In Praise of Non-Debt-Based Money

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:

Note: Feasta is a forum for exchanging ideas. By posting on its site Feasta agrees that the ideas expressed by authors are worthy of consideration. However, there is no one ‘Feasta line’. The views of the article do not necessarily represent the views of all Feasta members. 

4 Replies to “In Praise of Non-Debt-Based Money”

  1. I discovered your website just today. browsing through some of the links and articles I was struck by the similarity between the ideas being expressed and those that were, briefly, current during the 1980s economic crisis, a period when I was politically actiev in the UK. I cannot help feeling that such ideas surface in times of crisis only to sink, not entirely without trace, but to lie dormant until the next crisis.
    One such idea of which I made a fairly extensive study in the mid 1980s is Social Credit whcih was devised back in the days of the 1920s/30s depression. It is kept a live by an organisation called The Douglas Social Credit Secretariat. I am not sure if you permit links in comments, many websites don’t. If you do, this will take you to the Secretariat’s website:

  2. A couple of comments. You say:
    “Money is created as debt by the banks. In return they facilitate the excessive deficit spending of governments.”

    I think referring to ‘excessive deficit spending of governments’ is a bit misleading, although it is probably the mainstream view.

    Since money is created under the current system by borrowing, then some kind of deficit spending is practically mandatory. If governments don’t borrow much, then individuals or companies must do so, and this is the more dangerous strategy, as the current Irish crisis shows very well.

    Private-sector borrowers much more likely to default, and at the peak of a boom may default in large numbers at more or less the same time, putting the entire financial system at risk. Just because the government then steps in and tries to bail out the banks and gets itself into huge debt in the process doesn’t mean that there was any initial excessive deficit spending by the state.

    If someone is going to have to borrow, then I think it tends to be better that much or most of the borrowing is done by governments. Not only is it much safer, it’s also much cheaper, since the state usually has a better credit rating than individuals or companies.

    you say: “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’”

    Good point. A couple of comments on avoiding “big government”. Firstly, although I’m very much in favour of non-debt based currencies, and believe therefore that governments should print/create a lot more money (and, of course eventually stop private banks from creating money), I don’t think such a system would have to involve giving governments new powers. In fact, I would want to see governments’ theoretical powers for money printing reduced.

    I say this because (with the exception of Eurozone governments), governments generally already have the right to print as much money as they want and do what they want with it. They generally refuse to use this power (saying it always creates hyperinflation), but then as we have seen more recently with ‘quantitive easing’, occasionally they do create money but instead of distributing it to the people as I would like to see them do, they invest it nearly all into the financial sector.

    In the kind of system that I would imagine coming into being, governments would lose the right to create, or not to create, as much money as they wanted. They also wouldn’t have the right to do what they wanted with it. They could still make spending decisions with money raised through taxation, but not with newly created money, which I would like to see distributed to the people. There would be clear rules on how much money was created each year, depending on the economy and the rules would be designed, of course, to ensure the integrity of the financial system.

    Finally, it’s precisely because of the worry that people would see it as “big government” that although there is much that I like about Richard’s ‘deficit easing’ plan, I tend to think it is a mistake to say that people without debt should be forced to invest in green industries.

  3. I do not understand why the author does not mention gold or silver as possible money alternatives. These commodities performed the functions of money for thousands of years. Modern money has grown out of commodity money and it is almost certain that commodities will return.

    Originally gold silver and copper coins were money. Goldsmiths set up banking facilities and issued reciepts for deposits. Bearers of the reciept were able to redeem deposited gold. This is the origin of paper money. Eventually banks issued more notes than the gold they posessed, setting up the fraudulent fractional reserve system. This transformed money from being a 100% backed currency to a fractional currency. Governments approved of this as they were able to use this system for their own benefit. Then governments created central banks, and regulated retail banks. Laws were created, which prevented individuals from using gold money and only banks were allowed to hold gold. This allowed governments to inflate money supply within its own jurisdiction freely and paper was not redeemable against gold. But other governments needed to redeem paper against gold, so the Bretton Woods system was set up. In 1973, the United States defaulted on its obligations and refused to allow redemption of gold and set up the pure FIAT currency system, with the dollar as the reserve currency.

    Since the 1920s particularly, the value of money has been transformed from the value of gold to the value of government debt. As governments issue more debt, more money is created, which is backed by this debt. Governments have transformed money and destroyed the value of money.

    The value of modern money is linked to the value of government debt. The amount of money backed by gold is negligible. Why not return to gold, rather than trying to create new valueless monies?

    If I want to buy oil, why should the Arab accept my Quid or whatever money I use. He may have his own ArabQuid, which I will need to have, so if I want to buy oil, then I will need to sell him something, like food to get his ArabQuid.

    Other problems, which you fail to address is the assault on liberty associated with some of your money solutions. It is proposed that holders of money should have restrictions on the use of their money. If I am free, then I should be permitted to enjoy the fruits of my labour in whatever way I want, assuming that I don’t trespass on another’s property rights. But if the proceeds of my labour is money, then you want to able able to restrict my use of this money. This is an assault on Liberty.

    Also, there is no reason to believe that any administrative system that you create will perform any better than the State driven system that we already have. Our State system derives its legitimacy from the fact that it is democratic, but it has systematically destroyed the life blood of society, money. It is unlikely that a free people will adopt a valueless money. The medium of exchange needs to be a previously valuable and marketable commodity.

    Finally, you get the issue of money creation exactly wrong. Once a floor on the reserve of a bank is established, it cannot create any new money. Today, new money is created at the Central Bank, when the retail bank calls in with his government bond as collateral for a new loan. The new loan is created from nothing. This new money creation is in exact proportion to the amount of debt that a government issues.

  4. Non-debt based money (at least the alternatives discussed here) are not a whole solution because they focus on money as the means of exchange, and on increasing liquidity and do not address how to store value. So it was probably a mistake to rail against the evils of debt as an introduction to the piece, maybe implying that there is a whole solution.

    I understand the attraction of reverting to a limited supply commodity to back debt because as you say the abandonment of the link facilitated the avalanche of subsequent fiat currency debt. Its outside the scope of this thread, but many people thinking along these lines want to see currency backed by something of worth (usually energy) rather than a commodity with no utility.

    Modern currencies are accepted because they are trusted based on experience, not because they are backed. So non-debt currencies have to build reputation and trust no matter what scale they operate at.

    The assault on liberty arguments are often used by proponents of the ‘free market’. Much of our freedom is already illusory – restricted and controlled. It’s a disingenuous argument cited to justify non-interference in dysfunctional systems with vested interests.

    Quids in Richard Douthwaite’s original proposal are given into circulation with no associated claim on assets. It’s difficult to take on board that this approach can work to ease liquidity, but it can. It’s reasonable, though to give it ‘with strings attached’. So in a Liquidity Network it may be given in expectation of various Positive Behaviours that help the currency. In a Deficit Easing context it may be given on condition that it is used to pay down debt and/or invest in green technology. This isn’t constraining liberty, it’s driving strategic objectives.

    The separation of function that is possible in non-debt money means we can think more clearly about specific monetary objectives. In the process hopefully it also helps disentangle real economies (food, energy, housing) from financialised economies (speculation, derivatives etc).

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