Slide 2 The End of Money and the Liberation of Exchange A path
toward social harmony and universal prosperity International
Conference on Dinar Economy Kuala Lumpur, Malaysia July 27, 2007
Thomas H. Greco, Jr. Slide 3 June 27, 2007Thomas H. Greco, Jr.2
What I Will Cover 1.Fundamentals of Exchange. The Necessary
functions of money 2.Stages of evolution of money. 3.The abuses of
money Enabled by centralized control of credit. 4.Decentralized
credit clearing An honest and efficient system of exchange
5.Escaping dollar dominance A multi-stage plan. Slide 4 June 27,
2007Thomas H. Greco, Jr.3 Exchange Requires Three Fundamental
Elements A marketplace Where buyers and sellers come together A
measure of value For expressing prices A means of payment For
concluding a transaction Slide 5 June 27, 2007Thomas H. Greco, Jr.4
Basic Kinds of Economic Interaction Gifts -- Transfer of value
without any particular expectation of anything in return.
Involuntary Transfers e.g., theft, robbery, extortion, taxes.
Reciprocal Exchange equal exchange of value between two parties by
voluntary agreement. Slide 6 June 27, 2007Thomas H. Greco, Jr.5
Money Plays Its Role Within the Realm of Reciprocal Exchange The
sole function of money is to serve as a medium of exchange (means
of payment). The other traditional roles of money: Measure of
value, and Savings medium, Must be achieved by other means. Slide 7
June 27, 2007Thomas H. Greco, Jr.6 The Evolution of Money Commodity
money Tobacco, hides, gold, silver, etc. Symbolic money Redeemable
paper, warehouse receipts Credit money the current stage Bank
credit, central bank notes, private credit and notes Direct Credit
Clearing - Beyond political money Slide 8 June 27, 2007Thomas H.
Greco, Jr.7 Why Reinvent Money? Throughout the world, money has
become an instrument of political power. Money and banking are
manipulated by and for limited private interests. Political money
is exploitative, dysfunctional, and undemocratic. Slide 9 June 27,
2007Thomas H. Greco, Jr.8 How is Political Money Dysfunctional and
Exploitative? Money created as bank loans: Is kept artificially
scarce. Is expensive, because interest is charged. Is misallocated
at its source, serving to concentrate power and wealth. Forces
artificial growth. Slide 10 June 27, 2007Thomas H. Greco, Jr.9
Legal Tender Laws Serve to Centralize Power and Concentrate Wealth
Legal tender laws are an abuse of monetary authority. Provide
governments and banks with a way to avoid the discipline of the
market. Improper and excessive issuance of money would normally be
punished by discounting or refusal of the currency as payment. The
obliteration of the value standard by legal tender enables abuse to
continue. Inflation is the result. Example: the definition of the
U.S. dollar Slide 11 June 27, 2007Thomas H. Greco, Jr.10 Modern
money is Credit and Credit is the Life Blood of Business Two
distinct credit functions: Exchange Short-term credit (turnover
credit or working capital) Money Finance Long-term investment and
savings (value storage) in the form of debt or equity Not Money
Credit Makes the World Go Round Slide 12 June 27, 2007Thomas H.
Greco, Jr.11 Credo = Belief > Credit All credit derives from
belief in a promise. Credit is based on trust and contractual
obligation. Who or what do you trust? Who deserves credit? Whose
promise will you accept as payment? Slide 13 June 27, 2007Thomas H.
Greco, Jr.12 Sources of Credit Banks Loans Customers Prepayments /
gift cards & certificates Suppliers and Employees Vouchers,
complementary currencies Direct credit clearing Slide 14 The Credit
Commons The Organization and Allocation of Credit is a Fundamental
Feature of Civilized Society How should it be done? June 27,
2007Thomas H. Greco, Jr.13 Slide 15 The Credit Commons Central
Government Loans Banks The Credit Commons can now be accessed only
through banks! Loans June 27, 2007Thomas H. Greco, Jr.14 Slide 16
June 27, 2007Thomas H. Greco, Jr.15 Privatization of the Credit
Commons Access to credit is controlled by the banking system in
collaboration with central governments. Banks decide who gets
access and on what terms. Banks collect interest on all loans.
Favored clients get credit on easy terms. National governments have
extraordinary access. By their arrangement with the banking system,
governments can borrow as much as they wish and never repay. Slide
17 June 27, 2007Thomas H. Greco, Jr.16 Two Parasitic Elements of
the Conventional Money System Interest Collected by the banking
cartel Inflation Caused by government deficit spending Slide 18
June 27, 2007Thomas H. Greco, Jr.17 Direct Access to Credit is
Possible and Desirable It is our collective credit that supports
the monetary system. We have the power to use our credit as we
wish. People are free to decide who they will trust and to allocate
their credit directly to one another. Whom or what will you trust?
