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Money – a true “Wolf in Sheep's Clothing”!

It was an early spring morning when I was driving down the motorway. Wisps of light mist were floating over the fields as the red sun rose in front of me and the day began gathering pace. Cars and huge lorries were rushing all around me; people were hurrying along the streets and shopkeepers were beginning to open their doors. Somewhere, indeed in many remote places, oil rigs were pumping the stored energy of ancient sunlight out of the ground and huge diggers were mining valuable ores laid down millions of years ago by the magic of nuclear furnaces in dying stars. Humans were swarming all over the Earth – mostly much too busy to be able to wonder why all this was happening and whether the miraculous ordered complexities of the human brain could in any way direct this process in some life enhancing way!

Everywhere there was action – the world was certainly moving at speed. Was anyone in charge? Why was everybody rushing about like this? What were the forces driving this great whirligig of activity?

It only took me a few moments of reflection to realise that one human invention above all others was driving the machinations of 21st century humanity – that invention was “money”. Most of those people rushing about were doing so because of money – either commuting to work, driving lorries for commerce or making a trip to go shopping. Even those making a visit to friends, or heading for a walk in the hills, had to assess the cost of their outing based on the price of the fuel they would use.

Of course, most of us take “money” for granted – it's just something we have to work for so we can use our wages (rents or profits) to pay bills and buy ourselves “stuff”. When David Attenborough (and many others) tell us about the tragedies of our disappearing natural world or climate change scientists warn political leaders of environmental disaster ahead, we don't instinctively think about “money”. The links between our money system and the fate of the Earth are not simple or straightforward but in truth they are massively significant and important.

You will not learn much about “money” in school or at university. Even our expert economists are not really interested in the money system itself (how different types of money - and there are different types as we shall see - are created and destroyed) because they regard “money” as simply a neutral mechanism of account which replaces barter and exchange.

As soon as you begin to think about “money” you start to realise that this invention has turned what would otherwise be fairly useless pieces of metal (coins) or paper (notes) into powerful “tokens of power”. People that have “money” can make other people work for them or give them food, housing or pretty well anything they might want. When we think of “money” as “tokens of power” we begin to get nearer to its true substance. The fact that most of the money we use is marked with the emblem of the head of state is a constant reminder that the value of most of these “tokens of power`' is protected and enforced by the power of the state. Yes – money is important stuff – you need it to pay taxes, you need it to fight wars.

Life Threatening “Tokens of Power”

There are some who would say that “money” is possibly the most dangerous and life threatening invention ever created by humans. “Goodness me” - you may say. “Can money really be more dangerous than the hydrogen bomb?” For most of us “money” is just something we use to pay our bills, buy our food or pay for our holidays. On the face of it the money we use for this does not appear to be dangerous (life threatening) in any way! We are completely familiar with paying our taxes or going to the “hole in the wall” to withdraw the cash we need. But do we in fact know anything about how this “money” is created. Who invented money and what did they invent it for? What are the subtle yet powerful ways the inner workings of money systems influence what humans are doing to each other and to our home, planet Earth?

Clever economists will tell us that “money” is just a convenient alternative to primitive barter and exchange but a little study and reflection will soon show you that this is far from the whole truth! The way our “money” works as “tokens of power” has profound implications for how we manage our planet.

When we watch beautiful nature documentaries (like Blue Planet II), as many of us do, we can see that there is a desperate need to change the way we do things. When we see that our political leaders are unable to respond to such dramatic calls to limit global carbon emissions (as set out in the 2018 Report of the International Panel on Climate Change), we may wonder what is stopping them. In fact, the inner workings of our “money” system are a hidden cancer that is acting “behind the scenes” to make us mine more, drill more and pollute more. When the man (it probably was a man) cut down the last tree on Easter Island he probably sold the wood at a good profit! After all, the wood from the last tree would have been worth a lot! Money was giving him the wrong signals – as it still does all over the world today.

