as a one-way trip away from barter, and towards currency by preference, because currency is so preferrable to barter. And for some things it is - but for some things it isn't, and it might be more accurate to argue that part of the problem has been the prioritization of a way of life that made barter seem inferior, rather than the inherent limitations of barter.


I don't think it's inherently an either/or. The sticking point seems to be in applying a value. It is interesting to note that in the 17 and 1800's inflation was incredibly slow and stable. I forget where I read it, but I'm sure it was from here at TOD, but there was something like an 80 year period in the 1800's or so with virtually no inflation...

So, if we can determine a value that has some inherent value and, by extension, generally perceived validity, AND set up the system so it simply can't be screwed with, then it doesn't matter if you use a note to represent the "real" good(s) or not.

Or, so it seems to this non-economist.


I think talk of a barter system is idealistic nonsense. It sounds good but be careful of what you wish for.
Governments need fiat money and taxation to keep the peace, to enable elections, health services, education and public services like police, coast guard, border patrol and weather forecasting etc.

Maybe look to Somalia to gain an insight in a system without government.
When you come up with a fair barter system which can pay the sailors and airmen, police and teachers with bags of beans then you have success.

I don't discount that bartering could become a means of survival but if it becomes widespread, it will most probably mean we have anarchy, warlords and slavery and a whole damn lot more misery than necessary.

I agree with you that a barter system would work. Why couldn't someone trade a certain weight of gold for a certain amount of fish?

Money does have inherent value, otherwise its not money. Gold and silver have inherent value; just look at the tremendous amount of effort and risk that is undertaken to remove it from the earth. By the way, definition for fiat - An authoritative command or order to do something; an effectual decree. Surely you don't believe that gold and silver only have value because the government says so? Because if you think about it, they would much prefer that you think the opposite. Follow this logic, and Gold and Silver are really anti-fiat money.

This thought experiment is interesting to me, as a proponent of free-markets and limited government intervention.

What I'm about to propose might be a little out there. I think that we already live in a world without money. How could this be, you ask? Well, think about what we currently use as "money". We use paper notes issued by the government, which are nothing but a promise that this paper will have some purchasing power in the future. It is fiat money ("fiat" means by decree, so our money is only money because the government says so, and because people believe it). Here are a couple of attributes of money that would probably arise in a free-market for money.

1. Store of value - In a free market people would look for money that would be the best store of value. As noted by Kiashu, that could constituent any good that has utility or is deemed valuable by people for any reason at all. Since 1913 the US money supply has been inflated by 1300%. That inflation means devaluing currency, hardly a solid store of value. Meanwhile, gold purchases roughly the same amount of goods in 1913 that it does today, it has not devalued at all. See gold/oil ratios over the past century and although there has been a range, its roughly unchanged.

2. Inherent value - Does our current money have utility? What can you use paper or 0's on a computer for? There is no inherent value for the latter and very little for the former (toilet paper?) Given that in the US, the dollar has lost 95% of its value (1300% inflation) since 1913 and the creation of the Federal Reserve, in a free market would you hold US dollars for any reason at all? Maybe some would, but I doubt many would consider promises from politicians to be more valuable than tangibles such as gold,silver,oil,land etc.

Another interesting thing to note is that in that inverted pyramid, finance and its derivatives rests at the top. A system based on real money would probably see Finance closer to the bottom or near the middle. Here's a great example, the FDIC insures all bank accounts up to $100,000. Consider gold as money; there would be no need for this entire organization if we had gold as money, because your money would be sitting in a bank vault, and would not be lent out to either people 10x over (fractional reserve banking). This is just one example, another big one would be that there would never have been a market for credit default swaps, a type of derivative that acts as insurance when a company goes bankrupt. These types of financial instruments, which total over 1000 trillion worth, are only possible under a system of endless monetary expansion. Another example, the ponzi schemes of social security and Medicare would not be possible with real money.

So instead of desiring a world without money, we should be asking for a world WITH money. Real money, not the counterfeit paper that is pushed out by the quasi-government-criminal Federal Reserve and all Central banks the world over (every country has one). In the US, our lack of real money keeps us forever in servitude to the owners of the Fed, with us wondering how in this age of prosperity we only seem to ever increase our debt. I think if people realised that they pay interest on debt which they themselves issued (Fed receives Treasury bonds in return for working a printing press), which brings in $100's of billions to the owners each year, they would be all for real money. The constitution of the US only allows the Federal government to issue money in the form of gold and silver. Maybe the Founding Fathers were on to something.

I would love some constructive criticism on this; I'm writing my undergraduate thesis on the destructive nature of central banking and the case for free-market money, and any comments would be much appreciated.

Oh, but the USDollar and most modern money is backed. It's issued by the government and will be paid out with next year's (or in 30 years') taxes. It's backed by the power of taxation. They'll take your gold away, if it is deemed to be the most effective tax.

Now, it would only be a shame if next year's taxes are less than this year's..

"I would love some constructive criticism on this; I'm writing my undergraduate thesis on the destruction nature of central banking and the case for free-market money, and any comments would be much appreciated."

Don't waste your time. Free markets only work in a utopia where everyone would follow the rules and not act “human” [irrational]. The Federal Reserve is a result of “free markets”. Individuals or groups will always gain more capital [power] over others and they will form cartels. There exists a drive within humans to have power over others and those with power will conspire together for more power. You can put in all the “checks and balances” in whatever form of government you can dream up but it will be as corrupt as the humans the designed it.

Seriously you might as well write your undergraduate thesis on the destructive nature of humans, then you might be getting closer to the answers you seek. Good luck, but seriously, free markets are dreaming with your eyes open…


"Physiologists should think before putting down the instinct of self-preservation as the cardinal instinct of an organic being. A living thing seeks above all to discharge its strength — life itself is will to power; self-preservation is only one of the indirect and most frequent results"

"My idea is that every specific body strives to become master over all space and to extend its force (its will to power) and to thrust back all that resists its extension. But it continually encounters similar efforts on the part of other bodies and ends by coming to an arrangement ("union") with those of them that are sufficiently related to it: thus they then conspire together for power. And the process goes on."

~Friedrich Nietzsche

Although you might believe that free-markets are dream, or utopia, my point is only to show that we would be better off. I'm not concerned with how improbable this is, just what would result in a return to sound money. My whole point is that sound money limits the power of those in control to devalue your savings endlessly and use your money for evil means.

If people desired to be free, and understood the game, we could end this control tomorrow. It would only take individuals to bypass central banking currency altogether. There is no law against what can be used as a medium of exchange. For example, we could use gold and silver coins to exchange goods between each other, and not use paper currency at all in the process. If these coins were once issued by the government, they would be legal tender, and taxes would only be paid on the face value. The effect would be a completely legal way to pay less tax, and usurp the power of the political majority. Another benefit to this is that it would strengthen local economies, as people would have more purchasing power, as the Fed would not be able to use the invisible inflation tax.

I never said it would be easy to create a system free from control of the elite, but the first, and most important step is to take away their credit card. Quickly, the American empire disintegrates; without the common citizen to pay the bills war and destruction would be limited. No longer would poor people have to go kill other poor people for the sake of the ruling elites. It would take a revolution, but with the only other option being endless slavery for our masters, is it not worth trying?

"I'm not concerned with how improbable this is."

If you are not concerned with the probability of it happening why waste your time?

"No longer would poor people have to go kill other poor people for the sake of the ruling elites."

At what period in human history did this not exist in some form post hunter-gather? As soon as there is any sort of agricultural surplus it will create economic inequality and class war will form.

"It would take a revolution, but with the only other option being endless slavery for our masters, is it not worth trying?"

One you slaughtered the top a new top would form and the cycle would begin again. There is no way out you are trapped if you want to lay down your life for some ideological cause, be my guest. May you find some sort of meaning or comfort in your existence because of it. The only advice I could really offer you was this little tidbit a read today:

"Stop trying to make a difference.
in trying to make a difference,
we grow attached to our efforts, and
the ideology that drives these efforts.
And attachment is at the root of suffering.
Thus, to let go of our attachments to
'make a difference' is to let go of suffering."

Good luck in your quest...


I would rather live one day as a free man, than a whole life as a slave.

Thanks for your support.

Fallacy of the excluded middle.

Specific to what?

Specific to the one thing you said. What else?

Between the absurd and rarely seen extremes of a single day as a perfectly free man and a lifetime as a slave there is a middle ground of a life where some rights are compromised for the sake of other rights or other people, and where you live not a single day nor a hundred years, but another 30 years or so.

So of all the things I wrote, thats where you choose to find the fallacy. missing the point no?

The quicker you realize you have been and always will be a slave the fuller your life will become. The freedom you seek can only be found in the graveyard, where all are truly "equal" and "free". Maybe like Kazanzakis you can have the epitaph "I want nothing, I fear nothing, I am free." chiseled into your grave stone. I am merely pointing out the contradictions in your romanticized notions of freedom and the myths you are perusing. Below is a link to a short piece that gives a brief summary of some of the myths you are holding as the highest good:



“Each person “has” an idea of the absolutely real, the highest good, the greatest power: he may not have this idea consciously, in fact he rarely does. The idea grows out of the automatic conditioning of his early learning; he “lives” his version of the real without knowing it, by giving his whole uncritical allegiance to some kind of model of power. So long as he does this he is truly a slave; not only is he unconsciously living a slavish life but he is deluding himself too: he thinks he is living on a model of the true absolute, the really real, when actually he is living a second-rate real, a fetish of truth, an idol of power.”
~Becker, “The Birth and Death of Meaning”

Hi Chenri,

With all due respect, as a proponent of free markets and limited government intervention how do you explain the ongoing economic debacle? Is it not the product of free markets, and the deliberate reduction of government intervention?

The uncontrolled and 'out-of-regulatory-sight' creation of elaborate financial instruments is what just wrecked the global economy. Trillions of dollars of debt-based pseudo money was thereby created by a market that was 'free' of government intervention. No Fed or central bank was necessary.

The Federal Reserve is, as you stipulate, quasi-governmental. In other words, less subject to government intervention than if it were an actual component of the government. Indeed, the Fed is just a private board of directors representing the interests of private banks, but with the special privilege of creating money out of thin air. Are you proposing that it be relieved of that special privilege, and that the creation and control of currency be put back under the exclusive control of the government?

If so, then would not the regulation of money supply fall entirely upon the Treasury Department, thus increasing (not decreasing) the government intervention in business matters that you find objectionable?

Looks to me like the can of worms you propose opening might overfloweth.

Hi D. Benton Smith,

Thanks for responding. I will try and answer the case for the free market as best I can. This is a very broad topic, so forgive me if my response is a little narrow.

Most economists would agree that the current economic debacle was triggered by the increasing defaults on Sub-prime mortgages, which is both a result and cause of the real estate market bubble popping. Most economists would also state that this collapse is due to deregulation that saw the financial institutions recklessly lending, seemingly without any regard for the future. Oh my, how the free market has failed, they cry. We need more government regulation and nationalization to ensure that this does not occur again, to make sure that the nasty free market doesn't cause so much damage.

This issue can be understood in the same way as the question of what our world without money would be like. I argue we don't have money. I argue that we don't have anything that resembles a free market either.

In order to understand subprime mortgages, one must understand that there exists two Government-sponsored entities called Fannie Mae and Freddie Mac. These two quasi-government entities subsidized mortgages for people who, under more-prudent rules of borrowing, would never have qualified for a loan from a conservative banking institution. In fact, Fannie and Freddie Mac hold half of all mortgage debt in the US. Without Fannie and Freddie buying up this mortgage debt, there would have been no market for debt that could never be serviced. Without the governments intervention, the free-market would have ensured that these loans would not have been made, and the result would be that we would not have a major collapse in real estate prices, nor would we have had a major run up in property prices.

Here's a quote from Congressman Barney Frank in 2003 , "I want to roll the dice a little bit more in this situation toward subsidized housing." Of course, when the luck eventually runs out, and the massive fraud is exposed, its quite convenient to blame the free-market and advocate even more government to solve the problem which they themselves created. Kind of like the fox eating some of the chickens, and than believing that only the fox should look after the chickens.

With regards to your question about the money supply being given back to control of the government. Here are two articles from the constitution;

Article I, Section 8, Clause 5: The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.
Article I, Section 10, Clause 1: No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

The founding fathers understood how the Republic could be undermined through paper currency. If Congress took over control of the money supply and followed the constitution, they would mint gold and silver. Congress (and government) would also be handcuffed; they would not be able to spend at will, for there power would be limited due to their inability to "print" more money. Mining gold and silver is a very difficult task, and the supply of both metals only increases by about 3% per year. So you see, even if congress wanted to expand the money supply, they would be prevented from doing so. Not only that but instead of selling debt to private banksters, in which every citizen has to pay interest on, Congress would receive the interest payments from the people, which could be used to cover costs of the government, rather than increasing the power of the Fed owners.

I understand that there might be objections to this, which is why I also wouldn't find it a problem to allow competition in currency. Let the free-market decide what should be money, just as letting the free-market decide who should receive mortgages would have largely prevented the current economic debacle.


I read your two articles of the constitution as saying something completely different than that fed. has to be gold/silver backed. If you remain with "The Congress will have power" and "No state shall", then you don't need to read the rest.

Federal govnt can make "money" out of anything they damn well please. It's call the division of power - we can, you can't. Again, it goes back to power. Power, power, power. States, on the other hand can not make money. They can only circulate gold and silver. The fed. can also take away ANY of the proposed currency solutions that are discussed here. And if they want to, they sure won't play around (see the ban on private ownership of gold in 1932 (?)).

And that's why they call it a dollar "bill". It's a bill of debt, a bill of obligation...
"Legally, they are liabilities of the Federal Reserve Banks and obligations of the United States government." (wiki)

For all those others claiming the oposite, it's NOT a store of value... (except in a time of deflation, but that's not intended..)

Which is probably your point anyway.

It is a promise of the powers that be to honor it's own debt. Just think if we were all allowed to do that!

But no. This power is held ALONE by the federal govnt. States can issue gold and silver coins - if they think they're so rich!!

Greetings from Munich,

SamuM wrote a post earlier that tidily sums up what many who agree in spirit with gold-buggers but disagree in practice think.

"Beyond their industrial demand, precious metals are fiat currencies just like anything else.

Who does not understand this, has not read his history of money. Gold bugs can argue what they want, their arguments are not based on history or reality.

As such, if the thought game calls for a breakdown of not just the first line of money (national fiat paper currencies), but all forms of money, then it's back to barter we go. You have fish, I have grains. Let's barter.

However, before we would get there even in an imaginary scenario like that, I do believe we'd go through some other form of currency first. Maybe precious metals, maybe something else.

But let's not make the mistake of saying that any 'money' has inherent value, when it's all based on a social 'fiat' contract."

i think gold is a cooler currency because its so shiny, but other than that, i have got to agree.

Chenri, AC, Kiashu.

I get a strange feeling you are all absolutely correct, simple looking from different frames of reference and what you words have evoked in me is:

Perhaps we need to change there core of what we are as a species, mayhap a phrase like "Conscious Spiritual Evolution" is what You have inspired.

