My submitted idea on is a movement of citizens inspired by the presidential campaign who are now submitting ideas for how they think the Obama Administration should change America. It’s called “Ideas for Change in America.”

I’ve submitted an idea and I’d appreciate greatly if you read. If you like it, please visit my idea’s page on to vote for it.

Establish a Research Center on Money

Money is at the center of our economy and fundamentally shapes our relationships as humans and the value system of the society we live in.

Recent financial, ecological and humanitarian events have increased popular intuition that there is something wrong with our current money system itself, and that policies will have limited impact unless the money itself we use is changed.

History has shown that money can exist in various shapes and forms. Some grassroots efforts in many communities in the U.S. and outside the U.S. have shown that alternative/complementary community money is a powerful way to increase local wealth, increase social capital and keep economic activity going in times of recessions/depressions. Last, technology advances such as the Internet, open security and collaborative development efforts have made it easy more than ever before to create new forms of electronic money.

Yet, there is little scientific research, whether theoretical or empirical, available on alternative forms of money, whether based on units of sustainable energy, hours of work of people, online reputation, or commodities.

A Research Center on Money would fund scientific economic research on alternative/complementary forms of money and how they can benefit our communities from neighborhood to cities to counties and states. It would be a tremendous resource for communities to confidently start using money as a powerful tool for change.

SXSWi session on the Future of Money

SXSWi 2009, which takes place in Austin, TX on March 13-17 2009 will feature a panel on Mobile Ubiquitous Computing and the Future of Money. The panel is organized by Kyle Outlaw of Razorfish. Kyle kindly invited me to share my thoughts on this favorite subject of mine, so I look forward to seeing you there.

Nearly half the world’s population now has a mobile device and more than a thousand cell phones are being activated every minute. The ubiquity of mobile devices will make new services available to billions of people worldwide who have not had access to traditional banks or credit cards. In developing countries such as Kenya – where nearly 80% of the population is excluded from the formal financial sector – text messaging is being used to transfer money to friends and family living in other countries. Moreover, new forms of currency are being created – trading cell phone minutes for goods and services, for example. This panel will explore the challenges and opportunities as banks go mobile, and how the revolution in mobile financial services will change the way we think about money. ideas relating to changing money

I’ve compiled a list of ideas that relate to changing how our money system works:

  • Slow Money (most voted for so far): This is not exactly about changing the money but focusing stimulus efforts on local economies and businesses has the biggest economic impact. My comment: Slow Money should be called “Near Money” and it should be powered by local community currencies.
  • Abolishing Money by “pan voluntarism”. My comment: idealistic/unpractical.
  • Convert to debt-free money: This suggests essentially that the government does not borrow money from banks, but prints it to spend it on project of public utility. My comment: Rather than debt-free money, what I think is meant is interest-free money. Money is debt because it is the unexecuted part of a transaction. Nothing wrong with that. What’s wrong is for a 3rd party to charge money for money, especially in case where there is social capital. Using a 3rd party for trust may indeed lead to social fabric destruction and wealth extraction.
  • Replace monetary system with resource-based economy: The idea is not very clear but it consists in ensuring that the currency can be redeemed for actual resources like corn or gold. Quick comment: Not practical since there is so much more money than raw resources and also because this would put control over money creation in the ends of raw resources producers, which is probably not acceptable.
  • Do away with the Federal Reserve system and Abolish the Federal Reserve. No comment on these ones.

I haven’t seen anything related to asset-based finance and business-to-business trading systems or community currencies.

Money system as architecture and other insightful metaphors

Video recording of J-F Noubel talk on the Future of Money

In April 2008, Jean-François Noubel gave a talk on the Future of Money in Paris. If you understand French, are not familiar with money and want to sit and relax and learn about it, I highly recommend watching this video. I hope this will be eye-opening for you.

