A Surprising Solution for Unsustainable Property Buyouts


In this blogpost I will argue that extreme climate events like floods, fires and storms are causing both central and local government financial challenges. This will only increase with global warming. For councils the problem is worse. As we found out during Covid-19, the Reserve Bank can create new money but councils can’t. Continue reading “A Surprising Solution for Unsustainable Property Buyouts”

Banks’ Dangerous Power over What is Mined, Manufactured or Grown


The power of banks to create money as interest-bearing debt has a dangerous influence on the global economy. By allowing commercial banks to do this, we give them the power to decide what resources are mined, manufactured, and grown. And because they can also issue loans for real estate, banks effectively control the flow of money in our economy.

What? You say banks create money? Yes they do indeed and the Bank of England has explicitly stated this. And then they charge interest on it? That sounds like they have a ridiculous amount power. Well actually, they acquired it through several centuries of land enclosures in England. The land barons and industrialists became bankers and they affected the politicians who obliged by changing laws. The three groups also influenced universities’ economic teaching.

Margrit Kennedy in her book Interest and Inflation Free Money has described how money creation leads to an unequal distribution of wealth. Others have explained how it leads to destabilisation of the global financial system. Ultimately, this can cause economic hardship for many people and communities.

Douthwaite and Rowbothan have explained how it leads to a growth imperative.

The power of banks is immense when it comes to the creation and flow of money.

The Negative Consequences of Allowing Banks to Create Money as Interest-Bearing Debt

So let’s summarise the negative consequences of allowing commercial banks to create money as interest-bearing debt . This system gives these banks a significant amount of power and control over our economy.

  1. Firstly, it can result in an unequal distribution of wealth. As banks decide who to issue loans to and at what interest rates, they can inadvertently contribute to the concentration of wealth. This creates a vicious cycle where the rich get richer, while the poor struggle to access necessary funds.

2. Secondly, the reliance on debt-based money creation can lead to a high level of instability in the financial system. As banks issue loans, they expand the money supply and increase the overall level of debt in the economy. If borrowers are unable to repay these loans, it can trigger a domino effect of defaults, potentially leading to financial instability and economic downturns. The contagion can spread throughout the entire financial sector.

Commercial banks’ interconnectedness can amplify the transmission of risks. This interconnectedness can also contribute to the concentration of power. Large banks may become “too big to fail” and require government bailouts, putting taxpayers at risk as seen in the global financial crisis of 2008.

3. Allowing banks to create money as interest-bearing debt is the structural fault responsible for the growth imperative. How does this happen? Well, since banks create the principle but not the interest, there is never enough money in the whole system to pay interest. This means someone misses out and has to get another loan. This expands the money supply. So the economy has to expand. More mining, more material throughput, more energy, more trashing of the planet. More fast food, fast fashion and fast cars.

4. Lastly, this system allows banks to determine what resources are prioritised for extraction, manufacturing, and cultivation. This means that banks can indirectly influence what products are produced and consumed, potentially leading to overproduction in some sectors and underinvestment in others. Sustainable industries are ignored in favour of short-term gains.

Commercial banks, with their power to create money as interest-bearing debt, have the ability to create all these systemic risks in the economy.

But for the rest of this blogpost let’s just focus on the last effect.

Commercial Banks’ Dangerous Power over Business Investment

By allowing banks to create money as interest-bearing debt, we are essentially granting them the authority to determine what resources are extracted, manufactured, and cultivated.

This influence extends beyond simply financing these activities; it encompasses the very decisions regarding what should be produced and consumed. And all this without any concern for the environmental or social consequences of their decisions.

And it is not just the primary industry like dairy they fund. There are a number of industries adjacent to dairy that need loans too e.g. a firm that produces special paint for dairy sheds. Through the issuance of loans, commercial banks control the flow of money in our economy.

They have the power to fund businesses, drive economic growth, and allocate capital to various industries. Additionally, banks play a crucial role in providing loans for real estate, effectively shaping the housing market and influencing property prices.