It does not have to be like this! We could use less dangerous (less life threatening) money systems. We certainly have the technology and the creative wit to do so. We could even do without money altogether following the example of the (very successful) civilization created several centuries ago by the Incas in South America. But the first thing we should all do is to try and understand how our present money system works, the consequences this brings – and why the present arrangements are so dangerous for life on Earth.

Why Money Matters

Money can do some very strange things! Here is a list of some major issues which result from our present global money systems. We will discuss all these in more detail as our story unfolds.

Inflation - All populist democracies have a need to win votes; this means keeping people in employment and this requires constant increases in consumer spending. This is why such populist governments always try to achieve a degree of inflation in their money supply. Inflation means your money is worth less tomorrow than it was today – naturally this provides a strong incentive to spend rather than save. But more spending means faster use of Earth's (limited) resources, more greenhouse gases, more waste and more pollution.

Hyper-inflation - When kings or governments are tempted to “print or mint” more money instead of raising taxes, then money values may change with remarkable speed. Such “hyper-inflation” will have very serious consequences. People's savings are destroyed and the country's exchange rate radically devalued. Civil unrest (and even war) will often follow. Throughout history rulers have always been tempted to debase currencies rather than raising taxes. Hyper-inflation never works out well and quite possibly was a major cause of the collapse of the Roman empire.

Gross Domestic Productshould be called “Great Deception Policy”! GDP (measured in money) has become the touchstone of success for all governments run by populist democracies. If such governments wish to be re-elected then they need the consumer economy to grow, with more jobs and more stuff. However, this no longer makes any sense when Earth's resources are being exhausted. In fact GDP measures how fast we are using up Earth's resources whereas any prudent person can see that the time has now come to try and reduce the speed at which we use resources. Even our successful Green Parties do not have the courage (or wisdom?) to begin to spell this out!

Boom and Bust - We use the same money to save and to spend. This leads to serious instability in the system – the boom and bust syndrome. Fear of a bad future will encourage the public to reduce spending,“save” their money and pay off their debts. But taking money out of circulation then causes the very problems of slump and unemployment which they feared! Equally if the public feel optimistic and confident about the future they will spend money and increase debts – putting more money into the system and so the economy begins to boom. The workings of the banking system magnify this process by either by banks calling in loans (when they fear times are bad) or expanding loans when they think times will be good. This makes our money system extremely unstable.

Transfers of Wealth - The ease with which the modern banking system enables money to be transferred from one place to another keeps remote places poor and makes central places rich. This is why rural areas are starved of investment as banks prefer putting people's money into safer and higher returns found in industry and the cities. It is one reason why the euro (which has no effective equalisation arrangements for the countries “on the edge”) brings economic disaster to peripheral countries like Greece, Ireland, Portugal, Spain and Italy.

Running fast to stand still - Because all modern bank money is created through debt someone somewhere has to pay interest on this debt. Our banks are licensed to created money “out of thin air” by lending money they have not got! The interest on all this debt can only be paid if more money is created either by inflation or economic growth. This is one reason why “economic growth” is at the top of every politician's wish list. This “growth” is necessary simply to keep the huge pile of debt afloat. But “Economic Growth” is the last thing we need if we wish to make our Earth's eco-systems more life enhancing.

“Free market” pricing does not reflect real cost - This is because of what economists call “externalities” - for example the price we pay for our fish does not reflect the cost of repairing damage to the seabed caused by trawlers; the price we pay for fuel for our cars does not reflect the cost of dealing with the air pollution it creates – and so on. The Earth's “commons” (especially air and water) are outside the scope of our economic system – there is no way the price mechanism can protect them from exploitation.

The “free market” is not actually free – Countries or people with the greatest resources will always have a bargaining advantage over those with less. This is particularly true when you compare rich countries in the northern hemisphere with poor countries in the south. The rich countries have been developing an effective infrastructure (roads, railways, water, electricity, etc.) for hundreds of years. This gives them a natural competitive advantage which is usually enforced by the system of money and debt.

Banking for ProfitsThe direction of new investment is almost entirely controlled by commercial banks (apart from government spending), and banks direct investment for profit regardless of the social consequence or the democratic will. Cash profit is not a good indication of whether new investment is life enhancing or life threatening – often quite the reverse! The priorities for investment should reflect the real needs of the community and the Earth's life support systems. Naturally banks prefer what they see as risk free investment – this usually means a housing boom when what we really need is a new “green” infrastructure as well as health and better recycling.

