How to solve the crisis

We can start by setting up local barter currencies in every city that help new enterprises use wasted land, buildings, resources and people.

Err, yes.

Just what we need, we really should stop Lambeth from trading with Southwark.

Tony Greenham is head of business and finance at Nef (the New Economics Foundation). He has previously worked in investment banking at Credit Suisse and Barclays.


15 thoughts on “How to solve the crisis”

  1. …..He has previously worked in investment banking at Credit Suisse and Barclays…….

    No surprise. In many of my dealings with investment banks, its clear that they don’t understand that trade is a voluntary arrangement that enriches both parties.

  2. Sudden and large increases in particular forms of spending as advocated by Tony Greenham (green projects and infrastructure improvement) invariably lead to money being wasted. Labour’s sudden and big increase in NHS spending half way through its time in power resulted in this form of waste.

    The twits that make up this country’s elite have never learned this lesson, and they never will.

  3. Have to concur the man’s a tit but isn’t there a modicum of sense somewhere in that.
    We know the €uro’s a flop because it’s locked dissimilar economies into common interest rates etc. If we went back to national currencies why not go a stage further? Country like Spain there’s a helluva difference between north/south. Catalans get up early, do shit – us Andalus are some of the laziest tossers in Europe kept afloat by the tourist industry & wealth transfer. Maybe we’d get our act together if we had to cope with reality through our own money.
    With money becoming largely electronic the exchange process would be trivial.
    I think in the end I’m arguing for much smaller, agile states. Government much smaller & closer to the action.

  4. What you need is some kind of global currency. All these local ones are a very bad idea. A global currency will allow anybody to trade with anybody else, locally or internationally. In order to achieve that, you need something or other that is held to be valuable everywhere. Some kind of commodity, perhaps. The nice thing is, if we can think of some such commodity, then differences in economic production will be reflected in the market by flows of that commodity into and out of various regions, maintaining its correct value in every such region with only relatively small term fluctuations. This will prevent regions having the wrong currency value at any time. The commodity will flow out of low production regions and into high production regions, maintaining price stability.

    Ideally, this commodity should be something that maintains its physical integrity over long time periods. Metals are very good for this, if they are unreactive. We should choose a metal which is not abundant, to prevent sudden inflationary expansion of the commodity supply. It should be a metal which, were it common, would have many practical uses, which will maintain its rarity value.

    It seems that the metal “gold” would be an excellent choice for our global currency. The only trick then is to get rid of national banks that flood the market with excess promisory notes.

  5. Brian, follower of Deornoth

    A barter economy in which everyone concerned naturally pays income tax and national insurance contributions on the results of their trading.

  6. @IanB, commodity money has problems because you cannot fix the value of a commodity before long. Imagine if we all negotiated our salaries in Brent Crudes. That would have completely trashed the world economy. As would have negotiating our salaries in Krugerrands when gold was $200 an ounce, and getting (effectively) 7-8 times as much pay today as just a few years ago.

    Two things I don’t get about the anti-euro position are that there is precious little more logic for having a national (as opposed to international) currency as there is for little currencies in different parts of the same country (as bloke in Spain pointed out). The second is that floating exchange rates are a comparatively modern experiment. Sure, in the past currencies came in different units and denominations but were mostly tied to some standard or other. If not gold, then the dollar. We have only had a real floating rate system since the end of Bretton Woods – most of the previous 6000 or so years of civilisation relied on those precious metal standards.

    Tim adds: The phrase here is “optimal currency area” and the important word in the phrase is “optimal”.

    There are benefits to local currencies. There are benefits to only one currency over a very large area. Tehre are also costs to each. Thus we’re looking for the optimal mix, the optimal size. Brixton having a different currency from Streatham Hill is insane. Brixton having the same currency as Baghdad is insane. Somewhere in between those two there is an optimal position.

  7. JamesV, gold prices were pretty stable until currency was decoupled from gold. It worked fine as a tradable commodity for many centuries; it was the switch to paper currency that undermined it, and then decoupling in 1971 that completely wrecked things.

