I am afraid your thought experiment is not too far removed from reality--in fact it is a real issue, as we look at a world with far more debt and derivatives than real assets.

The questions I have are, "How much of current commerce would be able to continue? How does one operate an electric utility without money? Do you call (assuming telephones are available) Wyoming, and promise to send a trainload of Georgia wood back if Wyoming will send you coal for your power plant? (A hydro-electric power plant might do better, as long as long as a part isn't broken, the river isn't frozen over, and it still has enough oil for lubrication.) How could gas stations operate, if electricity for pumping fuel (in pipelines and at the gas station) is not available? Without oil and gas, and with very little electricity, how could a big business like a telephone company, or a refrigerator manufacturer, continue to operate?"

I am afraid we would have only the food that is locally in storage, or currently growing. Clothing would be just what is in our closets. Golden Retrievers would only be helpful, if they could find their own food, and provide some services in additional. Medicine would be whatever is in our medicine cabinet.

The new currency would most likely be local. It could be based on some quantity of food or labor. It probably wouldn't be tradable at any distance. We would go back to the days before oil and gas, and mostly to the days before electricity.

Well, let's see....

Assuming no money, at least for some period of time, barter becomes the economic "coin" of the realm.

No money, most current jobs disappear. Most current jobs exist primarily so people can earn money to consume stuff. In a world without money most of the existing systems have come to a screeching halt. After the smoke clears, work will be centered on two things: growing/obtaining food and making things/providing services that can be bartered for food.

Anybody with land, climate, ability, etc. to grow food will probably be doing so, bartering any excess for additional labor, supplies, etc. Depending on location, people with hunting/gathering skills should be able to gather sufficient stocks to survive and barter.

The remaining folks will have to come up with skills that are useful in the new society. Primarily, these will be skills that provide goods and services used in the production and delivery of food, or that provide the other basic necessities of life. Depending on their specific skill sets some veterinarians, doctors, nurses, and teachers may be able to parlay those skills into food. Actually, I'm not sure about teachers. I suspect that all adults and most teenagers will need to be working at sustaining themselves and their families. Maybe grade school/high school teachers might be necessary, but I'm not entirely convinced, at least at first. People with woodworking or craft skills may be able to create enough business to survive. People who can repair things, carpenters, mechanics, plumbers, and other mechanical/creative types will probably have plenty of work as things break down and must be repaired (as they can no longer be easily replaced).

Eventually, some kind of local money will evolve, if only to grease the wheels of barter. Depending on the availability of transportation and communication, perhaps regional or national currencies will come back into existence. I would be shocked if any of these were not tied directly to some underlying asset. It could be gold, energy, food, livestock, timber, land or something completely different. I just don't see much likelihood of some kind of fiat fractional-reserve money system reappearing.

If money were to disappear, I think you end up with a very different society. Different professions. Different relationships. Different social, political, and security structures. I think almost everything ends up focused on the exchange of physical goods or services directly or indirectly tied to the core task of obtaining the basic necessities of life (food, water, shelter, basic medical care, etc.). People with skills or resources that support that task will be in a good position, relatively speaking. Those that cannot will need to learn quickly or get used to some probably unpleasant alternatives.

Brian

Clearly in a situation like this precious metals would become the only way to transact large international deals. Gold and silver would once again take their rightful place as the only real form of money.

If you look at how gold is on the climb again right now, you'll see that this is happening as we speak.
Gold Rises, Caps Eighth Straight Annual Gain, on Haven Demand

In a world suddenly bereft of financial capital, there would be some very interesting re-orderings taking place within your four other categories of capital. The world already knows or suspects the kinds of re-orderings that could take place in such a world. For example, nurses and high-school teachers likely experience elevation, in such a world, in the human capital category. In the built-capital category, books and tools are elevated whereas toys and other discretionary items are demoted.

Restoration is a strong pattern in any disruptive event, however, so there would be those who would get very busy trying to do just that by attempting to restore money sytems. War analogies or wartime examples are relevant here. Money substitutes emerge. Liquor, for example.

I think ultimately what would be most revealing would be how quickly credit relationships get re-established. In fact, I think credit relationships would be rebuilt even faster than any re-establishment of money. Credit is nothing more than a means to shift tasks across time, into times of one's choosing. It's the foundation of modernity (imo) and efficiency. (I should acknowlege that money is also a form of credit). For example, I'd be delighted to start guitar lessons now, in Winter, for my neighbor's 10 year old son, in return for a share of their corn, tomatoes, and basil this coming Summer. That's both a barter and a credit deal.

Anecdote: my wife is both a psychotherapist and a nurse. She grew up and got all her nurses training in New Zealand. The history of nursing in NZ is intense, because, as a frontier society for many years nurses were the doctors for most communities. So, to this day, a nurse's education in NZ is grueling and very medical. Seeing how things played out in countries like colonial NZ and also Aus. give good clues as to how things would get shuffled now.

Here in Western Massachusetts we have a ton of niche/small scale farmers that produce all manner of stuff through the four seasons. When I drive by their farms, or see them at the Saturday open market, I think "these people are the future millionaires."

G

Why gold or silver? Any commodity can be currency? Gem stones? Titianium? Bronze?

In anything more than the most basic subsistence type of social order / economy some sort of currency will be required to pay for goods and services. Even barter currency would arise and have some sort of value.

This non currency is not going to happen on the scale of the human population organized in any way close to how it is.

Elgin Groseclose on the history of money. 1934 ( pdf)

http://mises.org/books/money.pdf

**Thanks to my massage therapist Kathy for helping me envision a world without money

Um... what did you trade?

;>

You don't have to imagine a World without Money, you only have to look at how the Swiss WIR business barter system has been operating for over 70 years.

Or any of the proprietary barter systems like Bartercard.

On the WIR system goods and services are exchanged not FOR Swiss Francs but BY REFERENCE TO Swiss Francs as a Value Unit.