I'm working on it but with little progress so far. Technically it is possible for US to evolve out of "automatic control of our nature by the given wiring of our primitive brain structure"

If we can develop an education system that bypasses what is now a completely inadequate brain structure, we may be able to eliminate animalistic urges such as greed and the desire for power over others.

Get rid of a few "cardinal sins" and the problem of currency holding a steady value dissapears.

I know it is difficult to see through my fog, I'll go find my flashlight.
You may find it dazzles a bit at first. I am dedicating my year 2009 to elucidating this theme of "Conscious Spiritual Evolution"

(Chenri, you asked for input, sorry it's not immediately helpfull)

In a world suddenly bereft of financial capital, there would be some very interesting re-orderings taking place within your four other categories of capital. The world already knows or suspects the kinds of re-orderings that could take place in such a world. For example, nurses and high-school teachers likely experience elevation, in such a world, in the human capital category. In the built-capital category, books and tools are elevated whereas toys and other discretionary items are demoted.

Restoration is a strong pattern in any disruptive event, however, so there would be those who would get very busy trying to do just that by attempting to restore money sytems. War analogies or wartime examples are relevant here. Money substitutes emerge. Liquor, for example.

I think ultimately what would be most revealing would be how quickly credit relationships get re-established. In fact, I think credit relationships would be rebuilt even faster than any re-establishment of money. Credit is nothing more than a means to shift tasks across time, into times of one's choosing. It's the foundation of modernity (imo) and efficiency. (I should acknowlege that money is also a form of credit). For example, I'd be delighted to start guitar lessons now, in Winter, for my neighbor's 10 year old son, in return for a share of their corn, tomatoes, and basil this coming Summer. That's both a barter and a credit deal.

Anecdote: my wife is both a psychotherapist and a nurse. She grew up and got all her nurses training in New Zealand. The history of nursing in NZ is intense, because, as a frontier society for many years nurses were the doctors for most communities. So, to this day, a nurse's education in NZ is grueling and very medical. Seeing how things played out in countries like colonial NZ and also Aus. give good clues as to how things would get shuffled now.

Here in Western Massachusetts we have a ton of niche/small scale farmers that produce all manner of stuff through the four seasons. When I drive by their farms, or see them at the Saturday open market, I think "these people are the future millionaires."


Credit (long enough for time-shifting) only works in a growing economy. I am sure there are a lot of folks who will try it again, and get burned again. It may be the foundation of modernity and efficiency, but it is going to be a whole lot more limited in the future. You may be willing to give guitar lessons in return for a share of their corn, tomatoes, and basil this coming summer, but I would be willing to bet you wouldn't give guitar lessons in return for a share of their corn, tomatoes, and basil five years from now. There are just too many contingencies that could arise, especially if one is doing without a lot of modern conveniences.

I would be willing to bet the small scale farmers use diesel to transport their produce to market, and tractors in the cultivation of their crops. Even organic farmers seem to use special organic "sprays" for their fruit crops. Seeds are generally hybrid seed that require considerable fossil fuel inputs. These farmers may be the future millionaires, but they have some big hurdles to jump to get to that point.

Credit (long enough for time-shifting) only works in a growing economy.

Yes and no. It's more true to say that credit encourages growth.

If money is only created when debt is created (as with US Treasury Bonds or bank-issued money as loans), then debt always exceeds the money supply. So people desperately try to produce more goods and services to grab the insufficient supply of money to pay back their debts.

Imagine that you start a business, say a bakery. At some point its profits allow you and your family to live comfortably. You will often decide to stop the business' growth there - you have all you need or want. But if you have a debt which is growing, then you'll try to have your profits grow faster than the debt grows, in the hopes of paying off the debt.

In this way, the debt always exceeding the money supply encourages economic growth.

It also encourages environmental destruction, abuse of human rights and so on. If you as a baker employ a worker and have decent profits, you will be happy to pay and treat them well. If you have enormous debts, you'll seek to both increase revenue and decrease costs, and part of the cost decrease will be to do things like make the worker do unpaid overtime. Likewise the woodcutter supplying your bakery with wood for the ovens, as you try to increase revenue by producing more bread, you also need more wood for the ovens. So while the woodcutter may know that he can only take one cord of wood per acre per year if he wants to keep the forest in good condition, that extra money you the baker offer him to cut an extra cord or two starts to look very tempting - especially if he also has some debts.

Kiashu is wrong here to say Gail was wrong. The point is that without expectation of growth no-one wants to provide the credit that depends on that growth for repayment (plus interest). That the (now nonexistent) credit would have stimulated growth is besides the point.

Why gold or silver? Any commodity can be currency? Gem stones? Titianium? Bronze?

In anything more than the most basic subsistence type of social order / economy some sort of currency will be required to pay for goods and services. Even barter currency would arise and have some sort of value.

This non currency is not going to happen on the scale of the human population organized in any way close to how it is.

If we assume that we still have working computers and telecommunications, then money need not be something that has traditionally been used for money. It need not be something 'valuable' like gold, silver, or gems. It could be something of relatively low value, like bricks, or charcoal brickettes. The reason that money in the past has been some like gems is that the expense of carting things like bricks around to pay for other stuff was too great and inconvenient. But, with telecommunications, and computers we can have computer records of how many brickettes each of us owns and where they are stored. The whole financial structure would very quickly come to look very much like what we have today - or more properly what we thought we had before the recent financial meltdown. Then, no one really held any significant cash. Most money was just a number in the computer memory slot called 'balance' in our computer bank account. With charcoal brickettes replacing dollars, the 'balance' would be a number of brickettes rather than a number of dollars. Not, to my mind, a big change.

I think it is impossible to make all money disappear, either over night, or over a millennium. Money is an idea. It is an invention. Once we know about it, we cannot 'uninvent' it.

I read recently a news report about prisoners in California state prisons using tins of sardines as money. They cannot have real money in prison. All their earnings from prison work are held in accounts at the prison commissary, and can only be spent of items purchased at the commissary. The commissary stocks tinned sardines. Viola, money! And a
regulated currency exchange!

If money suddenly disappeared, telecommunications would cease and few people would have working computers. My computer would work until my equipment sustains a major malfunction because my entire system is only indirectly reliant on the system. I have tools, parts and knowledge to repair my off-grid photovoltaic system and computers. When they fail, I probably would not have anything that I would trade to replace them. Food would be more precious. Computers would be sacrificed. Since people could not pay for electricity computers would become a thing of the past along with electronic currency.

Telecommunications would cease in less than a month. I pay for my Internet access via satellite system with debit card auto payment which would create debt as my account would have no balance. Since I could not pay the bill, I would immediately terminate my service. Nearly all of their customers would do the same simultaneously overloading their customer service department making communication with them difficult. Their customer service personnel would probably walk off the job immediately because the company would have nothing for their paychecks. I would have to go to the bank (assuming it is open and not burned to the ground) to cancel my debit card wasting the precious gasoline in my fuel tank. Without money I could not buy any gasoline. Would I trade a can of peaches for a gallon of gasoline? No, it would have to be more like one 29 ounce can of peaches for 10 gallons of gasoline. That is, assuming I could even survive the trip to town as people would kill me for my can of peaches.

The reality of erasing money overnight would be looting, burning, murdering and chaos just like in Argentina when they changed the currency stealing half of people's savings. People would essentially barter and steal for basic survival. Bullets would likely be valuable for barter.

I have been hesitant to jump in here because the concept is so mind boggling. "Paradigm Shift" doesn't even come close to describing it.

Since people could not pay for electricity computers would become a thing of the past along with electronic currency.

True, but in this new world, people will be looking to trade anything of value in order to survive. Electrical generation has value so even if payment is haphazard and marginal, it does provide income. The alternative is resources going idle in a period of upheaval. It may not be the suits, it may be the guys in coveralls that get the income, because they have the knowledge. Wise locals will back them up. The supply chain will respond similarly, with a difficult delay.

IMO, most people don't really know how to do anything useful, in a survival sense. In a world of no money, telemarketers are SOL. Altogether now "Awwwww".

I see a very ugly period where people are killed for peaches, but after the melee, the concept of value will go through some fast and drastic changes.

I can fix damn near anything (really) but if I can't strike a deal before I starve then I lose.
If I fix something and don't get paid (food) I starve, and lose.
If my skills are recognized, and I don't get shot for my sack of rice, I will prosper and will likely sire many children.

PC? Perhaps not, but resources, or the appearances of same have always been a deciding factor in survival. We are wired that way. Google "Bower Birds" if you don't believe me.

"What have you done for me lately?" becomes "What can you do for me right now?"

I can't see that scenario (yet) but as an exercise it exposes some ugly truths.

Lastly, this imaginary scenario is highly location dependent. The themes (and fears) expressed on this site are largely Americentric or from the "developed" world. Many areas throughout the world will adapt to a no money world easily or not require any adaptation at all.

Many (most?) in this world "get it" because they never lost it.


Money is an idea. It is an invention. Once we know about it, we cannot 'uninvent' it.

The idea that things cannot be uninvented is one of those myths that never die. In reality many things have been "uninvented", for just one instance in the 1950s it was well understood that it was lethally dangerous to attach a front mudguard stay near the axle on a bike. Then, progress took place with big self-service stores, at which the customer was (blissfully uninformed) King, and so customers insisted on buying the lethal designs because they "looked nicer". And now it seems that mudguards have been uninvented altogether (due to yet further McCustomerism).
In respect of trading relations, what is crucial is confidence in others. Once lost it can be very hard to re-establish. Those who have not judiciously prepared in advance are going to have a desperate time, regardless of how many guns they might masterfully control.

Said by pragma:
Electrical generation has value so even if payment is haphazard and marginal, it does provide income.

Yes, electricity does have value, but part of my point is that it is difficult to barter long distance or in large quantities. If the electrical power plant is 100 miles away or in another state, how do we get barter to them? After considerable time and expense, the meter reader could also be a bill collector driving around picking up items that could be given to their employees and parts suppliers. I suspect such a practice would increase energy consumption and be destined to fail due to the size, weight and number of items that must be transported. People would not have enough time to take barter to all of the service providers. Mailing packages would greatly increase cost and energy consumption eliminating many customers.

My Internet access via satellite provider provides Internet access to mostly rural customers in all of the lower 48 states. Collecting barter would be prohibitively expensive and impossible during inclement weather. This company would fail.

I can not envision a barter system working for 310 million Americans and much less for 6.5 billion people globally.

Elgin Groseclose on the history of money. 1934 ( pdf)


**Thanks to my massage therapist Kathy for helping me envision a world without money

Um... what did you trade?


You don't have to imagine a World without Money, you only have to look at how the Swiss WIR business barter system has been operating for over 70 years.

Or any of the proprietary barter systems like Bartercard.

On the WIR system goods and services are exchanged not FOR Swiss Francs but BY REFERENCE TO Swiss Francs as a Value Unit.

That is to say, participants transact with each other by reference to the Swiss Franc and may extend interest-free credit (aka "time to pay") to each other. The buyer settles the credit in "money's worth" of goods and services etc rather than "fiat" Swiss Franc money, whether of the non interest-bearing paper object type, or the interest-bearing balance on a bank ledger type.

The discipline - which protects the WIR system against defaults on debit balances - is that participants have to put up their properties as security. ie the WIR is a "property-backed" monetary system. It turns over billions of Swiss Francs worth in value a year, and while it tends only to "tick over" when conventional finance is working, at times like this - when fiat money = credit is in short supply, the WIR comes into its own, which is why it came about in the first place....

The fact is that wherever a barter system incorporates credit the outcome is a monetary system requiring only a Value Unit as a reference, rather than as an exchangeable/acceptable object.

I believe that it is straightforwardly possible for such B2B barter to be not only introduced generally as a quasi-utility "Clearing Union", but also for it to be extended B2C to retail clients as well through the use of what I call a "Guarantee Society". This is simply a mutual guarantee agreement backed by all the users - sellers and buyers - who make provisions into a default fund for the use of the guarantee.

In this partnership-based "Peer to Peer" credit model banks do not operate as credit intermediaries putting their capital at risk by creating interest-bearing credit based upon it. Instead they act as pure service providers, managing risk, setting guarantee limits and dealing with defaults, all in return for a fee.

We would still need "money's worth" which most individuals and businesses find acceptable. That's where Peer to Peer investment through "unitisation" of property and energy comes in....

Unitisation: solving the Credit Crunch

Happy New Year!

I think what would work well at a local level would be a currency which,

- is a medium of exchange, not a store of value
- is backed by a basket of commodities which decline in value over time
- so that the currency itself declines in value over time
- and which cannot be lent at interest

I'll explain below.

Money today has two functions, as a medium of exchange and as a store of value.

A medium of exchange is plainly necessary, so that we don't have to note down which part of a living cow we'll give when we slaughter it in June for this hoe we get in January. I can give my mate Joe an IOU, "Jim owes Bob one-twentieth the cow Betsy". If I only accept IOU from Bob, it's just an IOU. If Bob can give the IOU to someone else in payment of his own debts and I'll give that one-twentieth of a cow to that person instead, that IOU has functioned as a medium of exchange. Money is simply an IOU anyone will accept.

Getting people to accept your money is the most difficult part, as creators of local currencies have found. This is why so many people instinctively look back at gold and silver with nostalgia, thinking that if the stuff has intrinsic value, people will accept it. Unfortunately gold and silver don't have intrinsic value, they're usually just pretty, and sometimes but not always useful.

It's not clear that a paper or electronic store of value is necessary, as opposed to just putting it in real goods, or getting share of a business, etc.

When money is a store of value, this encourages people to hoard it. This is especially true if they can lend it at interest; putting it in the bank is in effect lending it at interest to the bank, the bank then lends it at higher interest to credit card holders, mortgagers, etc. In this way wealth tends to concentrate into the hands of a few, and drain away from the many. Then when the wealthy few screw things up, it screws everyone up; whereas if wealth were more evenly distributed (not necessarily 1:1 for the top and bottom quartiles, but let's say 5:1 rather than 100:1), mistakes of the few would not ruin the many.

Having money as a store of value is thus inherently inflationary and creative of unemployment and poverty, since whether people hoard it at 0% interest, or lend it out at 5% interest, the total debt will always exceed the money supply. By definition, there's never enough money in the community to repay all its debts.

The solution then is to ensure that we have money which is a medium of exchange, but which is either not a store of value, or has a declining value over time.

The well-known examples of Worgl and the like show good evidence of this. Currency was issued, and had to be stamped each month to be valid currency, this stamp cost some fraction of the currency's value (one-tenth maybe, I forget how much). So your $100 paid you in January would be worth only $90 in February. This encouraged you to spend the lot today.

