Results-Driven Monetary Design Principles for Economic Prosperity

Principles and Practice in Results-Driven
Monetary Design
INTRODUCTION
We live in a time of economic crisis. We are, however, so accustomed to such periodic downturns that
we take tend to them for granted, patiently suffering while awaiting the next upswing. And by upswing,
I mean a ‘recovery’ that takes the form of people just scraping by again in debt and quiet desperation, as
opposed to losing their homes and dignity like they tend to do during the unpleasant and frustrating
‘recession’ part of the cycle. The assumption is that is just the way things are, and that the system that
creates these results over and over again is the best we can come up with. I beg to differ. We’d like to
believe that our system creates opportunity and prosperity (just look at all the technological gadgets we
have!) but a satisfying quality of life under our system remains elusive. I must refer the reader who
doesn’t yet know how our monetary system creates this tease/disappoint or ‘boom and bust’ cycle, to
Paul Grignon’s series of short videos that do such a fine job of explaining the workings of our system
and how it came to function the way it does. They are available to all on Youtube (as well as for
purchase on his website) under the name “Money as Debt”. I won’t be reviewing the workings of our
current system in this book, since Gringon and others have done such a fine job of presenting this
material. The first video in the series, “Money as Debt, the Goldsmith’s tale” gives sufficient
understanding of how credit (or debt, in our current system) can be converted into circulating money.
With that knowledge, it will be easily seen how the alternative credit accounting systems presented in
this book function and how they give their users a much better deal than that which is available to
today’s users of money. If you already understand how our system of fractional-reserve debt money
operates, then you also understand it operates the way it does by design. This book lays out sound
design principles for money systems in general, and then attempts to use those principles to propose a
design that creates human-friendly results, namely, less tease and frustration and more actual prosperity
and satisfaction in life and in our creative interactions with one another.
To most people I’ve known, money is something they, as customers, give to a company in exchange for
its products. It’s also something they, as employees, get paid by a company as they make or sell its
products. That’s their main interface with money, and they scarcely imagine there can be more to know
about money than, say, strategies for earning, spending or saving it. How money first comes into an
economy to then be available for circulation is a question that most people seem to never consider
asking. Those very few who do think to look up the answer to this question find baffling mainstream
ideas about money “supply” being deposits in banks. I know when I first learned that money supply was
“deposits in banks”, I assumed that what was meant by “supply” was merely the money already in
existence that could be supplied into circulation by withdrawing it from the bank. I certainly did not
understand that deposits were the source of new money that had not yet been created, or how any

existing money, whether deposited or not, could be a source of new money for the economy. To
explain what money is in mainstream terms serves only to confuse and to avoid explaining what money
actually is in its essence. The mainstream explanation to be had in a university economics course serves
only to convince the student that money is something that is created through the interaction between
governments (or other borrowers, for those who are really paying attention in class) and lending
institutions, and that there’s no way to approach the subject that does not involve legislation and
banking regulations. I am writing this presentation to make the understanding of money simple. I
intend to demonstrate what money actually is at its core, and not to baffle the reader with explanations
of how the form of money we currently use is administrated by our system of finance. I also intend to
show that groups of people who understand what money fundamentally is are enabled to design
systems of money for themselves. They can purposefully design their money to foster the kind of
economy they want to live in. For example, a money can be designed to force the maximization of
production above all else, or, conversely, it can be designed to enable freedom and prosperous leisure
time. Once money design concepts are understood, people can see how to design into their money
system’s features that enable the things they value and want to encourage in their society, and they can
also design their money to discourage things they feel are antisocial.
As mentioned earlier, we live in a time of crisis. 2008 saw the collapse in the American housing market
and enormous turmoil in the lending sector. Meanwhile, several European countries suffered crushing
austerity as “solutions” to their unbearable debt loads, and their people did without many of the good
things that the market otherwise can bring such as food, shelter, medicine, etc. That crisis continues to
grind on with no end in sight. We can see is that the situation for the whole world is precarious;
Americans may soon find themselves under extreme austerity as government spending ceases to
replace national debt as it is repaid to international lenders. (Money disappears from circulation when
that happens.) Also, when that happens, it means that the individuals and companies in the United
States quickly find themselves unable to find money to hire each other to do the things they need each
other to do in order to create and distribute the things they need in order to survive. (Actually, that is
mostly already the case- American individuals can even now seldom afford to hire each other; they live
only because they can afford to buy things from China. When that is no longer possible, the game is up
for China as much as it is for the rest of the world they export to.) Under austerity, debtors are not able
to find income from their usual sources, as those sources in turn find their streams of income run dry.
Debtors face widespread repossessions and foreclosures by their lenders. So has it been in Greece,
Ireland, Spain, Portugal, Italy, and Malta these last several years. (The list keeps growing!) Also, after
austerity wipes out all production by bankrupting all the producers, we might soon find that there’s
nothing left for our currency to buy. The money put into circulation via government spending into a
non-productive economy then loses its value, making it almost as useless for people who want to hire
and work for each other as would be if it had simply disappeared from circulation. This is how
sustained deflation can flip suddenly into hyperinflation. Either way, the people’s power to spend and
buy evaporates despite their best efforts to work and earn a living. Inflation is not more fun than
austerity (deflation) as people helplessly watch the prices of everything rise out of reach of their
spending power as market goods become scarce. Again, my goal in making this presentation is to make
it easy for people to understand that they can create and circulate their own money to enable them to
continue working together and providing for each other’s needs through the market economy- even
when the official currency disappears or devaluates. Armed with this knowledge, communities can
thrive despite the failures of their leaders at the national level and despite the decisions of the central
bank.

This presentation is intended for entrepreneurs who want to continue to provide their products despite
economic crises that may befall the general economy. It is intended for those businessmen who want a
better deal for themselves and for their customers in any economy, and who realize they can create that
better deal by cutting out the financial middleman who practices usury for financial services. It is
intended for community leaders who want to live in vibrant, healthy communities. It is intended for the
“prepper” who realizes that his chances of surviving a crisis increase dramatically when he has a means
of hiring his neighbors and also of providing them with his own services- as opposed to defending
himself from them when they have no idea how they are going find their next meal and start turning to
theft and robbery out of desperation. This presentation is intended for those who wish to create a
system of money that fosters a just and fair society and for those who wish to avoid using money
systems that create desperation and crime.
MONEY AS LANGUAGE
Designing a system of money isn’t quite as daunting when we realize what money actually is. Simply
put, money is a very specialized purpose-specific language. That’s it- no more, no less. We use this
very specialized language to ask one another if we can have and/or use each other’s products. The
buyer asks, “May I have this to use for myself?” and the seller answer that question with either “Yes,
you certainly may. I can afford to let you have it for the credit you give me in return for this thing of
value I’m giving to you.” or “No, you may not. I cannot afford to give it to you. You don’t have a way
to account for the value you would be receiving from me if I did.” We use the language of money to
communicate what is available to be used by others when we declare it to be “for sale”. The sale price
communicates how much value others will have to exchange for the use of those things. Those who
have money can use it to communicate to anyone else that they are, in effect, permitted by society to
use that which is available for sale in the market. Indeed, when a person uses the money of their
society, they communicate the society’s approval of them using the precise quantity of society’s
resources or products represented by the value of the money they possess. Which particular
resources/products a person requests from the market is up to the whim and will of that person. But the
value of products/resources they are permitted to claim is communicated through society’s system of
money. Since money does the special job of communicating that particular information, it is a
language. Since it’s a language, let's first look at a curious reality of human language in general.
We humans use languages to communicate, but let's face it, our languages communicate imperfectly.
Some force the inclusion of extraneous information. Some are terribly inadequate for communicating
certain specialized kinds of ideas. Let's look at an example of extraneous information that is imposed
on a speaker of a language: there simply is not an option in Spanish to refer to a noun as anything other
than male or female. Information about the sex of an object must be included despite the fact that most
objects don’t do much procreating. There's a male form of the English word “the” (el) and a female
form (la), and either one or the other of them is assigned to each and every noun in the language.

