"What is now being called the 'Great Recession' shows no sign of ending either in the U.S. or elsewhere in the world. What then should be done? In many locations people are increasingly turning to creation of alternative currencies. But can these really be effective? This and many other questions will be addressed by Richard C. Cook, author and retired U.S. Treasury analyst." As a resident of Roanoke and director of the Peace Spiritual Center, Richard brings a wealth of information and an open-eyed critique of the most discussed solutions as well as examples from both ancient and recent history.

1. Alternative Currencies:
The Solution to the Economic Crisis?
Howery Mezzanine,
Roanoke Main Library
January 23, 2011, 6:30 p.m.
by Richard C. Cook
1

2. About the Author
• Retired after 32 years working as an analyst for the federal government,
including the Carter White House, NASA, and 21 years with the
U.S. Treasury Department.
• Author of several books, including We Hold These Truths: the Hope of
Monetary Reform.
• Resident of Roanoke, VA, co-founder with wife Karen of Peace
Spiritual Center, and speaker at Lifestream Center and other venues.
• September 2011: Keynote speaker at annual convention of the
International Reciprocal Trade Association, Riviera Maya, Mexico.
• Featured in November 2011 issue of Valley Business Front.
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3. 2012 and the World Economic Crisis
• We are in the midst of the “Great Recession”
• Economic stagnation in the world’s largest economy: the U.S.
• Failure to recover from the crash of the housing bubble
• Massive debt worldwide: entire nations going bankrupt
• Personal debt slavery a reality for millions of people: average U.S. family
of four owes over $600,000 in all types of debt including government
• Unprecedented inequalities of wealth
• Increasing worldwide unemployment
• Dominant political power in the West remains the financial sector
3

4. Facts About
Government Debt
#1 During fiscal year 2011, the U.S. government
spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.
#2 When Ronald Reagan took office, the U.S. national debt was less than
1 trillion dollars. Today, the U.S. national debt is over 15.2 trillion dollars.
#3 During 2011, U.S. debt surpassed 100 percent of GDP for the first time ever.
#4 The U.S. government spent over 454 billion dollars just on interest
on the national debt during fiscal 2011.
#5 During the Obama administration, the U.S. government has accumulated
more debt than it did from the time that George Washington took office
to the time that Bill Clinton took office.
#6 If you divide up the national debt equally among all U.S. taxpayers,
each taxpayer would owe approximately $134,685.
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5. Solutions?
Progressives and conservatives offer contradictory solutions:
• Raise taxes vs. cut taxes
• Increase federal spending vs. reduce federal spending
• Restore the gold standard vs. more fiat currency
• More bank regulation vs. less bank regulation
• Free trade vs. protectionism
There is no real confidence or consensus that
any of these will work.
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6. No solutions in sight except “austerity”
But austerity for whom?
6

7. Roadblocks
• In industry after industry the need for workers has plummeted due
to increasing automation, greater productivity, global competition,
and collapse of “demand.”
• Economic growth requires capitalization, but capital is being used in a
limited way due to hoarding and conversion to long-term assets.
• Competition for resources may be ending the industrial age, requiring
that economic growth be based on innovation; thus a business climate
that fosters innovation is essential.
• Bank lending at interest is not a viable substitute for stagnant consumer
income or shortage of capital investment. Anyway, banks are not lending.
• The financial volatility of the past 20 years has created an
atmosphere of risk aversion. 7

8. The “Gap”
In a modern industrial economy the ability of the economy to produce goods and
services vastly the income paid to workers that is available to purchase the output.
This gap may amount to 25 percent of GDP and results from corporate and individual
savings (including hoarding and hedging against risk).
Keynesian economics was invented 80 years ago to reduce the gap through
government borrowing.
Today, with government debt out of control, the gap is made up for by borrowing from
banks for consumption. This solution is unsustainable and is why society is ever
deeper in debt.
The housing bubble was an attempt to close the gap by inflating housing prices.
It worked…..for while. Then the bubble burst.
8

9. Bubbles Always Burst
The housing bubble exposed the fatal flaw in modern economics:
• From the early 1980s to the present the U.S. has been shipping its
manufacturing jobs overseas and trying to make up for it through
an increasingly dominant and manipulative financial sector.
• After the “Dot-Com” bubble burst in December 2000, the Federal
Reserve and the Bush administration were facing U.S. bankruptcy.
• To finance the tax cuts for the rich and the wars in Afghanistan and Iraq
they created the housing bubble; housing prices skyrocketed.
• By 2005 half the growth in the U.S. economy was in the housing sector
but by 2007 the bubble was starting to burst.
• The economy crashed in the autumn of 2008 causing the government to
step in with the multi-trillion dollar bank bailout.
• Housing prices plummeted, have never recovered, and never will.
• The U.S. economy has not recovered and has dragged down the rest
of the world with it. This is the genesis of the “Great Recession.”
• The bursting of the housing bubble may someday be viewed on a par
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with the stock market crash of 1929.

