Recent demands to abolish the Federal Reserve may hearken back to a more populist and participatory, if not also more chaotic era in the history of monetary governance, as noted monetary historians M. N. Rothbard and P. L. Rousseau call the pre-Fed era. Nevertheless, demands to reform the Fed are firmly rooted in a crucial right, taken for granted in every democracy. That is: the right of citizens to participate meaningfully in the key decision-making processes associated with the communities in which they live.
J. Huber and M. Kennedy, economists analyzing the debt-based creation of our modern money supply and inflation, agree that the private ownership of the Fed and its share in the seigniorage revenues associated with the Fractional Reserve Banking System present problems for both social justice and long-term financial stability. Nevertheless, economic historian K. Polanyi´s work showed that the gold standard, which would perforce be necessary without The Fed, upheld a system of currency monopoly which was just as prohibitive of fully egalitarian economic participation. One potential set of solutions involves a multi-layered approach which can allow greater flexibility for both local communities and multi-national or large-scale investors.
As Western economies began the first processes of globalization, revered economist J. M. Keynes´ “General Theory” showed that governments must force circulation of the medium of exchange (MOE), preferably by spending into the public sector, through borrowing if need be. This is the key benefit of fiat money, created from nothing. Yet, Keynes agreed with monetary reformer S. Gesell that modern money´s MOE function of conflicts with the Storage of Value (SOV) function, also filled by modern money, but previously filled by separate currencies, before modern national monetary monopoly became standard.
Prominent economist I. Fisher likewise advocated different currencies for the MOE and SOV functions, allowing local communities to be insulated from the financial instability of the global monetary supply while simultaneously allowing access to both international and local economic participation. MOEs like Stamp Scrip and Ithaca Hours have worked as “multipliers” in local economies, while SOV currencies like Time Dollars, issued by community-based currency advocate Dr. E. Cahn´s Time Banks, allow local storage of work energy without inflation concerns. Such community currencies also allow for greater access by local citizens to monetary decision-making processes, thus allowing more citizens into the Monetary Governance sukkah.
A. Fung, in his work on Participatory Governance, suggests creating links between institutions at various levels. A similarly linked three-tiered financial system arises as a logical policy recommendation that could potentially allow all monetary stakeholders a significantly increased level of access to monetary decision-making.
First, each community having its own community-based MOE currency as well as multiple community Time Banks would allow more direct input from currency users, and more direct control over local economies. Those community currencies may need to be regionally connected to the national currency or to the currencies of neighbouring communities, allowing greater flexibility for local communities while coordinating financial concerns across several regions. At a second level, national currencies can continue to allow independent but connected financial structure across national and international boundaries. At a third level, the creation of a truly international currency, separate from any domestically used national currency, would provide international money users with a neutral and coordinated financial system for travel and international business needs.
Participation in currency decision-making is important from several standpoints: economic, social and ethical. From an economic perspective, the more participation in decision-making and hence buy-in, a currency has, the more circulation, and the more support from users of that currency. From a social point of view, Huber´s “Constitutional Consensus” mandates sharing the benefits of common resources, including money, throughout all levels of society. Jewish tradition relates both the holiday of Sukkot to sharing of Torah with the 70 nations of the world, and this Season of Repentance to sharing of economic resources through Tzedakah.
Readers familiar with economic sociologist V. Zelizer´s “Pin Money” will recall her contention that money is a shared social construction. As such, money belongs within a shared set of social-economic spheres, and clearly the political sphere as well. In a democratic society, this entwining of the social with the economic and political implies an inherent right to meaningful economic as well as social and political participation in decisions which affect all members of society. Since money so deeply affects both society as a whole, and individual members of society, Nobel Prize-winning international development expert A. Sen´s assertion that communities have a right to control their own development means that communities must participate in monetary decision-making.
Shared Monetary Governance, by devolving more economic decision-making to local levels, widens the Sukkah, increasing that buy-in and social good which is not only the consensus in democratic societies, but also a basic human right.