There is an obvious problem here. Banks, being commercial enterprises, have no concerns about whether planetary boundaries are overshot. Bank decisions can result in:-

  • Soils ruined because agribusinesses have planted monocultures.
  • Greenhouse gases increased by banks lending to fossil fuel companies.
  • Clearing forests for agriculture (land use change). e.g. changing the Amazon from a carbon sink to a carbon source.

As degrowth in rich countries is becoming essential in a full world, degrowth advocates need to understand the role of banks in getting to this situation.

Banks’ Role in Determining What Gets Produced and Consumed

Through their lending decisions, commercial banks shape the direction of our economy. They can choose to invest in industries that align with their profit-making goals, often resulting in the prioritisation of sectors that generate higher returns. This can lead to overproduction in certain industries like the fashion clothing industry, while other essential sectors may be left underinvested and struggling.

By favouring certain industries through loans and financing, they determine which businesses can thrive and which ones struggle to survive. This can impact the variety and availability of goods and services in the market, limiting consumer choices and potentially distorting the economy.

Banks influence the mining industry

In the realm of mining, for example, banks may be more inclined to fund projects that promise quick returns, leading to environmentally harmful extraction practices. This leads to an emphasis on large-scale mining –operations that yield higher returns.

A Chinese mining company MMG wanting to mine zinc, copper and lead in 2021 found itself at odds with the conservation movement as it was to impinge on rainforests with national heritage value.

In the Dominion Republic of Congo campaigners say, “The mining industry has ravaged the landscape of the DRC. Millions of trees have been cut down, the air around mines is hazy with dust and grit, and the water has been contaminated with toxic effluents from the mining processing.”

It is clear this approach can have adverse socioeconomic and environmental consequences. It may disregard the long-term sustainability of resource extraction and neglect the needs and rights of local communities. While this can drive economic growth in the short term, it may not serve the long-term interests of society.

Banks decide what is manufactured

In manufacturing, a focus on industries with higher profit margins might prioritise industries that outsource labour or cut corners on quality.

The fact that it is profitable means it’s fine to manufacture private planes. Or more cars. Banks in Germany or Japan funded the cars imported to New Zealand. We have 895 vehicles per 1000 people (top in the world) whereas the Democratic Republic of Congo has 4. (Hedges Company 2023)

The fact that it is profitable means that outside electric heaters are not just produced but heavily advertised on television. What a waste of precious electricity!

Banks implicit in environmental damage from agribusiness including big dairy

Similarly, in agriculture, banks might favour large-scale, monoculture operations over smaller, sustainable farming practices due to their potential for higher profits. This preference can lead to an emphasis on large-scale, high-yielding practices of industrial agriculture. But they contribute to deforestation, loss of biodiversity, climate change, animal abuse and soil degradation.

This preference for industrial agriculture can sideline sustainable and environmentally friendly alternatives, such as organic farming or regenerative agriculture. Additionally, small-scale farmers and agricultural enterprises may struggle to secure loans, limiting their ability to invest in modernisation and productivity improvements.

Under the current system, commercial banks tend to favour lending toward sectors that promise high returns or quick profits.

In New Zealand bank loans to big dairy have resulted in pollution of the water table of Canterbury and in unswimmable rivers. As prices for milk solids rose, so did our dairy numbers. So over the last 30 years the number of dairy cows has doubled.

Climate Justice Taranaki’s spokesperson says, “For decades Maori have called on farmers to clean up their act and return stolen lands but we have just seen further pollution of waterways, reefs, soils, air and the spread of inequality in our communities by rich, powerful landowners.”

So what have been the effects worldwide? It’s cumulative. Humans and their livestock now account for 96% of mammals biomass, according to a 2018 study. This leaves wild animals at only 4%. Most of the world’s agricultural land is for raising animals for food for our species.

How can the influence of banks be neutralised?

It takes a government decision to slow or ban damaging industries. For example for the first time in history, Australia in February 2023 banned a coal mine north of Brisbane. And under Prime Minister Jacinda Ardern, New Zealand stopped issuing permits for oil exploration.