10. The Housing Bubble was
Created Deliberately; Its
Effects Were Disastrous
Truthout reported on Jan. 16, 2012:
“Today, an estimated 29 percent of all homes with mortgages are underwater.
In addition, at least one respected analyst estimates that a total of 14 million homes
will be foreclosed on from 2007 to the end of the crisis.
This represents a hard-to-imagine one in every four mortgages. With foreclosures
increasing, there is now such a looming imbalance of supply and demand that,
as the Fed notes, further decreases in home prices are likely.
Some believe home price reductions of another 20 percent are likely. This would,
in all likelihood, have disastrous consequences on at least three fronts —
and ripple effects that are impossible to predict.”
The three fronts are 1) negative impact on consumers; 2) chaos in the mortgage
financial markets; and 3) more social unrest.
Truthout, “The Foreclosure Crisis: A Government in Denial,” by Bruce Judson
10

11. How Could Such a
Thing Have happened?
“…the Fed had become the government’s main
tool for pumping bubbles. There was
nothing else up the sleeve; it was all there was so
far as a government strategy for growth. It was the
tried and true method developed under President Clinton. And it worked. Until it didn’t.
And won’t any more. Unfortunately, neither President Obama nor the likely Republican
candidate, ex-governor Romney have anything up their sleeves, either.
And the US economy will not recover until housing recovers. And housing will not recover
until the Banksters are shut down. Because they’ve got all the dogs in the hunt—they
cannot recognize the real estate losses because their exposure is too big.
It’s the biggest Catch 22 the world has ever seen. The big banks must be
resolved—shut down—to relieve the pressure on homeowners, but that cannot
happen because the big banks are too big to be shut down.”
L. Randall Wray, “Mortgage Fraud Revisited: Why Did the Fed Pump and Dump U.S.
Real Estate Markets?” 11

12. Revolution?
12

13. War?
13

14. Or Renewal?
14

15. Demystifying
Money
There is no topic less understood by the general public than that of money.
Money is viewed as sacred, arcane, mysterious, hard to get and keep, an object
of lust and temptation, etc.
If you find this hard to believe, read a famous book: The Secrets of the Temple:
How the Federal Reserve Runs the Country by William Greider. Explains how the
banking system controls the money supply which in turn controls everything else.
15

16. So Where Does
Money Come From?
The Bank?
In the U.S. and other modern nations,
the banking system, international
in scope, has gradually taken over
economic and political systems.
But, the U.S. once had a mixed monetary system of gold and silver currency, notes
Issued by both state-owned and private banks, government-issued Greenbacks,
barter, and scrip. The private banking system took over through a series of steps
including the National Banking Acts of 1863-4 and the Federal Reserve Act of 1913.
The Federal Reserve System is owned by private banks.
Under the New Deal the banking system was tightly controlled by the Roosevelt
Administration. Since the 1950s the power of the biggest banks, centered in Wall Street,
has grown to their dominant position today, particularly during and since the
Reagan years. They show no sign of relinquishing this control. 16

17. Putting the Banks
In Their Place
Modern banks are licensed to create money out of thin air through the fractional-reserve
system that was invented during the Renaissance and institutionalized through the Bank
of England, founded in 1694. Operating under a public charter and using public credit as
capitalization means that credit should be treated as a public utility and a public trust.
The banks abuse this privilege through excessive profits due to interest (once called usury)
and control of the economy through issuance of money. They do this through fractional-
reserve book-entry lending.
Not only should banks be more highly-regulated but debt-forgiveness should be
legislated when it becomes excessive. Bankruptcy does this but with too many restrictions.
Many types of debt can never be forgiven, including taxes, alimony, and student loans.
Through other types of monetary reform people would not have to borrow as much
and banks could be restored to the servant of society and not the master. 17

18. In reality money is anything
that can conveniently serve as
a) a medium of exchange
and/or b) a store
of value.
Anything!
18

19. A Small Sampling of Money in History
Yap Island Stones Precious Metals Livestock Fiat Coinage
Tobacco Bank Notes Wampum Securities
Heroin
Cocoa Beans Bytes 19
People

