Why we urgently need more currencies

Tweet

One of the most creative of the new economics pioneers is the Australian maverick Shann Turnbull.   It was Shann, a former corporate raider and holder of the round Australia flying record, who developed the ideas of Bob Swann about kilowatt hour currencies and community land trusts in the 1980s.  It was Shann who developed the idea of corporate investments that expire.

His latest idea builds on some of the proposals that nef has also been working with about the optimum size of currencies, aware that huge currencies like the euro – if they are all that is available – can cause extremes of wealth and poverty, and consequently huge debts. 

The idea that every nation, or even every continent, should have just one currency to serve everybody’s needs is a piece of eighteenth century Whig ideology that we have been stuck with unthinkingly ever since.  The plight of Spain and Greece is evidence of how faulty it is. 

Not everyone, or every city, is served well by the same interest rate, which is why single currencies like the pound cause inflation and poverty on either side of the nation.

The solution in Australia, according to Shann Turnbull, is to start thinking – and urgently – about parallel currencies circulating.  In the case of Australia, one could be available for the less developed Western Australia.

Alternatively, most nations would benefit from having a parallel currency with a negative interest rate, as most cities had in Medieval times.  The negative interest rate would encourage circulation (people tend to spend it before they have to pay it), as set out nearly a century ago by the Argentine economist Silvio Gesell.

Turnbull argues that the most likely source for parallel currencies may be phone companies. 

But he also points out the work of the Citigroup’s chief economist Willem Buiter to revive interest in negative interest rate currencies.

Buiter is a refreshing voice in top-level economics, especially in his old Maverecon blog, in which he once described his future employers Citigroup "a conglomeration of worst practice from across the financial spectrum”. 

Shann Turnbull is, as always, a creative voice of reason.  What is extraordinary here is not that conventional economics is stuck – people like Buiter prove that isn’t true – but that conventional economic policy is absolutely constipated.  Our masters seem quite happy for the whole edifice to come tumbling down all over again, as long as they don’t have to innovate.

That is what happens when conventional wisdom suggests that the banking system was created complete and unchanging by God sometime around the Sixth Day – in other words when policy-makers start forgetting their history.

The sooner we get some innovation in the euro zone, and a whole series of parallel mediums of exchange, the sooner will the world economy will inch its way off its current knife edge.