Further back in history, the Egyptians had large granaries which farmers were obliged to store their grain in. When you brought in (say) 100lbs of grain, they'd give you a receipt for it, a clay tablet with "100lbs, January" stamped on it. Anyone who brought that tablet back to the granary could get grain in exchange. But because rats and damp and so on ruined the grain over time, if you brought it back in February, you'd only get 90lbs of grain for it, in March only 80lbs, and so on. So the grain tablets functioned as a medium of exchange which was a declining store of value - and people spent them quick, giving life to the rest of the economy.

Obviously this would combine very badly with lending at interest. If you can lend $100 in January and have the right to demand that they give you $110 in February, then you make $20 profit, and again we have debt exceeding the money supply. So we'd have to ban lending at interest.

This seems impossible to us in our debt-laden economy. How would banks function, how would houses be built? Yet Islamic banks manage it, and Jews through history have had many successful businesses in this way. Rather than lending $100,000 at 5% to a restaurant owner so she can double the size of her restaurant, the bank simply becomes a 50% shareholder in the restaurant, and gets a 50% share of the profits... and a 50% share in the losses. This makes banks very cautious about who they invest with, makes them look seriously and in detail at them.

Would this be a bad thing, for banks to become more cautious in their investments? Nobody would get rich overnight, but while missing out on the booms we'd miss out on the busts.

Locally then what we could have is a warehouse which takes in grain, timber, cloth and the like, things for daily life. In exchange for these goods which perish they give currency which declines in value over time.

This could also be an indirect tax system. If the goods actually rot away at the rate of (say) 4% each month, then the warehouse owners (the state) could have the currency depreciate at (say) 6% each month. The 2% difference is currency they issue to pay people in state service, being police, building roads, manning libraries and so on.

The currency could not (by law) be lent at interest. That combined with its depreciation would mean nobody hoards it, so it gets spent and encourages production of other non-perishable things. Because it's a declining store of value people would seek to store value in other things, like improving the land they own.

I think this would work very well locally. As for currency at a state, federal or international level, I don't know what would work best. But since I believe that peak oil will mean a reduction in the range of our lives, perhaps preventing even city states from working well (at least as large as they are today), this doesn't concern me a lot. Money exists because people trade, not the other way around.

Money today is an Object. In fact Money is a relationship.

Credit - or time to pay - is implicit in a monetary transaction, but need not necessarily be "monetised". As I point out above, the WIR and other barter systems with in-built credit are proof of that.

We are accustomed to a system where we have actually monetised interest bearing IOU's created by credit intermediaries. Some - eg proponents of LETS - advocate monetising interest-free credit, which is fine where everyone trusts each other, but not where anyone games the system. LETS also do nothing for capital formation in terms of long term financing of productive assets.

I advocated in my recent annual lecture to FEASTA in Dublin the "unitisation" of land rental values - as follows:

Unitisation: a solution to the Credit Crash - Presentation


Unitisation: a solution to the Credit crash - Video

I believe that such unitisation not only solves the Credit Crash, but also creates what is an inherently local currency, since it is only redeemable for value against land rentals.

I also advocate the "unitisation" of energy, and believe that this creates the possibility of a new global reserve currency in the form of Units redeemable against a fixed amount of energy.

Financing Energy beyond Peak Credit

Combine an energy currency with a carbon levy, and it's game over.

The result is essentially to monetise the energy value of carbon, rather than to monetise - by political "fiat" - something inherently worthless, like CO2 or carbon credits.

As the guy said: "If you want to keep a donkey healthy, you don't regulate what comes out of it: you regulate what goes in."

It's no surprise to find that this whole useless Carbon industry is brought to use by the same people who monetised interest-bearing debt and thereby brought us the Credit Crunch.

An Inconvenient Truth, indeed.

NASA climatologist James Hansen has just published his letter to Obama. Some extracts:

29 December 2008

Michelle and Barack Obama
Chicago and Washington, D.C.
United States of America

Dear Michelle and Barack,

We write to you as fellow parents concerned about the Earth that will be inherited by our
children, grandchildren, and those yet to be born........

There is a profound disconnect between actions that policy circles are considering and what
the science demands for preservation of the planet. A stark scientific conclusion, that we
must reduce greenhouse gases below present amounts to preserve nature and humanity, has
become clear to the relevant experts. The validity of this statement could be verified by the
National Academy of Sciences, which can deliver prompt authoritative reports in response to
a Presidential requesti. NAS was set up by President Lincoln for just such advisory purposes.....

Science and policy cannot be divorced. It is still feasible to avert climate disasters, but only if
policies are consistent with what science indicates to be required. Our three recommendations
derive from the science, including logical inferences based on empirical information about
the effectiveness or ineffectiveness of specific past policy approaches.

(1) Moratorium and phase-out of coal plants that do not capture and store CO2.
This is the sine qua non for solving the climate problem. Coal emissions must be phased
out rapidly. Yes, it is a great challenge, but one with enormous side benefits.....

(2) Rising price on carbon emissions via a “carbon tax and 100% dividend”.
A rising price on carbon emissions is the essential underlying support needed to make all
other climate policies work. For example, improved building codes are essential, but full
enforcement at all construction and operations is impractical. A rising carbon price is the one
practical way to obtain compliance with codes designed to increase energy efficiency.....

(3) Urgent R&D on 4th generation nuclear power with international cooperation.
Energy efficiency, renewable energies, and a “smart grid” deserve first priority in our
effort to reduce carbon emissions. With a rising carbon price, renewable energy can perhaps
handle all of our needs. However, most experts believe that making such presumption
probably would leave us in 25 years with still a large contingent of coal-fired power plants
worldwide. Such a result would be disastrous for the planet, humanity, and nature.......

Of course it is unfair that everyone is looking to Barack to solve this problem (and other
problems!), but they are. He alone has a fleeting opportunity to instigate fundamental
change, and the ability to explain the need for it to the public......

The challenges today, including climate change, are great and urgent. Barack’s leadership is
essential to explain to the world what is needed. The public, young and old, recognize the
difficulties and will support the actions needed for a fundamental change of direction.
James and Anniek Hansen
United States of America


The full report is here:

" ...and the ability to explain the need for it to the public...."

That's the key phrase. Mr. O's ability to pull this off is going to be tested. But he just might succeed....

ChrisCook - inconvenient that that long thing about Obama jumped in straight after your intriguing post (not that that Obama thing was unworthy).
Anyway, that unitisation concept looks most interesting but that I didn't entirely grasp whether it is sound or not at first reading. Is it something you've invented? Has such a thing previously existed. Like the LLP system perhaps.

Hello Kiashu,

Well said, especially the paragraphs on Egyptian grain banking and the natural shrinkage from spoilage and rodents. This ancient system is the basis for my speculative 'Federal Reserve Banks of I-NPK' as the shrinkage level can be vastly reduced by controlling for Hygroscopicity [2-page PDF Warning]:

Physical and Quality Properties of Solid Fertilizers
But the biggest advantage of using I-NPK over grain is 'human rats' are generally not going to steal this I-NPK, counterfeiting is impossible if purity sample testing is routinely applied, and the liquid jugs, bags, boxes, and/or pallets can be serialized as required.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Yes, but how do we handle the fact that human urine makes an extremely fine fertilizer, and can provide a private reserve of NPK - I for see difficulty reserving a pee-based currency, although it does provide novel opportunities for wealth increase "keep drinking, honey!" ;-).


Yes, but how do we handle the fact that human urine makes an extremely fine fertilizer,

Other than the NaCl. It seems the way to bind the Na is via drying the urine, reacting it with sand and you get white P as a condensate.

Unfortunately gold and silver don't have intrinsic value, they're usually just pretty, and sometimes but not always useful.

Wrong on every count. Precious metals are rare in the crust, and difficult to extract (which is why they also embody the implicit value of their energy of extraction). They are also durable (you can find them unharmed after hundreds of years immersion in the sea, for instance). They are also useful. Silver for example has many uses other than the monetary one, and, as the most reflective metal, has a great future in the solar energy industry.

As I said, "sometimes but not always useful."

If the stuff is locked up in solar panels or computers or whatever, then it's not available for currency, is it? So we issue silver currency, then someone builds 1,000MW of solar panels, and we have a currency shortage, welcome to deflation. Hmmm.

The fact that gold is used in dental work or silver in microbicides, etc, does not detract from their value and rarity, and is not an argument to be used against their use as stores of value underpinning an electronic currency. I am also not averse to seeing other commodities used as underpinnings for electronic dollars, such as oil, copper, etc. It seems complex, but it's sensible and with computers, it can be done.

I'm sceptical of the notion of gold as priced by intrinsic value. That's because its price appears to be very subject to speculation, and its ownership very rarely related to its utility. Reminds me of why (inimitable) Stadivarius violins are much cheaper than (easily reproduced) Van Goghs -- because any billionaire can hang a painting on his wall but approximately none can play the Strad!

its price appears to be very subject to speculation

That's because the collapse of Bretton Woods relegated it to the status of a commodity. That can be reversed, simple.

Bretton Woods didn't simply collapse, it was kicked over :)

Not so simple to reverse, though. There'd be a LOT of debts we'd have to write off...

I don't understand why lending or interest imply that debts get ahead of the money supply.

Here's a scenario. Suppose banks do all the lending. I deposit an initial $100 into my bank account. At this starting point, outstanding money exceeds outstanding debt by $100.

The bank lends $90 to Fred. Now Fred has $90 in his bank account, I have $100, so the total money supply is $190. The total debt is $90. So the total money supply exceeds the total debt by $100.

Seems clear enough that money can move from one account to another and people can borrow money and repay debt in any arbitrary fashion, and the money supply will exceed the debt by the same $100.

How about interest? Suppose the bank pays 5% on deposits and charges 10% on loans. After a year, Fred's debt increases by $9, my bank balance goes up by $5, and the banker's bank balance goes up by $4. The total money supply went up by $9 but the total debt went up by $9 also, so again the total money supply exceeds the total debt by $100, the same as at the start.

If have $90 and then lend it to Fred, then I end up with an IOU worth $90, Fred gets $90 in cash plus a debt of $90. No net change in (money supply - debt).

No doubt, if people borrow faster than they repay, both debt and money supply go up. If they start to repay loans faster than they borrow, the money supply goes down.

What am I missing?

When folks say that debt and interest cause the money supply to increase and to increase faster than debt... is this some mathematical or accounting truth, or is it more a political or psychological reality - like indulging desire will increase that desire, like drinking salt water.

Any help appreciated!

Go to http://mises.org/Books/mysteryofbanking.pdf and download the PDF of "The Mystery of Banking" by Murry Rothbard. Go to the section on Fractional Reserve Banking on page 94.


What am I missing?

What you're missing is your belief that: "I have $100, so the total money supply is $190. "

No. You don't have $100. You have a claim for $100. If you go to the bank and claim back what you believe (wrongly) is "your" $100, the bank may not have enough cash on hand to make good on your claim. When you make your claim (a recall) for the money back, that creates a debt. The bank then "owes" you $100. It doesn't mean the bank will pay that debt immediately. And as long as the bank doesn't clear that new debt, you do not "have" what you believe is "your" money. It's not your money. The bank owns it and holds it (well at least on their books).

I highly recommend that you watch Crash Course.


It is well worth the time IMO. I really opened my eyes, perhaps it will do the same for you.


I don't understand why lending or interest imply that debts get ahead of the money supply.

Here's a scenario. Suppose banks do all the lending. I deposit an initial $100 into my bank account. At this starting point, outstanding money exceeds outstanding debt by $100.[...]

What am I missing?

Debt in itself does not mean that debt always exceeds the money supply. Only if all money created is created from debt does debt always exceed the money supply.

In your scenario, that's what you're missing. The $100 you put in the bank, where did that come from? Did you borrow it from someone else? Did the government just print it? All money comes from somewhere.

Here's a more relevant scenario, taken from Economia by Geoff Davies, a book I strongly recommend you buy if you're interested in this sort of thing, how our money and economic systems encourage or discourage certain behaviour, and thus how they affect us and the natural world.

The village of Example has never had money before, then a young woman Avaricia who worked in a bank in the big city returns to Example, and tells them about money. She says,

"There are 10 families in this village. I will issue each family with $100 which you can use to buy and sell things. After one year, you must pay me the $100 back, and $10 on top of that as payment for my trouble in printing this money."

After a year, the Smiths had held onto their original $100, and earned more money by selling $100 of cows to the Jones, and $10 of cow manure to the Browns. So the Smiths have $210, they repay the $100 and the $10, and have $100 remaining. Avaricia tells them, "deposit that spare $100 with me, and a year from now I'll return it to you and give you $5 on top of it." This seems good to the Smiths and they agree.

The Jones had bought $100 of cows from the Smiths, and so at the end of the year had $0. Of course they slaughtered the cows and made jerky and leather out of them, but they couldn't find buyers - plenty of people wanted jerky and leather, but they didn't have enough money to buy them. Avaricia scolds the Jones for their laziness and incompetence and agrees to lend them another $110 to pay her back, but this time with a payment of another $20 on top of it - they're a bad credit risk, after all, she needs extra money to make up for that.

The problem was that while Avaricia created $1,100 of debt while only issuing $1,000 into circulation. There was no way that the $1,100 could ever be paid back in full because there was only $1,000 of cash floating around. Either everyone had to default a little bit on their debt, or some people do well and others are in trouble.

In the same way, in the US money is never simply printed. The US government never issues a dollar of currency, it issues a dollar of US Treasury bills, saying, "give us $100 for the Treasury bill, in one year we'll give you $5." The banks buy the Treasury bills and call them "assets", and then they themselves lend out money based on those assets. So the debt always exceeds the money supply. There's simply not enough cash to pay back everyone's debts, however hard the Jones work at producing stuff.

The debt exceeding the money supply also takes small differences in people's ability to handle their money and magnifies them. It creates a class of people who produce nothing and live off the interest on their money - the Smiths sell their cows and live off the money they lent to Avaricia. The people who produce a lot of stuff can never find enough buyers for it, and gradually become more and more in debt. Thus the rich-poor gap gets bigger between the Smiths and the Jones, between the idle and the productive.

If Avaricia charged no interest but simply issued a fresh $1,000 every year, then gradually the money supply would increase. Naturally the prices of everything would go up. This is called inflation, and is what Zimbabwe is facing.

If Avaricia issued $1,000 and then not any more, only replacing old and worn bills or coins, then there'd be a short burst of activity as people sought the new currency, but then things would decline. Because the currency is scarce, people would hoard it. People would then drop prices in an attempt to get more of this increasingly scarce currency, which would encourage people to not spend, since prices might drop in the future. But if people can't be paid for their production they stop producing. This is called a deflationary spiral, and is what the US is facing at the moment.

If Avaricia acted as an employer or warehouseperson and issued currency to those offering particular goods and services, and if the currency could be used to redeem goods or services from Avaricia's government and warehouse, that would encourage the production of those same goods and services. For example, if Avaricia paid $1 for a bushel of wheat, and if you could buy wheat for $1.05 a bushel from the warehouse, or buy a telephone connection from Avaricia for $2, then lots of people would grow wheat, buy telephone connections, and would accept that currency as a token.

In these simple stories you can see a lot of truths of modern world economies. Of course they are not the whole truth, but it gives you the idea.