German also forces a speaker to include information about a nouns' gender when using the definite
article “the”. “Der hund” = the (male) dog . “Die Frau” = the (female) woman. But, unlike Spanish, it
also includes a neuter option for objects that are just as arbitrarily considered to be neither male nor
female: “Das Auto” = the (neuter) automobile. This neuter option does not mean, however, that you can
just ignore gender and use “das” for everything that has no real gender (a big temptation for English
speakers not used to all this). “Der Stein” = the (male) stone is correct, “Das Stein” = the (neither male
nor female) stone is not correct; correct usage forces the speaker to call the stone male. You had better
get the genders of your nouns right or you will confuse the listener by making the subject of the
sentence sound like it’s intended to be the indirect object. Because “der” is the correct article for a male
subject, and “der” is also the correct article for a female indirect object, but if she’s the subject of the
sentence you have to use “die” for her. So if you already know what the genders the subject and object
of the sentence are, and you also know how the gender-specific articles change for those nouns in either
the subjective, accusative (direct object), or dative (indirect object) cases, then you stand a chance of
successfully communicating who is giving or doing what to whom. So there’s no way you can avoid
adding in the extraneous and arbitrary gender information and still get the signal through. By the way,
the grammatically correct gender of a pregnant woman in German is masculine, “der”. No kidding. And
little girls aren’t feminine, but neuter. Confused yet? If a monetary system were this confusing, there
would be a whole lot of swindling going on by those who knew the rules against those who did not. In
the centuries after the Norman Conquest of England, a compromise was hammered out between
Norman husbands and their Saxon wives and they did away with all the gender-specific articles and
endings on their nouns and verbs; Old English was transformed into something we might more easily
recognize and understand today. Our English does not now force arbitrary gender on its nouns. “The”
works fine for every noun: “the ball” “the girl” “the boy”. It's less confusing and happens to be more
popular as a second spoken language. But does even the word “the” really need to be forced on a
speaker of a language? Not really. Russian drops the definite article altogether as extraneous and
unnecessary. “Man feed dog. In Soviet Russia, dog feed man”. Gender is not the only annoying extra
bit of information to be forced into a language. Japanese, for example, forces its speakers to
acknowledging each other’s social status in relative to each other. Speakers get to choose to
communicate their either higher or lower status along with their intended message, but there is no
option to deliver the message without the status information included. There is neither word nor
grammatical structure in Japanese to refer to the second person as simply “you”, a word in today’s
English that only indicates that one is addressing a second person and carries no status information at
all. The brilliant and very amusing American physicist Richard Feynman recalls this problem from his
experience working in Japan in his memoir “Surely You’re Joking, Mr. Feynman”:
While in Kyoto I tried to learn Japanese with a vengeance. I worked much harder at it, and got
to a point where I could go around in taxis and do things. I took lessons from a Japanese man
every day for an hour.
One day he was teaching me the word for "see." "All right," he said. "You want to say, 'May I
see your garden?' What do you say?"

I made up a sentence with the word that I had just learned.
"No, no!" he said. "When you say to someone, 'Would you like to see my garden? you use the
first 'see.' But when you want to see someone else's garden, you must use another 'see,' which is
more polite."
"Would you like to glance at my lousy garden?" is essentially what you're saying in the first
case, but when you want to look at the other fella's garden, you have to say something like,
"May I observe your gorgeous garden?" So there's two different words you have to use. Then he
gave me another one: "You go to a temple, and you want to look at the gardens . . ."
I made up a sentence, this time with the polite "see."
"No, no!" he said. "In the temple, the gardens are much more elegant. So you have to say
something that would be equivalent to 'May I hang my eyes on your most exquisite gardens?'"
Three or four different words for one idea, because when I'm doing it, it's miserable; when
you're doing it, it's elegant.
I was learning Japanese mainly for technical things, so I decided to check if this same problem
existed among the scientists.
At the institute the next day, I said to the guys in the office, "How would I say in Japanese, 'I
solve the Dirac Equation'?"
They said such-and-so.
"OK. Now I want to say, 'Would you solve the Dirac Equation?'--how do I say that?"
"Well, you have to use a different word for 'solve,' "they say.
"Why?" I protested. "When I solve it, I do the same damn thing as when you solve it!"
"Well, yes, but it's a different word--it's more polite."
I gave up. I decided that wasn't the language for me, and stopped learning Japanese. (Surely
You’re Joking Mr. Feynman, p 159)
We most definitely do not want our monetary language to communicate an extra built-in message such
as, “We the humble, lowly, and desperately groveling producers, sellers, and buyers of all wealth and
value revere and give X% compound interest tribute to our most exaltedly high and dominantly
glorious bank” each and every time we conduct transactions with our money! Yet that pretty much is
the situation with the money we use now!
How about a look at some inadequacies of spoken languages to communicate ideas in specific
conceptual areas? Amazingly, some New Guinea highland languages have no words for specific colors-
“dark” and “light” are the most specific “color” words that they have. Closer to home, Biblical Hebrew,
oddly enough, has no word for the color blue. And in English, some of our color words can be terribly
misleading in different contexts. A white redhead drinking white wine describes three things of which
none are actually the colors the color words describe them to be. The “white” person’s skin is pinkish,
the “redhead’s” hair is orange, and her drink is transparent light yellow. While describing the language
of the Iroquois, Lewis Henry Morgan wrote of its construction being inherently inadequate for
communicating deceptions. In his “Leage of the Hodenosaunee or Iroquois” he writes, “In fact, the
language of the Iroquois does not admit of double speaking, or of the perversion of the words of the
speaker. It is simple and direct, not admitting of those shades of meaning and those nice
discriminations which pertain to polished languages.” (League, p 326) We’ll be spending some more
time with the system of the Iroquois a bit later.

None of these spoken languages do very well at describing mathematics- precise notions such as
growth functions and series and number theory and so forth. They can somewhat work around
communicating ideas of quantity, (some, many, few) but to really do the job of communicating quantity
precisely humans need the precise language of arithmetic. And every branch of mathematics and the
natural sciences develops its own symbols and language to communicate its specific ideas. Newton’s
Calculus is necessary to communicate precisely about rates of change. Partial differential equations are
indispensable in order to represent events observed in thermodynamics. Thermochemistry has its own
symbols and written language to communicate the amounts of energy absorbed by or released by
chemical reactions. A chemist needs only to read this language in order to know (a) if a reaction will
happen, and (b) if it does, how much heat it will produce or absorb. He doesn’t know how rapidly it
will produce that heat; he needs the language of chemical kinetics to know and communicate that.
Indeed, the sciences are full of these single-purpose micro languages used to clearly and precisely
express very specific attributes of our universe. These languages are, without exception, designed to
impose no extraneous or arbitrary information on the subject being communicated. And, without
exception, none of these precise and scientific languages are adequate to express people’s feelings for
one another. In a later section, we’ll talk specifically about vital information about the goods we buy
(such as how much exploitation and destruction of people’s lives went into producing it and bringing it
to market) isn’t included in its sale price, and I’ll propose a means of adding that information back in,
thus making price signals more accurate communications.
Since money is a purpose-specific language (more like a specialized branch of mathematics than a
language for poetry, to be sure), how well does our current monetary language work for us? The
externality imposed on our intended communications of exchange that bothers me the most is of course
the imposition of interest on finance. For example, if I use the unit “dollars” to measure how much of
my credit I am spending to buy a car from a seller, I currently have no option but to also communicate
how much interest (tribute) I will pay to a (most high and glorious) bank that “monetizes” my credit- or
in other words converts my credit into numbers that others accept as money. That externality of interest
may seem reasonable enough when presented along with all the contemporary arguments for its
justification, e.g. as a means to compensate the lender for risk, or as means to incentivize lending
toward the most productive ventures, etc. However, including the integrated interest feature in the
design of a money system dooms the economy and the society that uses it to the kind of “crash” crises
we see all around us in the world today -and repeated over and over in our history. That little interest
feature enables the creation of a small “lending” class that wields enormous power to decide not only
what production will or will not be financed, but also how much claim to that production that tiny
lending class is entitled to- even before the would-be producer gets his financing that permits him to
produce anything. Beyond putting the creator and producer squarely in a subservient role to the lender,
the stipulation of interest also creates what is called the “growth imperative” in the economy, meaning
that the physical economy must continually grow along with the growing interest on the “loans” that
finance it or it will crash. Of course economic growth cannot keep pace with the mindlessly and
relentlessly growing aggregate interest bill forever, no matter how creative and innovative we may be.
And that means, in turn, that sustainability is impossible within such a money system. The crash comes
around every generation or so, the wealth generated by the economic boom (after the previous crash!)

is foreclosed upon and concentrated in the hands of the lender, and the cycle begins again. Economic
growth is only once again possible after the period of foreclosure, starvation, and bad debt. Ultimately,
the debts are written off or the people die (forcing a write-off just the same) and the people can try once
again to get the financing to create the wealth that will only be gobbled up by the lending class of the
next generation. (Again, I refer the reader to Grignon’s “Money as Debt; the Goldsmith’s Tale” for a
very clear illustration of just how interest unavoidably causes this result.) An inevitable systemic crash
is definitely something we want to avoid building into the design of our money.
We want our money language to communicate one thing effectively: who can have how much of what
they want from the market of goods and services (collectively “market benefits”) that are made
available by the members of the market community. We want to do it without communicating
distracting extraneous information. Specifically, we want our money to communicate that parties have
transferred goods and services between themselves, and how much they have decided goods and
services transferred are worth to them. (Both have to agree on this or there is no sale.) And we want our
monetary language to impose no extraneous information whatsoever. We want those who manage
credit accounting to make a living from the service they provide, but we do not want to impose a fee
that grows exponentially over time and compounds upon itself. We want sustainability to indeed be
possible within our monetary system. If we use our credit to buy a car, we want the deal to be between
the buyer and the seller with no bank collecting parasitic interest from the transaction. Not only that,
we want to be able to finance the construction of the auto manufacturer without giving a bank a claim
on the wealth produced by that manufacturer, merely for having given financial permission to the
manufacturer to gather the capital and resources needed for production.
In the simple and purpose-specific language of money, its one word is its monetary unit. This unit is
like other kinds of units of measurement- inches, gallons and so forth. The inventor of the LETSystem,
a Canadian fellow by the name of Michael Linton, likes to point out a curious quirk of money as a unit
of measurement. He speaks of a hypothetical construction crew using both money and inches as they
build a project. In scenario (a) the construction crew can't function anymore. They've run out of money.
There's no more money to fund the project. In scenario (b) the construction crew can't function
anymore because they've run out of inches. They can't measure materials anymore because they have
depleted their supply of inches. Obviously, its utter nonsense to speak of an ‘inch supply’ and the crew
can't run out of inches. Of course, money is a unit of measurement just as much as are inches. There
seems to be some kind of mystical, metaphysical difference between units of value and units of length
until you realize you can indeed run out of inches of #6 re-bar. You can't run out of “gallons” but you
can run out of gallons of diesel fuel.
People- individuals and households and organizations- do run out of money. And yet, even with no
cash in our pockets, we can still measure the worth of things in terms of this unit. We can describe how
many dollars the house is worth, the ship is worth, the military program is worth. But just measuring
the house's worth at $150,000 doesn't make it yours. Simply “saying” the word of the language is not
enough to gain ownership of the value described by the word. You have to “Put your money where
your mouth is” so to speak. You have to transfer the right to claim $150,000 worth of value from the
market to the seller of the house. Then the seller of the house can afford to give it to you. With the
$150,000 they can then afford to claim another house from the market for themselves.