That is to say, participants transact with each other by reference to the Swiss Franc and may extend interest-free credit (aka "time to pay") to each other. The buyer settles the credit in "money's worth" of goods and services etc rather than "fiat" Swiss Franc money, whether of the non interest-bearing paper object type, or the interest-bearing balance on a bank ledger type.

The discipline - which protects the WIR system against defaults on debit balances - is that participants have to put up their properties as security. ie the WIR is a "property-backed" monetary system. It turns over billions of Swiss Francs worth in value a year, and while it tends only to "tick over" when conventional finance is working, at times like this - when fiat money = credit is in short supply, the WIR comes into its own, which is why it came about in the first place....

The fact is that wherever a barter system incorporates credit the outcome is a monetary system requiring only a Value Unit as a reference, rather than as an exchangeable/acceptable object.

I believe that it is straightforwardly possible for such B2B barter to be not only introduced generally as a quasi-utility "Clearing Union", but also for it to be extended B2C to retail clients as well through the use of what I call a "Guarantee Society". This is simply a mutual guarantee agreement backed by all the users - sellers and buyers - who make provisions into a default fund for the use of the guarantee.

In this partnership-based "Peer to Peer" credit model banks do not operate as credit intermediaries putting their capital at risk by creating interest-bearing credit based upon it. Instead they act as pure service providers, managing risk, setting guarantee limits and dealing with defaults, all in return for a fee.

We would still need "money's worth" which most individuals and businesses find acceptable. That's where Peer to Peer investment through "unitisation" of property and energy comes in....

Unitisation: solving the Credit Crunch

Happy New Year!

I think what would work well at a local level would be a currency which,

- is a medium of exchange, not a store of value
- is backed by a basket of commodities which decline in value over time
- so that the currency itself declines in value over time
- and which cannot be lent at interest

I'll explain below.

Money today has two functions, as a medium of exchange and as a store of value.

A medium of exchange is plainly necessary, so that we don't have to note down which part of a living cow we'll give when we slaughter it in June for this hoe we get in January. I can give my mate Joe an IOU, "Jim owes Bob one-twentieth the cow Betsy". If I only accept IOU from Bob, it's just an IOU. If Bob can give the IOU to someone else in payment of his own debts and I'll give that one-twentieth of a cow to that person instead, that IOU has functioned as a medium of exchange. Money is simply an IOU anyone will accept.

Getting people to accept your money is the most difficult part, as creators of local currencies have found. This is why so many people instinctively look back at gold and silver with nostalgia, thinking that if the stuff has intrinsic value, people will accept it. Unfortunately gold and silver don't have intrinsic value, they're usually just pretty, and sometimes but not always useful.

It's not clear that a paper or electronic store of value is necessary, as opposed to just putting it in real goods, or getting share of a business, etc.

When money is a store of value, this encourages people to hoard it. This is especially true if they can lend it at interest; putting it in the bank is in effect lending it at interest to the bank, the bank then lends it at higher interest to credit card holders, mortgagers, etc. In this way wealth tends to concentrate into the hands of a few, and drain away from the many. Then when the wealthy few screw things up, it screws everyone up; whereas if wealth were more evenly distributed (not necessarily 1:1 for the top and bottom quartiles, but let's say 5:1 rather than 100:1), mistakes of the few would not ruin the many.

Having money as a store of value is thus inherently inflationary and creative of unemployment and poverty, since whether people hoard it at 0% interest, or lend it out at 5% interest, the total debt will always exceed the money supply. By definition, there's never enough money in the community to repay all its debts.

The solution then is to ensure that we have money which is a medium of exchange, but which is either not a store of value, or has a declining value over time.

The well-known examples of Worgl and the like show good evidence of this. Currency was issued, and had to be stamped each month to be valid currency, this stamp cost some fraction of the currency's value (one-tenth maybe, I forget how much). So your $100 paid you in January would be worth only $90 in February. This encouraged you to spend the lot today.

Further back in history, the Egyptians had large granaries which farmers were obliged to store their grain in. When you brought in (say) 100lbs of grain, they'd give you a receipt for it, a clay tablet with "100lbs, January" stamped on it. Anyone who brought that tablet back to the granary could get grain in exchange. But because rats and damp and so on ruined the grain over time, if you brought it back in February, you'd only get 90lbs of grain for it, in March only 80lbs, and so on. So the grain tablets functioned as a medium of exchange which was a declining store of value - and people spent them quick, giving life to the rest of the economy.

Obviously this would combine very badly with lending at interest. If you can lend $100 in January and have the right to demand that they give you $110 in February, then you make $20 profit, and again we have debt exceeding the money supply. So we'd have to ban lending at interest.

This seems impossible to us in our debt-laden economy. How would banks function, how would houses be built? Yet Islamic banks manage it, and Jews through history have had many successful businesses in this way. Rather than lending $100,000 at 5% to a restaurant owner so she can double the size of her restaurant, the bank simply becomes a 50% shareholder in the restaurant, and gets a 50% share of the profits... and a 50% share in the losses. This makes banks very cautious about who they invest with, makes them look seriously and in detail at them.

Would this be a bad thing, for banks to become more cautious in their investments? Nobody would get rich overnight, but while missing out on the booms we'd miss out on the busts.

Locally then what we could have is a warehouse which takes in grain, timber, cloth and the like, things for daily life. In exchange for these goods which perish they give currency which declines in value over time.

This could also be an indirect tax system. If the goods actually rot away at the rate of (say) 4% each month, then the warehouse owners (the state) could have the currency depreciate at (say) 6% each month. The 2% difference is currency they issue to pay people in state service, being police, building roads, manning libraries and so on.

The currency could not (by law) be lent at interest. That combined with its depreciation would mean nobody hoards it, so it gets spent and encourages production of other non-perishable things. Because it's a declining store of value people would seek to store value in other things, like improving the land they own.

I think this would work very well locally. As for currency at a state, federal or international level, I don't know what would work best. But since I believe that peak oil will mean a reduction in the range of our lives, perhaps preventing even city states from working well (at least as large as they are today), this doesn't concern me a lot. Money exists because people trade, not the other way around.