Money is the Primary Tool which gives Power to the “Merchants of Greed” - Before the invention of easy credit and paper money (certainly before 1694 when the Bank of England was founded) most people lived in a rural economy. In the countryside money was not an important part of day-to-day existence. Rural communities were more or less self-contained and self-sufficient. People were mostly born into the jobs they would hold all their lives. With the arrival of modern banking at the beginning of the 18th century all this rapidly changed. A new merchant and industrial class emerged, powered by bank credit, and very soon took a dominant position over and above the traditional land-owning aristocracy.

The new business people effectively became “merchants of greed”. They quickly realised that their monetary success depended on making people want to buy more “stuff”. It was essential for them (both then and now) that people wanted more than they needed. It was essential for them to get people away from a self-sufficient life on the land to work in factories and cities as “wage slaves” This process required the “enclosure” of common lands which were seized by force (if necessary) and given to local (rich) landowners. It was a brutal policy that went on for over 100 years throughout the 18th century. At the same time the huge increase in the importance of money enabled the new industrial businessmen (they were almost all men) to cream off money wealth for themselves. This process now continues with billions of dollars spent on advertising each year – trying to persuade us that we should not be happy with what we already have! The”merchants of greed” are the “winners” while almost everybody else (including the living eco-systems of Earth) are the losers. As this process continues it creates even greater disparities in wealth between those who work for the great corporations and those who remain “wage slaves”.

“Money” is the Life Blood of the Empire or Nation StateHuman beings, like most life forms, tend to be in constant competition for resources. The invention and existence of the Nation State (or Empire) was an important evolutionary step because an organised large conglomeration of humans has big advantages for war and defence. “Money” was a vital invention because it enabled the payment of soldiers, the effective proliferation of trade and the easy collection of taxes. This remains the case today. In fact government manipulation of the state money system is the primary policy instrument available to influence national economies. Nation states themselves continue their tradition of competing for scarce resources. This competition is dangerous and outdated; it continues to create conflicts of interest that can lead to war and the economic activity it encourages now threatens the security of our eco-systems. Perhaps the very existence of Nation States should now be questioned?

Currency “Wars” dominate World TradeThere has always been competition between Nation States which now form the primary social units on planet Earth. Most nations want a bigger share of Earth's resources or, at the very least, seek to protect the share they already have. Sometimes this “competition” takes the form of physical war (what the generals call “kinetic war”) but for most of the time competition is channelled into trade agreements and currency wars. One nation will try to engineer a competitive advantage over others by devaluing its currency – so making its exports cheaper and its imports more expensive. Any nation which can establish its own currency as a “reserve” currency (such as the British pound during the time of the British Empire, or the US dollar now within the Bretton Woods system introduced in 1944) will have a big trading advantage over others.

An Example from Reality

When I was in Rio for the first Earth Summit in 1992 we were all surprised to find that the cost of a taxi ride would increase significantly between the morning ride and the evening return. This had nothing to do with the time of day! Brazil was in the midst of an inflationary crisis – the value of its national currency was getting smaller every hour. People spent their money as quickly as they could, whilst it still had value, but this only made things worse! However, this situation in Brazil was as nothing compared to what happened in Germany just after the First World War. Money inflation in Germany went into over-drive after the national Government printed more and more Marks in its attempts to buy the foreign currencies it needed to pay off the severe financial reparations imposed after the First World War. At the beginning of 1921 you could exchange one US dollar for 90 German Marks. By the end of 1923 the price of one dollar had risen to more then 4 trillion German Marks. The Germans had to build more printing presses to provide all the notes this inflation required. Ordinary people lost the value of all their savings and were taking wheelbarrows full of notes simply to buy a loaf of bread. The effect on ordinary people's lives was brutal and dramatic – savings became worthless overnight. The bitterness and social unrest which this caused was a primary reason for the rise of Hitler.