For non-French speakers and those already familiar with money, I want to share some of my notes as I think J-F Noubel found excellent metaphors to explain complex concepts:

  • Money is an invisible architecture. An architecture is something human designed that defines the rules on how the components of a system relate to accomplish the system’s purpose. Inevitably in software development, the architecture of the system influences how software developers contribute to the system, leading them to good and poor division of work and determining speed of development, maintenance and execution. A monetary system is very similar to a software architecture in the sense that a monetary system is fundamentally an information system, which relate to establishing value and tracking exchanges, with very precise rules defined and refined over time by humans. It is invisible because we’ve got so familiar with it that it’s like air we breathe.
  • Our current monetary system is like the Monopoly game: there are only losers. Just like the game of Monopoly and many natural phenomenon, our monetary system obeys the Pareto law of self-aggregation: 20% of the population own 80% of the wealth, 250 individuals own 60% of the World’s wealth. This is because money attracts money: the more you have it, the easier it is to make more. Just like in Monopoly the winner takes it all, and as a result cannot play with the other players who lost, so he lost as well. Just like we could change the rules of Monopoly to make it impossible for a winner to take it all, we could change the rules of our monetary system to make sure distribution of wealth is more equal.
  • Money is like water, and the money system is like an irrigation system in a garden. You don’t want your water to end up in one spot, but distribute it equitably in the way that maximizes the fruits, beauty, diversity and long-term health of your garden. This metaphor is particularly relevant as “currency” comes from current, so etymologically money is the thing that flows between us.
  • Money influences our culture (society) just like water influences our culture (garden). Our current monetary system forces us into competition and extreme optimization of processes making our overall society less resilient to shocks. No only do we depend more than ever on each other, but as we optimize we end up in a monoculture. It’s like having one giant field of genetically modified corn, instead of a lot of small fields, each with a different variety. Not optimized, but much more resilient to a pandemic.

Here is a link I found where some of these metaphors are also discussed.

The Ascent of Money

The Ascent of Money is an upcoming book by Scottish financial historian Niall Ferguson. It is also an upcoming PBS documentary in January.

It’s good to see more writers and producers bringing public awareness to what money is and how it influences unnoticeably yet heavily relationships between humans. I can’t wait to see how far it goes in unveiling the mechanisms of money, its power, and how “We the people” can take back ownership of it as it was originally intended to be by founding fathers such as Jefferson.

In the following interview, Niall introduces his book. He talks about the origin of money 4,000 years ago in Mesopotamia, John Law, the British bond market, the use of money as instrument of power and invisible taxation by the rulers/government, and the current crisis.

Chris Cook on asset-based finance to the rescue of the housing crisis

Chris Cook of put together a very insightful presentation on how to stop the real estate crisis by switching from our secured debt-based housing financing to a new form of equity-based housing partnerships. If I understood his comment correctly, his point is that 70% of our money is secured on assets and this is the big problem right now (we can deal with the unsecured debt later used in our economy, which could be replaced by a community currency).

His solution, as I understood is, is to break the vicious circle of owners/developers having to sell properties at fire sale prices because they can’t pay back their debt. It consists in:

  1. placing the house(s) in a pool
  2. renting them at a low price to occupier(s), based on a highly-reputable rental index
  3. having them managed by a manager paid as a % of the rentals

Then the magic happens as follows:

  1. New investors interested in steady highly predictable revenues (ex. pension funds) buy shares in the pool
  2. the proceeds are used to pay bank distressed owners/developers, who can pay back distressed banks
  3. occupiers can pay more than their rent and automatically become investors
  4. as they become occupier-investors, they have incentive to invest sweat equity in maintaining homes
  5. they may end up paying their own rent from the rental they get as shareholders, thus breaking the slavery of debt

This equity model is different from a corporation since there is no debt/leverage that would maximize temporarily the management fees by increasing and underestimated risk, which ends up in bankruptcy when default happens. It is similar to a Royalty Trust used for oil production.

Here is the complete presentation:

Community Capitalism: increasing your wealth with community currencies

YouTube screenshotThe idea that our money system is wrong is becoming more visible every day, but creating money systems designed for grassroots adoption (without government involvement) is quite a challenge.

At the unMoney convergence event last spring, Michael Linton, a pioneer of alternative community currencies, gave a presentation of a money system that I found very convincing (Part 1, Part 2, Part 3, Part 4).

The basic premise is that an alternative money system designed for grassroots adoption should not require long, philosophical explanations, but should simply make economic sense for all participants.