Ah, I am starting to get the idea that the confusion is over the different types of money like M1, M2, etc.

It is very clear to me that the total debt can grow vastly beyond the total amount of cash.

An economy can be run just fine using checks or ATM cards. Cash just isn't necessary at all.

Or, one could run a huge economy with no checks at all, but just maybe a single coin or bill that everybody shares to settle all accounts. If I owe you $1000, I go to the bank and take out the one $1 bill in the world, and give it to you. Now I owe you $999. You deposit the $1. I go to the back and withdraw it. I give it to you again. Now I owe you $998. Etc. So a huge economy can be run with very little cash and no checks or ATM cards at all.

If A promises to pay to B an amount of X dollars in the future, then A has a debt of X and B has an asset of X. If we look at the total value of such debts and assets, they never get out of synch because of such borrowing/lending activity. Of course, other events may make them go out of synch. A person could go bankrupt and all their obligations dissolved, but people could keep trading their IOUs because they don't know about the bankruptcy. That makes the money supply get ahead of debt.

It might help to divide up two functions of money.

1) Money is a measure of value. We can manage the unit of measurement any way we like - tie it to some commodity or some basket of commodoties. It just makes trading a lot easier to have some common unit of measurement.

2) Money is a store of value. Of course, we can store value any way we like. One crucial question is how we want to manage the value of a promise. If promises can be traded or used as collateral for loans, then the usual multiplication of money can eaxily happen. Starting from 100 bushels of wheat, there can get created expectations to recieve 1000 bushels of wheat, along with promises to deliver 900 bushels of wheat.

When these functions get combined, it gets complicated. If I promise to give you next year something worth X units of value at next year's prices, then whoever controls the definition of the unit of value has a lot of power over me.

Actually, the issue of creating "money" was the topic of the novel, Gumption Island: A Fantasy of Coexistence by Felix Morely, 1956. Felix Morely was a Fed governor at the time. Like all good novels, an island is isolated from the rest of the country due to war. It's a good read if you find a copy. Be forewarned, however, that some sections are highly racist in their presentation. The book explains how they instituted a monetary system along with lots of other things. The book ends with a copy of The Constitution of Gumption Island.

Interestingly, I bought my copy, all those years ago, because it was reviewed by the WSJ. And, yes, it's still on my bookshelf.


I finally logged in to note all this wonderful work here for which i thank you all.
I have been in the oil biz, owned production, and follow all here very very closely.

This particular subject of money is my favorite, as I see it coming. The money dies.
Regarding what happens when the money dies, my favorite example is Argentina.
When they defaulted on their $160 Billion of debt, the banksters closed the banks and took all the cash, USD and pesos, and flew it out of the country. People were stoning and burning bank buildings.

The middle class was stopping the cattle trucks on the roads and killing all the cows to take meat home. Famous old quotes from folks on the streets were:
"There is no dollars, and no one wants pesos, so why not ink on toilet paper, we have a lot of that."

When the Japanese credit bubble burst, for several years the single largest volume consumer goods seller was------home safes. Why leave any money in a bank if it is likely insolvent and apying no interest??? There was a clip on CNN of the local small villages in the north with the folks at the bank. Bank is a few people around a couple of banquet tables trading chits for goods and services.
Like Gilligans Island, sort of.

The other example of the money dying now is Zimbabwe, following Turkey as an example of hyperinflation. End result is the same, the money dies.

There is a bloomberg release on the Japanese suggesting selective default on u.s. debt.

On the point of Japanese banks.
The Japanese government had a postal banking system, like most governments of the OECD. The post office functioned as a sort of ATM. You dropped off cash and got interest paid. The governments weren't really functioning as banks, they just were an alternative to banks from the point of view of the 90% of the people who weren't investors. The investors put large sums of money in large banks that financed corporations. They got more interest and had to accept more risk.
The Japanese government shut down their postal banking system because it was a safe place to put money and the banks were obviously dangerously overextended in real estate lending (Japanese land prices are much lower than they were twenty years ago) and were likely to go bust.
So the government forced the Japanese people to bail out the banks by shutting down the postal savings system.
The US government is doing the same thing by regulating purchases of savings bonds and TIPs. Safe places to put money while you wait to see who is bankrupt.

My thoughts on this subject.

Lets assume that it can get very bad in the future.
So how can one prepare now?

Lets say a doomerish type would be wise to go to the outback,somewhere that conditions are reasonable as to soil,woodlands,water,climate,etc.

Say the outbacks of the Ozark Mts. of which I am very familiar with.

And further that to prepare he or she or them build a Thoreau type of structure and live there for some entended periods of time in order to realize what skills they may need and learn.

What would they learn by not buying food,driving to restaurants,heating without any electricity or piped in gas or storage of the same.

But they could experiment with solar and wind etc. but realizing that they might not work always or falter then they have to live like pioneers once did. Or those ancestors who settled this country.

Neighbors? Yes. Barter? Yes. If possible but no automobiles. Just animals various types of stock and poulty,etc.

Well I once lived pretty much that way back in the late 30s to the early 50s. I live a lot like that now and am slowly easing back into the past further and further and its quite an experience.

So I thought to create a RTF of my experiences and possibly putting it in an essay form that is not very scientific. More on the woodsy,farmer Brown style of articulation.

Then if the Campfire Pipeline finds it worthy to post on this domain I would be happy to submit same.

I would like to make a contribution in this area and think I may have some experiences of value to pass along before I step out of this realm.

For instance. Making soap the way my granny did. Slaughtering hogs and curing the meat. Best type of cattle to have. How to cure leather. How to get up firewood. On and on. I put these down and have been of late.

I am sure many others such as Todd et.al. would have similiar contributions and we can all share in those who are 'doing' it now on the land.

I have a website. Long inactive that I put up WordPress blogs on and also a nice forum but I grew tired of it long ago so I use it only for my personal use as a diary of sorts and a holder for family photos. Also for my genealogy work. So its not public at all.

Thats why I welcomed Campfire. A place where those who lived some of this in the past or are doing so now can contribute.

I enjoy all major posts even though some of it is not something I try to understand. The graphs are fine but ..well they won't help you make it when those hard times come as I am sure they will.

Better to create a larger essay than to do it by bits and pieces here and there among all the other facets such as this one and the daily DBs where they are sometimes lost in the background 'static',not to lessen the importance but it can get hectic on the DBs and if one posts late in the day it flys off the radar pretty fast. Better to be more organized in such a 'domain' as Campfire.And also so it can be searched easier as well.


Hi Airdale,

I, for one, would be delighted by everything you care to contribute to our collective knowledge, especially along the line of practical skills.

For example, is there anything about soap making, meat processing, fire-wood acquisition, etc. that has changed since your youth?

Knowing what you know now, could you improve on the way your forebearers did things?

In other words, has much of the technical and scientific advance of the past 50 years given us anything that might improve upon the old skills?

For example, insulation and passive solar gain architecture can help get more 'bang for the buck' out of firewood (or, in a world with no money, 'sweat for the sweat')

That might be an interesting approach to recalling the proven technologies of our elder's ways.

Yes Airdale, please prepare such a thing, sounds most interesting! A possible best way to go might be put something on your own site for the tod editors to look at starting a page with.

"Money no longer exist and how do you structure things?"

Mhhh...a thought experiment then.

Myself? I don't structure any but my own life and perhaps help some of those around me. What do we call that? A community.

Around this part of the country there still exists what are called communities. And actual signs on the roadways point to them.
They are too small to be a town but they will have a general store,now more like a gas station/convience part but sell fried chicken daily and fish on other days. A local community church. Many of those there are closely related.

I visited some today chasing down my Indian heritage. Very small places just a crossroads and church but all with a sense of community. Very very insular. Even some of them my kinfolks long removed but still looked at me oddly and even knew my close kin and this was 15 or 20 miles away.

Many of the roads have family names. In fact one road was the name of my gggrandmothers folks. Lots of indian blood in them for sure for this is where the Trail of Tears came thru.

But that is a real old fashioned community. Close knit. Able to survive by helping and knowing each other.

That is my idea of the 'structure' that will have to evolve.People who look out for each other. Help each other.Can borrow from each other. Live by the 'favor'system.

The graveyards in those communities go way back and tell the genealogy there. You will usually find a coffee area in the store. That serves as a place to tell gossip for that is how people must communicate with no newpapers and the TV doesn't tell local news. You spread it by 'word of mouth' and know who is ill,who died,who married who and who is a thief...on and on.

Only law is the county sheriff. Sometimes people work things out on their own. This is real country living and the way I think we will have to go back to.something many never left.

Yep they live in double-wides now , a lot of them. Some get by on minimum wages jobs. Some clean houses. Some work in the fields. Lots have gardens. Lots have chickens and many eschew that but still is small and close knit.

The gossip passes thru the church so lots of help is given if someone's house burns down or is 'shutin',or gets the big A.

I live 6 miles from my hometown but I also live in a 'community' of which my uncle and many kinfolk are nearby. MY neighbors will let me cut firewood if I want or lend a hand if need be.

We do all this without money in many cases. Give each other garden produce. Lend a tractor. Give you some eggs from their flock.

Its hard to understand this in a farmstyle of living and perhaps its not this way elsewhere or maybe it is. I have experienced it most every where I moved that was in a rural area.

Never experienced in it the suburbs though. Not that we didn't go to other folks houses and party but that wasn't the same and it would hardly work out sustainably IMO.

Now my advantage is I have close kinfolks who are in local government. This in a small area is nice that you can really influence what is going down and happening. Hard to do in a larger populated area. I mean I can ask my second cousin what my property tax will be and argue with them on it. Same as the Judge Executive. Same with the sheriff. If I get caught with a bottle of beer in my jeep down in the bottoms? He isn't going to say anything but he knows quite well who drives while drunk and has an eye out for them. Me I value my reputation and try to keep it squeaky clean. It works for me. It works for most every one....and I think it is what we will have to evolve back to.

If your sick and no one to help you out? You can be in real bad trouble. But if you help your neighbor when his ox in is the ditch and he pays back favors? Then he will help you.

Putting up fences is got to involve both landowners. Keeping you stock put up and not roaming is you reponsiblity and he needs to tell you politely when they are out or chase them in for you.

This is how we live here in my neck of the woods. Its how it was back when I was growing up but there has been some bad types come in.They soon move back out and if not ..well everyone knows who they are.

Mostly our problems are sometimes judges who do not enforce the law wisely. Or a lazy sheriff. Since we elect all these locally we have major control. Not like in the larger cities. And word of mouth can just kill you.

Airdale-the way it seems to me,the way I like it

If it all goes bad overnite, you had best be at least a wee bit prepared. I'm not suggesting Mormon 2 years of food, just some low cost ways to to provide food and be versatile.

To wit; Purchase a dozen Frost brand blue handled fishing knives. Lovely Swedish stainless. Cost $11 to $14. Great tool and everyone can use them.

Purchase fishing rod and tackle and lures. $100 fresh water. $200 salt water

Purchase a handful of silver quarters. Each should buy a loaf of bread. Cost about $2.50 each.

Purchase a dozen Mars energy bars at $1.25 each. Well rated and taste fine

OK now you can feed yourself for 3 days and will find a body of water with an edible and saleable food source.

Longer term you need to provide a useful service or food. Fishing works well and you're already there. Sharpening tools will be useful. From scissors to saws, shovels. Become a tinker. Since communication will be toast, everyone will want it. Get a used ham rig and solar panel and become the new AT&T with bicycle messengers for final delivery. Ham licenses are now only written questions and in an ' emergency ' anybody can use a ham radio. Think what you will need. Everyone else will also need those services. $1.00 haircuts anyone?

Sure to appear for the less than fastidious are the categories of : faith healer, ' protection ' services, black marketeers, push cart food vendors, alcohol distillers, drug providers, abortionist , arsonists and butchers for pets.

Dress down and try to keep as low a profile as possible. Don't try to get ahead, just get by. Remember; " The tall poppy gets cut "

Longer term, you'll need to organize a co-op for mutual protection and reliable providing. Work by suggesting rather than leading. Avoid political organizing and arguments. Always try to help others. At the very least the Tribunal may allow you to go to re education camp.

Happy New Year . Heath and prosperity to all

Longer term you need to provide a useful service or food.

I am currently looking to re-skill and move onto a property in a couple of years. I am currently in IT and may look to take an apprenticeship, I am just not sure which trade is best. I have been thinking of seeking work with a handy man... The "Dial a Hubby" type where I can learn a little bit of everything however I reckon I know most of what he does already!

Your help would be most appreciated!

Greetings Start

If you want to learn to be a handyman, there is little need to apprentice. Simply go to you local home building supply store and pick up the appropriate full color book. Think Sunset magazine size. These are an amazing value and will show you the proper way to do everything. Plumbing, electrical, concrete, insulation, door and window installation, etc. This is called stealing a trade and it works very well indeed. You're a smart guy, you'll become the local expert in one month. More difficult problems are solved by networking. EX. Water collecting at toilet base might be simple condensation from ceramic base. Solution; stuff interior of base with foam from old pillow. This is easy stuff.

You might want to become the local expert at a more esoteric trade. If you live near to water, consider learn how to compensate compasses. All boats and ferries need this yearly. You will need few tools and it's an intellectual trade.

For food you might think along the lines of KISS. Try growing mushrooms. Common agaricus can be grown in your basement , needs darkness and produces daily. Child's play.

I have no way of knowing where you live which could give me a chance to taylor some other suggestions. If you need more ideas, click on my bio [ the green WaveRider ] to get my email address

The future can seem daunting with all the doomsday info you can read on this site, but the same information has allowed you the luxury to prepare. Remember, there are only about 10,000 people reading this site and the advice you read here is fabulously creative. If you can think outside the box like Toto and Nate, you'll be in great shape.

Carpe diem , Dave

Said by Nate Hagens:
... natural capital (land, animals, trees, riparian zones, ecosystems, fresh air, sunlight, etc.).... The moment money disappeared, all these 'real' forms of capital would instantaneously increase in value, some more than others.

Land would not increase in value. Without money, property owners could not pay property tax. Counties would seize the land to collect back taxes and flood the market with real estate for sale to whom ever has something the government wants in exchange. Price would plummet. It would be a massive real estate swindle benefiting wealthy businessmen leaving the middle class homeless and small farmers without farms. Possessions that could not be carried would become burdens soon to be abandoned.

Fresh air and sunlight would be worthless in a city, deemed immensely less significant that survival. People would burn everything in sight to stay warm filling the air with choking smoke blocking sunlight.

Any currency resulting from such a catastrophe would be selected by the powerful or otherwise relegated to a thriving black market.

If you would like to “get rid of money” you must come up with a significant psychological replacement for “money”. While we may believe “we” are “smarter” then archaic man we a still just as superstitious and we thrive on the "supernatural". Money has become a highly specialized ritual in our relentless quest for immortality. Humans are not even close to shedding the illusions they need to keep them from going mad.


