People powered money issued by groups of citizens and businesses complements bank and government issued money and enables a sustainable monetary ecosystem.

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 profit
  • Government Money — created in the form of physical notes and coins.
  • People 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 1970–2011, makes one (and the countless people affected) wonder if crashes are in fact an inherent property of the system?

The dynamics of an artificially enforced monoculture in the financial system (Lietaer et al. 2009)

Grounded in scientific evidence, the argument goes that the financial system is optimized towards efficiency and, because of that, barely has any resilience properties. Practically speaking this refers to efficiency in terms of: 1) having only one dominant type of money, 2) that financial and currency markets are digitized and highly interconnected and 3) economies of scale create single points of failure in terms of “too big to fail” institutions.

Now, let’s have a brief look at the scientific evidence that this claim of an inherent systemic risk in the financial system is based upon.

Dynamics in complex flow networks.

A number of researchers, including Nobel Prize winning chemist Ilya Prigogine, have studied what endangers ecosystems and conversely what makes them sustainable. The approach utilized has been to analyze complex networks, (e.g biological ecosystems, grid systems, living organisms and economies) as self-organizing matter-, energy- and information-flow systems.

One outcome of this has been the Universality Theory, stating how complex flow networks — independent of their specific dynamical details — all follow certain universal principles and patterns. In this context, sustainability is achieved by balancing resilience and efficiency:

  • Efficiency measures the ability of a system to process volumes.
  • Resilience measures the ability of a system to recover from disturbance.

Both of these are influenced by diversity (the different types of agents/nodes in the network) as well as interconnectivity (the presence of pathways between agents/nodes). Bernard Lietaer, Robert Ulanowicz and Sally Goerner 2009 describe this dynamic as:

In general, a system’s resilience is enhanced by more diversity and more connections, because there are more channels to fall back on in times of trouble or change. Efficiency, on the other hand, increases through streamlining, which usually means reducing diversity and connectivity.

Sustainability curve mapped between the two polarities of efficiency and resilience (Lietaer et al. 2009)


Whether processing biocells, energy or economic transactions, a complex network thus needs to properly balance resilience/efficiency to achieve a sustainable optimum: the Window of Viability. This optimum does not imply a balance of parity, but encompasses having a significantly greater emphasis on resilience than on efficiency.

Unfortunately, this is the exact opposite of the status quo within the financial system.

Towards a sustainable monetary ecosystem.

The opposite of a monetary monoculture is a monetary ecosystem which encompasses a mixture of the previous examined types of Bank, Government and People monies.

The Positive Money movement suggests to take away the power from commercial banks to create money, and put it in the hands of the state. This does, in other words, imply more or less reversing the proportions between Bank money and Government Money in circulation. While it certainly eliminates shareholder driven financial institutions from the privilege of creating money, it is questionable whether this will not just replace one monetary monoculture with another (perhaps better) one.

Finally, there is People Money, or People Powered Money as the EU funded CCIA initiative names it. This in turn is complementary currencies, issued by groups of citizens or businesses, driven by local, social, environmental, commercial or mixed purposes. These currencies take offline or digital forms and are a response to the fundamental need of having a medium of exchange. A need which, due to the scarcity or volatility of bank and government monies, persists to exist all over the world. Contemporary examples range from community oriented ones through membership-based business networks and customer ‘loyalty points’ oriented designs to blockchain technology based cryptocurrencies.

The effect of diverse Complementary Currencies (Lietaer et al. 2009)

People Powered Money initiatives, being complementary and diverse, have the potential to sacrifice efficiency on behalf of resilience, thereby moving the financial system to the right direction towards a sustainable balance between the two.

Inspired by the book Rethinking money, spiced up with a few recent blockchain technology examples, the next generation of a multitiered monetary ecosystem might look like something along the following lines:

  • A global reference currency, e.g Terra TRC / MakerDAO
  • Main multinational currencies, e.g USD / RMB / EURO backed tokens
  • International commercial scripts, e.g LEGO points / Frequent Flyer Miles
  • National currencies, in a non-exclusive legal tender statutory form
  • Regional currencies, e.g WIR Bank / Sardex(C3 design)
  • Local currencies, e.g Bristol Pound / Bangla-Pesa
  • Functional currencies e.g Ethereum / Gnosis / Saber

The above guesswork glimpses a future for a sustainable ecosystem where bank, government and people monies will be much more interwoven than today. The variety of currency designs and their high technological dependency also seek to make the point that:

There is a long way of collaboration ahead within and across the complementary currency and blockchain communities before we together can create a sustainable monetary ecosystem.

The post was written on Medium by Gustav Friis who helps build the Trustlines Networkwhich is based on the original Ripple idea, but implemented on the Ethereum blockchain.