These are obvious examples of how money systems can affect real life. We shall find many other examples of how our money systems can take on a life of their own, having serious effects on the way we live. Whether we admit it or not, the way we live has a serious impact on the planetary resources and eco-systems which are vital for our survival. If we simply continue to accept the way our present money systems work as a “given”, we will continue to face the hidden dangers our money creates. It's not a happy prospect! We need to look at “money” more carefully.

We Humans Invented “Money”

As a first step in our story we need to understand that “money” is not a God-given “hard-wired” feature of the Universe. All these “tokens of power” were invented by humans and they can be changed by humans. There are in fact many different types of money and they were all invented by humans for different reasons at different times. We shall be talking about these in more detail later but you will get some insights from this list of eight of the main types of money.

“State Money” - This is the money which the state (your government, king or emperor) will accept in payment of taxes. It is often referred to as “legal tender” and is the money most of us use every day. The value of “state money” is protected by force – forgery can be (and often was) punishable by death and failure to pay taxes will soon get you into prison. Today most “state money” (more than 95 percent) is in fact “bank money” created by the banking system which is licensed by governments (since 1694) to create money “out of thin air” - see below.

“Sovereign Money” - is state money which is created directly by the state (king or emperor) by minting coins or printing notes. This was the first really important type of money, used to pay soldiers and state employees more than 2600 years ago. It was a brilliant invention which became an essential part of the nation state or empire for thousands of years. Its primary purpose was to “finance” war, facilitate trade across large nation states and enable the collection of taxes. The quantity of sovereign money was always limited by the available supply of gold or silver (despite attempts by various kings and emperors to debase their currencies ) until banking credit and paper money became dominant early in the 18th century.

“Bank Money” - is money created “out of thin air” when banks make loans. The British built the biggest navy in the world when they used a bank loan (in 1694) rather than having to raise taxes. This amazing invention soon showed the rest of the world how powerful military might could be created by using bank loans rather than raising taxes. Very soon other governments followed this example. The creation of the commercial banking system after 1694 opened the flood gates of industrial expansion which in turn powered the industrial revolution and the greatest empire the world has ever known (the British Empire on which “the sun would never set”). Bank loans and “paper money” allowed governments and industrialists to obtain “credit” so they no longer had to either collect taxes or hoard savings (piles of heavy coins) in order to make large capital outlays. This paper money became known as “fiat” currency because it was no longer backed by any precious metal (such as gold) – it's value depended purely on the “belief” of the public that it had value (because it was backed by the government as “legal tender”).

During the 18th century national governments all over the world quickly abandoned use of “sovereign money” and moved over to “bank money”, which was more flexible and less limited by supplies of gold or silver. The licensed banks became a vital part of the government system and remain so today despite the upheaval and economic disaster of the 2008 crash. “Bank money” now makes up more than 90 percent of the state money used throughout the world. Bank money free from links to gold allows national governments to run up huge spending deficits – most will probably never be re-paid.

“Community Money” - consists of tokens which specific communities find useful as a means of making barter and exchange of goods or services easier. Almost anything can become a “token” for these purposes provided it does not rot away, is convenient to store or handle and is relatively rare (so the quantity is limited or requires considerable labour to increase). Cigarettes have often been used as tokens in this way in prison camps or closed communities. Wampum shells (with a hole drilled in them) were used by tribal peoples for hundreds of years. Buckskins (“bucks”) were used by pioneering traders as they pushed west in the Americas. Large stones, and tally sticks are other examples of tokens used by communities as “money”. The “I promise to pay the bearer” notes issued by goldsmiths and jewellers in the seventeenth century are yet another. “Local currencies” are a special case of community money – see below.

Community money systems are not controlled by governments although governments may try either to outlaw them or regulate them for the purposes of collecting taxes or 'managing” the economy. The private “credit club” known as WIR in Switzerland is now one of the most successful examples of community banking with over 70,000 members.