20. Medium of Exchange:
How Important Is It?
• It’s the most important concept in economics; yet how often do you
hear it discussed as something society can and should control for
public benefit?
• It’s literally the life-blood of the economy. Without it an economy dies.
• It’s the duty of every government at every level to assure a sufficient
quantity of a medium of exchange to move the production and trade
society has available, including all available labor.
• When is the last time you heard your political leaders talk about
approaching economic problems from the point of view of providing a
satisfactory and sufficient medium of exchange? 20

21. Out-of-the-Box
Solutions
To the Crisis
• Change the system of money-creation at the federal level
• Consumer pooling of financial resources: e.g., credit unions
• Charitable giving for start-up capital
• New and creative niche enterprises
• Worker-owned businesses and worker/consumer co-ops
• Alternative or complementary currencies
21

22. National Emergency Employment Defense Act of 2011
Dennis Kucinich’s NEED Act
Proposed to Congress as H.R. 2990.
Based on American Monetary Act
of American Monetary Institute.
Federal government would create money by spending it into
circulation for infrastructure improvements.
Federal Reserve would become an agency of the U.S. Treasury Department
while a separate Monetary Authority would make monetary policy for the
government .
National debt would be paid off by government-created money as the debt
became due.
Private banking system would be removed from control of the economy. 22

23. Programs like the
Western North Carolina
Fibershed Initiative
aim to create new local
economic engines.
Within 100 miles of Asheville, NC, there are:
· 405 fiber art professionals Program is sponsored by
· 2500 fiber art hobbyists
· 80 galleries with fiber art Handmade in America and
· 83 textile-related retail shops powered by the
· 51 yarn shops Internet.
· 462 fiber animal farms
· 5000+ fiber animals
· 21 cotton farms
· 7 schools & colleges teaching fiber arts
· 12 textile mills, both large and small
23

24. Worker-Owned Co-ops:
Mondragon
• Founded in Basque region of Spain in late 1940s by a Catholic priest.
• First institution was a technical school; first business was a stove factory.
• Based on spiritual ideals of cooperation, self-help, community-based
decision-making and lifetime employment.
• Run by a Congress which every employee belongs to and has an equal voice.
• Financial resources and earnings are pooled and managed by a cooperative
bank—no outside financing; they take no loans from any commercial bank
and sell no public shares.
• Fully competitive in modern global economy; not only runs its own businesses
internationally but builds factories for other businesses. 24

25. Basic Income Guarantee Movement
U.S. Basic Income Guarantee Network
(BIG); comparable movement
internationally called BIEN
1960s proposals by Milton Friedman,
Daniel Patrick Moynihan, Dr. Martin
Luther King, Jr., and President Richard Nixon
Earned Income Tax Credit
Alaska Permanent Fund
The Gaia Plan
What would have happened in 2008-9 had the government bailed out
the people instead of the banks and given away $10,000 per capita?
25

26. Social Credit/
National Dividend
• Worldwide movement of monetary reform
started by British engineer C.H. Douglas of
Great Britain in 1920s.
• Argued that everyone in society should benefit from ongoing appreciation of
industrial productivity.
• Measured the gap between national production and consumer income and
showed how the difference should be issued to individuals through a regular
national dividend.
• Competed with Keynesian economics as a solution to the Great Depression
until WW II wiped out debate.
• Continues to have a wide following in the U.K., New Zealand, Canada, and
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Australia.

27. International Barter
Movement
• According to the WTO, over 20% of the entire world economy is barter.
• Most modern barter is done business-to-business through sophisticated
on-line systems that monetize surplus business capacity.
• More than 90 countries in the world have adopted barter trade policies.
• More than 350 of Fortune 500 companies engage in some form of barter.
• There are approximately 500 commercial and corporate barter companies
in the United States.
• Approximately 500,000 businesses are members/clients of these
barter organizations.
• According to IRTA, its member companies earn an estimated $12 billion dollars
per year by using barter.
• IRTA estimates that 15% of a company’s revenues could/should be in barter.
27

28. Time Banks
• The simplest form of alternative currency allows for exchange of labor
hours by participants.
• Uses debit/credit recording system which can be paper or on-line.
• Measures in “time dollars”; all services have equivalent value within
system.
• IRS has ruled that Time Bank systems are not taxable.
• Recognizes and encourages community service, resists inflation,
and enables trade and cooperation among participants.
• Roanoke Valley Time Bank website is at www.rvtimebank.org
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29. Scrip
• Scrip is any type of paper currency issued
with a promise to pay in goods or services.
It is denominated in units equivalent to national currency.
• Scrip was issued by thousands of businesses in the U.S. during the 1800s
and saw a major revival during the Great Depression.
• Scrip got a bad name when issued as pay by coal companies in Appalachia
when it could only be spent at the “company store.”
• Scrip has made a comeback worldwide in the last 20 years of economic
instability.
• Two states currently prohibit use of scrip: Arkansas and Virginia.
But laws can be changed! 29

