The Truth About Money: The Money System Isn’t There a Better Way?

by Francis and Lia Ayley

Francis Ayley is president of Fourth Corner Exchange and a business consultant who has been active in monetary reform for 30 years. He founded North London LETS, the second-largest Local Exchange Trading System in the UK, in 1990. Lia Ayley is a psychotherapist and freelance writer who saw North London LETS grow from an idea in Francis’ mind in 1990 to a thriving local currency system. She is currently a member of the management group of Fourth Corner Exchange and is delighted to see a community currency system established in Whatcom County.

Part I

We all use money every day. Some of us think we know what money is. Yet ask the average person for a clear, scientifically accurate definition of money, and you will get a confusing muddle of unclear answers.

Despite all we may think we know about money and how to use it wisely, we have all been educated by our culture to have many incorrect and illusory beliefs about money. In this article, the first of three, we will look at one of these misconceptions: the idea that our present economic system is the only viable system in existence.

Most of us assume there is only one kind of money: the coins and paper money we use every day, issued by a central bank. The truth is that there are many different money systems available to facilitate the exchange of goods and services we all need. Some systems issue printed money, others issue electronic money. Some are time-based, others use units of currency. Some systems issue money only from a centralized banking system, while others issue it locally. The variety is endless, and like everything else, some systems of exchange are better than others.

Our current national money system, for instance, regularly and periodically fails. Ironically, this is called “the business cycle.” This boom-and-bust cycle has become enshrined within mainstream economic theory as inevitable and unavoidable. Large and small collapses of the money system occur in every country at some time. Occasionally, as in the Great Depression of the 1930s, the collapse is catastrophic.

Whenever the traditional money system collapses, people start asking questions. Why do we need money in order to trade? Isn’t there a better money system? How can we trade with each other despite a lack of money? Invariably, people invent alternative money systems, to compensate for the failure of traditional mainstream money. This cycle of failure and re-creation of viable alternatives has been going on for centuries.

Some of the alternative money systems turned out to be vastly superior to bank-issued traditional money. However, once the mainstream economy stabilized, alternative currencies have typically been suppressed by banking institutions and world governments, as they do not serve the interests of the banking world. An example of this occurred in 1932, in the small town of Worgl in Austria.

City in Austria Printed Local Currency

Worgl, like many other European towns and cities, was hit hard by the Great Depression. There was mass unemployment; four of the five local factories had closed, and the people were starving in the streets. Nobody had any money to buy anything. One of the features of an economic depression is that there is not enough money in circulation to ensure that people can meet their basic needs, and in the 1930s, the shortage of currency in many countries of the world became catastrophic.

The mayor of Worgl, together with local businessmen, decided to try to break this economic impasse by creating their own local currency. They printed and issued 60,000 Austrian shillings worth of local currency. These shillings could only be spent in Worgl, so they remained in the local community and were exchanged over and over again.

The positive impact was immediate and surprising to everyone. In only six weeks, unemployment disappeared, all the factories had reopened and everyone had food. For the inhabitants of Worgl, the economic depression was gone. This dramatic transformation became known as the “miracle of Worgl.” Surrounding towns, inspired by the success of Worgl, immediately started printing their own local currencies.

Sadly, the miracle did not last long. When the Austrian Central Bank heard about Worgl’s local currency, they initiated legal proceedings against the mayor and local businessmen. According to Austrian banking law, it was illegal for anyone except the Austrian Central Bank to issue money. The bank won the court case, and the mayor was ordered to shut down the local currency, which he did, under threat of imprisonment. The town then returned to the devastating economic depression of the 1930s, with all the human pain and suffering associated with this catastrophe. Factories closed, and once again, the people starved.

Alternative Currency in the U.S.

Irving Fisher, an American professor of economics at Yale University, visited Worgl before the local currency was suppressed and witnessed the ‘miracle’ firsthand. When he returned to the United States, Fisher spread the word by traveling and lecturing across the country, advocating the use of the Worgl ‘scrip’ everywhere. Inspired by his vision, hundreds of communities began issuing their own currency, and by 1934 there were over 1,000 local communities using ‘scrip’ throughout the U.S.

Every one of these communities experienced a tremendous rejuvenation of their local economies. They thrived while others suffered. Fisher then met with President Franklin D. Roosevelt, proposing the implementation of government-sanctioned local ‘scrip’ in every community in America. When FDR consulted with his top financial advisors and bankers, however, he was advised to shut all the ‘scrip’ systems down, which he did. Instead, he borrowed large amounts of money from bankers, at interest, and used it to pay for the Reconstruction Finance Corporation and the other work-creation projects, which collectively came to be known as the ‘New Deal.’ So ended the last widespread use of a local currency within the U.S.

This pattern of economic collapse and re-emergence of local currencies has occurred thousands of times in many parts of the world. When these currencies have failed or have been suppressed, banks have not always been to blame. Sometimes, local currencies fail because they have been badly designed or implemented. Sometimes, people lose interest in them when the mainstream economy recovers. But they have always returned in one form or another during times of economic failure.

Our present world situation is uniquely different. Despite a relatively prosperous and stable world economy, a quiet monetary revolution has been occurring around the globe over the last 20 years. Awareness is growing about the flaws in our current monetary system, and people are re-creating viable alternatives. We are witnessing for the first time the worldwide creation of money systems designed by the people who use them, instead of by central banks.

Time Dollars in Whatcom County

There are now hundreds of thousands of alternative currency groups operating in many countries around the world, each using their own locally-issued money. This quiet revolution came to Whatcom County in January of 2004 with the creation of Fourth Corner Exchange, a time dollar-based local currency system that now has over 300 members.

As many high-level bankers and international financiers are expressing concern that world economies are approaching another catastrophic failure, the need for visionary monetary reform is more important than ever. In his book “Infectious Greed,” Frank Partnoy, a professor at the University of San Diego School of Law and an expert in financial market regulation, states, “Today, the risk of system-wide collapse is greater than ever before.”

Local currency systems serve the specific needs of people locally, keeping money circulating within the local economy. They also bring people together, strengthening communities and rebuilding healthy economic interactions among people at a local level. When we experience the next Great Depression, the local currencies created during the past 20 years will sustain local economies, protecting them from the ravages of national and international economic downturns, and strengthening communities at the same time.

There is a better way. It’s called local currency, and it’s here in Whatcom County. Fourth Corner Exchange is a local time dollar system with over 300 members. To find out more visit:

Also see our previous article “Abundant Money: Fourth Corner Exchange Brings Time Dollars to Whatcom County” at: