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Alternative monetary systems

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Alternative Monetary Systems
Introduction
In most economies/ countries, approximately three percent of the money comes from governmental mints that produce coins and notes. The rest of the cash comes from private banks; it is created using digital technologies from nowhere. Specifically, the banks do not have their money but create it from loans extended to the customers as well as governments. The banks prolong the credit by the increasing borrowing current account of the client. In other words, the banks extend credit through creating money. As the banks continue to increase the amount borrowed and not increasing the interest on the loans the world experience more debt than its money. This situation creates a scenario where there must be an ever increasing lending to pay off the debts as well as additional interests while at the same time sustaining money circulation. It means that there is a continuous rise in the economic activities. Contrary as the debts become paid off, the supply of money shrinks; this translates to defaults, bankruptcies, foreclosures, depression, unemployment that eventually result in extremism and crime.
The sort of monetary system describe above shows that however much the individuals continue to pay off their debts, collectively the world’s population remains to be in debt forever, and the people continue to pay bank interests forever. Therefore, this kind of monetary system creates increasing inequality as an arithmetic certainty.

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It is worrying to note that about 50% of the world’s wealth is controlled by 2% of the world’s population. In this monetary system, the government is a beggar that does not ever issue or spend its money but always in debt to the private banks that ‘lend’ cash that they create in their digital systems. This creates a fiasco where the masses assume that the government is unable to assist its citizens by spending their currency as a result of a deficit. Surprisingly, the real deficit is in our approach and perception of the monetary system. This monetary system becomes a complete nuisance especially in the event of an economic crisis; this calls for a look at the alternative monetary systems (Bendell). Although so many people are reluctant to consider a look at the alternative monetary systems citing that it is too much a bigger task, or it is not worthy to take the criticism there is a bunch of goodies to learn from it.
Background
In 2014, the campaigns for reforms on the monetary systems took a higher pace, for instance, the Positive Money was at its peak in monetary issues discussion platforms. The issue was introduced into the political agenda and proved to be a gigantic task. Nowadays, more and more individuals are taking it upon their responsibilities to create their monetary systems and apply them to clear their bills owed to peer networks as well as businesses. As a matter of fact, they use their currencies. This case may sound awkward but it is never a new idea, and there is a plethora of information to learn from it (Bendell 4).
Positive Money is a campaign that emphasizes on an alternative monetary system that is entirely different from the one we are used to whereby that banks create money and subject the world to perpetual debt and borrowing. The campaign emphasizes on giving the society the power to create money for public interest. This is based on democratic, transparency as well as accountability in the creation of money for public interest contrary to the way that private banks create it causing a financial crisis. The campaign is based in the United Kingdom, but it has affiliate organizations in 17 countries. The organization began as a matter of necessity to curb the problems that are perceived to be as a product of the effects of the current monetary systems. The organization claims that the current monetary system has subjected the people to highest personal debts in a history of human economy. It has caused unaffordable housing, high levels of unemployment, worsening inequality as well as banks subsidized as well as underwritten at taxpayers cost. The most probable common root to this problem is attributed to money. Positive money is a non-profit organization based in London, but it has partners all over the world. The organization has a mission of democratizing money as well as banking so that it works for the society and rather not against the society as it is with the money oriented financial system. Positive money has supportive policies and ideas that move it towards its ultimate goal. It does so by trying to accomplish the following; prevention of the own creation of money substitutes or even money. The organization also strives to transfer the money creation power from the private banking sector to a more democratic, transparent as well as accountable procedure that works in the interest of the public. The organization also ensures that the new money can be spent either into the economy that is free from corresponding debts. Alternatively, the newly created money be lent in, if required, for on-lending specifically into a productive sector (PositiveMoney).
