The Monetary Cliff: Its the Driver behind Deficits and the Fiscal Cliff - Rethinking our Centralized Fiat Money System

Lessons we can learn from this analysis are the following:

• If we want a society whose purpose is democratic, the structure and decision making of our money system will have to be based on trust and 'power with', not 'power over'.

• Ultimately borrowers (traders) are the functional creators of money, rather than the banking system, a nd ultimately the market is the guarantor of those funds, not the banks. Therefore the rightful holders of seigniorage, the collateral pledged for loans, and the decision makers concerning who should create money and receive loans, (the holders of seigniorage) are the members of the market, not the banking system.

• Demurrage promotes long term thinking.

Suggestions for possible characteristics of a sustainable monetary system

• Embodies local democratic control, putting decision making at a level where people know each other, are capable of making decisions that are consistent with the dynamic of 'power with' and are based on their individual interests and the interests of their community.

• Local democratic control also takes away the structural incentive for accumulation of centralized power.

• Non profit. So that money can be exclusively a service, it is imperative that the organizations that manage its creation are not-for-profit. Profit becomes a driver for greed and concentration of wealth. This sets the tone for all transactions using it to do the same.

• Incorporates mutual credit, rather than managed money creation. This puts seigniorage where it belongs, in the hands of those who are making a commitment to their fellow money users. The money supply is self regulated by trades being made. Self regulation is much more immune to manipulation than central control, and automatically reflects the money supply needs of users. The money supply is free to increase or decrease according to need rather than have to continually grow, as in the present system, or to be second guessed by a central monetary authority. Community members can be much more effective in deciding what their needs are, and how to maintain solvency and economic balance than are profit oriented banks.

• Locally based. Any new system needs to be prototyped on a small scale, and operated at a local level. Communities are like businesses, individuals, and national governments, in that they have to have balanced budgets in order to remain healthy. With local money creation, this becomes possible to do.

• Growth can occur by multiplication and connection, rather than by biggerization. This makes for a much more robust and less fragile money system.

• Promotes maintenance of balances close to zero, not always keeping a positive balance. The principle of assuring that all budgets stay balanced (all account balances remain near zero, or return to zero) must be built into the structure of any monetary system, if it hopes to be stable over time.

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