The only other way is for climate action organisations like 350.org to spend hours of volunteer time campaigning to get commercial banks to stop lending to fossil fuel companies. Ethical investment firms also steer their investors away from fossil fuels.

A Comparison of Business Loans versus Real Estate Loans

When it comes to commercial banking, two types of loans stand out: business loans and real estate loans.

Business loans are designed to fund various business activities, such as expansion, equipment purchases, and inventory financing. They enable businesses to invest in their operations and create job opportunities. Business loans can fuel entrepreneurship and support the development of new products and services.

On the other hand, real estate loans are primarily used to finance property purchases and development. These loans have a significant impact on the housing market and property prices. They influence not only homeownership rates but also the availability of rental properties and overall housing affordability.

Banks benefit greatly from rising land prices. That is why they love real estate loans. Small business owners, in order to get a loan, often have to mortgage their house, showing again that banks prefer the security of land.

The Need for Reforms to Address the Root Cause of the Problem

It is clear that the power banks possess in creating money as interest-bearing debt has far-reaching implications. These implications include an unequal distribution of wealth, an imbalanced allocation of resources, systemic risks within the financial system, damage to the environment, and displacement of indigenous people.

Only through addressing this fundamental problem can we hope to achieve a fair and sustainable economic system that benefits all individuals and communities.

We need a system where the allocation of resources is not solely driven by profit motives but also takes into consideration the needs of society as a whole.

It is going to take some powerful thinking and tough action. Through comprehensive reforms, we can pave the way for a more inclusive and sustainable future, where the creation and allocation of money serve the needs of all individuals and communities.

Local currencies, community currencies are useful when money is short


When money is in short supply, or when local communities want to ensure there is more resilience, someone often starts a community currency. Some survive, others don’t. One of the best was the Wōrgl shilling which was so successful it scared the banks. They successfully pressured the central bank to ban it. Here is a list of various currencies, many of which are still in use:

TitleCountryDatesReason Why It Stopped
Wörgl SchillingAustria1932-1933Too successful. Banks got into action. Outlawed by the Austrian National Bank
Ithaca HoursUnited States1991-presentStill in circulation
Bristol PoundUnited Kingdom2012-presentStill in circulation
ChiemgauerGermany2003-presentStill in circulation
Toronto DollarCanada1998-2013Lack of widespread adoption
BerkShareUnited States2006-presentStill in circulation
SardexSardinia2010-presentDigital currency, still in circulation. They employ 60 people
Baroon DollarAustralia2003-2013Decline in usage
Kelantanese dinarMalaysia2006-presentStill in circulation
Sol VioletteFrance2011-presentStill in circulation
Brixton PoundUnited Kingdom2009-presentStill in circulation
Lewes PoundUnited Kingdom2008-2013Lack of sustainability
TuminBrazil1994-2010Widespread acceptance of national currency
TorekesBelgium2005-2014Lack of support from local businesses
Damanhur CreditItaly1995-presentStill in circulation
Calgary DollarCanada1996-presentStill in circulation
EuskoSpain2013-presentStill in circulation
WIR FrancSwitzerland1934-presentStill in circulation
Hudson River HoursUnited States2006-presentStill in circulation
Linden DollarGuyana2003-presentStill in circulation


Local currencies are also known as community currencies or complementary currencies. It is no surprise that they have a rich history of being used in various places and times to stimulate local economies and strengthen community ties. These currencies operate alongside national currencies and are typically used within a specific geographic area.

Citizens have implemented them for a variety of reasons, mostly wanting to stop money from leaving their area. Spending in a local currency saves using precious national currency.

While some local currencies have thrived and continue to be in circulation, others have faced challenges and eventually ceased to exist. In this exploration, we delve into 20 examples of local or community currencies from around the world, highlighting their country of origin, duration of use, and the reasons behind their discontinuation.

Local Currencies in Historical Context

One notable example of a local currency is the Wörgl Schilling, introduced in Austria during the Great Depression of the 1930s. This currency was used to combat high unemployment and stimulate economic activity. It was soon called “The Miracle of Wōrgl”.