30. Community
Currencies
• Like scrip a paper currency but directly convertible into national
currency at discounted rates.
• Bought and sold at local banks. Keeps money circulating within the locality.
• Legally equivalent to gift certificates so not subject to legislative
prohibitions.
• Uses consumer discounts as incentives to purchase.
• BerkShares in Western Massachusetts the most famous current
example of community currency. 30

31. Local Exchange Trading Systems
(LETS)
• Local people set up an organization to trade
among themselves, often paying a small membership fee to cover costs.
• Members maintain a directory of offers and wants to help facilitate trades.
• Upon trading, members pay each other with printed notes, log the transaction in
log books or online, or write checks which are later cleared by the system.
• Members whose balances exceed specified limits (positive or negative)
are obliged to move their balance back towards zero by spending or earning.
• LETS is a full-fledged monetary or exchange system. LETS members are able to
earn credits from any member and spend them with anyone else in the system.
31

32. Ithaca Hours
The most famous modern alternative currency is Ithaca Hours
from Ithaca, NY.
• “In 1991, Ithaca Hours began developing a legal currency for our town.
Today, there are over $100,000 worth of Hours in circulation. It’s money
for you. You can earn it. You can spend it.”
• “Unlike dollars, it is money that stays in our community. You spend it, but
you spend it with your neighbors. It stays here, for you to earn back.
Meanwhile, you’re building our local economy. “
The Ithaca Hours system includes lines-of-credit, loans, and
grants to community organizations. 32

33. More Examples of
Local Currencies
Fourth Corner Exchange – Bellingham, WA
River Hours—Columbia River Gorge, WA/OR
Potomacs—Washington, D.C.
High Desert Dollars—Prescott, AZ
Berkeley Bread—Berkeley, CA
Asheville Dollars—Asheville, NC
And
PLENTY—Pittsville, NC
Brooklyn Greenbacks—Brooklyn, NY
Dozens
Buffalo Hours—Buffalo, NY More!
Middletown Cash—Middletown, CT
Atlanta Hours—Atlanta, GA
Anacostia Hours—Mt. Ranier, MD
Bay Area Bucks—Traverse City, MI 33

34. The Tax Issue
While alternative currencies are legal, earnings denominated in alternative
currencies are taxable, but taxes must be paid in national legal tender. IMHO this
policy violates constitutional provisions for equal protection of the laws.
The single greatest economic reform would be to require the government to accept
any currency in payment of taxes if earnings in that currency are taxed.
By taxing an alternative currency the government is saying it is real money.
Upon receipt, it would be simple for the U.S. Treasury to convert these
taxes into national currency and thereby increase the national money
supply. 34

35. In Times of Crisis……
There have been times in history when
whole nations or civilizations have saved
themselves through alternative currency systems:
• Dark Ages—reversion to barter
• Medieval trading fairs using self-generated promissory notes
• Colonial America’s indigenous paper currencies
• Civil War Greenbacks
• Swiss WIR system has given Swiss small business financial independence
• Russian collapse of the 1990s resulted in widespread barter
• Argentina collapse of the early 2000s saw barter clubs rise up
• Greece today using labor exchanges
35

36. Next Steps?
36

37. It’s Really a
Spiritual/Ethical
Choice
Economics should not be just trying to make
a profit or saving one’s skin.
Economics should be the community working
together for the benefit of all.
37

38. So Claim Your Rights
“We hold these truths to be
self-evident, that all men are
created equal, that they
are endowed by their Creator with certain unalienable
rights, that among these are Life, Liberty and the
pursuit of Happiness.”
In economic terms this should also include
the free right of exchange.
38

39. Emergency Planning
• Does your city/town, business,
neighborhood, family have an
emergency preparedness plan?
• Does it include provisions for alternative currencies if
the banking/financial system breaks down?
• Will gold certificates do you any good in a real crisis?
What do you have to exchange? Examples: Toilet paper, soap,
food, tools, lumber, treated water, firewood, liquor….
or your own labor and skills….
39

40. For information, contact peace.spiritual.center@gmail.com
or go to the webpage at www.peace-spiritual-center.org.
Next program: The 2012 Prophecies: Fact or Fiction? Lifestream Center,
12:30-3:30 p.m., Saturday, February 25, 2012. $10. Call to register.

41. Thank You
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