So what is it that the unit of money is actually measuring? What is it that runs out? It's credit! Now,
there is something peculiar about measuring credit versus measuring gallons of water. Water is a
physical substance. Credit is an emotion. Other people “give us” credit. They feel we deserve credit,
and that feeling itself constitutes our credit with them. They don't have to first dig in a credit mine to
find credit to give us, any more than they have to first harvest love out of an orchard to give us love.
Love and credit, both emotions, come from other people who give them to us. And we feel and give
love and credit to other people. It's important to realize that both of these emotions are not merely felt,
but are also indeed gifts. What does this have to do with money? Just think of a bank- even the bank
gives us a line of credit based on how big they feel that credit line should be based on their imperfect,
subjective, past-analyzing formulas. However much credit they feel we should have magically becomes
the number that shows up as our overdraft limit on our line of credit. That credit can then be spent as
money. Indeed, that credit first becomes money the moment it is spent and accepted by a seller as such.
Back to Michael Linton's point. An individual's bank account balance may get low or their line of
credit may get “maxed out”. That means they haven't been receiving enough credit from their
community to replace the credit they have been spending on goods and services received from the
market. Thus, that person is running out of credit to spend. One person running out of credit is a pretty
straightforward idea and it’s easy to understand. However, for the collected members of an entire
society to run out of the ability to give each other the emotion of credit is absurd. That's what lack of
money in a society (monetary deflation) actually means and it's completely nonsensical. Look at
Greece, the most extreme of the current band of European countries experiencing national debt crises-
the Greek people have somehow lost their ability to measure out the value of goods and services they
would create and trade among themselves. They, like everyone else, believe money comes from their
government which in turn gets it from banks or from other governments (who also ultimately get it
from banks). And the banks say the Greek government’s credit is no good and can’t be turned into
money to be spent (and then owed back to the banks!). The Greek people (along with the rest of the
world) believe their government must first spend credit (approved and monetized by banks) into the
market before people can use it for their accounting language. The banks have quit “lending” and the
Greek government has quit spending, meaning it has quit transferring the right to measure out and
transfer claims of market value to the people. The Greek people march in the streets begging the
government to start spending again so they can use that credit as money for their transactions. Again,
the purpose of this book is to show how people can create their own means of monetary
communication independent of government, banks, and politics. Money is only accounted credit and
credit is only an emotion, after all. You may give some emotions to some people and other emotions to
others, but we're humans, and we don't run out of emotions. We just need a way to account for the
emotion of credit in order to use it as money.
WHY DO WE RESPOND TO MONEY?
Why do we respond to money? What is it that’s going on in our human brains that tells us it is okay to
give up our surplus wealth for some other guy's money? Clearly there have been cultures that have not
used money (formally accounted credit) but still have managed to work together, hunt together, even to
create astounding works of art and architecture without a money-style medium of exchange. How have
they been able to do it? People throughout time have developed different kinds of economies that have

enabled them to produce different kinds of results as societal groups. Each and every one of these
economies has some treatment of credit at its foundation. Whether a societal group hunts and gathers,
practices swidden agriculture, builds monumental architecture, or develops technologically advanced
widgets for sale in the marketplace, it's still fundamentally some treatment of the emotion of trust
between people that enables them to co-operate. It’s the various social groups’ treatments of trust that
define their different credit concepts. Different credit concepts produce very different results, indeed. A
society’s credit concept is a bit like a seed crystal. It determines how the people in the society self-
assemble in their collective activities- whether they start to build pyramids, or try to make names for
themselves as warriors at the expense of all else, or all try to get rich at the expense of each other.
Money is a twist on credit, and credit is a spin on trust. But, credit is trust in another person’s likelihood
to do what, exactly? Is it trust that someone will keep a confidence? Is it trust that a friend will give me
her honest opinion even when it hurts? It’s fine to be able to trust someone with these sorts of things,
but how do they translate into money? They don't, really. Such things do, however, translate into honor.
In a tribal context, such honor is the kind of credit needed to access the tribe's wealth and strength. It
comes specifically from the trust members of the tribe have in a particular member’s ability and
willingness to contribute to the wellbeing of the tribe. That trust is developed from that person’s history
of contribution to the tribe that he makes through his day-to-day interactions with the tribe’s other
members. From whence does the wealth in a tribe come? Just as any human wealth, tribal wealth (that
which improves human comfort and prospects of survival) comes from specialized labor. If every
individual tribesman had to produce everything for his own survival himself- the clothing, the shelter,
the winter food storage, the tools- his efforts would be inefficient and the burden of survival more
taxing than it really needs to be. Sure, some environments have a lot of potentially useful things in
them already provided by nature, but humans have to alter just about everything in nature in order to
make use of them. They can't just graze like antelope. Berries are great off the bush during the few
weeks when they are in season, but what about the rest of the year? Some effort must be made to dry
the berries for use later. Humans can't just grow a thicker coat of fur for the winter months. They have
to somehow turn trees into boats and plants in to cordage and then cordage into nets in order to catch
the fish swimming in the tropical paradise. All those tasks are a bit much for one person to do just for
herself. Some kind of economy is indispensable for the individuals who specialize within a society, to
enable them to focus their effort on becoming very good at producing one particular thing (or more
likely in a very simple economy of few specializations, set of things) their society needs. How, then,
does a tribal economy work? Let’s imagine a hypothetical tribe that’s been simplified to be more easily
understood from our perspective of “butcher, baker, and candle stick maker”. (We’ll get to actual
observed tribal economies later, but this concept is fundamentally valid for all humans working
together and who do not see each other as foreign or as enemies.) Everyone in the tribe somehow
seems to find a specialty and provides it whenever it is needed by anyone else. The spearhead maker
crafts spearheads and takes pride in his skill- the other tribespeople go to him for their spears. He might
also make spear shafts or even diversify within his specialty and make arrows or atlatls, depending on
what's “trendy” or traditional in that particular tribe. But the spear maker does not generally prepare
pelts or tan hides. While he may be a “jack” of the hide tanning “trade” as well, that's someone else's
specialty. The cordage specialist focuses on preparing and twisting plant fibers. He's considered the

“Kahuna” of cordage. Then there's the potter and the weaver, for those tribes with those technologies.
The medicine man does not hunt. He just focuses on herbs and incantations. Every time a tribesman
provides his specialty, he gains or at least maintains his esteem, worth, and credit within the tribe. Now,
these skills can all be learned by a modern wilderness survival expert. It is indeed possible for one guy
to become a “jack” or even expert of all these trades. But tribal life is much, much better when people
excel a specialty while also maintaining a repertoire of generalized skills (which adds to the robustness
of the tribe’s labor force. Robustness is important when specialists might die unexpectedly from raiding
or disease or what have you.) Some degree of specialization is exactly what is universally observed in
human cultures. The tribespeople can afford to give their products and skills to other individuals in the
tribe who they know are willing to give of their own skills when needed. They jump at the chance to
aid and contribute to one another- and this is key- because they can hardly afford not to. Holding back
from giving does not gain them the vital honor-credit and standing they need in order for them to
maintain their place in the tribe and their corresponding access to the much needed contributions of
others. That's the understanding- there's no direct value for value bartering going on within the tribe,
but rather constant giving in a context of floating credit perceived in the minds of its members. To the
outsider observing the giving at any particular moment, it appears that people are simply giving each
other whatever is needed upon request- hence the term “gift economy”. But inside the minds of those in
the tribe, credit is informally given by the person receiving the physical object and it is given to the
person who is giving the physical object. And this credit translates into the tribesperson’s reputation
with the tribe in general. If you have a good reputation (good credit) as someone who contributes, you
can ask for things even from individuals you have not already given to directly. When the members of
the tribe give to someone with good reputation, they are seen as helping a good man in the tribe and
they themselves gain reputation for that. Some of the good man’s reputation gets transferred to the
person who has given to him. The “gifts” move in one direction, the feeling and understanding of credit
flows in the opposite direction in very much the same way market goods and money move in opposite
directions when they are exchanged. Honor-credit within the tribe thus becomes generally spendable as
informal money. Let’s take a look at an example of a tribe whose economic system consisted of an
interesting spin on a type of gift economy and whose traditions revolved around it. The anthropologist
Franz Boas wrote in his ‘Reports on the Tribes of N.W. Canada’ in British Association for the
Advancement of Science:
The economic system of the Indians of British Columbia is largely based on credit, just as much as that
of civilized communities. In all his undertakings, the Indian relies on the help of his friends. He promises
to pay them for this help at a later date. If the help furnished consists in valuables, which are measured
by the Indians by blankets as we measure them by money, he promises to pay the amount so loaned with
interest. Boas,12th
Report, 1898 pp.681
He’s describing someone receiving a benefit from others on a credit basis, with the understanding that
he will be there to help the others in the future. The means he describes being used to quantify how
much credit is being spent is the essence of money. Thus, it would seem that our human brains are set
up to respond to money as a derivative of credit. It’s also interesting to note that the Native Americans
of the Pacific North West felt that more must be eventually given than received (but at a later time) in
order for a fellow to maintain his standing as one who is to be relied upon as a contributor. Also note
that Boaz identified practice of giving more than received as paying interest.

