Re-Imagining Money And Banking

For the last three decades, Dr. Margrit Kennedy has been advocating for a transformation of the world money system, for the introduction of complementary currencies and interest and inflation-free money. She proposes a sustainable money system, unlike the current system, which she argues is unsustainable because it builds expectations for exponential “cancer-like” growth into the economy, leading to constant ups and downs, and eventually to a complete collapse.
Dr. Kennedy, a professor of ecological building technologies at the University of Hanover, is an architect by training, with a master’s degree in Urban and Regional Planning and a Ph.D in Public and International Affairs. However, she is probably better known for her activism and advocacy for the need to transform the global economy. Her best known book, ‘Interest And Inflation-Free Money,’ which was first published in 1987 and has been translated into more than twenty languages, details her ideas of how to create a currency that works for everybody, not just the rich, while also protecting the Earth.
Inspired by Icesave
Dr. Kennedy decided to come to Iceland because she felt something special had happened—the stirrings of important change—that gave her hope because, as she argues, small countries can affect change more easily than large countries. “I get invitations to speak all the time, and I regularly turn down invitations, but I had this feeling that here is a country where people are ready for something new. So, I wanted to come to Iceland and see for myself if people have understood the danger of the money system, and to talk to people. I wanted to talk to people and bring these ideas into the public debate.”
What she found especially inspiring was the two-time rejection by the Icelandic public of the Icesave deal: “That was brilliant and inspiring,” she says. Generally, foreign activists view the Icelandic action as one of defiance, a message to the global financial system that the public does not want to pay for the reckless behaviour of bankers. Dr. Kennedy argues that the international community would be receptive if Iceland were to travel down this road: “People all over the world would be relieved!”
Judging by the reception Dr. Kennedy got at her lecture at Háskólabíó, there is considerable interest in Iceland in rejecting the current money system. The lecture hall originally scheduled for her event turned out to be too small, so she was moved into a second, larger auditorium. Clearly her ideas are finding a receptive audience in Iceland.

What is wrong with the system?
Dr. Kennedy explains that it is the money system, based on interest and compound interest, as she puts it, that is the core problem with the current economic system by making actual production “a side issue” and the real economy “a side issue to a global gambling casino.” Her key insight, really, is that the current system fails to serve people: “The major goal of the current money system is to make more money out of money,” she says. “Other goals—social, cultural and ecological—have a difficult time making money, so we need to create other money systems for those goals, because they would enrich our lives.”
The constant demand for growth, in her view, is a consequence of the need to pay interest. These interest payments also influence all investment decisions, creating a need to cover both the interest payments and a reasonable return on investments. “And on top of everything else, it only serves ten percent of the population!” she says, pointing out that around 90% of all interest payments are accrued by the wealthiest ten percent of society, which make interest payments a very efficient tool of income transfer and exploitation.
“But we can work against this by introducing complementary currencies which will make the whole system more stable,” she says, “a system that serves us, money that serves us, rather than a system that we serve.”
Complimentary currencies
There are essentially two elements to Kennedy’s ideas of social change. Firstly, she advocates credit cooperatives, in which people themselves can control and decide what they invest in. She argues for transparent banking, noting that “it is absurd that the banks know everything about us, but we don’t know anything about them.”
The second part of her argument is more original—the creation of complimentary currencies, which are either regional or sectoral. They are called complimentary systems because they are intended to operate alongside the existing system. “This is an evolutionary idea,” she explains. “I am not interested in a social revolution. I believe in evolution. I am not out to abolish money! Money is an important invention. What I want to do is to make it serve us, not the other way around. These systems will only grow to the extent they are useful. Unlike the present system which grows to the extent it is not useful.”
Aside from the main point, that complimentary money systems could avoid the built in inflationary pressures and the demand for interest payments, her argument for complimentary currencies is essentially threefold. First, this kind of system would be more stable than the current system: “Rather than having one monetary system, we should have a multitude. An analogy would be a monoculture forest, which if infested by a beetle, causes the whole forest to collapse, whereas a polyculture forest contains many systems, and it is not as serious if one of them breaks down, because we will still have others.
A second is that they counteract or restrict globalisation. Kennedy argues there are some advantages to globalisation, but at the same time there are big disadvantages, especially when it comes to the globalisation of the world financial system, which has taken on a life of its own. But even when it comes to trade, Dr Kennedy believes finding ways to strengthen local trade at the expense of global trade would be a good thing. “All the things you need to survive—food, water and essential services like waste disposal—all of these things are best organised on a smaller and more local scale. Here we can use specific currencies, like the regional currencies. Strengthening local, regional economies is also consistent with a desire for smaller units, which would benefit greatly from complimentary currencies.”
The third argument is that they can help fund sectors including educational, health and ecological projects, that have a difficult time getting funding in the current system due to its demands for growth.
Dr. Kennedy points out that this is no pipe dream: There are numerous complimentary currency systems in operation today. She takes the Japanese ‘Furei kippu’, or “care ticket” system as an example. The basic unit of account in this system is an hour of service to an elderly person. Young people earn these hours by spending time with elderly people, helping them at home, going to get the groceries or simply providing them company. The young people can then keep these credits and redeem them when they themselves get old, or they can send them to their elderly relatives who live in a different part of the country. Obviously this system is free from inflation: An hour is an hour now or twenty years from now, and there is no way to pay interest on an hour of care.
Another world is possible
The key issue for Dr. Kennedy is that we need to become aware that these things are in fact possible, that we can reject the current money system. “It is not something we cannot influence, it is something we have created and we can change,” she says. “If people understood there is an alternative, they would choose it.”
The problem, she argues, is that those who are in the best position to change the system also have the greatest interest in not changing it. “Even if the few rich know the system cannot continue forever, they also have the greatest interest in not changing it.”
Despite this, there is a lot we, who do not sit at the apex of financial power, can do: “People can become aware that they have influence, that how they use their money matters, for example whether they support big or small businesses, the globalised economy or the local, regional economy. People can join groups that aim at changing, and criticising the system. For example Attac, which fights financial globalisation. The ‘Tobin tax’, a financial transaction tax they have championed, is a very good idea—it has been calculated that this tax would eliminate poverty in Germany altogether.”
And affecting change is definitely possible in her view. “We need maybe 10% of the general population to understand that there is an alternative. Sociologists have found that if you reach 10% of the population and convince them to change things, then something will change. Not everyone needs to understand! So, this is the good news.”
“She argues for transparent banking, noting that ‘it is absurd that the banks know everything about us, but we don’t know anything about them.’”