Actually, the issue of creating "money" was the topic of the novel, Gumption Island: A Fantasy of Coexistence by Felix Morely, 1956. Felix Morely was a Fed governor at the time. Like all good novels, an island is isolated from the rest of the country due to war. It's a good read if you find a copy. Be forewarned, however, that some sections are highly racist in their presentation. The book explains how they instituted a monetary system along with lots of other things. The book ends with a copy of The Constitution of Gumption Island.

Interestingly, I bought my copy, all those years ago, because it was reviewed by the WSJ. And, yes, it's still on my bookshelf.

Todd

I finally logged in to note all this wonderful work here for which i thank you all.
I have been in the oil biz, owned production, and follow all here very very closely.

This particular subject of money is my favorite, as I see it coming. The money dies.
Regarding what happens when the money dies, my favorite example is Argentina.
When they defaulted on their $160 Billion of debt, the banksters closed the banks and took all the cash, USD and pesos, and flew it out of the country. People were stoning and burning bank buildings.

The middle class was stopping the cattle trucks on the roads and killing all the cows to take meat home. Famous old quotes from folks on the streets were:
"There is no dollars, and no one wants pesos, so why not ink on toilet paper, we have a lot of that."

When the Japanese credit bubble burst, for several years the single largest volume consumer goods seller was------home safes. Why leave any money in a bank if it is likely insolvent and apying no interest??? There was a clip on CNN of the local small villages in the north with the folks at the bank. Bank is a few people around a couple of banquet tables trading chits for goods and services.
Like Gilligans Island, sort of.

The other example of the money dying now is Zimbabwe, following Turkey as an example of hyperinflation. End result is the same, the money dies.

There is a bloomberg release on the Japanese suggesting selective default on u.s. debt.

My thoughts on this subject.

Lets assume that it can get very bad in the future.
So how can one prepare now?

Lets say a doomerish type would be wise to go to the outback,somewhere that conditions are reasonable as to soil,woodlands,water,climate,etc.

Say the outbacks of the Ozark Mts. of which I am very familiar with.

And further that to prepare he or she or them build a Thoreau type of structure and live there for some entended periods of time in order to realize what skills they may need and learn.

What would they learn by not buying food,driving to restaurants,heating without any electricity or piped in gas or storage of the same.

But they could experiment with solar and wind etc. but realizing that they might not work always or falter then they have to live like pioneers once did. Or those ancestors who settled this country.

Neighbors? Yes. Barter? Yes. If possible but no automobiles. Just animals various types of stock and poulty,etc.

Well I once lived pretty much that way back in the late 30s to the early 50s. I live a lot like that now and am slowly easing back into the past further and further and its quite an experience.

So I thought to create a RTF of my experiences and possibly putting it in an essay form that is not very scientific. More on the woodsy,farmer Brown style of articulation.

Then if the Campfire Pipeline finds it worthy to post on this domain I would be happy to submit same.

I would like to make a contribution in this area and think I may have some experiences of value to pass along before I step out of this realm.

For instance. Making soap the way my granny did. Slaughtering hogs and curing the meat. Best type of cattle to have. How to cure leather. How to get up firewood. On and on. I put these down and have been of late.

I am sure many others such as Todd et.al. would have similiar contributions and we can all share in those who are 'doing' it now on the land.

I have a website. Long inactive that I put up WordPress blogs on and also a nice forum but I grew tired of it long ago so I use it only for my personal use as a diary of sorts and a holder for family photos. Also for my genealogy work. So its not public at all.

Thats why I welcomed Campfire. A place where those who lived some of this in the past or are doing so now can contribute.

I enjoy all major posts even though some of it is not something I try to understand. The graphs are fine but ..well they won't help you make it when those hard times come as I am sure they will.

Better to create a larger essay than to do it by bits and pieces here and there among all the other facets such as this one and the daily DBs where they are sometimes lost in the background 'static',not to lessen the importance but it can get hectic on the DBs and if one posts late in the day it flys off the radar pretty fast. Better to be more organized in such a 'domain' as Campfire.And also so it can be searched easier as well.

Airdale

"Money no longer exist and how do you structure things?"

Mhhh...a thought experiment then.

Myself? I don't structure any but my own life and perhaps help some of those around me. What do we call that? A community.

Around this part of the country there still exists what are called communities. And actual signs on the roadways point to them.
They are too small to be a town but they will have a general store,now more like a gas station/convience part but sell fried chicken daily and fish on other days. A local community church. Many of those there are closely related.

I visited some today chasing down my Indian heritage. Very small places just a crossroads and church but all with a sense of community. Very very insular. Even some of them my kinfolks long removed but still looked at me oddly and even knew my close kin and this was 15 or 20 miles away.

Many of the roads have family names. In fact one road was the name of my gggrandmothers folks. Lots of indian blood in them for sure for this is where the Trail of Tears came thru.

But that is a real old fashioned community. Close knit. Able to survive by helping and knowing each other.

That is my idea of the 'structure' that will have to evolve.People who look out for each other. Help each other.Can borrow from each other. Live by the 'favor'system.

The graveyards in those communities go way back and tell the genealogy there. You will usually find a coffee area in the store. That serves as a place to tell gossip for that is how people must communicate with no newpapers and the TV doesn't tell local news. You spread it by 'word of mouth' and know who is ill,who died,who married who and who is a thief...on and on.

Only law is the county sheriff. Sometimes people work things out on their own. This is real country living and the way I think we will have to go back to.something many never left.

Yep they live in double-wides now , a lot of them. Some get by on minimum wages jobs. Some clean houses. Some work in the fields. Lots have gardens. Lots have chickens and many eschew that but still is small and close knit.

The gossip passes thru the church so lots of help is given if someone's house burns down or is 'shutin',or gets the big A.

I live 6 miles from my hometown but I also live in a 'community' of which my uncle and many kinfolk are nearby. MY neighbors will let me cut firewood if I want or lend a hand if need be.

We do all this without money in many cases. Give each other garden produce. Lend a tractor. Give you some eggs from their flock.