It arose after some decades of Gesellian movement. Silvio Gesell was an Argentinian businessman whose export business suffered greatly during a depression. Those who had money found that it increased because of interest. Those who had goods watched them deteriorate. He concluded that money should “decay like potatoes and rot like iron”.

So the Mayor of Wōrgl designed the local currency to circulate fast and it did! Anyone held it for a month would have to put a stamp worth one percent of its value on it to validate it. Consequently, the people of Wōrgl spent it fast; the local currency circulated many times faster than the national currency.

The local currency operated for only fifteen months. But look at the success!

“Taxes, in arrears since 1926, were repaid. Seven streets were rebuilt and asphalted, 12 roads were improved, the sewer system was extended, trees were planted and forests were improved. The construction of a ski jump was started in January 1933, along with the water basin for the fire department. A bridge in the town still bears the inscription Built with Free Money.”

Irving Fisher in his book Stamp Scrip

The currency was such a success in so many ways that over 200 surrounding towns wanted to copy it. However, the Austrian National Bank intervened, deeming the currency illegal. And unemployment soon came back. More on Wōrgl currency here.

Modern Initiatives

In recent decades, local currencies have seen a resurgence, with communities worldwide experimenting with alternative forms of exchange. The Ithaca Hours in the United States, launched in 1991, is one such example. It aimed to promote local spending and strengthen the local economy.

Unlike some other initiatives, the Ithaca Hours kept going for years and remain in circulation. This was largely due to the passion of its founder Paul Glover, but when he moved away the currency faded.

Similarly, the Bristol Pound in the United Kingdom, launched in 2012, sought to encourage spending within the city and support local businesses. It has been successful, but when they tried to convert it to digital using blockchain, they met difficulties.

Berkshares inland from Boston, started in 2006, has continued to this day. The secret appears to be that there are three banks that accept the currency and hundreds of local businesses. One Berkshare equals one dollar, which gives the users more confidence.

European Experiments

Europe has been a hub for local currency experimentation. The Chiemgauer in Germany, established in 2003, aimed to support regional businesses. Like the Wōrgl shilling it was designed to have a circulation incentive. Its website says it has over one million Euros in circulation.

The Sardex in Sardinia, launched in 2006, serves as a digital community currency for transactions among businesses. Its adaptability to the digital age has contributed to its sustained use. By 2015 it had the equivalent of 51 million Euros in circulation. It is expanding.

Challenges and Discontinuations

However, not all local currencies have enjoyed a smooth existence. The Toronto Dollar in Canada, introduced in 1998, struggled to gain widespread acceptance, leading to its discontinuation in 2013.

Similarly, the Baroon Dollar in Australia, introduced in 2003 in Maleny, faced a decline in usage and eventually ground to a halt. This underscores the importance of ongoing support for the success of local currencies. Local currencies most often depend on the continued devotion of volunteers.

Currencies with Cultural Significance

Some local currencies are tied to cultural or religious values. The Kelantanese dinar in Malaysia, introduced in 2006, was intended to promote the usage of gold and silver in accordance with Islamic principles. Its continued use reflects its significance within the local cultural context.

The Sol Violette in France, established in 2011, aimed to promote sustainable development and social justice. Its success illustrates the potential for local currencies to align with broader societal goals.

Mixed Results and Lessons Learned

While some local currencies have faced challenges and discontinuations, others have managed to adapt and thrive. The BerkShare in the United States, launched in 2006, became a model for other communities considering similar initiatives.

On the other hand, the Lewes Pound in the United Kingdom, introduced in 2008, struggled and eventually went out of existence in 2013.

Global Perspectives

Local currencies have not been limited to Western countries. The Tumin in Brazil, established in 1994, aimed to address economic challenges in a socially equitable manner. Its discontinuation in 2010 reflects shifting economic dynamics and changing priorities.