GIFT ECONOMIES, FORWARDS AND BACKWARDS
Up until mentioning the natives of British Columbia, I was describing the basic, fundamental gift
economy that makes it possible for people to create, share and co-operate in a small and essentially
egalitarian and anarchist society. Just as every tribe in the world comes up with its own language or
dialect, tribal gift economies arise just as spontaneously and also with their own spins on how to
communicate the giving and receiving of credit. The particular Native Americans Boas was observing
had developed a credit concept which resulted in added layers of hierarchy on top of this fundamental
human credit system. Their credit accounting had become obsessed with reciprocity- with the moral
obligation for one party to eventually repay values given to them by another. This departure from
general credit for contributions “paid forward” to members of the tribe (honor being contingent upon
willingness and ability to contribute without a clearly defined expectation of return to a particular giver
of values) into honor-bound reciprocity (plus interest paid in the name of one-upmanship!)- created
some surprising similarities with our own culture where loans are expected to be repaid directly to
lenders. Boas continues:
The Indian has no system of writing, and therefore, in order to give security to the transaction, it is
performed publicly. The contracting of debts, on the one hand, and the paying of debts, on the other, is
the potlatch. This economic system has developed to such an extent that the capital possessed by all the
individuals of the tribe combined exceeds many times the actual amount of cash that exists [cash being
actual blankets, versus units of value equal to the worth of a blanket]; that is to say, the conditions are
quite analogous to those prevailing in our community: if we want to call in all our outstanding debts, it is
found that there is not by any means money enough in existence to pay them, and the result of an attempt
of all the creditors to call in their loans results in disastrous panic, from which it takes the community a
long time to recover.
It must be clearly understood that an Indian who invites all his friends and neighbours to a great potlatch,
and apparently squanders all the accumulated results of long years of labour, has two things in his mind
which we cannot but acknowledge as wise and worthy of praise. His first object is to pay his debts. This
is done publicly and with much ceremony, as a matter of record. His second object is to invest the fruits
of his labours so that the greatest benefit will accrue from them for himself as well as for his children.
The recipients of gifts at this festival receive these as loans, which they utilize in their present
undertakings, but after the lapse of several years they must repay them with interest to the giver or to his
heirs. Thus the potlatch comes to be considered by the Indians as a means of insuring the well-being of
their children if they should be left orphans while still young. Boas,12th
Report, 1898 pp.681-2
Of course it must be noted here that although Boaz compares potlatch debt with bank debt, there was
no legal force or power to “call in loans” in the Potlatch system, and of course such panics and banking
crises mentioned by Boaz (that were and still are so common in American/European history) did not
happen in the potlatch system.
While hierarchy was indeed produced by the potlatch system (from the chief even down to the level of
a kind of slave), the ability of a “higher up” to apply force to others was limited to his ability to
maintain their indebtedness to him. And he did this by showering wealth upon them, thus capturing
their credit in the minds of all. Showering wealth on someone to keep him in debt is of course a far cry

from locking him in debtor’s prison. This kind of hierarchy did not grant a chief arbitrary or totalitarian
power to command. Oddly enough, one particular area in which a chief’s power was absolute was his
power to gift his wealth to another tribe, up to and including its people, in an intertribal contest of
wealth giving in order to try to capture the other tribe’s credit and honor. This giving of his own people
didn’t constitute a command to them per se, but was simply recognized as a kind of gift that he, as
chief, was authorized to give and of course his people went along with their transfers.
We’ll talk more about indebtedness to a gift giver and how it creates hierarchy in the context of a gift
economy in just a moment, but first let’s consider the role the anarchic tribal gift economy plays in all
our lives today. We are still human in this age of technology and ultra-specialization. Despite our
political and corporate hierarchies that drive us crazy daily, the fundamental anarchic gift economy is
still in action in today's society- even in capitalist America! For example, imagine a group of
employees in a welding fabrication shop. The painter might want to modify a scraping tool or the
mechanic might want to modify a wrench. They go to the welder and he's glad to do the modification to
show off his skills. He may hurry through his regular paid work, but the modified wrench will be his
prettiest work because he knows the mechanic will see the wrench every day and he will see the
mechanic every day. The welder may in turn ask the painter to paint some stylized flames on his
welding hood on some other day. But I have typically not seen those sorts of things exchanged with the
sort of understanding that the welder will only weld the object for the painter if the painter first
promises to stylize the welder’s hood. I have seen the counteroffer suggested right away by the painter
so that he can avoid feeling indebted to the welder. But for the painter to ask for his favor and for the
welder to demand something in return before considering granting the favor is quite unusual in my
experience. To do so diminishes rather than enhances the welder’s standing on the crew and everyone’s
willingness to non-grudgingly work with him. That's just not what buddies do. If the co-workers aren't
buddies they usually just won't ask each other for favors in the first place. Of course this is not just
something that happens in the fabrication shop. Office personnel often collaborate on projects with
other employees and contribute more or less willingly to each other's work depending on their
reputations and relationships with each other. How do rock bands weave their music together- it's not a
matter of a single composer writing all the parts for a symphony! Instead, the musicians all contribute
what they can out of their own specialized skill set as they hammer out their sound in jam sessions.
When their contributions are in balance with each other and appropriate to take the music where the
band collectively feels it should go they've then got a song they can perform. Sometimes bands look to
one member or another as their “leader” or principal giver of direction. Nevertheless, when the feelings
of credit had among the band members regarding their various contributions get out of synch, the
agreement about the band’s direction breaks down, and the band breaks up. While the “leader of the
band” enjoys a great deal of respect from the others and has a great deal of influence over the band’s
direction, he is in no position to force anyone to do anything. If he turns into too much of a prima
donna, the band members may tolerate this for a while as they keep extending him more and more
credit. When they decide he’s overdrawn, they bail. What about the family at home? Obviously babies
receive everything they need for their survival as gifts. What’s expected from the baby? Does the baby
give credit to the parents that they can then spend with other people? No. I think of the parents’ gifts of

nourishment and education to the child as a long term advance of strictly paid-forward credit. The
parents hope the child will grow to “pay” this advance “forward” to society and not that the child will
“pay it back” to the parents. If the child grows to contribute to society, the parent feels justified in
having contributed to the child's nurturing. Here we see especially clearly that credit is not necessarily a
thing that merely shuttles back and forth between two people- again, the parents don’t expect a return of
physical wealth from their investment in their children, they generally want more than anything that
their children find their place in society by growing strong and capable and willing to contribute to it.
Children who fail to do this bring grief and anguish to their parents. And think about the implications
of the gift economy between a husband and wife. Although a husband and wife pair constitute only two
people, a couple that thinks of their gifts to each other (of time, of affection, of support) as continually
“paid forward” will enjoy a very different spirit in their relationship than a couple that thinks in terms of
what they are owed by each other in the context of an underlying “paid back” mentality. A healthy “paid
forward” gift economy between spouses -where trust and its associated informal credit grows- makes
for a satisfying marital relationship.
Gift economies certainly have their benefits. There's much, much less artificial need for busy work in
the fundamental anarchist gift economy. By “busy work” I mean wasteful production that is really only
done only to game the accounting system. Instead of busy work, production is done for need or for fun.
Production within the anarchic gift economy is not done for “whatever it takes to get the bills paid”. In
our kind of monetary economy, when demand is satisfied and the needs of the customers have been
met, the workers go hungry. Conversely, when demand is satisfied in the anarchic gift economy, people
take a break and create art and tell stories and relax. No one is afraid of “working themselves out of a
job” at home. Having no more yard work to do is the best thing that can happen to a weekend!
Compared with our current monetary system, in a “paid forward” gift economy there is likely to be a
greater sense of fairness and equity. It's much harder (not impossible) for someone to manipulate a gift
economy to intentionally create the perpetual indebtedness of a servant class. If there's no trust
relationship there's no deal- one tribesman can't force another do something he can afford to refuse to
do. In an ideal anarchist gift economy there is no owner class who just uses money to hire subordinate
bosses to subjugate employees into giving the owners what they want without themselves ever
bothering to earn personal trust and status.
So far, I’ve been discussing what I call the “ideal anarchist gift economy”, and the idea that the
prevalent credit concept in such an economy is that good credit standing is maintained when debts of
credit are “paid forward”. Have there really been human societies in history where this has been the
primary mode of economic interaction? The Inuit (aka Eskimo) and the Lakota (aka Sioux) of North
America come to mind as examples. Within a tribe, the fundamental gift economy can produce a
culture that is egalitarian beyond anything that is experienced in the so-called democratic states of
today. Let’s have a brief look at Crazy Horse of the Lakota as an example of a “chief” living in such an
economic system. I had always thought of Crazy Horse as a great Sioux chief, but after learning about
his actual life I found he didn't spend his life making grand decrees for his people to follow or any such