Its hard to understand this in a farmstyle of living and perhaps its not this way elsewhere or maybe it is. I have experienced it most every where I moved that was in a rural area.

Never experienced in it the suburbs though. Not that we didn't go to other folks houses and party but that wasn't the same and it would hardly work out sustainably IMO.

Now my advantage is I have close kinfolks who are in local government. This in a small area is nice that you can really influence what is going down and happening. Hard to do in a larger populated area. I mean I can ask my second cousin what my property tax will be and argue with them on it. Same as the Judge Executive. Same with the sheriff. If I get caught with a bottle of beer in my jeep down in the bottoms? He isn't going to say anything but he knows quite well who drives while drunk and has an eye out for them. Me I value my reputation and try to keep it squeaky clean. It works for me. It works for most every one....and I think it is what we will have to evolve back to.

If your sick and no one to help you out? You can be in real bad trouble. But if you help your neighbor when his ox in is the ditch and he pays back favors? Then he will help you.

Putting up fences is got to involve both landowners. Keeping you stock put up and not roaming is you reponsiblity and he needs to tell you politely when they are out or chase them in for you.

This is how we live here in my neck of the woods. Its how it was back when I was growing up but there has been some bad types come in.They soon move back out and if not ..well everyone knows who they are.

Mostly our problems are sometimes judges who do not enforce the law wisely. Or a lazy sheriff. Since we elect all these locally we have major control. Not like in the larger cities. And word of mouth can just kill you.

Airdale-the way it seems to me,the way I like it

Said by Nate Hagens:
... natural capital (land, animals, trees, riparian zones, ecosystems, fresh air, sunlight, etc.).... The moment money disappeared, all these 'real' forms of capital would instantaneously increase in value, some more than others.

Land would not increase in value. Without money, property owners could not pay property tax. Counties would seize the land to collect back taxes and flood the market with real estate for sale to whom ever has something the government wants in exchange. Price would plummet. It would be a massive real estate swindle benefiting wealthy businessmen leaving the middle class homeless and small farmers without farms. Possessions that could not be carried would become burdens soon to be abandoned.

Fresh air and sunlight would be worthless in a city, deemed immensely less significant that survival. People would burn everything in sight to stay warm filling the air with choking smoke blocking sunlight.

Any currency resulting from such a catastrophe would be selected by the powerful or otherwise relegated to a thriving black market.

If you would like to “get rid of money” you must come up with a significant psychological replacement for “money”. While we may believe “we” are “smarter” then archaic man we a still just as superstitious and we thrive on the "supernatural". Money has become a highly specialized ritual in our relentless quest for immortality. Humans are not even close to shedding the illusions they need to keep them from going mad.

==AC

"Money provides a fixed, external, recognizable sign for what would be confused, contradictable operations: ritual makes visible external signs of internal states. Money mediates transactions: ritual mediates experience, including social experience. Money provides a standard for measuring worth: ritual standardizes situations, and so helps to evaluate them. Money makes a link between the present and the future, so does ritual. The more we reflect on the richness of the metaphor, the more it becomes clear that this is no metaphor. Money is only an extreme and specialized type of ritual."
~Mary Douglas

"The magical properties, with which the Egyptian priestcraft anciently imbued the yellow metal, it has never altogether lost. ... Gold (was) originally stationed in heaven with his consort silver, as sun and moon."
~John Maynard Keynes

"With the decline of the primitive world, and with the rise of kingship men came to imitate kings in order to get power. ... And so the pursuit of money was also opened up to the average man; gold became the new immortality symbol."

"Let us see how the ritual fascination of money began in the ancient world, and how it took over as an immortality focus in itself. One of the fascinating chapters in history is the evolution of money -- all the more so since it has yet to be written, as (Norman O.) Brown says. One of the reasons it isn't written is that the origin of money is shrouded in prehistory; another is that its development must have varied, must not have followed a single, universal line. Still a third reason touches closer to home; modern man seems to have trouble understanding money; it is too close to him, too much a part of his life. ... But beyond all this, ... the reason money is so elusive to our understanding is that it is still sacred, still a magical object on which we rely for our entrance into immortality.

"Put another way, money is obscure to analysis because it is still a living myth, a religion. Oscar Wilde observed that 'religions die when one points out their truth. Science is the history of dead religions.' From this point of view, the religion of money has resisted the revelation of its truth; it has not given itself over to science because it has not wanted to die."

"Hocart ... suggests a common origin for his the gold coin, the crown, and the halo, since all these represent the sun's disc. ... The great economist Keynes agreed that the special attraction of gold and silver as primary monetary values was due to their symbolic identification with the sun and the moon, which occupied a primary sacred place in the early 'cosmic government' cosmologies."

"Currency, then, seems to have had its origin in magic amulets and magic imitations of the sun which were worn or stored because they contained the protecting spirit powers. If gold had any 'utility,' as Hocart says, it was a supernatural utility."

"If gold was sacred, we can now understand -- with Simmel and Hocart -- how it was that the first banks were temples and the first ones to issue money were the priests. With the ascendancy of priestcraft it became the priests themselves who monopolized the official traffic in sacred charms and in the exchange of favors for gold. The first mints were set up in the temples of the gods, whence our word 'money' -- from the mint in the temple of Juno Moneta, Juno the admonisher, on the Capitoline Hill in Rome. Forgery was sacrilege because the coins embodied the powers of the gods and only the priests could handle such powers; we get the same feeling about counterfeiters today, that they are practising an unspeakable usurpation of hallowed powers.

"The temples, then, were clearinghouses for money transactions, just like banks today.

"It was surely not lost on the priests -- the first leisure class -- that the tiniest quantity of sacred gold-power could bring in huge amounts of food and other stuffs. Priests may have talents for dealing with the supernatural, but they have very human appetite (and often lots of it); and if they have the leisure to ply their trade, it is because since earliest times they have convinced their fellows that it is important to assure that leisure by bringing part of the fruit of the sweat of their brow to the priests. And so the food producers must have brought food to the temples in exchange for prayers and sacrifices being performed on their behalf. Also, it must have worked the other way too: gold was a fee paid to the priests for his intercessions with the invisible powers. ... Whence the tradition of the earliest coins being imprinted with the images of gods, then divine kings, down to presidents in our time. All visitors to the most holy temples could bring back with them gold encapsulations of sacred power that would keep them safe throughout the year."