Are you trustworthy? Slide 19 Alpha Company Bravo Company Charlie
Company Delta Company Bank Conventional Payment Process Using Bank
Credit Money Bank credit borrowed into circulation and used to
clear debts amongst companies. Interest must be paid on credit
borrowed from a bank. $ $ $ $ $ $ Interest 18 Slide 20 Alpha
Company Bravo Company Charlie Company Delta Company The Clearing
Process Without Bank Credit A common measure of value is used for
pricing but no need to borrow currency. Mutual credit is used to
clear debts among companies. No interest paid. Alphas i.o.u. Thomas
H. Greco, Jr.19 Slide 21 June 27, 2007Thomas H. Greco, Jr.20 Direct
Credit Clearing If money allows us to transcend the limitations of
barter, credit clearing allows us to transcend the limitations of
money. An association of traders can agree to offset purchases
against sales amongst one another. In effect, goods and services
are used to pay for other goods and services. Another way to
describe it is: Accounts Receivable (A/R) are used to offset
Accounts Payable (A/P) The same process can be applied by countries
within an international trading union. Slide 22 June 27, 2007Thomas
H. Greco, Jr.21 When you sell something, your account balance is
credited (increased); When you buy something, your account balance
is debited (decreased). How Does Credit Clearing Work? Slide 23
June 27, 2007Thomas H. Greco, Jr.22 How Does Credit Clearing Work?
(2) Ultimately, goods and services pay for other goods and
services. Money is just an intermediary device that is supposed to
facilitate the process, But money can be dispensed with. Remaining
balances may be settled at periodic intervals, or may be carried
over indefinitely. Slide 24 Mutual Credit Issuance and Circulation
Member - Issuers Mutual credit clearing association Member -
Non-Issuers Issuing members begin the process by buying from other
members. June 27, 2007Thomas H. Greco, Jr.23 Slide 25 June 27,
2007Thomas H. Greco, Jr.24 An Example Suppose $1 million worth of
clearing credits are created and spent into circulation by the
associated businesses. That means that their collective cash
expenditures have been reduced by $1 million. That $1 million
remains within the association instead of flowing out to pay for
imports. Slide 26 June 27, 2007Thomas H. Greco, Jr.25 An Example -
continued If the turnover is 10 times a year, that means $10
million in additional local sales. If the rate of profit on sales
is 20%, that will result in additional yearly profits of $2
million. Slide 27 June 27, 2007Thomas H. Greco, Jr.26 An Example -
conclusion Further, the issuance of clearing credits allows some
interest-bearing debt to be retired. If the interest rate on debt
is 10%, the businesses will together save cash interest costs of
$100,000 each year. Every dollar s worth of clearing credit issued
means: one less dollar that needs to be borrowed, one less dollar
that needs to be spent, one less dollar that needs to be repaid
with interest. Slide 28 A Successful Example Established in 1934,
the WIR Bank has continued to thrive. The WIR Bank clearing system
now serves more than 60,000 small and medium sized business
members. Credits cleared: $1.35 billion (2004) June 27, 2007Thomas
H. Greco, Jr.27 Slide 29 June 27, 2007Thomas H. Greco, Jr.28 A
Likely Scenario Stage one: Independent Trading Blocs (already
underway) Many Islamic countries, under the leadership of Malaysia,
form an Islamic trading bloc. Other trading blocs are emerging in
Latin America and elsewhere. Stage two: Payment offset (already
underway) These nations begin trading with one another under
bilateral and multilateral agreements that utilize credit clearing
intermediaries that offset payments for imports against receipts
for exports and settle accounts at periodic intervals using some
mutually agreed currency (dollars or euros). Stage three: Use of
Gold Dinar (being considered) Member nations adopt the gold dinar
as the common value standard and the settlement currency. Slide 30
June 27, 2007Thomas H. Greco, Jr.29 A Likely Scenario - continued
Stage four: Clearing union Member nations form a clearing union in
which sales to members offset purchases from members. They abandon
gold as the payment medium and utilize the gold dinar only as a
measure of value and pricing unit. Stage five: Settlement suspended
Member nations begin to realize that the period between settlements
can be increased without adverse consequences, so they gradually
lengthen the period more and more, but as balance of payment
difficulties become evident, limits are set on clearing account
balances to prevent payment deficits from becoming chronic for any
nation. Stage six: Mutual finance Associated countries create
mutual assistance programs that provide development finance on a
shared risk basis, using temporary equity- investment to help
countries with adverse balance of payments problems to become more
productive. Slide 31 June 27, 2007Thomas H. Greco, Jr.30 A Likely
Scenario - concluded Stage seven: Adoption of a composite commodity
standard Realizing that because the gold market is easily
manipulated by the central banks and governments of the developed
countries, the Islamic trading bloc countries abandon the gold
dinar as the value standard and adopt a common pricing unit based
on a market basket that is composed of a handful of freely traded
basic commodities. Stage eight Non-Islamic countries, seeing the
benefits of this system, seek to join the Islamic trading union, or
form clearing unions of their own, all of which are ultimately
networked together, creating a global association for fair trade
and mutual assistance. Slide 32 June 27, 2007Thomas H. Greco, Jr.31
Conclusions Political money is credit money that is used to
concentrate power and wealth. Private initiative and enlightened
government action can evolve credit money into credit clearing to
serve the common good. With credit clearing as the means of
exchange, gold can be the pricing unit. True Islamic prosperity can
be achieved through the organization of direct credit clearing
associations. Dollar hegemony can be transcended by organizing
trading blocs that use credit clearing instead of international
currencies for payment. Slide 33 June 27, 2007Thomas H. Greco,
Jr.32 Suggested Sources Explore the websites
http://beyondmoney.wordpress.com http://ReinventingMoney.com Read
books by Thomas H. Greco, Jr. Money: Understanding and Creating
Alternatives to Legal Tender, Money and Debt: A Solution to the
Global Crisis, The End of Money and the Future of Civilization
(published 2009)