thing. He was a brilliant and expert warrior and his buddies had a lot of respect for him. They were glad
to get on board when he participated in battle operations. So who was chief? Looking into the people
around Crazy Horse it's impossible to identify any single person as “boss” or “lord” or the sort of
commanding figure one would have thought of as equal to the old European feudal concept of what a
“chief” ought to be. Not Red Cloud exactly- although he was indeed well respected. While the Lakota
had no power centralized in a “chief”, they did have elders among them who had earned a great deal of
respect and whose words carried above average weight. I definitely consider their society egalitarian,
though this does not mean that all carried equal honor-credit balances at any time, and equality should
never be thought to mean such a thing.
The stories from the Lakota struggling to deal with the expansionist Whites and their market economy
machine are filled with the meetings of councils of their most respected members struggling to find
consensus about which way to respond to the crisis. Were they a leaderless people? No. I see them as a
people of leaders. It’s interesting to note that over the course of the long White invasion crisis the
Lakota actually decided to depart from their generally anarchist concept of life. We can see through
this story that the concept of hierarchy was not unknown to them, for they gave Crazy Horse the title of
“shirt wearer”, a title still remembered from their oral tradition yet not having been employed for many
generations. It had been used during past crises, and essentially meant that the tribe’s complete trust
had, by consensus, been placed in the “shirt wearer” and that his commands were to be obeyed without
question. The title -the “institution”- of “shirt wearer” proved tenuous and fleeting. When No Water’s
wife left him for Crazy Horse, the uncertainty that precipitated from the controversy was enough to
cause the consensus to evaporate and the title of “shirt wearer” was abandoned. Notice that another
“shirt wearer” was not appointed in Crazy Horse’s stead; it was the office that disappeared, leaving only
a new footnote in the oral history. It seems the expedient of resorting to hierarchy may have been
perceived as more of a threat to the individualist Lakota way of life than the unending invasion and
destruction of the buffalo. Or perhaps it was just not seen as a real answer to the crisis. What I really
want to illustrate here is the strength of the very individualist (even anarchist) notion that one person
did not have power over another among the Lakota. And only extreme and dire crisis could cause them
to even question their ability to afford to surrender so much personal freedom. They were free, and yet
they did work together in their society for mutual benefit. I believe their ability to afford such
individualism came from their “paid forward” credit concept. While one individual did not have power
over another, all were subject to their credit concept. Their individualism did not mean they could
afford to be so self-centered as to squander their credit through greed or laziness, yet none were trapped
on an artificially accelerated economic treadmill of work and consumption.
In his book “Debt, the First 5000 Years” David Graeber cites-
the words of an actual hunter-gatherer -an Inuit from Greenland made famous in the Danish
writer Peter Freuchen's Book of the Eskimo. Freuchen tells how one day, after coming home
hungry from an unsuccessful walrus-hunting expedition, he found one of the successful hunters
dropping off several hundred pounds of meat. He thanked him profusely. The man objected
indignantly:

"Up in our country we are human!" said the hunter. "And since we are human we help
each other. We don't like to hear anybody say thanks for that. What I get today you may
get tomorrow. Up here we say that by gifts one makes slaves and by whips one makes
dogs."
The last line is something of an anthropological classic, and similar statements about the refusal
to calculate credits and debits can be found through the anthropological literature on egalitarian
hunting societies. Rather than seeing himself as human because he could make economic
calculations, the hunter insisted that being truly human meant refusing to make such
calculations, refusing to measure or remember who had given what to whom, for the precise
reason that doing so would inevitably create a world where we began "comparing power with
power, measuring, calculating" and reducing each other to slaves or dogs through debt. (Debt,
the First 5000 Years, p. 79)
It would seem the Inuit quoted by Freuchen understood that a “thank you” was an acknowledgement of
indebtedness, and that indebtedness implied reciprocity. Or, in other words, the person giving thanks
owes the gift of assistance “back” to the person who gave it, rather than “forward” to whomever else
might need it later. And he’s quite clear about his understanding that such an expectation of reciprocity
turns all of society into a hierarchical rat race. And that “up here we” (his people) aren’t into all that.
This, of course, brings us back to the Potlatch system I mentioned earlier, where a gift receiver’s
perceived indebtedness to a gift giver creates social hierarchy.
POTLATCH
Earlier we mentioned that the indigenous peoples of the American Pacific North West had adopted a
reciprocal concept of credit. By their credit concept, a gift received must be matched sometime later by
the recipient with another gift in return, or the recipient will lose status relative to the man who gave it
to him. If his return gift is perceived to be less valuable than what he had originally received, then he is
seen as someone inferior- someone lacking prowess in his command of wealth as compared the guy
who gave to him. To be on the safe side, he must make his gift something perceived to be worth more
than that which he had received. The passage from Boaz cited earlier presented this idea in the context
of someone requesting help, and that help coming to him as a loan to be paid back with interest. Under
this notion of the necessity of reciprocity as a means to defend one’s credit and standing in the tribe,
gifts actually became the means to attack another’s credit and status. Boaz says the gifts could come if
they were requested, and surely this is true. But the Potlatch was above all a festival where gifts of
wealth were imposed, even showered, upon one another before all for the express purpose of
establishing status. So was the pecking order continually sorted out in an ongoing flux of credit and
honor, from one year’s Potlatch to the next. Like in our society, possessing wealth had something to do
with status. But unlike our society, wealth did not give its possessor the ability to buy things or control
markets. The thing that is ‘bought’ with Potlatch wealth is status over specific persons, and wealth had
to be transferred to (or rather, imposed upon) another person in order to transfer his
honor/credit/allegiance to the giver. (Interestingly, gathering allegiances in this way is not so very
different from the old method used to gather an entourage in the patron-client system in ancient Rome.)

In his classic essay, The Gift, Marcel Mauss uses the word “prestation” for this kind of giving, which he
describes as “antagonistic”. This system of prestations was the unshakable the rule of law and all were
subject to it. One could not refuse a gift to avoid being bound by it, for that would be seen as an
admission of one’s inability to repay and the same loss of status would befall the refuser of a gift as one
who could not find a way to adequately reciprocate later. Mauss says:
Outside pure destruction the obligation to repay is the essence of Potlatch. Destruction is very
often sacrificial, directed toward the spirits and apparently does not require a return
unconditionally, especially when it is the work of a superior clan chief or the chief of a clan
already recognized as superior. But normally the potlatch must be returned with interest like all
other gifts. The interest is generally between 30 and 100 per cent. a year. If a subject receives a
blanket from his chief for a service rendered he will return two on the occasion of a marriage in
the chief’s family or on the initiation of the chief’s son. But then the chief in his turn
redistributes whatever he gets from the next potlatch at which rival clans repay the chief’s
generosity.
The obligation of worthy return is imperative. Face is lost forever if it is not made or if
equivalent value is not destroyed.
The sanction for the obligation to repay is enslavement for debt. This is so at least for the
Kwakiutl, Haida, and Tsimshian. It is an institution comparable in nature and function to the
Roman nexum. The person who cannot return a loan or potlatch loses his rank and even his
status as a free man.” Marcel Mauss, The Gift p. 40
Throughout his essay, Mauss compares gift giving cultures around the Pacific (and even examples from
ancient Scandinavia, Germany, and Rome) and paints a picture of them all falling somewhere on the
reciprocal (“paid back”) gift spectrum, with the full potlatch at the extreme end. He calls the potlatch a
system of “total prestation”, where, as mentioned previously, chiefs were empowered to give members
of their own tribes away to demonstrate their tribes’ superiority over their counterparts receiving these
human gifts.
Just as the Trobriand kula is an extreme case of gift exchange, so the potlatch in North-West
America is the monster child of the gift system.” Marcel Mauss, The Gift p. 41
So the potlatch was a contest to demonstrate who the top dogs were for the year. Oddly enough though,
the act of competing in and winning this giving contest in the potlatch had the effect of leveling
somewhat the affluence of all in the tribe, as the wealth of the top givers was distributed through the
tribe. In order for the top givers to maintain their status at the top, many of their recipients would
necessarily stay below them because of their inability to return more than they received. This struggle
to keep up the reciprocity would thus necessarily mean an ongoing transfer of wealth from the top to
the bottom and a struggle to send it back up again. A chief maintains his position over the rest of the
tribe by, interestingly enough, giving others the very means by which they may eventually challenge
him. Unlike the tenuous title of “shirt wearer” used by the Lakota, the office of chief was stable indeed