Michael identifies three kinds of participants:

  • businesses
  • non-profits
  • people like you and me

The system works as follows:

  1. businesses issues promises in their “own currency”, i.e. in the goods/services their business provides. Could be movie tickets for a movie theater or bread coupons for a baker. They issue them to the non-profits of their choice, for instance a church or school or hospital. Note that this does not cost them anything as long as they don’t issue more than their business can deliver. For practical purposes these promises are issued in the same unit as the legal tender currency, say the US dollar.
  2. non-profits take theses local currency notes and sell them to people like you and me for real cash, which they can use to pay for their operating expenses. Again, here, people like you can me buy them from the non-profits of their choice.
  3. people like you and me work for hard cash at businesses and volunteer/work at non-profits. We earn both real cash and local currency notes. Local currency notes can be spent at local businesses who accept them according to their policy. For instance a restaurant might accept to be paid 50% in real cash and 50% in local currency, while a grocery store might accept to be paid 90% in real cash and 10% in local currency. This will depends essentially on how much real cash they need to support expenses that can’t be covered with local currency.

As the quantity of local currency increases, both in terms of absolute quantity issued and velocity, the benefits for each participants is that real wealth is created (better education, better service for old people, better roads, better health, etc.) but unlike real cash, it cannot be extracted from one community and spent in another one. In other words, the wealth of neighbors is captive and no one but the neighbors capitalize on it.

So, wealth increases, but it’s also shared:

  • businesses get more revenue in local currency that they can use to hire more people they pay in local currency, buy from other businesses in local currency, etc.
  • people like you and me get more real wealth via the non-profits and get more money in terms of things that are truly valued: local businesses and local free services.

My comment

This model follows some of my own ideas that promises from businesses are probably a better backing mechanism to a local currency then thin air or hours of people like you and me, or a commodity, especially if these promises are in their own currency, i.e. what they produce. I think borrowing in your own currency is a privilege everyone should have (not just the US government) to the extent that they can deliver on their promises.

This model is a sort of Scrip 2.0, which is great since it builds on an existing well established practice of using coupons issued by merchants to non-profit for fundraising (with the major disctinction that in Michael’s model case, there is no impact on the profit margin of the business: $1 of local currency is $1 of real cash vs. $1 of local currency is issued at say $0.9 real cash and sold at face value – $1 – to you and me in the case of scrip).

I think one issue might be that the distinction between businesses and non-profit is pretty vague in the current description I’ve watched (but I’ve probably missed some content). An improvement in that direction would simply be to say that may not discriminate who they provide their services/goods, in particular on the basis of who gave and who didn’t buy local currency from them. I think a local “shaming” or abuse reporting system might be enough for a local currency.

I think it’s important that the notes issued carry the brand of the business who issued it (either in paper or electronically). This would prevent businesses to print too much local currency which may ruin the system via inflation, which is essentially paper wealth or fictitious wealth):

  • Businesses could easily be forbidden to use local currency they’ve issued for paying other businesses or their employees: business would have to recycle money they’ve issued and got back via the non-profits.
  • People/Non-profits would quickly notice if the business has a hard time redeeming the local currency they’ve issued. Again here a local shaming/reputation system would put pressure on the business to limit their issuance.

I think Michael’s model is very exciting and I am planning to talk about it with people in my neighborhood. Feel free to comment here on the pitfalls/improvements you see. What I’d like to do as a next step is a more detailed analysis of the model with hard numbers.

Government-sponsored shopping coupons in Taiwan

An interesting government action is being discussed in Taiwan. Instead of handing out regular money that may most likely be saved and not spent, the government would be issuing time limited coupons that would be only used for buying consumables.

I think it makes a lot of sense. It goes along the line of separating our currency between an investment currency whose goal is to keep its value over time, and a medium of exchange currency whose goal is to flow as fast as possible b/c of its well-known expiration time.

In case of very bad recession, this is no unlikely to happen in western economies, as they fail to boost internal demand by pumping legal tender into banks who are refusing to lend. It may make particular sense if the products/services that can be bought with these coupons are scarce (ex. oil in the U.S.).

From AFP (hat tip reader Razzz):

Everyone in Taiwan will be given more than 100 US dollars in shopping vouchers in a government bid to boost the economy amid the global credit crisis, the prime minister announced Tuesday.

Under the scheme, the island’s 23 million people regardless of age or wealth will be given 3,600 Taiwan dollars (109 US)…those people who donated their coupons would be able to file for tax deductions.

It is expected to be implemented as early as January in time for the Lunar New Year holidays which will begin on January 26.
“The programme is aimed at boosting the economy … and is expected to contribute to a 0.64 percent increase in 2009 GDP,” Liu said.

