Towards more strategically differentiated money /credit creation and reuse

Every transaction between two parties involves a choice of where to direct money and/or how we spend our time. As individuals we have individual choices and consequent responsibilities with where we direct our own spending and attention. People are generally more aware of the consequences of their choices than they were. But money creators – those who bring money or credit into first use – have a special responsibility because only they have full agency and unlimited scope, and only at this point is the supply of money/credit aggregated sufficiently to make radical change possible quickly if that supply is redirected.

We are seeking a better Quality of money creation and exchange – better for quality of life, better for equality of opportunity, and better for planetary sustainability. Because on all three counts, as a global management regime we are doing very badly and the money/ credit ecosystem is a major factor in that poor, potentially terminally poor performance.

The Quality of Money: The First-Use of Credit, Government Spending and quantitative easing (QE)

The first-use of money and credit, in a sort of ‘revealed preference’[1] way, indicates what The Powers That Be consider to be their global priorities. And they are a long way from most people’s view of what’s important to them and their families. (And its also rather different from what TPTB *say* are their priorities!) The three ways in which money enters the economic system (bank loans, government spending and QE) are all dysfunctional in that they result in insufficient resources being deployed to address fundamental problems – with consequent impacts on quality of life and ultimately planetary survival. A closer focus on the Quality of allocation rather than a fixation with quantity is warranted.

The Quality Perspective

A 1970s management mantra was ‘if you can’t measure it you can’t manage it’. Economic narrative is generally dominated by the interpretation of numbers. Nothing can resist quantification. But as the manipulation and spinning of metrics becomes increasingly sophisticated (and increasingly documented) some scepticism is due. A more modern take on metrics might be ‘if you *can* measure it, it can be gamed’. There is a place for metrics but they should not function as a complete substitute for judgement[2].

Gaming numbers can take a number of different forms of which the simplest is selectivity. (Draw your bounds carefully and you can ‘prove’ almost anything). The most insidious form perhaps is exaggeration or misrepresentation of a metric’s significance. Thus GDP growth has erroneously come to be presented as a proxy measure for progress. In fact, GDP is a measure of activity including much regressive and toxic activity. (War and planned obsolescence are particularly good). GDP also excludes beneficial activities that can only be artificially expressed in monetary terms. The power of this ability to frame the ‘quantity’ narrative is so great – and apparently worth preserving – that any criticisms are generally met with an attempt to extend/ evolve the remit of the metric. Thus we have a notional economic value allocated to housework, and the nonsensical concepts of money-measured social and natural capital.

While not writing off attempts to get to the quantitative truth about matters, we should recognise that making decisions requires judgement. And for decisions that affect us collectively, this means it’s a governance issue. How do we collectively make decisions and how and when do we change the way we make decisions? If poor decisions are being made on the first-use of money and credit, we have to find ways to direct money into more progressive and/or productive use – that is into higher Quality transactions and activities.

The Gatekeepers

The commercial banks, government and central banks (to the extent they can be considered as separately constituted) are the gatekeepers of the monetary status quo. As far as the commercial banks are concerned there is no incentive for them to give up their privileged position as the creators and allocators of the vast majority of credit. Governments seem to have little appetite to reclaim this privilege, and indeed have implied their virtually unconditional support for undirected bank lending by repeatedly bailing banks out when crises occur. Governmental influence over strategic credit allocation is described as ‘picking winners’ – an activity that the private sector are allegedly best at, guided by the invisible hand of the market; and which governments in their ivory towers are distanced from. Unfortunately the long term effects of short term profit seeking are becoming clearer by the day. There is now an urgent existential need to pick winners.