The sun god of Egypt held out the salary of immortality. For the faithful who not only believed that you can get something for nothing in this universe, but also happened to have handy a few of his earthly golden tokens, he delivered a bonus right here on earth. The bonus was even better than the salary because you could enjoy it immediately. That something for nothing was compound interest on loans. The pyramid says it all."
~Ernest Becker

"If we divest ourselves of our modern preconceptions and study the evidence, we are driven to the conclusion that currency had a religious origin, that it began with amulets which were worn or stored because they contained a protecting spirit. Economists tell us that gold is used for coinage because it can always be melted down and used otherwise, but contrary to their teaching the essence of currency was originally that it had no material utility, but was of the highest supernatural value.

"If gold is of any material use today, it is because its supernatural value has led to its being used for ornamental objects and has endowed it with a prestige which it cannot lose even after the reason for it has been removed. The manifold advantages of gold for purposes of coinages have enabled it to triumph over rival materials such as shell, stone, and mats, but they were not the reasons for its original selection. It began its career as one of many materials used to contain the god; a little of it was given away in exchange for quantities of stuff because a few ounces of divinity were worth pounds of gross matter."

The link between the sun god (= pharaoh) and gold was clearest in Egypt."
~A. M. Hocart

Chris Cook mentioned FEASTA above. I've found Richard Douthwaite's book The Ecology of Money very useful. It reflects on the different functions of money and the need for an exchange rate between them. A 'one money fits all' solution may not be best.

It is available here:

http://www.feasta.org/documents/moneyecology/contents.htm

Happy New Year,

BobE

nice thought experiment. the very kinda thing i have worried has to happen, eventually ; & could at most any time, & can very quickly.

but nate u have said this can't happen w/o WAR; excuse me i distracted myself from the task at hand.

i live in a semi-rural area & i'd be recommending a meeting for us locals [but not offering to lead it-as a comment above suggested]. i think the purpose would be to explore mutual concerns[some of this would already be happening of course around immediate needs-meds, etc.]. knowing some of our diversity- a kind way of putting it- i'd be quite apprehensive about such; but even getting an idea of the possibilities/strength of community or where our "diversity" might take us in a bad direction would be a good idea early on.

this getting together would naturally give indications of our 'capital' as nate points to. being face to face[& we don't do this much] would be intensifying of our ability to understand our 'situation', maybe bigger picture-sharing- but especially locally; the really important picture.

great post/experiment; one similar that i'm pushing our friends/family-30 mi. or less distances- to do[face to face].

oh & by the way; if u didn't have an eye out for the gubberment well u'd probably miss the early on ,'main attraction'.

Probably a more realistic question would be to imagine a world without credit. While we may not get to the point at which there is zero credit available, we are clearly headed in that direction.

I've always thought that Kurt Cobb's inverted pyramid was a brilliant piece of work--it shows the US economy resting on the food & energy producers, but conventional economists don't see a real difference between the entertainment industry for example and the food & energy producers.

Let's assume that you have $10 million sitting in short term US Treasury instruments. You only have two choices for the next two years. You keep rolling over the Treasuries, or you invest $5 million in food producing assets and $5 million in energy producing assets. Which choice do you make?

Timebanking would really come into its own:
http://www.timebanks.org/
http://www.timebanking.org/
http://www.timebanking.org.uk/

Anything except the current electronic fiat 'money' system we have now will slow down the 'velocity' of money so much that the amount of business that can be transacted will violently contract.

The amount of business transacted has alot to do with perceived quality of life.

If for instance you have to wait a month to buy a pair of shoes that fit you because manufacturing has mirrored the slow down in the velocity of money and capital transactions, you will feel deprived compared to the current speed of transactions where you just buy what you want almost instantly.

Waiting for good quality stuff is a virtue, but something most Americans seem incapable of.

"I Want It Now" should replace 'E pluribus unum" on our rapidly devaluing currency.

Any barter/ wampum bead / time share scheme will be Very Slow compared to what everyone is use to.

Oh, and the credibility and Trust necessary to operate such systems will be in very short supply after the public finally awakens to the horrifying scope of cheating and skulduggery in the present financial system.

The Credibility of Accounting is collapsing as fast as the 'money' supply. Accounting as a profession is and will be tarnished beyond belief by the current global financial meltdown.

Honest accounting IS trust.

BWBTS (barter/ wampum bead / time share) schemes need Lots of Trust to operate smoothly and that sense of trust is leaving the building rapidly along with tens of trillions of funny fiat 'money'.

I guess we'll see if 'your word is your bond' will have any credence in the future. (The 'bond' market may take on brand new forms)

Trust is actually the core underlying principle of 'Money', not gold or oil or wheat.

Nate,

I was too hung over to respond earlier. (BTW Happy New Year.) But, surely, thought I; someone else (especially AC) would say, aha Nate, you didn't take away the right to contract!

So with the power to make private contracts (which IIRC
is in the US Constitution)
we could each make "money"
out of thin air instantly sort of like this:

CONTRACT
In consideration of Nate having given me 2 cooked chickens last night,
I hereby promise to compensate Nate,
or whomever Nate signs this contract over to,
by giving to them
--whenever they show up at my lumber yard--
2 chords of fire wood in exchange for this piece of paper.
--signed
Larry the Lumberman

This piece of paper (also known as an IOU) instantly becomes money because it can be passed around as a substitute for what everyone agrees to be the "value" of getting two chords of wood from Larry the Lumberman.

Now AC and others above are correct to observe that "TRUST" is a vital part of the equation. The IOU note would not be considered much of a value if no one could "trust" Larry to deliver as he promised.

However there are two other essentials to this quid quo pro bargain.
First there is the "promise" itself. Larry's note is a promise of value to come in the future --when you show up at his lumber yard.

Second, there is the physical capability to deliver on the promise. We're assuming that Larry will remain in good health when we show up at this his yard and that his yard will have a sufficient amount of wood to make good on the promise.

So "money" is not simply about "trust", it's also about a promise and the ability to make good on that promise.

Cool pyramid. Nate if the information exists it would be nice to see how the energy pyramid stacks up against the financial pyramid. And esp of course oil.

However even without exact information we know oil is primarily used for transportation. Given how weighted the economy is to financial services it makes sense using your theme that they could disappear In other words instead of assuming and abrupt disappearance of money simply assume the pyramid rebalanced to your new one. I'd argue the speed it shifts is secondary.

One important result of looking at it this way is that energy usage does not change a whole lot even if you inverted the pyramid. I.e we can move to a better monetary system and it does not change the overall energy usage all that much.

The monetary system is rebalanced probably painfully but this in and of itself is not sufficient to radically alter the pyramid. In fact the energy change is concentrated in laid off bankers now driving downtown to sweep floors vs going to the exchange.

Growth effectively stops but you can see that we can go through a fairly long period of rebalancing where the financial and government services are reduced substantially yet we don't shrink energy usage.

Finance 20.4
Government 12.6
Professional 11.7
Education 7.8
Construction 4.9
Information 4.5
Arts 3.6
Other services 2.3

These total to 67% of the economy. These can all readily be cut by 50% without any great hardship so we could easily lose 33% of our economy without having it collapse. Also I'd estimate that energy usage would drop by at most 10% as people formerly in this part of the economy took lower wage jobs in the rest of the economy. Most of the energy usage excluding construction is for personal transportation for this sector of the the economy.

The concept is that energy itself becomes a problem only once the economic pyramid is rebalanced to focus on the basic economy once this happens further declines in energy usage have a impact on essential goods and services.

So for a time we have a situation where the non-essential economy can be shrunk without things really falling apart and without energy usage dropping substantially. Once the pyramid reforms in to a more traditional one then real problems begin if energy continues to decline.

One way I like to explain this is take a look at housing. Up till now ever rising housing prices drove the economy esp in the form of HELOC's and new homes. Resale of existing housing stock helped but is orders of magnitude less then the injection from new home construction and associated commercial real estate construction.

Once this is firmly in reversal and construction is dead then you actually get a new feedback loop forming declining rents and declining home prices leave more money in the system for spending on other goods in services. Even foreclosures become a good thing if the banks losses are papered over as this generally frees even more money. I.e cash flow overall begins to increase by cannibalizing the implicit value of the housing and commercial real estate stock this expands into financial areas as they are dramatically reduced and also into manufacturing as home centric goods and services decline.

Thus the re balancing of the pyramid has already started we are seeing signs in government that services will soon be cut same for health care education etc.
What important is that as this process proceeds it generally is continuously freeing up current cash flow in exchange for the most part for defaults on longer term debts and various other sorts of long term contracts i.e rental agreements etc.

From the housing standpoint whats happening is nominal values in the form of equity are being converted rapidly to cash flow. I.e as housing prices decline housing costs less and you have more money to spend this money is effectively the previous equity of the homes. For paid off homes generally owned by older folks we are spending their retirement by for all intents and purposes stripping out the equity.

This is quite general and expands to roads and bridges that will not be repaired buildings that will not be replaced etc falling land values etc.

It goes until the pyramid is rebalanced only at that point is energy and energy usage really fairly valued. You can watch the progress of this re balance since its happening right now by looking back at this article. I will say that one part that was left out and its huge is pension plans and social security these will also be stripped of all value destroying the retirement plans of most people except a few that are prudent. This is a huge missing wedge but it will also be obliterated.

I have been thinking of this subject for a long time. Here are my ideas, for what they are worth:

Money is just a symbol; either it is made of paper or gold, stones or thin air. We usually believe that it translates into material wealth, but I came to believe that it does not: it translates to human motivation.

We accept paper money as payment for our work, and we work to obtain paper money because of the human needs that this symbol provides and the possibilities that he promises.

If we lose confidence that paper money will provide for our needs, then we will refuse to "work for it". Obviously gold is only valid as currency if a certain amount of people consider it to be so. You cannot eat gold and gold is not going to work the land for you. Symbols have no value by themselves.

And what does money (paper or gold) symbolizes? Besides the obvious fulfillment of basic needs (food & shelter), most people work to obtain more and more money, because society values material wealth. If one has much money, one is important, and has power over others.

This is actually a good thing (although I spent a long time believing otherwise), because if it where not for material wealth, the easy and available way of obtaining importance and power over others, would be ... by force.

That would explain why the communist experiences, while theoretically would aim for an equalitarian society, really ended up it totalitarian regimes. Removing wealth as a distinction, people would only have force as means to obtain importance and power. And those without force, what motivation would they have? This results in a very low productivity.

So, any system that we could consider to exist *after* money, would be a system based on the human drives. Take you pick: belief, fear, hate, love, power, pity, etc.

I would venture that the first victim would be Democracy. People need organization, and nowadays such organization is provided by a confusing economical/political/media maelstrom that is usually referred to as "Democracy". This kind of government is only possible because money is power, and raw power by itself is not very profitable to society. The system is built to limit power and remove from seat those that hurt the profits.

Government by the people is really something that never existed, because the "people" don’t make decisions and could never make proper decisions, since they lack the necessary information and education. People are reasonable as individuals, but a mindless and dangerous mob as a group.

So, we can expect some kind of dictatorial/totalitarian regime after the chaotic period. Such kind of governments, if they are to survive, need to use some type of human drive. I doubt they will use the positive ones as they will pick up a huge mess.

As for economy, there is only one kind of possible outcome: a state economy.
http://en.wikipedia.org/wiki/Nazi_Germany#Economy

Dear Nate,

We are starting a second hand shop in Pombal, Portugal, Europe, also to test a local monetary system.

One of the goals is to support a CSA system with a new local currency able to support the exchange of things and local food.