in the minds of the Kwakiutl, Tlinglit, Haida, etc. but its occupation by any particular person was not.
Yes, the potlatch created a hierarchy, but it should be emphasized that it was a hierarchy wherein an
individual’s status was continually challenged and thus in continual flux. Even with all that hierarchy,
the potlatch system was egalitarian in the sense that no one was above the law of their credit concept:
the reciprocal gift.
A great deal more wealth was produced in cultures using potlatch economics than in egalitarian
societies for the obvious reason that the imperative to climb socially and thereby avoid subjugation
necessitated the creation of a great deal of wealth indeed just to keep playing the game. This was not a
matter of production just for one’s own needs or the needs of others or even for fun. Not only were gifts
often not needed by the recipient, but indeed caused of a great deal of stress on the part of the recipient.
A gift was often no less than an outright attack on the recipient’s status and honor. Recipients were thus
compelled to generate a great deal of wealth just to defend their place in society. And as seen in the
passage from Mauss cited earlier, some of this wealth would just get destroyed by a chief who needed
to re-affirm his dominance, but had no particular person above him to challenge. Houses full of wealth
were even burned and copper shields (important wealth and status symbols among these tribes)
destroyed and thrown into the sea in these demonstrations. The further along the spectrum of reciprocal
giving a society found itself, the more wealth it created to fuel its ‘rat race’. Mauss comments on how
the most beautiful and prized native artifacts in collections among anthropologists were from natives of
British Columbia, and this is not surprising since those people of the “monster child of the gift system”
were the most driven to develop their skill in creating vast quantities of such objects. It should be
noted, nonetheless, that the waste and busy-work this system brought about hardly compares with that
of our current bank-debt money-financed market system that destroys entire ecosystems in an
ultimately futile attempt to keep up with the ever growing interest on its financing.
While Mauss was keen to demonstrate how universal this system was around the Pacific (and that it
even appeared spontaneously among some ancient and some medieval Europeans) it must be
remembered that this system was surprising to his European/American readers who were by this time
used to thinking in terms of their old traditions of feudalism. What strikes me as just as interesting as
the idea of this system of prestation so common around the Pacific being found in ancient and even
medieval Europe, is the fact of the feudal system so common in Europe arising spontaneously in the
Pacific. Japan and Hawaii fell in nowhere on the reciprocal gift system spectrum. From the Middle
Ages forward (very little is known of the history of either before the Middle Ages) both were feudal
societies (either with a strong central emperor or without, depending on the winds of an always fickle
flux of power concentration inherent in the feudal system) where rigid hierarchy was everything and
the only possible place for any kind of gift or credit might have been between people of the same social
rank. Quite unlike reciprocal gift exchange systems, in feudalism a gift from someone of lower status to
someone in the aristocracy could only be interpreted as an acknowledgement of the giver’s inferiority-
that the giver is only turning over to the receiver his just due as someone of noble rank. It could not be
seen as a gift coming from the giver’s will, but only as tribute to a superior. In the feudal credit concept,
neither gift nor credit could alter a person’s status, unless gifts were given by a superior to elevate one
vassal over the status of another. This one-way gift was called the ‘fief’ (from the German word for
cattle, Vieh (pronounced ‘fee’); cattle having long served as a unit of value to measure objects worth a

great deal more than everyday pocket change). A lord’s giving of a fief established the relationship
between the lord and his vassal. As was seen in the potlatch system, the recipient in a feudal society
finds himself subjugated by the gift. But unlike in the potlatch system, a vassal cannot possibly
reciprocate his way out of subjugation. People living in a feudal system are still human, and they still
operate on a basic human mental platform that perceives and processes credit. But in this credit
concept, the vassal owes his allegiance to his lord even before the fief is granted. His debt is primordial
because he is seen as a different kind of creature than the fief-granting class, and his serfs are seen as a
different kind of creature still, and nothing they can do short of extreme violence can change that.
Feudalism involves an inequality deeper even than some forms of slavery. An occasional Roman slave
might save up money and buy his own freedom. We even have stories from ancient Greece of slaves
who became very wealthy through speculation in the market, most notably one slave known as Hermias
of Atarneus. Hermias was educated by his master, Eubulus, the king (and banker!) of the Greek city
Atarneus in Asia Minor. Hermias the banker-educated slave became very wealthy indeed and
eventually inherited the throne as king of Atarneus. Alas, the act of buying freedom was quite
impossible for a feudal serf, much less so any dreams of wealth and power.
Humans living in a feudal society responded to gifts from their superiors in a way very similar way to
that of those people living in a potlatch system. Specifically, a gift from a superior served to impose a
debt of honor upon a recipient. Upon receipt of a fief, a vassal was no longer merely subject to his lord
on the basis of some primordial debt, but became “super” subjected to him, so to speak (by “super” I
mean ‘more, but not in a precisely quantifiable way’). If the fief was very large, the vassal would be
“super-duper” subject to his lord; his primordial un-repayable debt compounded by his additional un-
repayable indebtedness that came from his receipt of the fief. He paid tribute to his lord out of his
fiefdom’s production under his management, but it never reduced his indebtedness to his lord.
Something like interest-only payments on a bank loan that might be made today, a vassal’s tribute
would be his burden forever. Instead of seeing his payments as interest, perhaps a better way to see
why his tribute to his lord did not reduce his subjugation would be to see that the value of his tribute is
perceived as an entirely different kind of idea than the value of the fiefdom, just because his tribute
could never serve as a fief given to his lord. It’s like trying to balance the value of affection with a
quantity of avocadoes. Or motor oil. Or better yet, with diamonds. A girlfriend may well expect and
enjoy the regular gifts of jewelry on special days of the year, but they never diminish the boyfriend’s
obligation to continue the gifts. This is because the value of the affection and the value of the diamonds
are of mismatched types, and the gift of diamonds does nothing to affect the balance of the value of her
condescension to continue to allow him in her presence.
Of the three credit concepts noted thus far, feudalism is the least egalitarian, the most hierarchical, the
most rigid, and yet makes for the least stable society. The rigidity translates into brittleness as the
people at the top of their power structures (king, aristocracy, clergy, and sometimes break-away
military power, and more subtly, bankers dispensing market power) covet each other’s power to
legitimize one another before the serfs as superior beings to which the rest all owe a living. The
simplified scheme of legitimacy in feudalism goes like this: The nobility’s power is legitimate because
the King says so. The King is superior because the Pope says so (on behalf of God, of course). The
Pope and his clergy is superior not only because the people believe in God, but because also because
the armies of the nobles loyal to the king say so. It can be thought of a kind of system of

rock/paper/scissors, with market forces acting as a troublesome wildcard (Remember the very strange
case of Hermias? Markets have a way of throwing the other power structures upside-down, including
our democratic power structures of today!) The three most visible sources of legitimacy of upper class
power over the lower classes that reinforce and legitimize each other, namely the King, the aristocracy,
and the Church were constantly scheming to take over each other’s legitimizing power for themselves.
Hereditary kingly succession has been a dicey business in European/world history, what with royal
family and royal court intrigues and murders installing a particular king beholden to one court faction
at the expense of another. Such intrigues are well documented as far back as in the dynasties of ancient
Egypt, let alone feudal Europe. Beyond intrigues within the royal court, German medieval history is
known for the struggle of the German princes to gain control of the master fief grantor, the Emperor
(Kaiser of the Holy Roman Empire) to do the bidding of one faction of princes at the expense of the
other. Early on, hereditary succession disappeared as the princes gained the right to vote for the new
emperor. During the 12th century AD, there was a time when the factions of princes voted for two
different emperors and would not accept the results of an election to determine a winning choice. The
two contenders for office of German Emperor were from England and Spain, and both had paid large
quantities of wealth to buy the votes of the various German princes. During the 13th century AD, there
was a time when the office of Emperor was dispensed with altogether, as being hardly legitimate or
relevant anymore. The leadership of the other legitimizer of power, the Pope of the Roman Catholic
Church, was abducted by a military force sent by Philip IV to ensure that the things legitimized by the
Pope were the will of the king of France, and not the other way around. In England, King Henry VIII
made himself the de facto head of his own source of spiritual legitimacy, the Church of England. Japan
and Hawaii were hardly more stable; Medieval Japanese history is marked by constant military struggle
by various warlords to gain physical control of all the land and then the legitimizing title of Shogun
bestowed upon them by the head of the Shinto religion, the Emperor. Hawaii suffered a long chaotic
period of war during a power vacuum when there was no central King legitimized by the Hawaiian
spiritual Kahuna. The Hawaiian aristocracy fought themselves (using their serfs and warriors, of
course) long and hard to get their own will (in the form of their own person, of course) legitimized as
the supreme law of the land. But of course there never really is a supreme law of the land under
feudalism, really, but rather at best a tenuous hold on the strings that tug the levers in the minds of the
population that convince them that you are legitimately superior to the kind of creature that they are
and that they owe you a living. Those who take these strings into their hands are never at ease and
never sure of themselves, for they know it’s all a con game and those same strings might at any time be
tugged by some rival in a way that diverts the flow of the people’s power away from them.
The credit concept of our wage system is most similar to feudalism.* The employee only gives one
kind of value- labor- to his employer. The employer gives only one kind of value to the employee-
money. The direction of the flow of money, like the direction of the flow of a fief, determines which
party in the relationship is in the role of employer and which is in the role of employee. No amount of
giving on the part of the employee can change the relationship, but rather serves to cement and confirm
his position and status as employee. The employee may receive a promotion just as a vassal receives a
fief, and just like the vassal, is entrusted with the management and production from his fiefdom. And
yet an employee he remains. Do corporate owners, stockholders, boards of trustees, vice presidents,
and CEOs covet each other’s power within the corporation? Do they plot to undermine each other and
seize more corporate levers of power for themselves? Steve Jobs, for one, would agree that they do.
Like the feudal princes, do the corporations of today spend their energy attempting to capture and
control the systems that legitimize them, namely the legislature and the courts? The evidence is before