"Money provides a fixed, external, recognizable sign for what would be confused, contradictable operations: ritual makes visible external signs of internal states. Money mediates transactions: ritual mediates experience, including social experience. Money provides a standard for measuring worth: ritual standardizes situations, and so helps to evaluate them. Money makes a link between the present and the future, so does ritual. The more we reflect on the richness of the metaphor, the more it becomes clear that this is no metaphor. Money is only an extreme and specialized type of ritual."
~Mary Douglas

"The magical properties, with which the Egyptian priestcraft anciently imbued the yellow metal, it has never altogether lost. ... Gold (was) originally stationed in heaven with his consort silver, as sun and moon."
~John Maynard Keynes

"With the decline of the primitive world, and with the rise of kingship men came to imitate kings in order to get power. ... And so the pursuit of money was also opened up to the average man; gold became the new immortality symbol."

"Let us see how the ritual fascination of money began in the ancient world, and how it took over as an immortality focus in itself. One of the fascinating chapters in history is the evolution of money -- all the more so since it has yet to be written, as (Norman O.) Brown says. One of the reasons it isn't written is that the origin of money is shrouded in prehistory; another is that its development must have varied, must not have followed a single, universal line. Still a third reason touches closer to home; modern man seems to have trouble understanding money; it is too close to him, too much a part of his life. ... But beyond all this, ... the reason money is so elusive to our understanding is that it is still sacred, still a magical object on which we rely for our entrance into immortality.

"Put another way, money is obscure to analysis because it is still a living myth, a religion. Oscar Wilde observed that 'religions die when one points out their truth. Science is the history of dead religions.' From this point of view, the religion of money has resisted the revelation of its truth; it has not given itself over to science because it has not wanted to die."

"Hocart ... suggests a common origin for his the gold coin, the crown, and the halo, since all these represent the sun's disc. ... The great economist Keynes agreed that the special attraction of gold and silver as primary monetary values was due to their symbolic identification with the sun and the moon, which occupied a primary sacred place in the early 'cosmic government' cosmologies."

"Currency, then, seems to have had its origin in magic amulets and magic imitations of the sun which were worn or stored because they contained the protecting spirit powers. If gold had any 'utility,' as Hocart says, it was a supernatural utility."

"If gold was sacred, we can now understand -- with Simmel and Hocart -- how it was that the first banks were temples and the first ones to issue money were the priests. With the ascendancy of priestcraft it became the priests themselves who monopolized the official traffic in sacred charms and in the exchange of favors for gold. The first mints were set up in the temples of the gods, whence our word 'money' -- from the mint in the temple of Juno Moneta, Juno the admonisher, on the Capitoline Hill in Rome. Forgery was sacrilege because the coins embodied the powers of the gods and only the priests could handle such powers; we get the same feeling about counterfeiters today, that they are practising an unspeakable usurpation of hallowed powers.

"The temples, then, were clearinghouses for money transactions, just like banks today.

"It was surely not lost on the priests -- the first leisure class -- that the tiniest quantity of sacred gold-power could bring in huge amounts of food and other stuffs. Priests may have talents for dealing with the supernatural, but they have very human appetite (and often lots of it); and if they have the leisure to ply their trade, it is because since earliest times they have convinced their fellows that it is important to assure that leisure by bringing part of the fruit of the sweat of their brow to the priests. And so the food producers must have brought food to the temples in exchange for prayers and sacrifices being performed on their behalf. Also, it must have worked the other way too: gold was a fee paid to the priests for his intercessions with the invisible powers. ... Whence the tradition of the earliest coins being imprinted with the images of gods, then divine kings, down to presidents in our time. All visitors to the most holy temples could bring back with them gold encapsulations of sacred power that would keep them safe throughout the year."

The sun god of Egypt held out the salary of immortality. For the faithful who not only believed that you can get something for nothing in this universe, but also happened to have handy a few of his earthly golden tokens, he delivered a bonus right here on earth. The bonus was even better than the salary because you could enjoy it immediately. That something for nothing was compound interest on loans. The pyramid says it all."
~Ernest Becker

"If we divest ourselves of our modern preconceptions and study the evidence, we are driven to the conclusion that currency had a religious origin, that it began with amulets which were worn or stored because they contained a protecting spirit. Economists tell us that gold is used for coinage because it can always be melted down and used otherwise, but contrary to their teaching the essence of currency was originally that it had no material utility, but was of the highest supernatural value.

"If gold is of any material use today, it is because its supernatural value has led to its being used for ornamental objects and has endowed it with a prestige which it cannot lose even after the reason for it has been removed. The manifold advantages of gold for purposes of coinages have enabled it to triumph over rival materials such as shell, stone, and mats, but they were not the reasons for its original selection. It began its career as one of many materials used to contain the god; a little of it was given away in exchange for quantities of stuff because a few ounces of divinity were worth pounds of gross matter."

The link between the sun god (= pharaoh) and gold was clearest in Egypt."
~A. M. Hocart

If you would like to “get rid of money”

But it's not a matter of liking to get rid of money. Rather of it becoming defunct despite the wishes of all (but the worst debtors). For instance hyperinflation leading to the situation where the money is worthless anyway.

Chris Cook mentioned FEASTA above. I've found Richard Douthwaite's book The Ecology of Money very useful. It reflects on the different functions of money and the need for an exchange rate between them. A 'one money fits all' solution may not be best.

It is available here:


Happy New Year,


nice thought experiment. the very kinda thing i have worried has to happen, eventually ; & could at most any time, & can very quickly.

but nate u have said this can't happen w/o WAR; excuse me i distracted myself from the task at hand.

i live in a semi-rural area & i'd be recommending a meeting for us locals [but not offering to lead it-as a comment above suggested]. i think the purpose would be to explore mutual concerns[some of this would already be happening of course around immediate needs-meds, etc.]. knowing some of our diversity- a kind way of putting it- i'd be quite apprehensive about such; but even getting an idea of the possibilities/strength of community or where our "diversity" might take us in a bad direction would be a good idea early on.

this getting together would naturally give indications of our 'capital' as nate points to. being face to face[& we don't do this much] would be intensifying of our ability to understand our 'situation', maybe bigger picture-sharing- but especially locally; the really important picture.

great post/experiment; one similar that i'm pushing our friends/family-30 mi. or less distances- to do[face to face].

oh & by the way; if u didn't have an eye out for the gubberment well u'd probably miss the early on ,'main attraction'.

Probably a more realistic question would be to imagine a world without credit. While we may not get to the point at which there is zero credit available, we are clearly headed in that direction.

I've always thought that Kurt Cobb's inverted pyramid was a brilliant piece of work--it shows the US economy resting on the food & energy producers, but conventional economists don't see a real difference between the entertainment industry for example and the food & energy producers.

Let's assume that you have $10 million sitting in short term US Treasury instruments. You only have two choices for the next two years. You keep rolling over the Treasuries, or you invest $5 million in food producing assets and $5 million in energy producing assets. Which choice do you make?

A world without credit is not TOO far away than a world without money. Credit is just trust+money. With no credit, there is no trust (with money). Hoarding cash would ensue, and then governments would do what they are doing now -throw everything including the kitchen sink at creating more credit supply and credit demand via jobs, lower mortgage rates, etc. I think a world without money, allows one to visualize things completely out of the box - a world without credit is too real, and therefore we will address that hypothetical using business-as-usual tactics.

All money, properly so called, is an acknowledgment of debt; but as such, it may either be considered to represent the labor and property of the creditor, or the idleness and penury of the debtor.
~John Ruskin

IMO it can be argued that "money" and debt are governed by noneconomic motives. So how would it effect our social organization?

"Man's economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only in so far as they serve this end. Neither the process of production nor that of distribution is linked to specific economic interests attached to the possession of goods; but every single step in that process is geared to a number of social interests which eventually ensure that the required step be taken. these interests will be very different in a small hunting or fishing community from those in a vast despotic society, but in either case the economic system will be run on noneconomic motives."
~Karl Polyani


[Nate:] A world without credit is not TOO far away than a world without money. [.....] Hoarding cash would ensue,

I can just imagine you Nate, sitting there starving besides the money that you are hoarding, refusing to buy any food, or water, or anything else. In reality the hoarding is limited by the necessity of paying for necessities. And so the outcome is nothing remotely like your envisaged "world without money".

AngryChimp - I'm becoming angry at the considerable extent to which you are pasting in quotes rather than contributing sentences specifically designed for the context. Ggrrr!

Why does it anger you? If my posting style aggravates you don't read my posts.


how popular/widespread are those?

How popular/widespread are those?

Sorry for some brutal realism here, but timebanks are another bijou-boutique non-solution to our monetary problems.

Here's what ultra-pseud Dame Anita Roddick has to say about timebanking in her dispatch entitled 'Time as Currency':

Everyone's time is valued equally and one hour always equals one time credit. You can draw on your time credits when you need something done - attend a yoga class, want your gate fixed etc. or you can choose to donate your credits to someone else or a local community organisation.


Yeah, You give us one hour's brain surgery and you can exchange that 'time credit' for any of the following:

1 hour reflexology massage
1 hour baby sitting
1 hour yoga lessons
1 hour hocus-pocus alternative medical treatment
1 hour mumbo-jumbo astrological predictions

Timebanks are a non-starter -- sorry, try harder next time.

Nate, I'm not too sure how widespread timebanks are but the links I posted should give an indication from both sides of the pond. We're just starting up a scheme in my town. The lead article is the speculative "A World Without Money?" and Timebanks are an alternative to money in some, albeit limited, ways. I don't believe your 'brutal realism', Carolus, is well placed. I doubt whether brain surgery will ever feature in the offered skills list on a Timebank and you can keep your hocus-pocus and mumbo-jumbo if you wish but baby-sitting and getting your gate fixed in a convivial community support network is just what we may be needing more of in the future. It's part of the solution rather than part of the problem.


It's Anita Roddick that got my gander up -- actually if one substracts the whited sepulchres and the feng shui types and the the reflexologists the idea of 'timebanks' isn't all that bad, but I reckon it's always going to be very much a minority taste. The rock-bottom problem is that some people's time is worth a lot more than other people's, especially when it comes to the distinction between discretionary and non-discretionary occupations.

When in post-peak society TSHTF plumbers and electricians and repair guys in general will be worth their weight in gold, but the back-massage types will be next to worthless -- the kind of people you pay just to leave you alone.

Another problem is trust: these 'convivial community support networks' are non-starters in multicultural societies where communities compete for getting their snout in the trough with the usual MOPE tactics (MOPE = Most Oppressed People Ever). Beyond show-case jobs, expect nothing.

But even failed experiments constitute a contribution to knowledge -- if only to demonstrate how NOT to do it.

And if you prove me wrong, good luck to you!

I'm with Carolus Pompscurous on this.
More crucially there's the spurious notion that this sort of thing builds positive community relations. On the contrary it only works if there's a situation amenable to positive community anyway, and containing nice yogically-trustworthy people anyway. Please see my article about how excessive mobility (more exactly excessive accessibility) leads to the bad driving out the good rather than the opposite - http://www.zazz.fsnet.co.uk/urbna.htm . It indicates that the way to build community is to not have excessive transport/accessibility. In other words in a city or large-scale society, bad is guaranteed to drive out good, whereas in the sort of rural setting described further up, good and bad respectively thrive and sink according to their deserved reputations.

Local currencies face the same problem all currencies face: people have to be persuaded to accept them.

Governments have an advantage in persuading people to accept currencies because they already have perceived legitimacy in other respects (being elected, ensuring law and order, providing public services, etc). Private corporations are able to issue currency with limited use (eg frequent flyer points, store vouchers, etc) again because of their perceived legitimacy.

So any new currency faces the question, "okay, but where can I spend it?" Any individual will accept it because any other individual will accept it. It's as others have said, an issue of trust. If I offer my friend an IOU, he'll accept it. If he passes my IOU onto (say) his local supermarket in payment for goods, the store manager will say, "who the hell is this guy?" and reject it. The Worgl depreciating currency did well because it was backed by the city authorities.

Given that stumbling-block of trust and general acceptance, that gives us some ideas about how to design a currency. For example, if you designed a currency where one silver piece of an ounce was worth ten gold pieces of an ounce each, people would reject it, it doesn't make sense to them - gold is rarer and thus ought to be worth more. Likewise, in valuing everyone's hour's labour as the same, people won't accept that.

If you exclude the corporate currencies, there are quite a few listed on wikipedia. Probably the most successful is the Swiss WIR, which is actually not a scrip currency but only exists in book-keeping. The annual volume of trade in this currency is about 1.65 billion Swiss francs equivalent. Though perhaps you might consider the WIR also a "corporate currency", as it deals between businesses rather than individuals. Others are not so successful, and have prospered most when the federal currency was effectively defunct, as for example during Argentina's economic crisis. Once the federal currency returns to usefulness, the local ones decline in popularity.

Anything except the current electronic fiat 'money' system we have now will slow down the 'velocity' of money so much that the amount of business that can be transacted will violently contract.

The amount of business transacted has alot to do with perceived quality of life.

If for instance you have to wait a month to buy a pair of shoes that fit you because manufacturing has mirrored the slow down in the velocity of money and capital transactions, you will feel deprived compared to the current speed of transactions where you just buy what you want almost instantly.

Waiting for good quality stuff is a virtue, but something most Americans seem incapable of.

"I Want It Now" should replace 'E pluribus unum" on our rapidly devaluing currency.

Any barter/ wampum bead / time share scheme will be Very Slow compared to what everyone is use to.

Oh, and the credibility and Trust necessary to operate such systems will be in very short supply after the public finally awakens to the horrifying scope of cheating and skulduggery in the present financial system.

The Credibility of Accounting is collapsing as fast as the 'money' supply. Accounting as a profession is and will be tarnished beyond belief by the current global financial meltdown.

Honest accounting IS trust.

BWBTS (barter/ wampum bead / time share) schemes need Lots of Trust to operate smoothly and that sense of trust is leaving the building rapidly along with tens of trillions of funny fiat 'money'.

I guess we'll see if 'your word is your bond' will have any credence in the future. (The 'bond' market may take on brand new forms)

Trust is actually the core underlying principle of 'Money', not gold or oil or wheat.

"Trust is actually the core underlying principle of 'Money', not gold or oil or wheat."

The essence of money is power over men. It is a means to an end. For the hapless mass it fills a spiritual void that was created by the advance of "civilization" witch progressively removes humans from a largely natural environment to a predominantly artificial environment. Economics is a religion and money is the symbolic power of “GOD”. We all worship this “GOD” everyday of our lives…


The secret of life is honesty and fair dealing.. if you can fake that, you've got it made.~ Groucho Marx


"Not necessity, not desire -- no, the love of power is the demon of men. Let them have everything -- health, food, a place to live, entertainment -- they are and remain unhappy and low-spirited: for the demon waits and waits and will be satisfied."
~Friedrich Nietzsche

That senile Pretend President Reagan mouthed that idiotic non sequitur:

"Trust but verify"

Well gosh, I thought the verify Was trust.

No 'but's' about it Ronnie.

