Political Economy and Currency

A dictionary defines currency as the system of money used in a particular country. You find both the words ‘general’ and ‘particular’ in this general definition of this particular term. A currency belongs to a specific country. Financial transactions within that country are in that currency. If you go to Sweden to do some shopping, be sure you have some Swedish crowns on you. The economist’s definition is government money. It includes coins, banknotes, and central bank deposits, but not commercial bank deposits.

Under the gold standard, each currency represented a fixed amount of gold, and national central banks held gold in their vaults to back that promise. You could exchange banknotes for the amount of gold the currency represented. That was the basis of the currency’s value. And so, the underlying currency was not the national currency, but the international currency, gold. Under the gold standard, the world had a single currency, gold. You could exchange bank deposits for currency, thus gold.

Today, we have national fiat currencies, and bank deposits are also money. But what gives fiat currencies their value? It is the national economies backing them, because of the equation known as the Quantity Theory of Money, which says that Money Stock (M) * Velocity (V) = Price (P) * Quantity (Q), so Money Stock (M) depends on Velocity (V), Price (P) and Quantity (Q), and the value of a single unit such as the Swedish crown, is M / units in circulation. The money stock includes bank deposits.

Honest money

Proponents of the gold standard argue that gold is honest money and that fiat money is a fraud. However, the scam is usury, and charging interest on gold is a fraud. There isn’t enough gold to repay all debts, and interest compounds that problem. In that sense, fiat is honest money because it merely promises to pay in fiat, which a government can make good on. Everyone knows that this money will be worth less in the future, and no one knows by how much, which everyone knows. Usury turns money into a Ponzi scheme. And so, only usury-free fiat money is honest money.

Usury may seem victimless, but it corrupts everything, bringing down nations and civilisations. It is the gravest crime against humanity. As a result, honest people become increasingly rare. A society or a civilisation collapses due to scams and greed. Crimes seem victimless when you are unaware of the consequences, don’t care about them, or even deny them. But everything you do affects people, animals, plants, and future generations. Today’s economy is an orgy of planetary destruction, transforming energy and resources into waste and pollution, driven by the pursuit of profit.

Interest is the price of distrust, not only in the currency, but also in debtors. Usury-free money requires honest debtors. Planning not to repay your debts, or hiding the risk that you might not be able to, is a most serious offence, as harmful as demanding interest. Many financial frauds are comparable to usury. These crimes often seem victimless, but they cause distrust. They are worse than murder, because distrust causes interest rates to rise, and usury is a destroyer of civilisations.

A usury-free financial system requires a political economy with high ethical standards. The moral foundation of our civilisation is the ethics of the merchant, which is no ethics at all. And as long as there is no permanent world peace, nation-states will do anything to finance their war effort, such as offering interest on loans. Humans are a self-destructive species that may only do the right thing when inspired by fairy tales. And so, an honest political economy and permanent world peace remain unthinkable unless an inconceivable event, such as the emergence of a new world religion, were to occur.

Import and export

International trade also affects a currency’s value. When a country exports more than it imports, demand for its currency exceeds supply, driving its currency higher against other currencies. That makes foreign products more affordable than domestic products, allowing exports and imports to balance. Conversely, the opposite happens if a country imports more than it exports. After World War II, the German mark became a strong currency because Germany was exporting more than it imported.

That isn’t always the case. Countries lend and borrow in international markets. The central bank of Japan printed yen to buy US dollars, thereby increasing the supply of yen and decreasing the supply of US dollars by lending those yen to traders. As a result, Japan continued to export more than it imported for decades. The Japanese central bank set interest rates at a low level. Traders borrowed yen to buy US Treasuries with higher interest rates, pocketing the difference, subsidised by Japan’s willingness to depress the value of their currency. Without usury, that would have been impossible.

Likewise, countries that import more than they export can borrow foreign currency to cover their import costs. These countries can run into trouble as they borrow a currency they can’t print. They can borrow because, in a usury-based financial system with national currencies, interest is a reward for the risk of default. Had borrowing at interest been impossible, deficit nations would have to balance imports and exports. Instead, they go into debt and export more than they import to pay the interest on their debts.

The primary reasons for these persistent imbalances are usury and the existence of independent nations with national currencies and economic policies. The alternative would be to let these imbalances correct themselves, which would require the free movement of people around the world so they can settle where the opportunities are, or government policies to support weaker regions, such as ordering corporations to employ people in these areas. That becomes possible with a single world government and currency.

Reserve currency

Reserve currencies facilitate international trade. Since World War II, the US dollar has been the most widely used reserve currency. The arrangement allowed the United States to enjoy a higher standard of living and have a large military paid for by foreign nations. In the 1960s, the French Minister of Finance, Valéry Giscard d’Estaing, referred to it as the US’s ‘exorbitant privilege’. The US dollar and Wall Street have been the pillars upon which the US financial empire rested. Previously, Great Britain had a similar privilege.