The Torekes in Belgium, introduced in 2005, aimed to promote sustainable development and support local initiatives. However, insufficient backing from local businesses contributed to its eventual discontinuation in 2014

Continued Relevance and Innovation

Some local currencies have stood the test of time and remain in circulation. The Damanhur Credit in Italy, introduced in 1995, is still used within the Damanhur spiritual community. This is typical of the lasting impact of local currencies on close-knit communities.

In Canada, the Calgary Dollar, established in 1996, continues to facilitate local trade and foster community connections.

Newer Entrants

In more recent years, the Eusko in Spain, introduced in 2013, has gained traction by promoting local sustainability and reinforcing Basque identity.

The Hudson River Hours in the United States, launched in 2006, have continued to be exchanged within the local community, contributing to a sense of shared prosperity.

Global South and Cultural Heritage

The Linden Dollar in Guyana, introduced in 2003, showcases how local currencies can celebrate cultural heritage and promote local economic resilience.

In conclusion, local currencies have been used in various places and times to address economic, social, and cultural challenges. While some have faced discontinuation due to bad design, legal issues, or volunteers moving away, others have managed to remain in circulation and contribute to a vibrant local economy and stronger community ties.

It is important to secure funding for workers or brokers. However, none can really thrive long-term unless they are acceptable by either rates, power or insurance. Of course, it is best if it the council accepts it for rates.

I have argued this elsewhere. These days the currency must also be digital. These examples illustrate the diverse ways in which communities can use local currencies as tools for positive change.

Solve local councils infrastructure problem – let councils create their own money

FacebooktwitterredditpinterestlinkedinmailIn the news every day is the struggle of local councils to pay for their necessary infrastructure, especially after floods and cyclones. This article describes how councils can create their own money. Read what has been done before in Guernsey, Europe, Egypt with great results. Continue reading “Solve local councils infrastructure problem – let councils create their own money”

Negative interest rates are very different from a demurrage currency

FacebooktwitterredditpinterestlinkedinmailWith the prospect of New Zealand one day going as far as negative interest rates, we need to examine the consequences of that. The trouble is that those of us who know a little about demurrage currencies tend to think they are the same, whereas they are very different. Continue reading “Negative interest rates are very different from a demurrage currency”

A dual currency system

FacebooktwitterredditpinterestlinkedinmailCovid-19 in New Zealand has resulted in the loss of thousands of jobs, including from Air New Zealand, Auckland Council, Fletchers, Millennium hotels, Sky City, Ngai Tahu and Bunnings. With the first round of wage subsidies ending in June and the second round ending in September there will be thousands more jobs to be lost. Despite the fact that on Monday 8 June we moved to Level One and we can all move around normally within our country, there is no sign of overseas tourism starting up again or Air NZ getting back to 2019 levels within the foreseeable future. Continue reading “A dual currency system”

It’s our Superpower to create money says Reserve Bank chief economist


On Tuesday 19th May 2020 John Campbell, the then host of TVOne Breakfast, interviewed Yuong Hu, Chief Economist of the Reserve Bank of New Zealand and asked him about printing money. If the Reserve Bank is going to buy billions of dollars in Government bonds where does the money come from? Continue reading “It’s our Superpower to create money says Reserve Bank chief economist”

Which do you fancy – Economic Growth or Financial Collapse?

FacebooktwitterredditpinterestlinkedinmailI have now watched a TED talk on this topic twice and can’t help but respond. Ecological economist Marjan Van Den Belt is right when she says “we are mindlessly addicted to economic growth, we are growth junkies.” She advocates reciprocity in economies and says that is the key to a circular, sharing, regenerative economy. So far so good. Continue reading “Which do you fancy – Economic Growth or Financial Collapse?”

Designing a new economy without addressing money system or tax system is futile

FacebooktwitterredditpinterestlinkedinmailIf you want to design a political economy that works, you actually have to go to the roots. That means the money system the tax system, the welfare system and the governance system. So I was shocked to read the six winning essays in The Next System’s essay competition to discover that so few of them had addressed the money system or the tax system. Continue reading “Designing a new economy without addressing money system or tax system is futile”