    As to fiat currencies, there is nothing *in theory* wrong with one if you can convince everyone to use it (which normally means by force; by legal tender laws). The problem is that once the currency is decoupled from commodities, governments just start printing it by various means to pay for their excessive electoral bribes, wars, and so on, and we get into the current mess. If a government could be trusted to print, at Year Zero, say, 1 trillion Newpounds and were rigidly prevented from creating any more, evar, the NewPound would work fine. But without that restraint, disaster is inevitable.

  8. The other problem though is that the Newpound is legal tender in England but not in America, etc, so you have the problem of the necessary inflows and outflows to maintain currency value, which gold or another commodity just does automatically.

  9. In a sense he is correct. the world would be a happier place if we were all trading in goods and services that we actually wanted. that would stop all those jobsworths in local and national government who don’t do any good for anybody.

  10. Ah yes, I believe that’s the same nef that is behind the Brixton pound. Years after its launch, I have still never laid eyes on one, and I spend money in Brixton every day.

    I have heard tell that, if you pay in B£, you can get a 50p discount on food (but not drink) in the White Horse. I’m sure that’s doing its part to help enterprises use wasted people.

  11. @IanB, I think you’ll find the experience with the inflows and outflows needed to maintain currency value resulted in mercantilism, rather than gold producing some kind of automatic adjustment its hallowed status rather amplified the problem, not to mention caused many of the resource wars of its day, colonial grabbing of places that might have gold mines in them, and so on.

    Fiat money has its advantages, but you do have to trust the fiat issuers not to debase it, seeing as it’s easier to do that than reduce the silver content of your florins before word of the reduction gets out. I take note that the eurozone is being told that debasement (having been tried and thus far failed in the USA, UK and so on) is the solution to all our problems.

  12. @JamesV

    ” I think you’ll find the experience with the inflows and outflows needed to maintain currency value resulted in mercantilism, rather than gold producing some kind of automatic adjustment “

    That’s the fault of the mercantilist not understanding economics, and thinking that money is wealth, which is still a commonly held fallacy, as with all those who think that an economy can be improved by increasing the stock of money. Wasn’t correct then, isn’t correct now. Certainly, if you think in those terms you’re going to do stupid mercantilist things, but that isn’t the fault of gold (or any other monetary medium) it’s the fault of the person who thinks those things.

    not to mention caused many of the resource wars of its day, colonial grabbing of places that might have gold mines in them, and so on.

    Same problem. If the Spaniards had realised that wealth is goods and services instead of money stock, they wouldn’t have wasted all that effort trying to find gold, and just ending up with inflation, and so on. But since Adam Smith (and before, in fact) we have had a discipline called Economics that tells people why these fallacies are fallacious. That people ignore the theory is sad, but we can’t change reality to fit with what they want to believe.

  13. Ian B
    You do actually have to shift your physical currency around.
    War broke out in 1914 before the Brits tried to get their money out of Wall St. Washington occupied Wall St (shut it down) and severely constrained our efforts against the Hun. (We couldn’t get our hands on our own gold.)
    Similarly, when we were subsidising Stalin, we had to send him physical gold, some of which went to the bottom with HMS Edinburgh.
    Gold is as good as gold, in fact it’s as good as currency provided three conditions are met:
    1. It’s not hoarded in mattresses or jewellery
    2. It’s not subject to variations in supply (finding ElDorado, etc)
    3. Mine supply is regular and under our control, not a foreign power like South Africa or Russia which can choke or release the (our) money supply for their own ends.

  14. Oh Timmy, you fail to see what a magnificent idea this is! Can’t you see that the use of invented paper currency is like spitting in the face of Gaia’s bountiful natural media of exchange.

    Can’t you see that the very act of forcing with the violence of law worthless paper to be accepted for valuable labour is a timeless weapon of the oppressive patriachy/bourgoise to oppress the workers!

    No, the People’s Councils of Southwark and Lambeth should say: “enough!” to the capitalist classes, “henceforth, the workers will exchange real value for goods and services. our medium of exchange will by its very nature be the product of honest hard labour. I give you, the Golden Lambeth Sovereign!”

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