In Praise of Non-Debt-Based Money

Nov 01, 2011 4 Comments by

The debt we accumulate as individuals, companies and governments is instrumental in depleting the planet and deepening the rich-poor divide.

This ‘value-led’ critique is powerful and compelling to those wishing to listen, but it is not enough, of itself, to procure any meaningful systemic/ structural change in the monetary regime. We need to communicate widely about the side-effects of debt-based money, and to help people to imagine non-debt based alternatives.


When the Christian Council for Monetary Justice (CCMJ) talks about ‘insidious distortions in our way of life, generated by usurious money creation’ it is tempting for secular economists to pigeon-hole their views as uninformed minority religious fundamentalism. The Christian Church hierarchy has progressively re-classified usury (charging interest on loans) from deadly sin to ‘dont overdo the interest’ to grudging acceptance, so maybe the CCMJ are themselves off-message.

But growth can’t go on for ever on a finite planet, and for interest-debt to be repaid we need continual growth. So the sooner we design healthy no-growth monetary systems the better. Maybe they will be evolutionary currencies working in parallel; maybe they will be revolutionary replacements. The former might be less traumatic, but dams dont tend to burst in an ‘evolutionary’ sort of way.

The currency functions of means-of-exchange/ liquidity and store of value currently have to be balanced because in any single currency domain they act against each other.

A dual or multi currency approach gives us opportunities for designer currencies where we can use different monies for different objectives.

The existing ‘free market’ understands the mechanics of debt-money even if it can’t price risk or predict movements. And these mechanisms themselves make money in terms of transaction charges, so any move into the unknown (i.e. substitution of a chargeable transaction revenue stream) will be unpopular. So if we want an evolution, it will be important to develop innovative investment vehicles to replace the arcane derivative ‘investments’ of the casino economy.


Money is created as debt by the banks. In return they facilitate the excessive deficit spending of governments. Debt is central to the system.

During boom times money is cheap and lenders push loans aggressively. The profits on lending are virtually risk free, especially if governments underwrite failure. When the bust comes money is in short supply and assets can be bought up cheaply in distressed sales, to be sold again at a profit once the liquidity returns. There are profits to be had in both parts of the cycle.

Of course, borrowing money is not compulsory. Not for individuals – other nationalities do not share the UK/US fixation on heavily borrowed house purchase. Not for companies – though the competitive advantage apparently achieved from highly leveraged buyouts makes standing back a difficult choice for big business. Not for governments – though they do need to facilitate large scale capital projects.

But the prevailing zeitgeist at all three levels has been to live now pay later. Lenders know the force of peer pressure and trade on it. Not much effort is needed to keep governments on board. Most politicians do not understand the extent to which they are complicit, nor that there are alternatives.

But is this a jaundiced view of debt?

Why shouldn’t individuals make informed choices to borrow in order to live *now* in a style that would otherwise only be available to them later? Why shouldn’t a company back itself to generate a better ROI than the interest charged on its loan and derive a profit? If a company can organise a leveraged buy out of a more efficient competitor and take it out of the market, why shouldn’t it? If a government can borrow to build hospitals and schools why wouldn’t it?

Unless there are better ways.

Non-debt currencies (such as Feasta’s Liquidity Network) have so far been largely designed as local/ regional interventions – currencies improving local liquidity and local economic competitiveness. They reduce the amount of currency leaving an area (leakage) by facilitating, promoting and accelerating the exchange of goods and services within the locality.

One big question is whether this type of approach is ‘scalable’ and can be applied to a national parallel currency (see The Parallel Punt).

Another non-debt currency opportunity – Deficit Easing – has been proposed by Richard Douthwaite. In this case the non-debt money is issued straight to citizens (with some strings attached as to how it can be used).

Exploring these options will re-empower governments who may, in the process, review the rationale of using banks as the sole currency issuance intermediaries of the state.

If states subsequently use non-debt variations in the national currency mix, to manage the liquidity/ store of value balance, this must be seen as taking proactive responsibility for redesigning dysfunctional systems and not as a trend towards the free-market- detested spectre of ‘big government’.

It may even encourage a revaluation of the respective roles of the real economy (food, housing, energy) and the financialised economy. We will always need the former, but who notices when a casino is closed apart from the gambling addicts?

Featured image: Roulette wheel. Author: Richard Styles. Source:

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About the author

Graham Barnes is a Currency Designer. @GrahamJBarnes He is a Member of Feasta's Co-Ordination Group and co-organiser of the Feasta Currency Group. He holds a PhD in Computer Science and worked at a senior level in IT and online marketing in a previous life. His current projects include the detailed design and delivery of currencies to be sponsored by a local authority; by a social entrepreneur to complement and enhance a well established sustainability methodology; and by a restaurant chain.

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