The arrangement also gave exporting industries in foreign nations a competitive advantage. By buying US dollars for their currency reserves, competitors of the United States were able to suppress the value of their own currencies and sell their products at a lower price, leading to the deindustrialisation of the US. If you own a money printing press, printing money is also an easy way out. The US dollar reserve status harmed US exports and allowed other countries, such as China and Japan, to build their industries.

The US Dollar’s reserve status also made the FED responsible for the international financial system. The FED had to rescue foreign banks during the 2008 financial crisis. Americans felt they ended up paying to prop up foreign banks. That is incorrect, as the holders of US dollar-denominated debts paid for it, not indebted Americans. And had the Fed not acted, and the global economy had collapsed, they would have discovered that the rest of the world had been funding the United States.

Due to usury, debtor nations face a shortage of US dollars, making them hostages to the US dollar-based usury financial system. Meanwhile, creditor nations, lured by interest payments, store their wealth in US dollar-denominated debt. That has been the basis of the US empire. It was a deliberate choice by US policy makers to financialise the US economy under the guise of Reaganomics and neoliberalism, and to generate financial profits in the bullshit economy to attract investment capital.

Belief in the US dollar’s value and the promise of financial profits fueled the neoliberal economic boom. The imbalances in the system accelerated the conversion of energy and resources into waste and pollution, a process that economists refer to as wealth creation. The US dollar reserve status meant that Americans have lived beyond their means, paid for by austerity in the rest of the world. In other words, Americans could spend their way into prosperity while other countries had to export their way into it.

Government debt and liquidity

A government doesn’t need to borrow if it can print currency. Such a scheme doesn’t instil confidence in currencies. For that reason, central banks became independent of governments to promote trust in their currencies, as creditors don’t trust politicians. Instead of printing currency outright, the usurers made governments borrow and pay interest. Still, when a government borrows in its own currency, it can always repay the loan with interest, if needed, by printing currency. That makes government debt as safe as the currency itself, so banks could use it as a liquidity reserve in the financial system.

It has become unthinkable that a sovereign government would go bankrupt, so banks use government debt as an investment or collateral, thereby promoting liquidity in the financial system and generating profits for the usurers who operate the system. When a bank lacks cash, it can sell government bonds or pledge them as collateral for a loan from another bank. Government debt is a central pillar upon which trust in the financial system rests. US banks hold more in government debt than in commercial loans. Therefore, when the government goes bankrupt, the financial system collapses with it.

With fiat currencies, the currency is as good as the political economy backing it. Ideally, a stable society, industrious people, and a prudent, honest government help a fiat currency maintain its value. In reality, tax evasion also plays a role. High-net-worth individuals take their wealth from the societies that helped them generate it, because they don’t want to pay for the public education and infrastructure that made their wealth possible, and transfer it to tax havens that parasitise on productive economies. A single tax regime for the entire world can remedy that issue.

Under a gold standard, there was no guarantee that a government could repay its debts in gold. And so, only gold itself was a safe reserve, which constrained liquidity in the financial system. Fiat currencies in the usury financial system are not a store of value, but they usually suffice as a medium of exchange. With inflation rates of 10%, lending and borrowing can continue at higher interest rates. Therefore, under normal circumstances, interest-bearing investments in a fiat currency can retain their value.

Gold money requires interest, as you can store it without loss. Therefore, gold can’t be money in a usury-free financial system. Other forms of backing, such as food reserves, are also problematic as they generate a monetary demand for these items, which can make them more expensive. By owning gold, you can protect yourself against the failures of the political economies backing the world’s fiat currencies. Precious metals, however, offer little protection against societal collapse or revolution. Gangs or revolutionaries may take your possessions and murder you, so you are as safe as the society you live in.

Single currency

The member states of the eurozone have embarked on a monetary experiment. What is novel about the single currency is that the member states are sovereign, yet they share a single fiat currency. Eurozone member states can still issue debt, despite having agreed to limit their debt and deficits under the Stability and Growth Pact. The problems that arose demonstrate the relationship between sovereign governments and the currencies they issue. In a broader historical context, the euro is a prelude to a single world currency, and the euro experiment highlights the problems that come with it:

• Under the gold standard, there was a single currency, gold.
• After the gold standard had ended, states began issuing fiat currencies.
• Under the euro standard, the Eurozone has a single fiat currency, the euro.

A state’s prerogative to issue currency hands it a degree of independence in making political choices that impact the economy. If France still had the franc, and the country decided to lower the retirement age, it could finance the entitlements by printing francs. The franc would have lost value, and prices in France would have increased, with the French ultimately paying the cost. The Quantity Theory of Money makes it clear. The money printing makes M rise, and the lowering of the retirement age makes Q fall, so that P increases, and to compensate for the loss in purchasing power, lenders will demand higher interest rates.

The French socialists would then blame the higher prices on price-gouging corporations and the higher interest rates on usurious bankers, and the French would go on strike to demand lower prices and lower interest rates. However, now that France has entered the Eurozone, the consequences of its political and economic choices are felt across the entire Eurozone, and going into debt or printing currency to lower the retirement age has become a scam at the expense of other Eurozone member states.

In a fiat currency regime, government debt is ‘safe’, meaning that the government borrows in its own currency and promises to repay both the principal and interest in that same currency. In the past, France could borrow French francs in the market and repay them with interest, as it could print francs if needed. And so, France could always repay its debts in French francs. In today’s world, banks hold government debt as a liquidity reserve based on its presumed safety. Government debt is a pillar upon which trust in the financial system rests. So, to make the eurozone work, its member states must underwrite each other’s debts.

The underwriting was not part of the initial eurozone setup. That problem came to light during the eurozone crisis that escalated in 2012. ECB President Mario Draghi decided to do ‘whatever it takes’ to save the euro. Investors were losing trust in the debts of several eurozone countries. The recession following the 2008 financial crisis had deteriorated their finances. Due to the higher interest rates they had to pay on their debts, these countries were heading toward default, which would bring down the euro. It forced the ECB to underwrite these debts by buying them until their interest rates dropped.

The underlying cause of the crisis is usury. High interest rates pushed these countries toward default, while lower interest rates made their debts safe again. The fiscal irresponsibility, insofar as there was one, also relates to usury. Had these governments not been allowed to borrow at interest rates above zero, their finances would have been in excellent shape. And finally, the crisis began with subprime lending in the United States, which wouldn’t have occurred without usury, as there would be no reward for the risk of default. And so, a global fiat currency can only work when it is usury-free.

International Currency Unit

The euro experiment has shown that a single world currency, or International Currency Unit (ICU), doesn’t require a one-world government if all the world’s governments yield their prerogative to issue the currency, as the Eurozone members have done, and accept that they can’t issue debt if no lenders are willing to lend at a negative interest rate. In a Natural Money usury-free financial system based on a currency with a holding fee, the ICU becomes a unit of account only, as no one wants to pay the 10-12% holding fee. Government debt, rather than currency, will be the liquidity in the financial system.

All the world’s governments can issue their debt in the ICU, provided lenders are willing to lend them at interest-free rates. Hence, a global usury-free financial system founded on the International Currency Unit (ICU) can be politically neutral. It doesn’t require reserve currencies that can benefit specific nations. The ban on usury ensures the system’s integrity, as there is no reward for taking on risk, while debt issuance depends on a lender’s willingness to lend without interest. That includes government debt. Enforcement still requires a higher authority to oversee nation-states.

Governments can only issue debt to the extent that lenders are willing to lend them funds at a negative or zero rate of interest. When a government can’t borrow, it must either raise taxes or reduce spending. With Natural Money, government debt becomes a separate currency that also backs banknotes and coins. If nation-states continue to exist, these will be the national currencies. The same applies to a world government. The world government needs a tax base and may issue ICU-denominated debt that may become the Global Reserve Currency (GRC).

Private vouchers and crypto vouchers

Private vouchers and crypto vouchers, touted as currencies by their sales teams, are not currencies because no government has issued them, and there is no law requiring us to accept them for payment. They are comparable to supermarket chains’ value stamps and value tokens in computer games. If your employer proposes to pay you in Dogecoin, you can refuse and request payment in the national currency. It is your prerogative by law. But you can’t refuse the national currency. The government doesn’t accept crypto vouchers for tax payments unless it can’t issue a credible currency.

The proponents of crypto vouchers promise that they provide an alternative payment system independent of governments and banks. For criminals, they may do so. You can also legally invest in crypto. Those who hold crypto vouchers see them as a hedge against state-issued currencies. In that sense, crypto vouchers have a role similar to that of precious metals, as they are also eternal. As a result, a few crypto vouchers have seen spectacular value increases. Crypto vouchers don’t offer as much protection as gold, as they depend on a technological infrastructure that may fail.

National currencies hand nation-states a degree of political and economic autonomy. Governments have usurped the prerogative to issue currency and, through legal tender laws, to determine what is money. A contentious issue is that governments permit private banks to exploit their national money systems for private gain through usury, thereby undermining the currency. The crypto vouchers don’t have that issue, as lending and borrowing can’t increase their supply, so their sales teams market them as a store of value. But they aren’t gold, so the question is: who will end up empty-handed?

Latest revision: 13 December 2025

Featured image: Amazon Blue Front Parrot. Beverly Lussier (2004). Wikimedia Commons. Public Domain.