us. But that’s just par for the course in that kind of system. Americans are taught from childhood that
American freedom is synonymous with the “free market”. Of course, companies do sell things they
produce on the “free market”, which was also the prerogative of the feudal lord to do with the
production of his manor.
In order to better visualize how feudalism relates to principles of the gift economies, I like to picture
the relationships between people living in the somewhat simplified feudal microcosm of the Mafia. In
the anarchist gift economy and in a potlatch system people understand giving gets them credit,
reputation, and respect. This universal human characteristic is exploited by the Don. He knows a few
guys who are hungry for respect and he defines the kind of giving they need to do for him in order give
him the ability to manipulate the situations around him. The Don plays these guys to keep them giving
to him, and they’re glad to contribute to his power in order to increase his ability to grant fiefs to them.
What he's done is to break the tribal economy network and set himself up as the exclusive source of
respect. Just as King Louis XIV famously managed to equate contributions toward his own personal
aggrandizement with contributions to the welfare of the state, the mob boss positions himself as the
principal broker of reputation credit for the whole organization. How does he do it? As long as their
giving goes to him, he coordinates their muscle to increase the power of the group as a whole. The
goon squad sees they have an advantage over everyone else. They become an elite faction, a parasite
group distinct from the community. He's gaming the tribal credit system just like any other feudal lord
or military dictator would. As a master manipulator, he can see when an action will manipulate things
to the advantage of the group. The other guys probably don’t have the perspective to do this; not
everyone is a master manipulator. They just learn to do what he says and trust that it will work out.
They gain status by raiding the larger economy for the benefit of their “tribe”. Because they are all
giving to the central figure to gain status, they go into competition to give him more and more loyalty
*While it may be protested that the political structure of our democracy is not feudal, what I’m talking about here is where
most of us spend the lion’s share of our waking hours: in the wage system. A moment’s reflection reveals our political
systemto be little more than a corollary to the wage system, with politicians constantly chattering on about jobs bills and
“full employment”. Elections are largely determined by the public’s perception of their “management” of the wage system.
and service. They thus compete to become more valued by him than the other guys. This becomes an
anti-potlatch, so to speak, where it’s understood that his gifts to each individual might be smaller than
their gifts to him, yet precisely this fact ensures his continued dominance. A crime boss- a dictator- is
created and sustained this way. Their neighborhood supports and submits to these elites and also
actively weeds out dissidents as their gift to the dictator and his 'boys'. People in this structure really
can't find a way out. All their humanity that would build credit and reputation through contribution in
an egalitarian society is now being used to keep their boss on top and themselves beneath him. They
instinctively know they have to contribute to gain status, but their contribution to the boss to gain status
actually cements their place below him just as in any other feudalistic system. They can't figure out
how to fight against the system or the boss without fighting against their own humanity that's being
funneled into his aggrandizement. And most commonly, they don’t want to anyway, being content to
sing “God Save the King” with a certain national pride in their subjugation, and feeling secure in
“knowing their place”.

These three different credit concepts- anarchist “paid forward” gift economy, hierarchical “paid back”
reciprocal gift economy, and feudalism make for very different kinds of societies. All function the way
they do because of their treatment of credit relations between their members. The way credit is
perceived in each produces very different results for the people who live within each of these types of
societies.
Are there any other societal types that have been created by various cultures’ credit concepts? Well, for
one, thee Six Nations of the Iroquois were known for their economic system wherein the Iroquois
farmed communally, stocked goods and their harvest in their common longhouses, and then allocated
those goods as need was perceived by women’s councils. The farm land was managed by the women
who worked it The anarcho-communist style economic system of the Ho-de’-no-sau-nee (a.k.a.
Iroquois) functioned smoothly by all accounts. Food was grown collectively by the women, and hunted
collectively by the men. It was stored in both ends of the longhouse, near the entrances at either end,
hung throughout the longhouse from the rafters, or stored in closets between the dwelling
compartments of the families sharing the longhouse. Rather than having set mealtimes, “family
members helped themselves to the pot whenever they were hungry”. (New York State Museum
website)
And then there was the truly bizarre form of total 100% collectivism that was the cultural system of
Axial Age Sparta. It may well be that there is nothing we would ever want to adopt from their culture. I
personally find nothing about their concept of how to go about showing 100% dedication that appeals
to me. I mean, really, a Spartan was considered a thief if he sneaked out of the communal men’s
barracks to sleep with his wife, but it was his communist duty to share her with the other men upon
request. Where’s the part where that Spartan total communist dedication translates into a fulfilled and
joyful life? When the military no longer serves to protect “real life” but instead becomes the concept
and model of “real life”, as far as I’m concerned something has gone terribly, terribly wrong. Enough on
Sparta. They, too, are categorized as “none of the above”.
I took the trouble to outline the above three spins on the basic credit concept to illustrate that a
societies’ handling of credit pre-determines what is possible- what is affordable- within it. Money is
credit incarnate, and our aim here is to design systems of money knowing in advance what kind of
attributes our system of money/credit will impart to and enable in our society. We want to know how to
design in the ability to afford to be productive, the ability to afford to be charitable, the ability to afford
to be less wasteful, and so on, into our society by designing its credit concept and credit handling
system to enable these things.
Of the three societal forms following their credit concepts I mentioned above, feudalism is my least
favorite. How about the different spins on the gift economy? Are gift economies the best things before
or since the invention of industrially produced sliced bread? Before we romanticize the notion of the
gift economy excessively, let's look at some of the drawbacks inherent in both forms of gift economy.

First, there’s the problem of strangers outside the reach of the informal credit accounting. This cannot
help but to lead to an “Us vs. Them” mentality between tribes. The one tribe over here has its bonds and
communal ties but the other tribe over there can only be seen as alien. Informal accounting for internal
tribal contributions of course cannot happen with people outside the tribe, and so the people of the tribe
have no way to gain credit through co-operation with such outsiders. That all-important credit within
the tribe is what people are focused on; a 'quick and dirty' way to get credit within the tribe is to
demonstrate strength and bravery and skill in battle against the 'aliens'. So often people in gift
economies will feel driven to instigate conflict with other groups, even though they likely do not
consciously understand why they feel compelled to do so. Ethnic conflicts thus seem to be constantly
instigating themselves around the world. And once started, they tend to continue for generations as the
boys of the different groups are inevitably spurred on by the urge to gain “credit” for themselves by
causing trouble for the aliens. When other social forms break down, kids inevitably self-assemble into
gangs of “Us vs. Them” groups that make their distinctions between each other by the most arbitrary of
definitions. They are even willing to go through the process of getting “jumped in” just so that they
have a chance to gain and maintain a credit balance within their arbitrarily defined gang group. In
another example of a gift economy credit causing social distress, this tribal credit causes huge problems
for modern people living among their governments’ police forces. The police officers have their own
tribe within which they have given and spent credit; they’ve ‘had each other's backs’ on the street, so to
speak, and that credit does not extend to the human aliens they are hired to protect. It's nearly
impossible for the officers to really feel that people outside the police tribe count as human or deserve
respect, for those outsiders have no credit within the professional police tribe. Like cowboys, they build
camaraderie among themselves, but the managing the “herd” is just a job. It's hard for the police to
perceive the people in the herd as anything other than just dumb animals too stupid to take care of
themselves. Without interchange of credit between police and people, they can hardly see each other as
really human. Such police forces naturally alienated from the people they “serve” become ready tools in
the hands of dictators that never cease to spring up around the world. Police looking to gain credit
within their own tribe are keen to score points against the alien herd even without encouragement from
a tyrannical executive; such an executive has merely to set a few expectations about what kinds of
targets bring the most credit to an officer and all opposition withers before the relentless, organized
police persecution. Such police don’t even need to be well paid- they do most of what they do for
informally accounted credit, or in other words, as gifts.
And this is business of initer-tribal alienation is not different for Native Americans who live in my part
of the world. To the Diné (aka Navajo), the Hopi are just “cliff-shitters”, not really human. (A Navajo
friend of mine just can’t seem to refer to the Hopi any other way!) To the Hopi, the Navajo are just
skull-bashing savages, not really human. Bravery in war against other tribes seems to be heavily
weighted indeed in the accounting of the tribal credit economy. The more heroic the “protector” of the
tribe, the greater the debt of gratitude he is owed and the more credit he is given. If there's no conflict,
he'd better go create some so his people can ‘owe’ him respect. This same old buddy of mine told me
recently that the most important thing about tribal life today is that he be ready to back up his fellow
Navajo should conflict start; whether the fellow Navajo is justified or not in the conflict has nothing to