Some economists have called for so-called credit guidance to be applied to the banks – particularly with the aim of directing credit away from financial speculation and asset purchases (including mortgages) and towards the productive economy [3]. This has happened elsewhere but in modern western economies there is little sign of movement. Lending against secured assets and to the financial sector is seen as more rewarding, especially when any subsequent losses can be socialised via bailouts. No mainstream political parties feature credit guidance in their current manifestos per se, though the recent UK Labour party manifesto does at least suggest a move towards more strategically directed government spending, commenting in passing that “profit has proved a poor regulator for use of our natural resources” [12]. In contrast, in August 2017 the UK Conservative government sold off its Green Investment Bank since there was ‘no strategic rationale to retain [it]’ [9].

From a central bank perspective there are mutterings about broadening the remit of the bank and discussions on green-QE (i.e. buying equity in green enterprises), against a background of lobbying from academics that the next BoE Governor should ‘serve the whole of society’[4].

Interestingly in economies where there is national-level direction, e.g. Singapore and most notably China, a form of state capitalism is outperforming western economies (GDP wise). Arguably these nations are better positioned to pivot towards more progressive planetary survival/ quality of life goals in that they have at least demonstrated their willingness to take responsibility. (We can only hope). It would be good to see western political parties making a more confident claim of sovereignty over credit allocation into the production of essential goods and services (see below re ‘stuff-of-life’). The absence of any such claim is clear evidence of the hold that the ‘private good/ public bad’ narrative has over the public, a hold that has to be broken.

Quality – who decides?

Feasta’s co-founder Richard Douthwaite prescribed that a currency should be controlled by its users [5}. It seems reasonable to extend his prescription into credit provision. But the statement begs a whole series of questions that boil down to the core issue of how to exercise democratic control. We live in a supposed democracy but the level of control we have as citizens over our own currency and over credit and spending decisions is minimal. It is true that we have some control over our own individual spending so that we can decide not to buy Israeli avocados, but the degree of agency is severely limited because of systemic effects. It is difficult to buy local when there is no local source of supply for the goods we want. And virtually all the goods available to us have embedded fossil fuel use so choices are often made on a least-worst basis. What is more much of the information that might help us to make more informed , discriminating decisions is hidden from us [6].

The boundary of a democracy affects the decisions it makes. The UK voted for Brexit but Northern Ireland voted remain. Within Northern Ireland Antrim voted to leave [7]. But rather than thinking solely in terms of geographic boundaries we might consider communities with a degree of shared values or common interests – a commons with a common pool resource comprising means of exchange, credit and money creation. Indeed Ostrom’s rules for a commmons emphasise the need to establish clearly the boundaries both in terms of the participants (who is in, who is out and how people can leave/ join) and a well defined common pool resource. Ostrom’s rules also provide some other guidance as to elements that might be incorporated into the governance of such a monetary/credit commons [8].

So while innovations in democratic governance within nation states are of interest, commons-oriented communities have a relatively clean slate when it comes to governance. Interestingly some emerging crypto currencies are developing explicit value-sets, and are majoring on governance design as a critical factor -incorporating approaches such as liquid democracy and participatory budgeting [10}.

Aspects of ‘Quality’

Ruling certain activity out of scope (low Quality) by definition makes the attainment of critical mass more difficult. But we are not seeking here a universal money monoculture. We are imagining a process for creating pieces of a new diverse monetary/ financial ecosystem – one that through its diversity is thereby more resilient and sustainable than a monoculture. So multiple alternative approaches will be valid – incorporating multiple alternative definitions of High Quality.

One key element of Quality is the quality of the participants – the people [or indeed organisations] receiving the credit/ providing the service/ sourcing the investment. Here we get into the difficult area of trust – trust that the credit will be used for the purposes claimed; that the services provided (or to be developed) will be fit for purpose; that the exchange is life enhancing. This assessment can eventually be supported by collecting the accumulated experience of the community over time. But from a standing start Quality can only be asserted by (a) recommendations from already trusted participants – a sort of MGM (member get member) adoption and/or (b) by stated commitment to an explicitly stated value-set or prospectus (possibly with sanctions for subsequent indiscretions – graded if we are to be Ostrom-compatible).