The basic unit of civilization IMHO is not the individual or the family or even the tribe, it's the Warlord Unit.

"The essence of money is power over men"

Some say Warlords gain and maintain 'power over men' by the force of their personality, but that is simply a different way of saying:

'men trust this guy's judgment, let's Follow Him, not the other Dude'

"Force of Personality" is a way of transmitting and advertising your Credibility, your Street Cred as it were.

People trust others based on past performance and projected performance in the future.

How much do you trust the average banker right now?

Or 'investment adviser'?

Or 'financial pundit'?

Or 'accountant'?

Everyone seems to trust Their political representative, the other guy's is a bum. That is why incumbents get re-elected 95% of the time. Irrational? You bet. A recipe for inaction and rampant corruption? You bet. A glide path to extinction from Peak Oil? You bet.

All the grand ideas of energy 'reform' and 'innovation' are doomed by a lack of trust in new ideas and the 'leaders' who should have enough credibility/trust to implement them in a relatively democratic process.

Otherwise, we're left with the Warlord Option of 'power over men' by the force of their personality and the weapons at their disposal.

"Some say Warlords gain and maintain 'power over men' by the force of their personality"

Yes so humans still believe certain people have "mana" not essentially because they "trust" him but because in essence his personality displays a "supernatral" force[mana]. What is the difference between believing your local warlord can deliver the "goods" or a "primitives's" belief in the rainmaker"? Look at the people being hypnotized by the "mana" our new tribal rainmaker Barack Obama posses.

[W]e are reminded that government -of any kind- originated in kingship, which, under the name of monarchy, has survived as the most popular form of regime. Indeed it has been argued that any one-man rule as opposed to government by a group or class is monarchic in principle whether it sails under the flag of fascism, communism or so-called democracy. Such a political conception gains momentum from the emotional fact that the people themselves are inclined to conceive of their government in terms of a "governor," whether or not he be autocratic.
When, for example, the President of the United States has been mockingly made responsible even for "bad weather", we see in such a "joke" more than an echo of the "primitives's" belief in the rainmaker.
~Otto Rank, "Beyond Psychology"


"How much do you trust the average banker right now?

Or 'investment adviser'?

Or 'financial pundit'?

Or 'accountant'?

Everyone seems to trust Their political representative, the other guy's is a bum. That is why incumbents get re-elected 95% of the time. Irrational? You bet. A recipe for inaction and rampant corruption? You bet. A glide path to extinction from Peak Oil? You bet."

This is like asking somebody hundreds of years go how much they trusted their priest or how strong their faith was in the church and GOD. Bankers, investment adviser, financial pundit, and accountants all work for the church of the consumer industrial religion. They deal in hocus-pocus. There is no trust here at all. It's a belief in the magical...


A short Tale of Trust

The Bank Bail Out Explained

Young Bob bought a horse one day from a farmer for $100.

The farmer agreed to deliver the horse the next day. Fair enough.

The next day he drove up and said, 'Sorry son, but I have some bad news, the horse died.'

Bob replied: 'Well, then just give me my money back.'

The farmer said, 'Can't do that. I went and spent it already'

Bob said: 'Ok, then, just bring me the dead horse.'

The farmer asked, 'What ya gonna do with him?

Bob said: 'I'm going to raffle him off.'

The farmer said, 'You can't raffle off a dead horse!'

Bob said: 'Sure I can, Watch me. I just won't tell any body he's dead.'

A month later, the farmer met up with Bob and asked,'What happened with that dead horse?'

Bob said: 'I raffled him off. I sold 500 tickets at two dollars a piece and made a profit of $998..'

The farmer said, 'Didn't anyone complain?'

Bob said: 'Just the guy who won. So I gave him his two dollars back.'

Bob has been appointed to be in charge now of all financial 'bailouts'

I know what you are driving at but, IMO, you are staying on the surface of things. You could contact me by email and I might drive up to see you tomorrow and since you seem to be an honest guy I TRUST that the 500 dollars you promised to invest for me will yield a 50% return in six months. Then I never hear from you again. Ya I TRUSTED you and I was duped. So what? What does this have to do with the BELIEF in the industrial money complex that has hundreds of millions of people worshiping at its alter? On the surface it may seem like it’s trust but if we are to strike the root we must go much deeper than that.

If you ask somebody if they trust a bank or a finacial advisor what does that have to do with anything? They may not trust the bank or an advisory but they still BELIEVE in the money complex itself. We were all born into this system; to question its existence is to question the collective BELIEF of hundreds on millions of people. A collective belief of an abstraction that has no grounds in the physical world; and idol. Like the collective belief in a “GOD” idol. If you were to go on CNBC and question the very existence of the FED and of usury in general you would be laughed at. Hundreds of years ago you would be crucified. Since today almost everyone is an automaton; ridicule and the fear of isolation from the group is all that is needed to keep people inline.

I’m not trying to say you are wrong. I think we are just thinking on a different scale. You seem to be implying money’s existence relies on trust what I am saying its power comes not from implicit trust but a mystical belief that is rooted in the human psyche. Since the entire culture is built around a consumer industrial religion to expose the money complex for what it is would, in return, expose the entire culture for what it is; a fabrication. Illusions created by a frightened animal conscious of his own existence; “scarecrows to frighten away reality”.


“Take stock of those around you and you will...hear them talk in precise terms about themselves and their surroundings, which would seem to point to them having ideas on the matter. But start to analyze those ideas and you will find that they hardly reflect in any way the reality to which they appear to refer, and if you go deeper you will discover that there is not even an attempt to adjust the ideas of this reality. Quite the contrary: through these notions the individual is trying to cut off any personal vision of reality, of his own very life. For life is at the start a chaos in which one is lost. The individual suspects this, but he is frightened at finding himself face to face with a curtain of fantasy, where everything is clear. It does not worry him that his "ideas" are not true, he uses them as trenches for the defense of his existence, as scarecrows to frighten away reality.”


I was too hung over to respond earlier. (BTW Happy New Year.) But, surely, thought I; someone else (especially AC) would say, aha Nate, you didn't take away the right to contract!

So with the power to make private contracts (which IIRC
is in the US Constitution)
we could each make "money"
out of thin air instantly sort of like this:

In consideration of Nate having given me 2 cooked chickens last night,
I hereby promise to compensate Nate,
or whomever Nate signs this contract over to,
by giving to them
--whenever they show up at my lumber yard--
2 chords of fire wood in exchange for this piece of paper.
Larry the Lumberman

This piece of paper (also known as an IOU) instantly becomes money because it can be passed around as a substitute for what everyone agrees to be the "value" of getting two chords of wood from Larry the Lumberman.

Now AC and others above are correct to observe that "TRUST" is a vital part of the equation. The IOU note would not be considered much of a value if no one could "trust" Larry to deliver as he promised.

However there are two other essentials to this quid quo pro bargain.
First there is the "promise" itself. Larry's note is a promise of value to come in the future --when you show up at his lumber yard.

Second, there is the physical capability to deliver on the promise. We're assuming that Larry will remain in good health when we show up at this his yard and that his yard will have a sufficient amount of wood to make good on the promise.

So "money" is not simply about "trust", it's also about a promise and the ability to make good on that promise.

Good olde fashioned bills of lading.



Munting, an author of that day, preserved the following "bill of lading" delivered in exchange for a single root of a rare species called the Viceroy:

Two lasts of wheat
Four lasts of rye
Four fat oxen
Eight fat swine
Twelve fat sheep
Two hogsheads of wine
Four tuns (barrels) of beer
Two tuns (barrels) of butter
One thousand lbs. of cheese
A complete bed
A suit of clothes
A silver drinking cup

I suspect that most of the alternatives we come up with will simply ensure that
future bubbles use methods from the past.

The problem is of course outside of bubbles is you can readily kite more bills of lading then you have actual goods. No one can verify that you have printed more promises for firewood then you can deliver you can play the old fractional reserve trick by noting that most people won't redeem at the same time.

Promissory notes of any sort allow the creation of fractional reserve concepts regardless of the nature of the backing reserve effectively they allow you to print money.

Obviously corruption of the process to allow a party to kite notes puts us back where we are today. Generally the government or wealthy take this role and back it with the power of the gun.

I think we have to give up on the entire concept of money its utility in smoothing transactions simply does not make up for the ease that it can be corrupted. Why make it easy to exchange goods and services in the first place ?
Why move beyond simple direct barter ?
In a steady state or shrinking economy the difficulty in performing transactions is really not a huge issue if you think about it. Most of the transactions are fixed and closely related to daily needs i.e you always need a loaf of bread each day therefore you always exchange it to the baker for a half dozen eggs who gives them to the butcher for half a chicken.

I.e fixed and immediate real exchanges work just fine in a stagnant economy.
Assuming we have high speed communications complex immediate barter arrangements are quite readily created and executed.

So why move beyond simple immediate barter ?

So why move beyond simple immediate barter ?


No, not a bill of lading (a written receipt) but rather something more akin to a "negotiable" instrument because Nate can sign it over (endorse it) to another person.

The problem with immediate bartering (left click on image to read "Perfect Storm" article) is that of timing and identity of wants. Nate may not desire 2 chords of wood at this very moment. Maybe Nate wants a new hard drive for his computer instead. With some form of liquid transfer of value (money, negotiable instruments) we can smooth out the problems associated with immediate barter.

But of course, tokenized value (money) has its own set of problems; including "trust" and making good on the implied or express "promises" that the tokenized carrier of value (money) makes.

I'd have to dig but you can find it yourself but the core idea is using bills of receivables as money this has been done before and can be used to blow bubbles.
Back when we had gold back currencies people generally used ponzi schemes based of of these sorts of bills to steal money. A lot of people don't seem to realize that we had tons of bubbles of all sorts even with gold back currencies.

My argument is simple money was created primarly to allow the timing of barter and the final exchange to be disjoint. In general the main reason it used to be needed was simply because time/distance made it difficult to set up complex barter transactions in real time to create a equitable exchange of goods using simple barter alone. Money as we know it is a leftover from the old days of poor communications.

However given a fast large network and some sort of marketplace barters of any complexity could be negotiated in realtime without ever introducing money.

You don't need promises or money.

In might or might not make sense to add the concept of futures markets effectively agree to and exchange at a later date but other than that given a large enough group in with instantaneous communication I see no reason to use the concept of money. In the case of futures for example a hard asset such as land could be used to ensure the future contract is 100% settled. So secondary contracts in the case of default that are punitive ensure that future execution takes place. Thus simply barter coupled with the ability to push some transactions forward into the future safely is sufficient as far as I can tell to create and economic system that does not use money. Rapid communication seems to be required but other than that why use money at all.

Consider some sort of intelligent species that developed shortwave or some sort of fast signaling system early in its development. In fact one could argue that whales and dolphins if they developed the concept of repeating a message could actually have this sort of global communications network. So this species could exist on earth. Why would they ever develop money ? They don't need it I'd argue that for them complex barter arrangements would seem natural.

We obviously have this ability ourselves and I'd argue we simply don't need money.

Cool pyramid. Nate if the information exists it would be nice to see how the energy pyramid stacks up against the financial pyramid. And esp of course oil.

However even without exact information we know oil is primarily used for transportation. Given how weighted the economy is to financial services it makes sense using your theme that they could disappear In other words instead of assuming and abrupt disappearance of money simply assume the pyramid rebalanced to your new one. I'd argue the speed it shifts is secondary.

One important result of looking at it this way is that energy usage does not change a whole lot even if you inverted the pyramid. I.e we can move to a better monetary system and it does not change the overall energy usage all that much.

The monetary system is rebalanced probably painfully but this in and of itself is not sufficient to radically alter the pyramid. In fact the energy change is concentrated in laid off bankers now driving downtown to sweep floors vs going to the exchange.

Growth effectively stops but you can see that we can go through a fairly long period of rebalancing where the financial and government services are reduced substantially yet we don't shrink energy usage.

Finance 20.4
Government 12.6
Professional 11.7
Education 7.8
Construction 4.9
Information 4.5
Arts 3.6
Other services 2.3

These total to 67% of the economy. These can all readily be cut by 50% without any great hardship so we could easily lose 33% of our economy without having it collapse. Also I'd estimate that energy usage would drop by at most 10% as people formerly in this part of the economy took lower wage jobs in the rest of the economy. Most of the energy usage excluding construction is for personal transportation for this sector of the the economy.

The concept is that energy itself becomes a problem only once the economic pyramid is rebalanced to focus on the basic economy once this happens further declines in energy usage have a impact on essential goods and services.

So for a time we have a situation where the non-essential economy can be shrunk without things really falling apart and without energy usage dropping substantially. Once the pyramid reforms in to a more traditional one then real problems begin if energy continues to decline.

One way I like to explain this is take a look at housing. Up till now ever rising housing prices drove the economy esp in the form of HELOC's and new homes. Resale of existing housing stock helped but is orders of magnitude less then the injection from new home construction and associated commercial real estate construction.

Once this is firmly in reversal and construction is dead then you actually get a new feedback loop forming declining rents and declining home prices leave more money in the system for spending on other goods in services. Even foreclosures become a good thing if the banks losses are papered over as this generally frees even more money. I.e cash flow overall begins to increase by cannibalizing the implicit value of the housing and commercial real estate stock this expands into financial areas as they are dramatically reduced and also into manufacturing as home centric goods and services decline.

Thus the re balancing of the pyramid has already started we are seeing signs in government that services will soon be cut same for health care education etc.
What important is that as this process proceeds it generally is continuously freeing up current cash flow in exchange for the most part for defaults on longer term debts and various other sorts of long term contracts i.e rental agreements etc.

From the housing standpoint whats happening is nominal values in the form of equity are being converted rapidly to cash flow. I.e as housing prices decline housing costs less and you have more money to spend this money is effectively the previous equity of the homes. For paid off homes generally owned by older folks we are spending their retirement by for all intents and purposes stripping out the equity.

This is quite general and expands to roads and bridges that will not be repaired buildings that will not be replaced etc falling land values etc.

It goes until the pyramid is rebalanced only at that point is energy and energy usage really fairly valued. You can watch the progress of this re balance since its happening right now by looking back at this article. I will say that one part that was left out and its huge is pension plans and social security these will also be stripped of all value destroying the retirement plans of most people except a few that are prudent. This is a huge missing wedge but it will also be obliterated.

Memmel, you write:

These total to 67% of the economy. These can all readily be cut by 50% without any great hardship so we could easily lose 33% of our economy without having it collapse

Normally you write very sensible stuff but even Homer nods. We can easily lose 33% of our economy only provided we are 'Walden Pond' types, who unfortunately make up at most 0.1% of the US electorate. 'Hardship' in modern societies is not being able to afford an iPod. 'Great Hardship' is having to ride a bus to work.

This loss you refer to will of course come but it won't be easy. It will be very nasty. Riots. Looting. Sob-stories in the NYT about unmarried mums who can't afford disposable nappies any more. Or a Kleenex to cry into.

Don't forget the fact that 99.9% of the population are still clueless about the big tsumani that's on its way.

