The need for Local Currency
Society is built around the inter-reliance of people on one another to provide the things we need in order to live; this most typically involves the exchange of goods and services. Money serves the purpose of facilitating these exchanges and both measuring and storing value, in order that the exchanges be accurate and fair.

Modern central bank currencies such as the dollar neither measure value very accurately, nor store it very well. This is not obvious in the midst of our everyday use of money, but it manifests in such things as the steady devaluation of the dollar against goods and services ("inflation"), continuous concentration of wealth, decades of falling real-wage rates in the U.S. and the growing disparity in wage-rates around the world. Less obvious (to most of us) is the growing instability of the world's currency markets, a trend which has drawn concern even among professional economists.

Debt Money
The reason that modern currencies don't measure or store value well is related to how they are issued.

Money has evolved over the centuries from portable commodities such as grain or salt, to stores of precious metals, to paper notes representing stores of metal, to notes representing nothing beyond our joint faith that we will collectively continue to honor their use as a medium of payment.

Because modern money is not issued in relation to any fixed thing of permanent value, there is no in-principle cap on how much can be issued. At the same time, virtually all new money is issued via debt, i.e., it is loaned into circulation. Whether it is at the level of commercial bank loans or the Fed purchasing government securities, every dollar that comes into existence represents an income stream back into the banking system, not just of the principal issued, but of interest. Since interest is never created -- i.e., no extra money is spent into circulation by the banking system -- payback of any given loan inevitably requires using a portion of the principal from somebody elseÎs loan. This means -- as loan principal is paid off and disappears from circulation -- that money must continually be re-issued in new loans (in practice, circulation is often increased) to prevent a net draw-down of the money-supply which might lead to a destabilizing number of bankruptcies. Loans, in turn -- whether for consumption or production -- inevitably necessitate increased economic activity, since they come with debt-load (interest) that must be paid back. Therefore the dependence of our money-system on constant loaning predictably translates into over-production, over-consumption, and the concomitant resource depletion that goes with it.

Concentration of Wealth
Perhaps more important is the effect that issuing money only as debt has on the overall dynamic of money in the economy -- it is a primary factor in making money concentrate and become scarce for the bulk of the population.

As loan principal, each dollar ultimately needs to deliver a marginal amount of additional value back to its source. At the same time, all value comes from labor, and the dollar is the medium which translates information about value through every transaction in the entire economy. So, creating dollars as debt effectively amounts to attaching an additional labor demand or labor cost to each dollar while it's in circulation. Every user -- from the initial loan recipient forward -- has the incentive to pass this cost on, and what results is the creation of ubiquitous (and generally automatic and unconscious) behavior among users of central-bank money to somehow collect additional value without laboring.

While everyone is compelled to try and succeed at this task (and to compete against each other in the process), those who can acquire excess money are proportionately advantaged. Only with a scarce money supply can you make money from money -- ie, aggregate further value without additional inputs of labor -- by lending it or supplying equity. A positive base interest rate means that any aggregation of money can potentially earn money, and this is what starts money concentrating wherever it can do so in the economy.

This is also what accounts for the "putting to use" of idle funds at almost every turn, even when it's a piddling $20 plunked in a savings account rather than a piggy bank. Money literally "de-values" if it's not off somewhere returning a profit. And because all value comes from labor, somebody somewhere ultimately has to back that profit with their labor, at a net loss of value to themselves. The more money that accumulates to go profit-seeking, the greater this pressure becomes, and the unprecedented expansion of the money supply in the past few decades is indeed mirrored by a spectacular "race to the bottom" in working-people's wages globally over the same period.

Because of this universal re-employment of money for the purpose of making money without laboring, competition to produce the most competitive profits from inputs of money becomes increasingly intense. The "financial services" industry is devoted to perfecting this task, and to inventing new avenues through which the (typically) expanding (and inevitably concentrating) money-supply can be directed in order to deliver better money-flows to its clientele. This single economic sector now accounts for virtually all of the monetary transactions which take place every day (98% globally by some estimates, when currency speculation is added to the money changing hands in the stock and bond markets). While the financial services industry produces little of real value, it's nevertheless become economically critical to the stability of the financial system -- if the huge sums invested there had no place to go, the excess outflow of money toward the market of real-world goods and services would reduce the dollar to a tiny fraction of its current value.

Money for the Revolution Therefore, while ownership of the means of production (and plain old greed) should never be overlooked as proximate causes of wealth-concentration, even in their absence, the structure of our money system requires aggregation on the part of its participants in order for them to survive. Central bank money is effectively self-concentrating -- its creation as debt gives it an internal logic of aggregation which is generally transparent to its users, including those who are otherwise collectively-minded, conscientious and egalitarian. What we need is money which is spent into permanent circulation or issued at a less-than-zero interest rate, the total supply of which is modulated to adequately match the labor and resource capacity of the economy it is mediating. Only this can eliminate the unending pressure to aggregate wealth that is endemic to debt money.

While this may seem an impossible arrangement -- having a money/credit supply that is always available in sufficient amount to all who need it -- it is essentially how any mutual credit money system works. These systems -- which loosely include LETS, local currencies, time-dollars, and various other schemes -- typically create exchange media on an as-needed basis when demand of any kind is matched by supply. These systems present a host of additional benefits as well: they are locally organized and democratically controlled; they generally denominate their exchange media in something verifiable and immutable, like an hour-of-labor; the charging of interest is typically proscribed or collectively overseen, with its profits redistributed; they re-circulate wealth locally and foster increased local self-sufficiency; and, of course, they increase the overall money supply and help to redistribute wealth more equitably. While mutual credit and local currency systems are mostly designed to replace the exchange-medium function of bank-money rather than the value-storage function, they can certainly be augmented by other devices to supply this need as well. They are ideal for interlinking into a network of global trade since they are largely denominated in hours-of-labor, which are the same in all places.
Changing the relations of production permanently will always be an uphill battle so long as the medium-of-exchange we are fighting to redistribute is one which is geared toward self-concentration and insured scarcity. There is no egalitarian way to run central-banking; it needs to be replaced with a competent, well thought-out global network of democratically-controlled local credit and money systems. Only through such a mechanism can the economic benefits of global commerce be guaranteed to find equitable distribution amongst the world's people.