Pecunia non olet - money does not stink.
A saying that might have been true in the ancient Rome is now only that: a saying. Modern money stinks to high heaven. It is a game invented - quite recently - by the rich and mostly played by the rich. Its rules are designed to benefit the ones who have, neglecting and harming the ones who don't. This results in social inequality, unrest and sometimes economic crises.
National currencies are that pervasive, that most people can't even imagine alternatives. But they exist. We can start our own game. One that benefits the community and the underprivileged. We can play by our own rules.
So what exactly are the problems with money? The answer to this question lies in the answers to three other questions: Where does it come from? What is its function? And where does it go?
It is a common misconception that money is created by the government or the central bank. In fact almost all money is created by private banks for profits when giving out credits. How is this possible? With a little trick called fractional-reserve banking. This allows a bank that has 10 coins gives out 100 coins of credit, inventing 90 coins on the way. While gold smiths in the ancient Rome were sentenced to death if caught promising more than they have, it is common practice nowadays almost everywhere in the world. So your money is not only not backed by anything, most of it doesn't even exist. It's an unstable system that collapses as soon as too many people ask for the money that they have "in the bank".
And the bank doesn't lend the 100 coins out of good will. Every credit costs interests. If you get those 100 coins from the bank, you'll have to give back 110 coins. Where do these 10 coins come from? More debt. Because almost all money is created through debt. The result is that in order to pay the interest, there needs to be more money every year. This is achieved either through inflation or through "growth", meaning that more goods are traded and therefore there can be more money without becoming worth less. A result is that an economy based on interest-carrying debt is forced to perpetually grow to avoid inflation, which in turn means that in such a system, a sustainable economy is impossible, because the world is finite and can not support infinite growth.
Another problem with this rule of money only for interest is that it makes it easy to get more money if you have money, and hard if not impossible to get any if you don't have any. The rich get richer, while the poor stay poor. This negative property tax benefits only the rich and increases social injustice.
Economy textbooks tell us that money serves three purposes:
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A medium of exchange. Without money you would have to bring a couple of chickens every time you wanted to acquire vegetables. Money makes our lives a lot easier and our purses a lot lighter.
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A unit of account. How do you know how many tomatoes you can get for a chicken? Money is a common standard that we can use to measure the "worth" of things, like centimetres are a common standard to measure the length of things.
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A store of value. As it turns out, keeping money in the mattress is a lot more convenient than keeping chickens in the garden.
The problem is that we only have one national currency for all three purposes. Why is that a problem? Because these purposes are not compatible. To be a good medium of exchange, a currency benefits from losing value over time (aka inflation) to make people spend it faster. But this makes it a poor unit of account and a poor store of value because its value decreases over time. Using the same currency as a store of value means that less money is available on the market (because its hidden in mattresses) which makes it a poor medium of exchange.
Because of the profit pressure caused by interest, money tends to always flow in the direction of the most profit. Capital drains from economically weak regions towards the nearest financial center, leaving those communities depleted where it's needed the most. And since people follow the money, it also leads to an increased rural-urban migration.
And how does it move? Either physically by handing over cash or virtually by transferring credit between bank accounts. Both ways carry a transaction cost. Cash requires transport, and electronic payments impose a transaction fee. This fee cannot be avoided because all non-cash transactions depend on centralized institutions to keep account of who has how much. These unavoidable costs make micro-transaction unfeasible, once again benefiting the rich and limiting the economic options of the small and the poor.
One could think that these rules are universal. That this is just the way the world works and we have to accept this rigged game. But we don't.
We can create a new game with our own rules. We can create a currency that is run by the community instead of profit-driven banks. We can decide that this currency should be backed by delivery promises of services and real commodities, instead of being created out of thin air. And we can use cryptography (aka "mathematics & computers") to distribute accounting, freeing us from centralized institutions.
Such a currency would not try to replace the national currency but complement it. It can be used where conventional money does not reach or is not available. It would relief a single currency from having to fulfil contradictory roles.
What we need is people money that we can shape and design to serve our own needs, that follows our own rules.
The described problems are not intrinsic to money itself but a consequence of the specific rules of our modern money. It is not surprising that a game designed by private banks is mostly benefiting those who have money. But if they are caused by bad design, then each problem can be alleviated simply by better design.
So instead of using money that is not backed by anything and created with an accounting trick, we can design a currency to be based on real value. If each coin is backed by a delivery promise, then it has inherent value that is easy to understand and judge. These promises could be food, housing, electricity, work force or another currency. Such a currency cannot lose its value since it's bound to real things. And by limiting the promised amount to a reasonable proportion of what's actually available, such a currency cannot collapse as easily.
By giving out interest-free loans, a community can be free of profit-pressure and pursue goals more important than growth, like happiness, equality and sustainability. In such a system, non-profit organisations can exist more easily and even for-profit companies feel less pressure to exploit the environment.
Modern money is kept artificially scarce to protect its value. But a good medium of exchange needs to be abundantly available. By creating its own money, a community is free to make money when its needed. With their own money, people can transform their available assets, their skills and work force into economical power, pulling themselves out of poverty.
Because a single currency cannot serve all of its three purposes equally well at the same time, complementary currencies can fulfil specific roles, relieving the it from having to serve many masters and thus strengthen the national currency.
A community currency is guaranteed to stay within the community. The "community" can be limited to whatever people care about. The currency can be designed to support organic agriculture, to help local welfare organisations or give a discount on local products. With more opportunities for doing business locally, people have less reason to leave for the city.
Because the cost of duplicating digital goods is almost zero, many businesses give them away for free, depending on other sources of income like advertisement or selling user data. By eliminating transaction costs, creators of things like news articles and educational videos would be able to create income with the actual content, instead of having to sell banner spots. But not only on the internet would micro-payments make a whole new class of business models possible, creating a new kind of economy where really everybody can participate.
There are already many complementary currencies in the world filling many different niches where conventional economy does not reach. But although these currencies are meant to belong to the community, they are usually run by a central authority, using closed systems with central, access protected databases. In such a closed system, the data (the accounts and transaction history) doesn't belong to the people that created it. Instead it belongs to them, creating a data monopoly. In an open system, the data is democratized. If its users are not happy with how the system is run, they can always take their data and go somewhere else. This makes sure that nobody has absolute power over the currency and therefore cannot abuse their power.
We created groupcash to make it easier, cheaper and safer for anyone to create their own open currency. While it's not a currency itself, it can be used to create many kinds of currencies. This includes community currencies but also time banks, star ratings, local exchange trading system, frequent flyer miles, and many more. Go to groupcash.org to find out more about the project and how to start your own open, complementary currency with your own rules.