Well to be clear 33% before we even have to consider 2-3 third world issues.
Politically its hard to say when the decline would cause real problems. The same people that cry about losing a iPod probably are not going to run into the streets and fight the police.

My point is barring some sort of chain reaction collapse situation we would have to see at least this amount of reduction before we even have our economy back to a level thats basically sane with a reasonable distribution of resources.

I think it will happen and I also don't think its going to convert overnight.
My best guess is 3-5 years or relentless contraction primarily in the areas I've outlined before things get really and simply tough. At what point social instability happens if it does is really hard t gauge.

But my main point is more about cash flow or basically the velocity of money and the daily functioning of society we can shrink this much without having a huge impact on daily living. Certainly a lot of people would become more impoverished and spending most of their income simply paying rent, bus fare and food but by any measure these same people would generally be living well.

I'd also further assume that at some point as the health industry is effectively wiped out by this sort of situation that some sort of national health care plan would be forced to be provided. Not to help the citizens but to subsidize the Doctors. I'd guess most private companies at some point during this transition would cancel their health plans and hospitals will be overwhelmed with people with no insurance. I'm not suggesting that this would be fantastic care but enough for most people to not die of readily curable issues.

I don't disagree with what your saying just that people worried about the collapse of society for either financial or energy cost regions should recognize that we should without some "event" at least transition as much as I'm saying before we are faced with real problems.

If you look back to 1929 and how the economy was distributed before the Great Depression then I'm really just suggesting that at the minimum we need to contract and reconfigure to a level similar to our old economy ala 1920-1950 before we could collapse we effectively have that much useless fat that can be discarded.

People will get a clue I think but I'm also betting that various bailouts that eventually do no good will allow our economy to move quite far along this transition before the populace really realizes whats happened.

The problem with the 33% rule isn't people's spoiledness - or rather, it isn't *just* that - the problem is the inability to understand what's expendable.

For example, let's say a family has two incomes in the US, and one of them disappears. This leaves them just enough money to pay the mortgage and put food on the table, but not for much else. What happens?

In most cases, the family begins to cut back a little - while also assuming that the strategies of the past are functional in the present. So what happens is that a family works under the assumption "we will get another job" - so the put their electric and heating bills on credit cards, which adds a small additional cost they can barely bear. They keep that second car, because they are assuming they will go back to two jobs, etc.... And it is important to note that for most of their history, these have been completely rational choices.

But the growing debt means that they can no longer meet even the food on the table and mortgage payments - eventually, they end up losing everything if the job doesn't come along. Thus, a small cut in wealth and energy can be totally destructive. In a ratioal society, they'd cut back on energy usage, dump the car, stop buying anything unnecessary - but they don't know how this is going to work, and between the cultural stigma that pushes them to keep up appearances and the reality that if things do normalize, the price will be high, they are trapped to some degree.

So yes, we could handle a 1/3 cut, but only if people knew it was the new normal - and that is the great problem here.


And so, how do we educate people to a point of view of the future that can't be proven?

(Rhetorical question.)


memmel - You greatly underappreciate Carolus's point. You might think those jobs aren't essential but those doing them consider them essential in capital letters. A 33% cut in those would be a stupendous trauma, producing millions of alienated, desperate people. The social transformation would cause vast dislocations and inefficiencies. Would these unemployed hordes be exterminated, or rather supported via huge tax increases? Not least, somewhere among those "non-essential" jobs I'd have a safe bet that there are one or two key technical/managerial roles whose loss results in the fragile domino setup commencing its collapse into irreperable chaos. Our society is badly enough managed already if you hadn't noticed!

I have been thinking of this subject for a long time. Here are my ideas, for what they are worth:

Money is just a symbol; either it is made of paper or gold, stones or thin air. We usually believe that it translates into material wealth, but I came to believe that it does not: it translates to human motivation.

We accept paper money as payment for our work, and we work to obtain paper money because of the human needs that this symbol provides and the possibilities that he promises.

If we lose confidence that paper money will provide for our needs, then we will refuse to "work for it". Obviously gold is only valid as currency if a certain amount of people consider it to be so. You cannot eat gold and gold is not going to work the land for you. Symbols have no value by themselves.

And what does money (paper or gold) symbolizes? Besides the obvious fulfillment of basic needs (food & shelter), most people work to obtain more and more money, because society values material wealth. If one has much money, one is important, and has power over others.

This is actually a good thing (although I spent a long time believing otherwise), because if it where not for material wealth, the easy and available way of obtaining importance and power over others, would be ... by force.

That would explain why the communist experiences, while theoretically would aim for an equalitarian society, really ended up it totalitarian regimes. Removing wealth as a distinction, people would only have force as means to obtain importance and power. And those without force, what motivation would they have? This results in a very low productivity.

So, any system that we could consider to exist *after* money, would be a system based on the human drives. Take you pick: belief, fear, hate, love, power, pity, etc.

I would venture that the first victim would be Democracy. People need organization, and nowadays such organization is provided by a confusing economical/political/media maelstrom that is usually referred to as "Democracy". This kind of government is only possible because money is power, and raw power by itself is not very profitable to society. The system is built to limit power and remove from seat those that hurt the profits.

Government by the people is really something that never existed, because the "people" don’t make decisions and could never make proper decisions, since they lack the necessary information and education. People are reasonable as individuals, but a mindless and dangerous mob as a group.

So, we can expect some kind of dictatorial/totalitarian regime after the chaotic period. Such kind of governments, if they are to survive, need to use some type of human drive. I doubt they will use the positive ones as they will pick up a huge mess.

As for economy, there is only one kind of possible outcome: a state economy.

I asked a friend one time who had worked in the US corporate system her whole life, to describe what form of government she would label a corporation as. She said most certainly not a democracy or any variation of a Republic. It was a toss up she said, depending on the specific corporate culture, as to whether it was a fascist or Stalinist system.

I said, so basically a totalitarian mindset? She said absolutely. Ironic she said how the larger US culture never misses a propaganda opportunity to crow about 'democracy' to the rest of humanity but runs most of it's own economic and business entities like little tinhorn dictatorships, complete with Cults of Personality around the Maximum Corporate Leader and mandatory expressions of loyalty to 'the Team'. She said that gossip within an organization essentially functioned like an elaborate network of control and spying on the employees, complete with 'internal affairs' departments to keep even the 'keepers' in line and in fear of their jobs if they didn't toe the Party Line.

So I guess the US is perfectly positioned for transition to a State Economy, the sheeple having already been programed in the 'Official Groove'.

Ready, set, goose step 123...


You should not think hard of the US society, because it is the human condition that leads to this road.
Most people will be submissive before persons or organizations that apears to be more wealthy and “important”, as if money would suddenly fall from the sky into their pockets.

The line between a “Democratic Western Citizen” and “Party Oficial” is very thin. Take money out of the equation, and the line is gone.

This is a vital point. Echoing losthorizon, In Switz. many people live in two parallel universes.

In the first, they have free speech (say), the right to democratically participate in decision making, the right to make far reaching proposals (referendum), the right to use public space, to privacy, to denounce criminal behavior; laws that protect them from insult, harassment, crime, etc. etc. The exchanges, informal or not that take place are between equals, the same rules/laws apply to all.

In the second, the corporation or the work place, these rights are abrogated, or muted, diluted, by contract. By contract! Naturally also by custom. The exchanges fall into an authoritarian mold...(see losthorizon.) *Not always* of course.

And now to what lh made me think...Americans, when discussing social organisation, and exchanges, the topic here, seem to consider only the two levels - community, local contacts, etc. set in a frame that remains open-ended (what laws? what authority?), or Big Bad Boss, in the form of the Gubmint or feudal lords etc., which are usually seen as arbitrary, greedy, coercitive and punitive.

With nothing in between!

Surely the puzzle of how half a million people, or simpler, a small US state, could organize itself better, while trading with neighbors, would be an interesting thought experiment, because it would imply getting it all together - penal law and taxation (or none), territory and energy, to mention only a few things.

Apologies for length, and when I say “Americans” it is stereotypical I know, it is just a shortcut to avoid long sentences, such as a common conception in the so-called western democracies blah blah...

"Government aid could save U.S. newspapers, spark debate"

Wonderful, the government can Bailout Failout the Media.

No conflict of interest or anything, perfectly innocence aid and comfort in a time of need, no quid pro quo....

Nothing to see here folks, just keep moving...


because if it where not for material wealth, the easy and available way of obtaining importance and power over others, would be ... by force.

Finally an enlightened one!

"Democracy"... is only possible because money is power, raw power".

It is power to participate in the tax powers of the fed. govnt. As for your only one possible outcome, I disagree. A state economy is certainly a possibility, if society remains very well organized. Chaos on the other hand will usually give us some sort of Mafia-type or warlord organization.

Now that you have reached enlightenment, do you have any improvements on the System That Be?

Send me a note if you wish: dominic at schmelzer. com


I am enlightened? Hardly. And that is exactly the problem: present day man is no more evolved than primitive tribal man. The tools are better, but the way of thinking is not.

Improvements to the system? I once believed in utopias, and discussed these matters all night long. I once knew what would be best for everyone, and I would make it work, if I had the power. Absolute power ;) ...
Then I noticed that my ideas where always changing, so I concluded that there is no ideal system, not even a good system: just systems...
And any system is as good as its components. A car with bad wheels is always a bad car.
And the basic component of every society is man. Without the evolution of man, there will be no solution for man’s problems.

Let us see the big picture:
Imagine the worst we could do, imagine that we would want to destroy earth and every living organism in this planet. We would pollute the atmosphere, disrupt the climate, spread destructive chemicals and radioactive elements. (Nobody wants to do this, right?) We could even wipe clean the planet’s surface with nuclear bombs.
Life on Earth would not die; in a few million years it would be as diverse and abundant as today, just rather different.
Man would die, and we cannot survive a single year without our present ecosystem, less alone millions of years.

Believing that we are on control and separated from the natural world is nothing but a suicidal notion: harmless for small populations with insufficient tools, but dangerous for huge population and the tools we have today.

So, the question is simple self-preservation. Yet do we see it like this? Are we so worried that we would stop using our cars, and fly in our jets, and use less things? Or do we rub our egos with green discourses while we lead our lives in “business as usual” mode?

Man does not learn the good way; let us hope he will learn the hard way.

Dear Nate,

We are starting a second hand shop in Pombal, Portugal, Europe, also to test a local monetary system.

One of the goals is to support a CSA system with a new local currency able to support the exchange of things and local food.

Regarding your scenario, it will happen, I just don`t know when...

Happy New Year!


My thought. From the top post: The moment money disappeared, all these 'real' forms of capital would instantaneously increase in value, some more than others.

One could also argue that they immediately lose their value as it could no longer be measured (no monetary unit or medium of exchange.) They would be useful in real life - a house to live in, a trusted friend - maybe even precious, but would just be ‘the present state of affairs.’

Money’s two essential functions are to serve as a medium for exchange in the present, and to store value. See Kiashu above. The stored value pertains uniquely to future transactions (goods and services, or things and activities) so in a sense that is exchange as well. Money under the mattress or gold in the vault which is never used represents nothing and has no function, it is purely abstract. (It may provide psychological comfort to the owner because he imagines future transactions which will never take place.) Note that the scope of money (which exchanges are monetarized) is different in different societies, situations, etc. I share food with my family, but if I have a restaurant, I will charge. I give a present, and expect to receive something in return, but will sell my labor, etc.

If money goes poof so does stored value and therefore investment. However, exchanges must continue, so as many pointed out, you get barter, and increased co-operation and necessary trust. Mary can no longer pay her employee, but she keeps working, they will figure out some arrangement, both parties trust in the other’s goodwill and honesty, they will figure it out. (Or you get the Big Boss, etc. as pointed out above; in fact, a mixture of the two arises.)

However, as there must be some join between the past and the present, what will happen is the immediate creation of a new money or currency. Actually, this happens all the time..currencies die or are transformed (e.g. devalued.) As fiat money is immaterial, purely conceptual (though it has material existence in the form of pieces of paper, coins) it is easy to re-create. For example, when there is not enough physical money about, a system of IOUs, hand signed notes, arises, in units of the ‘old’ money. This makes accounting difficult, and limits the scope of exchanges, but it works. It was used, for example, by my family in ww2. Completely switching to a ‘new money’ is actually quite a good idea in some situations, as it wipes out debt (like a jubilee), destroys the monetary stored value, but not ownership or social capital. The electric utility keeps running, charging and paying in Xs, to invest in new infrastructure it saves/sells bonds/charges more/whatever. The power structure changes...a fresh start! In fact, the massive US bailouts (say) - touted as an ‘economic stimulus’, quite useless on that score imho - are an attempt to change the functioning of the system, to use money to destroy money (by wiping out debt, e.g. supporting home-owners, paying off bank debt, etc.) or at any rate to change it’s nature. Paulson is truly running the US - there is no president right now. Very dangerous.

SamuM wrote: Beyond their industrial demand, precious metals are fiat currencies just like anything else.

So, you can’t wipe out money, it is a human construct, like numbers or logic.

Some may be interested in the most used (in proportion to population) barter system or alternative currency in a OECD country: the WIR in Switzerland. short PDF with links:


I see Chris Cook and Kiashu mentioned it as well.

What would happen if all money instantly disappeared (and people
the concept of money)?

Barter, the basic exchange of goods and services directly between two parties would immediately become the predominant economic paradigm. Since two-party, barter based systems have difficulty when the participants can not directly satisfy each other's needs, a more complicated system would rapidly arise. A three way, four way, or more complicated barter exchange can occur if all parties are brought together and can simultaneously agree on a set of mutually interrelated exchanges.

Underlying all commerce is the issue of trust. Determination of trust takes into account past experience with participants and projections or expectations of the future behavior of the participants. In a two party barter based system, the level of trust is very low, perhaps zero. Validation and enforcement of the transaction is immediate. Valuation of the goods in determination of the equivalence relationship (e.g. five chickens for one hog, or one chicken for a bushel of corn) is solely the responsibility of the two participants. Since the trust level is non existent, the transaction does not incorporate a time domain for the relationship and the conceptual relationship terminates when the barter is completed. A transaction can occur without the participants having any past experience with one another.

Power almost immediately becomes relevant to commerce. Power includes both physical force (physical power) and the ability to have other people apply physical force (social power). A participant will only engage in a barter exchange if they believe that they have the physical ability to enforce the exchange of goods. In a social scenario, such as an open market with many participants, power will be based on the bartering party's belief that they can convince others in the market to help enforce the barter exchange. Social power rapidly complicates the analysis of trust relationships in bartering and I will temporarily set aside consideration of social power.

A multi-way barter exchange requires the introduction of a small amount of trust. Each participant is required to trust the other participants to carry out their part of the mutual exchanges required to effect the transaction. The requisite level of trust will arise as a consequence of negotiations and discussions of the group as a whole. When all parties have negotiated a mutually agreeable set of valuations and equivalence relationships, trust has been established and the goods can be exchanged. The level of trust starts at zero and rises over time as the discussions proceed, and returns to zero when the barter exchange has been completed. Once again, a transaction can occur without the participants having any past experience with one another.