Regarding your scenario, it will happen, I just don`t know when...

Happy New Year!

João
http://www.relocatenow.eu
http://www.hortadovizinho.com

My thought. From the top post: The moment money disappeared, all these 'real' forms of capital would instantaneously increase in value, some more than others.

One could also argue that they immediately lose their value as it could no longer be measured (no monetary unit or medium of exchange.) They would be useful in real life - a house to live in, a trusted friend - maybe even precious, but would just be ‘the present state of affairs.’

Money’s two essential functions are to serve as a medium for exchange in the present, and to store value. See Kiashu above. The stored value pertains uniquely to future transactions (goods and services, or things and activities) so in a sense that is exchange as well. Money under the mattress or gold in the vault which is never used represents nothing and has no function, it is purely abstract. (It may provide psychological comfort to the owner because he imagines future transactions which will never take place.) Note that the scope of money (which exchanges are monetarized) is different in different societies, situations, etc. I share food with my family, but if I have a restaurant, I will charge. I give a present, and expect to receive something in return, but will sell my labor, etc.

If money goes poof so does stored value and therefore investment. However, exchanges must continue, so as many pointed out, you get barter, and increased co-operation and necessary trust. Mary can no longer pay her employee, but she keeps working, they will figure out some arrangement, both parties trust in the other’s goodwill and honesty, they will figure it out. (Or you get the Big Boss, etc. as pointed out above; in fact, a mixture of the two arises.)

However, as there must be some join between the past and the present, what will happen is the immediate creation of a new money or currency. Actually, this happens all the time..currencies die or are transformed (e.g. devalued.) As fiat money is immaterial, purely conceptual (though it has material existence in the form of pieces of paper, coins) it is easy to re-create. For example, when there is not enough physical money about, a system of IOUs, hand signed notes, arises, in units of the ‘old’ money. This makes accounting difficult, and limits the scope of exchanges, but it works. It was used, for example, by my family in ww2. Completely switching to a ‘new money’ is actually quite a good idea in some situations, as it wipes out debt (like a jubilee), destroys the monetary stored value, but not ownership or social capital. The electric utility keeps running, charging and paying in Xs, to invest in new infrastructure it saves/sells bonds/charges more/whatever. The power structure changes...a fresh start! In fact, the massive US bailouts (say) - touted as an ‘economic stimulus’, quite useless on that score imho - are an attempt to change the functioning of the system, to use money to destroy money (by wiping out debt, e.g. supporting home-owners, paying off bank debt, etc.) or at any rate to change it’s nature. Paulson is truly running the US - there is no president right now. Very dangerous.

SamuM wrote: Beyond their industrial demand, precious metals are fiat currencies just like anything else.

So, you can’t wipe out money, it is a human construct, like numbers or logic.

Some may be interested in the most used (in proportion to population) barter system or alternative currency in a OECD country: the WIR in Switzerland. short PDF with links:

http://www.appropriate-economics.org/materials/wir_and_barter.pdf

I see Chris Cook and Kiashu mentioned it as well.

What would happen if all money instantly disappeared (and people
forget
the concept of money)?

Barter, the basic exchange of goods and services directly between two parties would immediately become the predominant economic paradigm. Since two-party, barter based systems have difficulty when the participants can not directly satisfy each other's needs, a more complicated system would rapidly arise. A three way, four way, or more complicated barter exchange can occur if all parties are brought together and can simultaneously agree on a set of mutually interrelated exchanges.

Underlying all commerce is the issue of trust. Determination of trust takes into account past experience with participants and projections or expectations of the future behavior of the participants. In a two party barter based system, the level of trust is very low, perhaps zero. Validation and enforcement of the transaction is immediate. Valuation of the goods in determination of the equivalence relationship (e.g. five chickens for one hog, or one chicken for a bushel of corn) is solely the responsibility of the two participants. Since the trust level is non existent, the transaction does not incorporate a time domain for the relationship and the conceptual relationship terminates when the barter is completed. A transaction can occur without the participants having any past experience with one another.

Power almost immediately becomes relevant to commerce. Power includes both physical force (physical power) and the ability to have other people apply physical force (social power). A participant will only engage in a barter exchange if they believe that they have the physical ability to enforce the exchange of goods. In a social scenario, such as an open market with many participants, power will be based on the bartering party's belief that they can convince others in the market to help enforce the barter exchange. Social power rapidly complicates the analysis of trust relationships in bartering and I will temporarily set aside consideration of social power.

A multi-way barter exchange requires the introduction of a small amount of trust. Each participant is required to trust the other participants to carry out their part of the mutual exchanges required to effect the transaction. The requisite level of trust will arise as a consequence of negotiations and discussions of the group as a whole. When all parties have negotiated a mutually agreeable set of valuations and equivalence relationships, trust has been established and the goods can be exchanged. The level of trust starts at zero and rises over time as the discussions proceed, and returns to zero when the barter exchange has been completed. Once again, a transaction can occur without the participants having any past experience with one another.

Clearly there are limits to the number of people who can participate in a multi-way barter. As group size increases, the ability of the group to achieve a mutually acceptable consensus will disappear, and the barter exchange will fail. Since people have an innate desire to satisfy their wants, they will be motivated to develop techniques that enable more complicated exchanges. Moreover, they will remember the trust developed through past bartering, and that trust will carry forward and be incorporated into the evolving barter systems. One early development may be to have highly trusted people act as intermediaries for the exchange of goods. The intermediary will accept the goods, along with obtaining knowledge of the desired item from multiple participants, and then engage in a series of exchanges that will have the effect of satisfying all parties. For this service, the intermediary will retain an agreed upon portion of the transaction as payment for the service they provided. One realization of this is the old styled American trading post, or store as it is more commonly called. It is a place and a person who can be trusted to effect trades over time.

Not only will the trading post develop more goods as the number of transactions increases, the merchant of the post will garner a greater degree of social power through a demonstrated high level of trust. As power, wealth, and the number of transactions increase, the merchant will either establish multiple stores or desire to interact with other merchants. Thus, another realization of a trusted intermediary is one where the intermediary acts as an agent of a trading post and negotiates the exchange of goods between merchants who are separated in time and space.