The value-set is a key element of any proposed monetary commons. What follows here is an example of a possible value-set. But it *is* the value-set that from my personal point of view gives all this intellectual pontificating some grounding.

Value-set Fundamentals

As a start Quality assessment might major on:

i) Local-preference. Preference for locally sourced products and services. A reflection of our over centralised economy and the anticipation of less cheap energy in future. (Note this doesn’t mean that participants have to be based in a geographic locality, just that localised interactions are a factor of superior Quality)

ii) Stuff-of-life. Energy, shelter, food and drink are priority followed closely by pro-social activity.

ii) Sustainability. i.e. being able to self-reproduce with a special focus on maintaining healthy common pool resources.

iv) Pro-community. Activities that help the developing commons to sustain itself as it evolves.

v) Perceived post-transaction sentiment. If after the event the participants feel it was high Quality, it was.

The irony of a Quality metric?

If a group adopts an assessment framework such as the example above, the natural inclination will be to give marks out of 10 for each desired attribute combined with a weighting system. The tyranny of numbers is persistent.

Changing the decision making process – forks and amendments

An empowering mindset might be that no decision or ruling is wrong provided it is made in a way that is transparently consistent with the governance rules the community sets for itself. That is perhaps helpful in ensuring a community doesn’t beat itself up after it makes mistakes.

But it still leaves the difficult area of how to change the decision making process. If the governance is transparent (which will probably mean open source in our digitised world), then the development can be forked – i.e. a sub-group can create a variation and move off into a separate project. However because of the adverse impact such a decision has on the attainment (or retention) of critical mass, this should be seen as a last resort rather than the default way of resolving conflict.

So if the emphasis should be on internal discussion and reconciliation of approaches, it will be useful to identify and compare decision making processes that allow for reflection and discussion, and mechanisms for such processes to change over time.

Postscript: Consequences for Degrowth Activism

To a large extent this analysis is ‘growth-agnostic’. That is, it is a valid perspective whether degrowth is inevitable or not and whether the green new deal is feasible or not. Indeed it would be valid even if climate change activism were to be proved alarmist. But the emerging consensus to the contrary does lend a sense of urgency to proceedings.


Misallocation of the first-use of money/ credit based largely on gatekeeeper-profit is having adverse societal effects and may eventually be terminal to the human race. Nation states already spend significant sums into circulation on health, education, infrastructure and other social goods. This spending is being gradually captured by for-profits via privatisation of public services and the direction of travel needs to be reversed. But this is not enough. Without a better strategic framework for directing the first-use, and an explanatory narrative to facilitate consent, this reversal of direction will be seen as simply ideological. Even with a new (and community-amendable) framework to help us discriminate, the issue of who allocates what purchasing power in which direction will remain fundamental and fiercely contested. Whoever said “Give me control of a nation’s money and I care not who makes its laws” [11] they were right …. on the money.



[2]: I am reminded of being involved in an evaluation exercise to choose a technical architecture where we listed key criteria and gave them weightings, and then scored the various alternatives against each criterion. When it didn’t come up with the answer we wanted we went back and changed the weightings.

[3]: Notably Richard Werner:


[5]: Richard Douthwaite: The Ecology of Money

[6]: ref Vinay Gupta (@leashless) and others. Arguably by design. Interestingly Gupta sees the censorship-resistant publication of this information (such as slave labour metrics or embedded carbon) as a key potential deliverable of blockchain and other Fintech developments.




[10] see for example: and

[11] Ërroneously (apparently) attributed to one of the Rothschilds


Featured image: Compass.

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2 Replies to “Towards more strategically differentiated money /credit creation and reuse”

  1. Dear Graham,
    Thank you so much for your wisdom. Your thoughts express the fact that many of us have parts of the plan for a much better world and I will do all I can to promote everything that Feasta publishes alongside my own activities with Carbon negative building.

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