Clearly there are limits to the number of people who can participate in a multi-way barter. As group size increases, the ability of the group to achieve a mutually acceptable consensus will disappear, and the barter exchange will fail. Since people have an innate desire to satisfy their wants, they will be motivated to develop techniques that enable more complicated exchanges. Moreover, they will remember the trust developed through past bartering, and that trust will carry forward and be incorporated into the evolving barter systems. One early development may be to have highly trusted people act as intermediaries for the exchange of goods. The intermediary will accept the goods, along with obtaining knowledge of the desired item from multiple participants, and then engage in a series of exchanges that will have the effect of satisfying all parties. For this service, the intermediary will retain an agreed upon portion of the transaction as payment for the service they provided. One realization of this is the old styled American trading post, or store as it is more commonly called. It is a place and a person who can be trusted to effect trades over time.

Not only will the trading post develop more goods as the number of transactions increases, the merchant of the post will garner a greater degree of social power through a demonstrated high level of trust. As power, wealth, and the number of transactions increase, the merchant will either establish multiple stores or desire to interact with other merchants. Thus, another realization of a trusted intermediary is one where the intermediary acts as an agent of a trading post and negotiates the exchange of goods between merchants who are separated in time and space.

As the overall complexity of the barter system increase, accounting will become necessary to track the amount and value of goods being exchanged. For highly trusted parties, it is a simple step to introduce a marking system where tokens are equated to account balances. When trust levels are sufficiently high, merchants and other participants will begin to accept the tokens in lieu of goods. This introduces a monetary system. Since the barter no longer requires the immediate or near term exchange of goods, and promises of future payment can be represented by the tokens, the overall efficiency of the system increases, and so can it's complexity.

This evolving trading system is Utopian in that it neither recognizes nor takes into account greed and the subsequent motivation to engage in unfair transactions -- those that result in an inequitable exchange of goods. Clearly, greed can be satisfied by the application of physical power to force another party to relinquish goods. Less clearly, greed can be satisfied by an intermediate's violation of the trust relationship. This can be accomplished by withholding information from the participants about the true valuation of the goods, by misinforming (lying) them, or a combination of both techniques. The greedy merchant benefits by retaining, for his own use, the difference in valuation of the goods. The greedy merchant runs a risk of losing his trusted relationship if others become aware of the misinformation. When that happens, the merchant looses the ability to act as an intermediary.

When physical power is predominant, then social power will tend to coincide with the ability to apply physical force. A relatively small group of powerful people can install and enforce a system that perpetuates an inequitable system. marauder, bandits, fiefdoms, lordships, and kingdoms are all, in some sense, based on the application of physical force, or threat thereof. In one sense, greed is an ineluctable component because the system allows inequitable transactions. The greedy merchant can participate in the power group and use that group's ability to apply force as a means of perpetuating his inequitable trades.

When social power is predominant, greed can be satisfied through manipulation of social relationships, through favoritism or by manipulating the perceived relationships, to the disadvantage of another. The greedy merchant can effect his deceits by manipulation of the the social power systems.

Since greed, trust, and complex social systems appear to be fundamental aspects of the human condition, any monetary system would inevitably incorporate all three. When power and greed come to predominate, then whatever trading systems arises will eventually break down. Since complex trading systems are so very useful and efficient, proposing that they naturally arise seems reasonable.

This short thought exercise has lead me to realize, at a much deeper level than before, that monetary systems are based on trust and the balancing of the combination of greed with risk in the extension of that trust. The original question seemed to be aimed at investigating what fundamental capital would remain if the monetary system was removed. I chose to examine what would evolve to replace money if it and the knowledge of it
was magically vanished. The ruminations were restricted to trust and greed -- external checks and balances as well as social forces to maintain a fair game were not under consideration.

Although none of the concepts herein are novel and I am most certainly biased by my exposure to a western styled system of finance, I suspect that a very similar system would rapidly arise as a replacement for the vanished concept of money. Since trust is inseparable from monetary systems, perhaps investigating what would arise if all trust in extant monetary systems was vanished, but the memory of the trust violations was retained, would be useful. What type of system could manifest the attribute of holding power and greed in check?

Smaller, community based systems, such as that used by the Iroquois (Haudenosaunee) nation, seem to have included culturally based checks on unbridled expansion of power and greed. However, it is not clear that such a system could scale to hundreds or millions of billions of citizens.

its actually very simple, we all keep doing our jobs, working as much as normal until we can get all the unemployed and all the newly unemployed people who deal in money and in killing(except the psycho’s) trained to do other work, and then we all do less work. Simple...

This comment of for all those "Gold bugs" out there that root for a return to "real" money.

Recently, I've taken some time reading about the fall of the Roman Empire (the 3rd Century Crisis to be more specific). What I realize is the following:

1- At the time of the Roman Empire (circa 3rd Century CE), the succeeding emperors debased the metallic money in circulation then (until the currency system eventually collapsed). They did this because they needed to spend more money than they had. They needed it to preserve a working state, but also for stupid things (like rewarding generals when they got to become emperors). At this time, there was no central banking (but there was private banking, and even fractional reserve banking, but the reserve was so high that it's nothing comparable to what we have today), no paper money (there were, however, forms of IOYs and bills of exchange, pretty much like Western Union stuff) and there was no such thing as "deficit spending". This tells me that even in the case of a metallic "real" currency, inflation and monetary collapse is possible because it's still possible, and even quite easy, to "cheat".

2- What allowed the Roman economy and currency system to recover somewhat (for another century in the West and for almost a Millennium in the East), is because an emperor issued "worthless" copper coins with value marks on them and promised to accept those coins at their face value as payment for taxes and forced the bureaucrats and those offering services to the state to accept those coins. Basically, that was an (first?) experiment in "fiat" currency. It lasted for some time, until another emperor simply decided to go back to silver (Romans used mainly silver for money, instead of gold). That system never collapsed and at that time, there was no extreme inflation (like it had happened during the time of a "real" currency). Basically, IMO, it worked well because it was NOT money created out of debt, banks were not allowed to mint money (or loan it into existence), and there was no fractional reserve banking to speak of. The money that was minted was to pay for real goods and services (however necessary or unnecessary) and required by the population to pay for its taxes. Thus the government had the money it needed without needing to wait for what would be like a generation of savings to accumulate in its treasury only to keep the state working. And since the government a complex state like the Roman empire is such an important player in the economy, whatever it says is money, is money.

This brings me to the subject of this main post :-)

In my opinion, the event described, the total disappearance of money, is simply not really possible anymore. Even in a controlled "environment", like a prison, where currency is severely limited, inmates invent money. In my opinion, if the current monetary system collapses, it will simply be replaced by another (after much turmoil).

Again, in my opinion, in the future, the currency system should be a fiat currency backed, at least at first, by the products and services rendered to the state and the taxes payed by the citizens (as opposed to backed by debt). Both represent real economic output (the government renders real services to the population, and the proportion of the citizens' income that is paid in taxes is the result of real work done in the real economy). The money can be issued by a central bank as a transfer to the government (as opposed to a debt that the government contracts towards the central bank) and then, the state spends that money. As long as the central bank remains a "quasi-judicial" (like a 4th power, after the executive, the legislative and the judiciary) and independent entity, and as long as the money issued is consistent with the economic output growth of the currency zone, there should be no inflation. Of course, banks cannot be allowed to practice fractional reserve banking and MUST be allowed to fail (but still preserving some insurance to protect, at least partially, depositors). They should be allowed to fail because banks will always find some financial commodity that behaves like money and can trigger some inflation. But if they are responsible for that "money" and if it can bring their business down without possibility of being bailed out by the government or a central bank, then they might think twice before being stupid about it.

As for barter, I believe it is only realistically possible on a very small scale, in an environment where people are not very mobile (thus forcing people into long term relationships where betrayal is severely reprimanded not be punishment, but but some form of "shunning"). The reason is that bartering is never really "even". One party of a transaction or another is always a little "out of pocket" because it's extremely difficult to evaluate properly the "value" of something. But if it's so difficult to move out of the city or county or small locality one lives in, then the next time, the one "out of pocket" can redeem its "debt" by doing something for the other. There is no need for corporeal punishment for failure to comply since every member of that small society needs the other and being "shunned" might mean becoming destitute or even dead.

The next level of being really out of currency might be real communism. I do not believe it is possible at the current level of population and the scale of our societies, but on a very small scale it is possible. Basically, it's like bartering, except some important "public equipment" (like communes, lands to grow food, some public buildings, roads, libraries, schools) are built and operated by people for free (in exchange for the right to use those equipments for free). But, again, it can work only in very small scales where people cannot easily migrate and where "shunning" is a real threat to one's well being.

Anyways.... that's my 2 cents.....

Open Source Software to run a local currency/barter network.


The people writing the software make their money via selling install services or via hosting the application for your group. $10 per person per year is what my memory says.

(The software does work BTW)

This is very cool software, however, in a world without money and the following breakdown of society (akin to a new Dark Age), who is realistically expecting it will be possible to even use computers on the scale needed to make that software work properly AND on the scale barter can work.

I agree. Such a method is totally dependent on the underlying infrastructures; i.e. the 'net, and the electric grid.

The net, for all its amazing robustness, requires a great deal of power and both the 'net and the grid require payment that would not be easily served by barter. Electricity, because of its utility, would likely form some sort of ad hoc system with reduced customers but Internet subscribers would likely drop off a cliff, meaning less people paying for the same infrastructure and so on.

The economic upheaval caused by money loss, (or the economic upheaval causing money loss) would mean that most people would need software like a fish needs a bicycle, no matter how cool it is.

We would be looking at chaos within a week and complete breakdown of social order. We might maintain some measure of social order the first 2 or 3 days. I base that mainly on my experience during a hurricane, but somehow I think people would turn nasty much faster. The government wouldn't have enough time to act. The police wouldn't be able to control the population because all semblance of solidarity during crisis would disappear. Imagine 30,000 police versus 4,000,000 scared people who have been living paycheck to paycheck. No contest.

Cities would be on fire and in panic with the strong versus weak. Military overseas would be called home to restore order (actually we ALREADY have 20,000 troops deployed on US civilian soil just for this purpose). I'd recommend reading _KNOWN UNKNOWNS: UNCONVENTIONAL “STRATEGIC SHOCKS” IN DEFENSE STRATEGY DEVELOPMENT_ by Nathan Frier. The government is preparing for such an event due to a financial crisis or "other reasons".

Emergency responders would try to control things, but would fail quickly. As more and more desperation set in, the emergency responders themselves will be in survival mode and taking care of their families instead.

It wouldn't start out that way immediately, but it would happen as soon as they realize that they lost control. There would be looting very quickly. Many people would be in denial. Traffic jams and altercations as some rush for supplies or to exit the cities before things get too bad. The smart bet would be to fall back to safer zones, far into the country. Gas would be gone within a day in many areas. In other places they would try to turn the spigots off. Most people would be caught unprepared.

The safest spots would be far out in the desert or in very remote land that is much harder to access. Even 2-3 hours outside of the big cities, smaller towns will be overwhelmed with a humanitarian crisis. The smart ones will block roads and turn back the undesirables at militia gunpoint. Smaller towns are the one ones with a real chance of surviving and that's only to the extent that they can fight off mobs. And fight they would because there would not be enough to go around.

The cities would turn into war zones. Only the strong gangs, remaining police, or the prepared and organized survivalists have a shot. With the collapse of society, government, some scientists, and financial elite will huddle together in a network of government bunkers. They are prepared to wait out such a crisis for decades if need be, so long as they retain their power.

As military forces can be organized they will try to make a show of force and start taking over territory zone by zone. Their ultimate missions will be to round up all the survivors and escapees to put them to work or to imprison/re-educate.

If we were collectively more responsible, none of it would have to happen. We would all be prepared for a rainy day. We would have evolved more sustainable ways of living. Alas, our social evolution couldn't keep pace with the technological and so 95% of people may die at some point.

In a world without money communities would soon find their way to a replacement system reflective of their values and competencies. I've been studying the issue and here share my evolving ideas:

The best backing for a local alternative currency is current production, either goods or labor time. Credits can be created by being accepted into circulation for goods or labor. The money supply would thus reflect the real value present in the economy. Designing-in a declining value factor for a medium of exchange would stimulate spending not hoarding. The more variety and volume of transactions happening in a place, the more prosperous that place is. There would in effect be a discount for spending quickly and of course locally. This would be a real and ongoing local economic stimulus, bootstrapped.

At the start, people or businesses could buy credits with USD as desired. There could be an exchange operating all the time; but the USD are likely to fall against any local credit system based on real productivity of basic goods needed locally. Thus a local system could protect and buffer a place from the shocks of hyperinflation, or other financial disruptions. The system would have to start with a robust B2B barter exchange system within a large enough locality to provide the variety of products required, say county-size, as far as the local credits went. Larger scale transactions could take place in another system –USD, or within national or global B2B barter and exchange services which have been thriving on the side for years already.

The local alternative finance system described would need to be managed ongoing by a not-for-profit, transparent community organization, maybe a cooperative. Managers would look for and find the transactions needed to relieve any currency bottlenecks. That way, no business (such as a grocery store) would get stuck with too many credits without the ability to use them to buy stock. Imbalances, or bubbles or malfeasance would be spotted right away by the oversight team and dealt with. Vacant niches in the economy would quickly become obvious. Part of overall management would be getting needed production up and running to fill any gaps, providing financing and training, as needed.

The system could incorporate a savings and loan function with zero interest. As said elsewhere, interest just serves to drain energy away from doers to havers. It's not fair in the big picture. Instead of interest payments, savers could gain points which qualify them for loans or other benefits. Instead of paying interest on loans, borrowers could pay small amounts into their own savings accounts. This would increase the money supply based on real value added.

Trust need not be an issue if all transactions are available for viewing online by anyone. Personal names could be omitted for privacy; but the system would be transparent. No one person would stand to gain from the system --instead all would gain from it. Each local system would have to be at a manageable scale, so the data do not become overwhelming and hard to understand, and so capable of manipulation. All participants would understand the entire system –it advantages, its fairness goals, its operational nature.

There are more options than just either strong-man despotism or chaotic anarchy. As a society we are starting to outgrow both of these systems, although regression during stress could happen. The experience of the information age has now given us a kind of autonomy that readily coalesces into collaboration. The internet has been very leveling.

I don't think taxation from states or federal government will be much of an issue if there are major disruptions. Localities will more likely be on their own. In the meantime of course USD will be needed to pay taxes on gains.

It's possible to create alternative financial systems like this now while we have internet. A good idea is to get this up and running before we are critically stressed by shortages. We could be preparing now to provide local internet servers with renewable power sources.

Eventually we will do essentially the same thing as the internet even without the high tech, if necessary. It is another invention out of the box and into the culture.

What we would need to do is not replace money with anything... Thats a concept that will have your head spinning for days...