tl;dr: People Powered Money issued by groups of citizens and businesses complements bank and government issued money and enables a sustainable monetary ecosystem.
An artificially made pine forest, designed to utmost efficiency, is vulnerable to sparks of fire, contrary to the resilience of a natural diverse ecosystem. In this post, I will explain how the same universal dynamics applies to the sustainability of the financial system.Effects of a Bank Money monoculture
In the Ecology of Money from 2000, economist Richard Douthwaite argues money can be:Bank Money — created by commercial banks when they offer loans to individuals and businesses at a profitGovernment Money — created in the form of physical notes and coinsPeople Money — created by groups of businesses or groups of citizens
In present times, almost all money in this world is bank money. In fact, the Bank of England in 2014, released the article Money creation in the modern economy, with the following introduction:“This article explains how the majority of money in the modern economy is created by commercial banks making loans”
As of 2013, bank deposits, made up an estimated 97% of the amount of broad money in circulation — that is, 97 % of the total amount of money held by households and companies in the economy. In the modern economy, those bank deposits happens to be mostly created by commercial banks themselves rather than by central banks, people or businesses.
Currency expert Bernard Lietaer refers to this phenomenon as a monetary monoculture, and claims it constitutes a structural cause for systemic financial instability. Such instability shouldn’t be confused with the noise caused by regular cycles in the economy, such as inventory, capital and real estate cycles.
A first glance at the 147 systemic banking crises and 218 monetary crisis, which according to the IMF have taken place during the period 1970–2...