Last week, we put up an article on Bernard Lietaer and his suggestion for alternative money systems that will act as complementary to the existing. This ex- banker believes that the design of money is the root of all that happens or doesn’t happen in society- that money is not really needed to solve the world problems, but it is the cause of the world problems. Money to him, is our daily experience, and this daily experience involves, above all else, a continuous shortage of money. There is a scarcity of money, and a lot of things that require money to be accomplished. So what if we just introduce a complementary money system? (You can read the article here). To illustrate the qualms he has with the existing money systems, Bernard tells a story in his book, The Future of Money. He calls it The Eleventh Round.

Once upon a time, in a small village in the Outback, people simply used barter in all their transactions. So, on every market day, you would see people walking around with chickens, eggs, hams and breads and engaging in prolonged negotiations among themselves to exchange what they needed. At key periods of the year, harvests for example, or when someone's barn needed big repairs after a storm, people also had brought over from the old country the traditions of helping each other out. A stranger came by, and observed the whole process with a sardonic smile. "Poor people, she said, so primitive.... There really is a much better way to do all this. See that tree there, well, I will go wait there for you to bring me one large cowhide, and gather every family together. I'll explain the better way."

And so it happened: She took the cowhide, and cut leather rounds in it, and put an elaborate and elegant little stamp on each round. Then he gave to each family ten rounds, and explained that each represented the value of one chicken. This way, people could trade and bargain with the rounds instead of the unwieldy chickens. "Oh, by the way," she said, after every family had received their ten rounds, "in a year's time I will come back and sit under that same tree. I want you each to bring me back eleven rounds. That eleventh round is a token of appreciation for the technological improvement I just made possible in your lives."

What do you think had to happen during the next year?

Remember, that eleventh round was never created. Therefore, bottom line, one of each ten families will have to go bankrupt to pay the financier, without regard to how well it manages its affairs, and lose all its rounds, in order to provide the eleventh round to all the others. So when a storm was threatening the crop of one of the families, people suddenly had less time to help bring it in before disaster struck.... It was indeed more convenient to exchange the rounds instead of the chickens on market days, but the new game also had the unintended side effect of actively discouraging the spontaneous cooperation that was traditional in the village. Instead, the new money game was generating a systemic undertow of competition among all the participants.

Source: The Future of Money