Sunday, March 6, 2022

Cooking the Books: Silly money (2009)

The Cooking The Books column from the March 2009 issue of the Socialist Standard

We mentioned last month that currency crank ideas flourish in a slump as the problem appears to be a lack of money, as implied by the term “credit crunch”. The government itself seems to accept this view as it thinks that pumping money into the banks will solve the problem. As this is not working (because banks are not going to throw good money after bad by lending to firms they think won’t make enough profit, due to the slump, to be able to share some of it with them as interest) others are coming up with other proposals.

One of these is the Green guru, George Monbiot. In his column in the Guardian (20 January), headed “If the state can’t save us, we need a licence to print our own money”, he endorsed the proposal for local communities to be able to issue their own money. He mentions various historical examples from Germany, Austria and Switzerland (he was discussing a book on money by a German author that he had just read). All these happened to be linked to the ideas of the German currency crank, Silvio Gesell, mentioned in this column last month, whose pet theory was that money should lose its value if it wasn’t spent within a give time period. But they don’t have to be.

Monbiot makes the following claim for local currencies :
“We need not wait for the government or the central bank to save us: we can set this system up ourselves. It costs taxpayers nothing. It bypasses the greedy banks. It recharges local economies and gives local businesses an advantage over multinationals”.
Last September one such scheme came into operation in Lewes, Sussex. A “Lewes Pound” was issued and started circulating. But it seems more a scheme to get people to use local shops than an alternative, local, “green”, way of encouraging people to spend the way out of the crisis. As the organisers themselves say on their site (
“[I]t is easiest to think of it as a gift voucher or a book token: A Lewes Pound is a voucher worth 1 pound that can only be redeemed at locally owned participating stores.”
The Lewes Pounds get into circulation by people buying them for ordinary pounds and  are convertible back into pounds on demand. In answer to the question “What happens to the sterling pounds that are taken when people buy Lewes Pounds?” the organisers explain: “All Sterling pounds are held in a safe deposit box with a local bank, so that we can access them at any time should people wish to trade their Lewes Pounds back into Sterling”. They go on to say that this means that the introduction of Lewes Pounds won’t have an inflationary effect “as there is no additional currency added to the total pool because for each Lewes Pound that is brought into circulation a Pound Sterling is taken out of circulation.” In that case, then, it’s not an alternative way of pumping more money into the economy for people to spend a way out of the crisis.

The organisers themselves don’t make the wild claims for local currencies that Monbiot does. In fact they are surprisingly honest. In answer to the question “Isn’t it just silly money? Lewes Pounds aren’t going to make a difference” they reply “initially, it won’t make a difference from an economic perspective, as the number of Lewes Pound released is minimal compared to the size of the Lewes economy”.

That in fact is the whole point. All such schemes are only ever going to be marginal compared with the total amount of local buying and selling, debt settling and tax paying transactions. They are not going to make any difference in a depression. Their aim is essentially, as Monbiot puts it, to “give local businesses an advantage over multinationals”. Another inter-capitalist dispute not to get involved in, then.

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