Taiwan’s gross domestic product growth is projected at 5.08 percent for 2009 according to government figures, after an estimated 4.30 percent for 2008.

However, analysts and businessmen were more sceptical.

“I can’t see that the programme will have much impact on the GDP. If people can’t make their ends meet, they won’t be encouraged to spend more just by getting the vouchers,” said Johnny Lee, an analyst at President Securities…

The vouchers, which will expire in December 2009, can be used at registered retail stores, supermarkets and restaurants, officials said.

The scheme, proposed by the island’s top economics planning body, the Council for Economic Planning and Development, is based on a similar initiative launched by Japan in 1999…

October exports, the engine of the economy, fell 8.3 percent from a year earlier, largely on falling demand for electronic and precision products amid the global economic slump.

The figures, together with an updated IMF forecast, prompted Taiwan’s central bank to further lower interest rates by 25 basis points last week — the fourth cut in just over a month.

The International Monetary Fund earlier this month predicted that advanced economies — major export markets of Taiwan — would shrink next year under pressure from the global credit squeeze, forcing a new round of European interest rate cuts.

The government lowered its economic growth forecast for 2008 to 4.30 percent from 4.78 percent, but an increasing number of economists and analysts regard the revision as too optimistic given the current economic turmoil.

The Future of Money conference

Jean-François Noubel is organizing the conference The Future of Money on November 26th from 7pm to 10pm in Mexico City.

Our conventional monetary system will not last long. This prediction is shared by almost every economist today: debt-based and interest-based money is an unstable system that is condemned to die from intrinsic congenital imbalance (for instance the market cannot follow the speed of interest-based debt to pay back). No one knows precisely when the big collapse is to be expected, but everyone agrees it will happen sooner than later. The current world wide monetary crisis, as well as the effects of monetary concentration, are one of those historic social alerts announcing the big crunch.

What no one anticipates is that money is about to follow the same path the media followed during the past years; from controlled ownership of media with one-way top down broadcast systems, to peer-to-peer, participatory, open publishing. Millions of free currencies will soon circulate on the Net and through our cell phones. They will not be controlled by states or central banks, they will be issued and used by millions of marketplaces willing to free themselves from conventional debt-based, interest-based money (85% to 95% of money circulating today). Everyone will use these free currencies simply because they will be ubiquitous, easy to integrate into current media technologies, and because most people and organizations are undermonetized.

This new paradigm is likely to turn the current monetary system into a completely obsolete system. The next one will offer marketplaces the capacity to maximize their trade potential with the ever right amount of monetary mass at their disposal.

Hat tip to @JCCapelli

Sustainable Money

I listened during my commute today to an interview of Jay Hanson of and, in which he talks about the inherent limits to our economic growth, sure nuclear holocaust if we stay the current course and societal changes that may save us.

I know some of you may discard the above as scaremongering socialist progaganda, but Jay actually describes himself as a succesful computer engineer who loved capitalism, but got to realize its inherent limits and decided to study the problem in details and try to come up with a practical solution.

I took a lot of notes, but the first basic idea is that capitalism, and in particular our money system, is incompatible with a sustainable society. The money we use, fiat money, is by definition infinite, but it is a claim/promise on resources that are finite, so sooner or later we hit a wall: our money claims a smaller stake over the available resources and we get poorer. The U.S. founding fathers used economic growth as a tool to solve problem, but today, our economical growth IS the problem, so we can’t find a solution for it via economic growth. “We’re stuck”.

The second basic idea is that we compete to accumulate much more money (as claim on resources) than we really need because as social animals, we desperatly seek status. It’s not the $500M we want, it’s the largest sailboat in the world. We won’t be able to change the fact that humans want status and would kill for it, but we can possibly change the kind of status we strive for itself, through cultural evolution.

A development on his conclusion is that we need two kinds of money:

  • One that is essentially a rationing on remaining resources. In his ideal society, 5% of the population would work 2 years in their life to produce all the food, housing, healthcare and clothing, which would be allocated in equal ways to each person in the population, would expire and would not be exchangeable.
  • One that is the status money. Since most of our time could be spent playing, studying, creating art, etc. we could be rewarded for it via the status we would earn from it.

The similarity of this second money to the Whuffie concept is quite stricking. In many ways, the Web is where we spend more and more of our time creating digital artifacts. The resources there are close to infinite. If we could build a way of measuring our status there, we would have something similar to what Jay proposes.