do with it. Again, it doesn't seem to me that the people instigating such conflict are quite aware of why
they feel compelled to do this. At least, they don’t seem to be able to explain this compulsion beyond a
simplistic “that is the way of our people” or “a man's gotta do what a man's gotta do”. And so they
‘gotta count coup’. The situation is not different between the Trese and Sereno gangs that occasionally
make their presence known in my town. Even when a gift economy is carried on between tribes, the
gift economy is most often not able to change a people’s view of the other tribe as being something
alien. The anthropologist Bronislaw Malinowski noted this perspective as present among the Kiriwina
islander people who shared inter-tribal gift economy relations with the Dobu. Inter-tribal gift
economies operate on the same “paid back” credit basis as in a potlatch style contest of gift one-
upmanship that often actually serves as an alternative form of warfare. This “total prestation” kind of
warfare is still is about credit, really. But again, it is antagonistic, for it is hoped that credit can be
captured rather than honored. The opposing parties prefer that each other not quite be able to repay,
much like a loan shark prefers that his clients default. And yet, the benefit from the continuation of
hostility is that foreign products to which a tribe would otherwise not have access continue to be
brought into the tribe’s possession. It’s weird to think about- the enemies end up providing for each
others’ prosperity, and yet remain enemies. As an example of such giving failing to create brotherhood
between tribes, Malinowski quotes the Kiriwina as having told him, “The Dobu man is not good as we
are. He is fierce. He is a man-eater. When we come to Dobu, we fear him, he might kill us! But see! I
spit the charmed ginger root and their mind turns. They lay down their spears, they receive us well.”
(Malinowski, Argonauts of the Western Pacific, p. 246) Apparently it’s easier for people to believe in
charmed ginger roots than in the humanity of those classified as alien. The mechanism of internal gift
economy credit can be seen creating internal group cohesiveness, while alienating the rest of humanity,
and this can be observed in populations as seemingly disparate as rival mafia organizations and high
school cliques.
The opportunities for specialization usually remain quite limited in the gift economy, and that’s another
large drawback. The tribe’s internal informal credit can only be extended by its members to people who
they know and interact with personally or know by reputation. Humans can only maintain relationships
with a few people at a time- maintaining more than roughly two hundred active relationships at once
(either the Dunbar number or Bernard-Killworth number, feel free to pick your preference) over-
extends the brain's capacity to keep track of them all. When a trading group is thus limited in size, its
products can't go through very many stages of added value from start to finish. The group is limited to
working with found objects and modifying them by just a few steps. Take again the fabrication shop as
an example. The painter can take a putty knife from a hardware store and give it to the welder for
modification. The putty knife is a found object picked up out of the market economy and it is modified
by the equipment found in the shop. The employees in the fab shop cannot smelt ore to make the steel,
nor can they roll it into bars or plate from which to cut the knife blade. Nor can they even make an
alloy suitable for such a blade out of the various steels lying around the shop. Despite all their tools,
equipment, and skills, one or two steps of modification of what they already have lying around are all
they can manage.

So far we've established that credit is the basis of human co-operation. In a gift economy, credit comes
from contribution. And reputation comes from credit. And status comes from reputation. We respond
to status because we respond to reputation which comes from credit. We respond to money as if it were
status. No surprise here, since money also comes from credit.
CREDIT AMONG VIRTUAL STRANGERS
But money works between strangers, and strangers have no reputation, nor status, nor credit with one
another.
Barter works between strangers and money works between strangers. Quite a lot of ink has been spilled
in economic academia over the years explaining money as merely a slightly more developed and
refined form of barter. It’s easy to see why money might be confused with barter, since both barter and
money that has already been put into circulation facilitate trade between strangers. Money is created
by credit, but once it is in circulation, it takes on the peculiar attribute of an exchange commodity and
does a fine job of bridging the chasm between strangers in a way that otherwise only direct barter can
(and can only do poorly with great inconvenience).
My old Diné (Navajo) buddy (yes, there’s good old Sherman again) explained to me that his tribe did
in fact traditionally use barter to get their ceremonial peyote. They had to use barter because peyote
came from the lands of another tribe, the Zuni. (He didn’t describe to me a potlatch situation between
the tribes, so I’m going with what he told me.) It was bit of a trek to go trade with them for it, and the
young Diné men would of course gain respect within their tribe by making that journey to trade with
the Zuni. The other tribe did not simply give the peyote to the Diné - reciprocation had to happen on
the spot and be done on a direct value-for-value basis. I should also note here that there is no need for a
common spoken language to support such barter. The values being traded speak for themselves.
When trading between strangers is done, barter has often made sense as a means to work around a lack
of a shared credit concept but it has never been terribly convenient. One thing that made barter much
easier throughout history has been the use of some commonly accepted commodity as a base unit of
value. In ancient Sumer that common commodity became silver mostly because the supply of newly
mined silver was more stable than the supplies of other commodities. Wampum was filling this role for
natives on the American east coast as the Europeans came into their world. The Lydians of ancient
Greece used gold (or Lydian electrum, a natural gold-silver alloy) because they could find it in their
river sands. And gold worked great to get value from a stranger if only you could somehow get your
hands on some. A thief could steal the gold and still get value for it. A person with gold doesn't need to
earn credit through contributing to anyone! This is not to say that gold really was universal as a
common commodity of exchange for everyone- for eons the Lakota had gold in their black hills
streams but it wasn't accepted as a barter commodity by other tribes- so it stayed in the river sands.
They would have eventually preferred that it hadn't been there at all because during the 1800's it kept
luring Caucasian prospectors into their lands. The Egyptian tombs were of course full of gold objects.
Unlike the Lakota, the Egyptians took the trouble to work their placer deposits all along the Nile for
literally thousands of years. And yet oddly enough, in all of ancient Egyptian archeology, there has
never been found any reference to using gold as money, or even as the default commodity of trade. And
so, while strangers may not have to know each other personally in order to trade using gold, they at
least have to have the common understanding that trading can be done with gold in order for gold to

serve that purpose for them. A common commodity of trade has to at least take on that particular aspect
of a common language- namely the understanding that it is a means of communicating value- in order
for it to function that way.
A commonly accepted commodity based economy can have the advantage that it can be used by
strangers, among whom there is no accounting of credit, whether formal or informal. If strangers can
trade conveniently, that opens up a whole new universe of possibilities for specialization unheard of
within the gift economy. Ore can be mined and smelted into pig iron. The iron can be sold as a market
commodity for money. The pig iron is not useful to anyone in that form- but a hot-roller mill can buy it
for money to turn into other not-yet-useful things like coils of sheet metal or wide-flange beams. The
W-beam isn't useful just sitting there in and of itself- it has only potential value- that potential is
realized when it becomes a component of a building. The coils still aren't directly useful to anyone yet
until the coil is unrolled, split, rolled and welded into square tubes or stamped into sheet metal products
like folding chairs or steel grating or putty knives for painters to give to their welder buddies for
modification.
Adding the possibility of these extra “added value” steps makes possible a universe of materials for
teams of specialized engineers to use in commercial products. The engineering teams themselves would
not be possible without money that behaves enough like a common commodity so that it allows co-
operation between strangers of the magnitude seen in today's global markets. This is not to say that
bartering is what has enabled the specialization of today. Not at all. Again, direct bartering has always
been far too awkward to be a terribly significant portion of the world’s economies. What I’m talking
about here is language again, and one with just enough of a barter component to enable specialized co-
operation between people who don’t know each other personally.
One disadvantage of a common commodity as mentioned before is of course that it can be stolen.
When gold takes on the role of money, people respond to it as if they were responding to real status,
again because they can get what they need with gold just like they could if they had status. Producers of
value give their products to the thief so they can get some of his gold- a bit like they would give their
products to a respected tribesman in order to have some of his status rub off on them. Both are
spendable, in their own way. So while money that behaves as a commodity does indeed enable trade
and creativity, it also has the nasty side effect of elevating the status of the thief, the fraud, the
extortionist, and the exploiter in ways that would not be possible in a gift economy.
Audio snippet: W. J. Bryan's “Cross of Gold” speech.
EDIT EDIT EDIT
Is money then just a kind of barter? Should money therefore just be a kind of gold? Remember, in a
barter exchange value is given for value on the spot because there is no trust to allow for reciprocation
at a later time, and there’s no tribal context within which to develop and build credit. E. C. Riegel
imagined “true” money as “split-barter”. That is to say, money enables barter to be split into two halves
of which each carried out at different times. In the first half of the split-barter exchange I give value
away to someone for money. In the second half of the split-barter exchange I receive value from some
completely different person for money. But how does the would-be split-barter exchanger know she
can execute the second half? There's the trust component again. But isn't trust only possibly within a
gift economy? Well, instead of my trusting the individual directly based on my experience with her,
and instead of my trusting what I personally know to be her status in our tribe, what I'm trusting is the

Results-Driven Monetary Design Principles for Economic Prosperity

Results-Driven Monetary Design Principles for Economic Prosperity

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