Positive Money is not the only organization that deals with an alternative monetary system. In Brazil, Banco Palmas an initiative of the local currency and the microcredit is another example of such organizations. The initiative has been in operation since 1998 as an initiative of Ashoka Fellow Joao Joaquim. Banco Palmas was started as a strategic plan to address the larger vicious cycle of poverty as well as the stalled economic development that occurs due to inaccessibility to credit facilities in the poorer regions. The institutions offer small loans, not in the real Brazillian currency but in a form of Palma, which only circulates within the neighborhood. The value of 1 Palma is equivalent to 1 Real (Brazilian currency); this property makes it easier for the population to accept or use this form of exchange value. Some users are also given credit facilities and house reforms. For every Palma set within the circulation, there is a one real that is held in the institution’s reserve. Since the application of the Palma is confined within the location’s boundaries, the borrowers spend the resources on a purchase of local goods and local services. This generates a positive index in the improvement as well as the growth of the local economy (Banco Palmas).
As a matter of fact, Banco Palma has been effective in financing the needs of the low-income citizens by conforming to the unique needs of the favelas. For instance, the credit issued by the Palma Bank is not subject to documentation, registered guarantees contrary to the bigger institutionalized banking facilities. In Banco Palma lending, the neighbors by default are liable to vouch for the individual who receives the credit. The neighbors give assurances that receiver is responsible as well as has experience in the activity he/she intends to engage into. In summation, the community validation increases the level of collaborative nature within the population (Banco Palmas).
Where it’s used
The alternative monetary systems apply to the rural areas that are characterized by remoteness, extreme poverty and high levels of illiteracy. The institutionalized financial systems may have limited access to these areas due to claims of insecurity, economic backwardness or high level of resistance from external influence more so the western civilization. The existence of strong cultural customs and attachments to traditions also make the current banking and monetary system unable to exploit these areas.
This leads to a growth of individual economies within the main country’s/ region’s economy that is characterized by unique ability to circulate financial tools within a particular community. The tools are aimed at the generation of local economic growth and development. This occurs in a rather original non-institutionalized ways that restrict the financial banks as well as protect the locally generated resources (Banco Palmas).
Applications on large scale
However much we try to liberate our minds and understanding on the actual problems created by the current monetary system, it is quite hard to replace money completely. The facts behind this lie regarding the political influence that surround the monetary systems and banking. The essences of the importance of the conduction of international trade as well as international borrowing make the situation harder. Another factor that bars the application of the alternative monetary system is the limitation of the applications within a specific region where it is acceptable. Since every country has its currency that is reserved there is a possibility that the replacement of the monetary ideology in the people, as well as the economies, is difficult. In some extent, if alternative money were possible to be applied all over the world it would also lead to the same problems that we experience right now in from the banking oriented monetary system. This is because the need to create more profit for the institutions would lead to the issuance of credits to the people with the aim of attracting interests. The local development that is anticipated would be spread across a vast population making the whole economy grow uniformly. As the people continue to pay off what they owe the institutions, there is a deficit in the circulating resources and, therefore, results in an economic, financial crisis.
Conclusion and Recommendation
The financial institutions are believed to cause the financial problems of economic crisis as they lead the people to have debts forever. The commonly used monetary system is a strategy whereby all the people including the governments are debtors of the private banks. The banks do not have their money but create it through digital systems that operates regarding generation of interests from increasing the borrowing of the clients. The alternative monetary systems are however applicable to specific regions and offer good loan terms in different currencies from the main ones. They are seen as a remedy to the poverty as well as low-income levels experienced by some communities. Such institutions need to be promoted in areas where there is extreme poverty, and there should be a good system for exchange of the major currencies. The reason behind this is to bring about equality in economic development among all the populations regardless of the location, become situations and political orientations.
Works Cited
Banco Palmas. About Banco Palmas. 2015. http://imaginationforpeople.org/en/project/banco-palmas/. 3rd December 2015.
Bendell, Jem. “Trading without money; why a new monetary system can address the economic spiral.” TheGuardian (2013): 1-2.
PositiveMoney. PositiveMoney. 2015. http://positivemoney.org/about/mission/. 3rd December 2015.

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