“Local Currencies” - these are currencies which are created by local governments (towns or villages) or groups of industrialists to facilitate trading WITHIN that group. Local currency allows the group to avoid potentially restrictive actions which might be imposed by the external banking system. Most important of all, the use of local currencies prevents resources “leaking`' out of the local area (or industry) as they almost certainly would be when re-invested elsewhere by profit-seeking banks. The Bristol pound is probably the best known example in the UK. Scottish local authorities also have their own trading arrangements as do many industrial groups in Germany.

“Mobile Phone Money” - the M-PESA system which began in Kenya uses mobile phone credit as “money”. This allows “payments” to be made simply by transferring credit through the mobile phone network with local offices which can “cash out” such credit for coins or notes as necessary. The system enables anyone with a mobile phone to have what is effectively a bank account. It has been extremely successful – despite all efforts by the banking lobby to discredit it. More than half of the Gross Domestic Product of Kenya is now transacted by M-PESA and the system is spreading to other countries such as South Africa and India. Transfers by M-PESA can be done much more cheaply than through the conventional banking system.

“Crypto-currencies” - effectively came into being when inventors succeeded, in 2008, in finding a way to enable transactions to be carried out via the internet WITHOUT the use of a trusted third party (normally a bank or payment agency such as Paypal). The ground-breaking invention which enables crypto-currency to work is called “block chain technology”. Just as we trust a bank to store our money as a number held electronically as a string of 1s and 0s in a computer so we can trust the “block chain” to hold an electronic number safely when this number is stored on thousands of independent computers. Each number which represents “money” is linked to its owner's software “wallet” which is stored and protected by cryptography on the owner's computer, memory chip or piece of paper. Every “transaction” made anywhere on the network is confirmed within a larger block of transactions by a “proof of work” algorithm (usually about every 10 minutes). The owners of computers on the network are paid to do this work by a complex system of rewards. Once a block of transactions has been confirmed the detail (stored on thousands of independent computers) cannot be changed unless a majority of the independent computers within the block can be hijacked by hackers. In this way the contents of each wallet are protected and every transaction is open to public scrutiny even though the identity of wallet holders remains secret.

The block chain is secured and “locked” every 10 minutes (for Bitcoin) when one of the “miners” (people holding the data of the block chain on their computer) find a special string of 1's and 0's (called a “nonce”). The “nonce” is the number which when added to the new block of data creates a specified string of 0s at the front of the number produced by a clever mathematical “hash” function which whizzes through every number in the block. Once this “nonce” has been found then nothing in the block can be changed without this change being immediately recognised - this is how the block is `”locked”.

“Gold and Silver Bullion” - despite the dominance of bank money and the importance of state money, gold and silver bullion are still popular forms of “money”. Bullion keeps its value outside formal government arrangements because of a long historical tradition. The roots of their importance lie deep within history, where there has always been a large measure of distrust in the new “inventions” of paper money and bank money. You have to remember that even before bank money became the dominant form of state money, many Kings and Emperors were tempted to expand their money supply by debasing the currency. Coins could be melted down and made smaller or the metal could be alloyed with cheaper metals. When the amounts of money circulation increased too much this caused unpopular increases in prices. This is why there have, from time to time, been strong demands for a “return to the gold standard”. If the value of electronic or paper money has to be linked to a certain weight in gold then this puts a clear limit on money supply. This can be a good or a bad thing as we shall see.

Your Money is More Important than your Vote.

Those who own and control the tokens of money have power over those that don't. How they use this power (by spending their money) has become the dominant factor which now governs the future of life on our planet Earth. How you spend your money has a much bigger impact on the future than how you cast your vote! And once money is in circulation the way it is created and managed can produce some unexpected (often very negative) consequences. Like so many clever human inventions, money solves some important problems but as progress has moved on no creates effects which, as we shall see, now threaten the very existence of life on our small planet Earth.

It does Not Have to be like this!

For thousands of years humans lived very effectively without money. Indeed the Inca empire – possibly the most successful empire in human history – did very well without the existence of either money or markets. In Inca society the allocation of resources and rewards was done directly by the community and the state. The governing class (the Incas) managed what was perhaps the ultimate socialist state. For the masses (non-Incas), social status and responsibility was based on merit. The education system was good and those that did well were given status and responsibility. Supplies of food and resources were pooled in communal stores and people were allocated what they needed. Care and improvement of the soil was a top priority in a difficult mountainous area. The system worked well for several hundred years until it was destroyed by the Spanish invasion. There are many lessons (and mysteries) to be studied in the workings of this very advanced society.

Even now there are many vibrant rural communities where money is less important that social credit. Humans who live in close-knit communities are always hoping for opportunities to help their neighbours. Everybody prefers to have favours owed to them rather than owing others favours. The very idea that one might pay a neighbour for doing one a favour is obviously ridiculous! Everybody in the community knows who owes what favours to whom.

If your curiosity is stimulated by this brief introduction then I hope you will see that “Money” is not simply a passive and neutral system which has replaced barter and exchange. The inner workings of different money systems have profound consequences which we should all understand. Perhaps we could find other types of money system that would be less life threatening. Certainly some of the less well know money systems have their advantages. Perhaps the creation and management of money should be completely revisited! The world had every chance of doing this after the banking hiatus of 2008 but our politicians did not have the courage or the wisdom to upset their comfortable relations with the banking sector. But the 2008 dramas and the troubles of the euro should have given us a warning. Perhaps the emergence of crypto-currency and the efforts of Iceland to experiment with a new version of “sovereign money” will prompt more radical review.

The “Holy Grail” - Money for a Better Future

We have listed some of the major (life threatening) flaws in our present state money system. We have listed some of the different types of money which are currently being used in other groups and communities The great question facing us now is to find the “Holy Grail” of a money system (or combination of systems) which can become life enhancing rather than life threatening. Certainly we must all realise that none of the pressing environmental challenges facing humanity can be solved without changes in the money systems. Our dominant state money system is the wolf in sheep's clothing which plays a major role in causing these life threatening ecological challenges.

Of course the bankers, politicians and the powerful “merchants of greed” all want you to find MONEY boring and unimportant. At present the money system serves their needs very well. And you will not hear the Green Parties, the huge environmental NGOs or the celebrity ecological media pundits even mention the money system in all their outpourings. “Money” people have done well to surround their subject with mumbo jumbo and mysterious complexity. You will have to decide for yourself whether the words written here make the mysteries of “money” and its impact on the planet more or less comprehensible!

Good luck.


Those five little letters are all very well

But m o n e y is bringing us signals from hell

Fat cats get rich with their banks and their money

But for most life on Earth it's not very funny

We're talking of dustbowls created for cash,

We're crying with rage at trees burned to ash

We're saddened by seas with no fish to swim

We're maddened by politics, pointless and grim

Quick, dig out the oil, big machines cut out toil

Don't care for tomorrow or the air that we spoil

Devil's dust sours the land, reaping chemical crops

Paying interest to Bankers until the fun stops

Why we do it is simple, we've got to pay bills

We do what pays best and enjoy our cheap thrills

Prices and money have tied us up well

Like zombies we're damned by signals from hell

It's all very fine for the suits guzzling wine

But something is wrong and the Earth's in decline.

We can see it’s all mad, a terribly folly

Being trapped by this stuff we call lolly

The system is studied by slicks doing tricks

With sums and equations that’s “economics”

And the Bankers who smile getting fat on this diet

They’re enjoying their fun and ignoring disquiet

While Joe in the street just knows he is beat

In a system all powerful that governs complete

A groan every morning, his routine spells defeat

In a cultural desert with fast food to eat

One man one vote but that's just a joke

A spin doctor’s name for a worker’s hard yoke

Egotistical nonsense, hot air like graffiti

But signals from hell, they have no pity

Dress it up smart in fine college courses

Worship its wonder in smart padded bourses

Bow to its power, its sophisticate pleasure

Lavish your soul with greed's transitory treasure

It goes on and on but it won't be forever

This short love affair that's not very clever

This urge to compel with the signals from hell

This romancing with lolly, the ultimate folly

But life's magic rules will not be denied

It won't be long now before our world's died

Then they'll say "when", all those greedy sad men,

"Will we re-invent money and start over again

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