Friday, November 18, 2011

Funny Money and the Real Economy

As Europeans face daily updates on the fate of their economies and of the Euro, public figures appear to disagree on the detail but agree on the broad framwork of how to respond to the crisis. The assumption from all quarters is that governments must in some way guarantee European currencies - whether through the European Central Bank, the International Monetary Fund, sovereign loans or some other mechanism or combination of strategies.

This approach makes one assumption - rarely challenged - namely that the currency used by the large financial institutions must and should be the same currency used by individual citizens.

An alternative approach is that ordinary citizens use (or create) their own currencies for peer-to-peer trading, and leave the global finacial institutions to sort out their own mess. The global markets, of course, will never make this happen, as such alternative and micro-currencies necessarily undermine the power of large financial institutions.

Which is, of course, one of their appeals, at least in the real economy whch most of us live in.


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