10. The demise of the old money system ?

Having developed local and regional LETS currency and tax systems in the manner in which I have described, we must now address the question of whether the old money system still has a useful role to play. In the recent report of the National Performance Review by US Vice President Al Gore (September 7, 1993, From Red Tape to Results, Creating a Government that Works Better & Costs Less ) the performance of the system of government inherited by the new presidency was likened to a car with a broken engine; with new policies being as ineffective as pointing a broken down car in a different direction. Clearly most public agencies have a useful job to do but need to undergo fundamental change if they are to be responsive to the needs of their clients. I think something more than just propagating good practice from the more to the less responsive public agencies is needed if the system of financing state enterprise is defective.

We must first ask whether this system is even capable of being repaired. Certainly all of the principles which I have written about could, in theory, be incorporated into the existing system piecemeal in which case the old system would survive by a process of evolutionary change. This would obviously require very major surgery, but it is doubtful whether the patient would make it out of the operating theatre. There is a more practical difficulty to this approach: the public-deficit problem which lies at the core of the disintegration and collapse of the old system is politically insolvable. How do you get people to vote for higher taxes in return for further cutbacks in the financing of public services ? 

It is not only the third world governments that have become bankrupt; this condition is near universal. The collective government debt forms the basis of credit in the old currency system and I doubt many believe it to be sustainable either with or without further massive doses of the same medicine: i.e. further borrowing to pay interest on the loans. Under this state of affairs, global hyperinflation is both a necessary precondition for and an inevitable consequence of the cancellation of this debt.

If people can meet some of their needs by using a new currency they will work less hard in return for an old one; either the supply of the old one will have to be decreased or its value will diminish. Global hyperinflation is therefore made more possible by, and its probability requires, the kind of developments in alternative currency systems which I have described. The possibility of getting rid of the old system is created by the availability of a new one, but we do not want a sinking ship to go down until we have got as many of the passengers into lifeboats as can be managed. In conclusion, various factors will accelerate the transition from the old system to the new one and appear likely to result in the demise of the old money system. 

Version #001 20-12-94

Written by Richard Kay  rich@driveout.demon.co.uk