As the overall complexity of the barter system increase, accounting will become necessary to track the amount and value of goods being exchanged. For highly trusted parties, it is a simple step to introduce a marking system where tokens are equated to account balances. When trust levels are sufficiently high, merchants and other participants will begin to accept the tokens in lieu of goods. This introduces a monetary system. Since the barter no longer requires the immediate or near term exchange of goods, and promises of future payment can be represented by the tokens, the overall efficiency of the system increases, and so can it's complexity.

This evolving trading system is Utopian in that it neither recognizes nor takes into account greed and the subsequent motivation to engage in unfair transactions -- those that result in an inequitable exchange of goods. Clearly, greed can be satisfied by the application of physical power to force another party to relinquish goods. Less clearly, greed can be satisfied by an intermediate's violation of the trust relationship. This can be accomplished by withholding information from the participants about the true valuation of the goods, by misinforming (lying) them, or a combination of both techniques. The greedy merchant benefits by retaining, for his own use, the difference in valuation of the goods. The greedy merchant runs a risk of losing his trusted relationship if others become aware of the misinformation. When that happens, the merchant looses the ability to act as an intermediary.

When physical power is predominant, then social power will tend to coincide with the ability to apply physical force. A relatively small group of powerful people can install and enforce a system that perpetuates an inequitable system. marauder, bandits, fiefdoms, lordships, and kingdoms are all, in some sense, based on the application of physical force, or threat thereof. In one sense, greed is an ineluctable component because the system allows inequitable transactions. The greedy merchant can participate in the power group and use that group's ability to apply force as a means of perpetuating his inequitable trades.

When social power is predominant, greed can be satisfied through manipulation of social relationships, through favoritism or by manipulating the perceived relationships, to the disadvantage of another. The greedy merchant can effect his deceits by manipulation of the the social power systems.

Since greed, trust, and complex social systems appear to be fundamental aspects of the human condition, any monetary system would inevitably incorporate all three. When power and greed come to predominate, then whatever trading systems arises will eventually break down. Since complex trading systems are so very useful and efficient, proposing that they naturally arise seems reasonable.

This short thought exercise has lead me to realize, at a much deeper level than before, that monetary systems are based on trust and the balancing of the combination of greed with risk in the extension of that trust. The original question seemed to be aimed at investigating what fundamental capital would remain if the monetary system was removed. I chose to examine what would evolve to replace money if it and the knowledge of it
was magically vanished. The ruminations were restricted to trust and greed -- external checks and balances as well as social forces to maintain a fair game were not under consideration.

Although none of the concepts herein are novel and I am most certainly biased by my exposure to a western styled system of finance, I suspect that a very similar system would rapidly arise as a replacement for the vanished concept of money. Since trust is inseparable from monetary systems, perhaps investigating what would arise if all trust in extant monetary systems was vanished, but the memory of the trust violations was retained, would be useful. What type of system could manifest the attribute of holding power and greed in check?

Smaller, community based systems, such as that used by the Iroquois (Haudenosaunee) nation, seem to have included culturally based checks on unbridled expansion of power and greed. However, it is not clear that such a system could scale to hundreds or millions of billions of citizens.

its actually very simple, we all keep doing our jobs, working as much as normal until we can get all the unemployed and all the newly unemployed people who deal in money and in killing(except the psycho’s) trained to do other work, and then we all do less work. Simple...

This comment of for all those "Gold bugs" out there that root for a return to "real" money.

Recently, I've taken some time reading about the fall of the Roman Empire (the 3rd Century Crisis to be more specific). What I realize is the following:

1- At the time of the Roman Empire (circa 3rd Century CE), the succeeding emperors debased the metallic money in circulation then (until the currency system eventually collapsed). They did this because they needed to spend more money than they had. They needed it to preserve a working state, but also for stupid things (like rewarding generals when they got to become emperors). At this time, there was no central banking (but there was private banking, and even fractional reserve banking, but the reserve was so high that it's nothing comparable to what we have today), no paper money (there were, however, forms of IOYs and bills of exchange, pretty much like Western Union stuff) and there was no such thing as "deficit spending". This tells me that even in the case of a metallic "real" currency, inflation and monetary collapse is possible because it's still possible, and even quite easy, to "cheat".

2- What allowed the Roman economy and currency system to recover somewhat (for another century in the West and for almost a Millennium in the East), is because an emperor issued "worthless" copper coins with value marks on them and promised to accept those coins at their face value as payment for taxes and forced the bureaucrats and those offering services to the state to accept those coins. Basically, that was an (first?) experiment in "fiat" currency. It lasted for some time, until another emperor simply decided to go back to silver (Romans used mainly silver for money, instead of gold). That system never collapsed and at that time, there was no extreme inflation (like it had happened during the time of a "real" currency). Basically, IMO, it worked well because it was NOT money created out of debt, banks were not allowed to mint money (or loan it into existence), and there was no fractional reserve banking to speak of. The money that was minted was to pay for real goods and services (however necessary or unnecessary) and required by the population to pay for its taxes. Thus the government had the money it needed without needing to wait for what would be like a generation of savings to accumulate in its treasury only to keep the state working. And since the government a complex state like the Roman empire is such an important player in the economy, whatever it says is money, is money.

This brings me to the subject of this main post :-)

In my opinion, the event described, the total disappearance of money, is simply not really possible anymore. Even in a controlled "environment", like a prison, where currency is severely limited, inmates invent money. In my opinion, if the current monetary system collapses, it will simply be replaced by another (after much turmoil).

Again, in my opinion, in the future, the currency system should be a fiat currency backed, at least at first, by the products and services rendered to the state and the taxes payed by the citizens (as opposed to backed by debt). Both represent real economic output (the government renders real services to the population, and the proportion of the citizens' income that is paid in taxes is the result of real work done in the real economy). The money can be issued by a central bank as a transfer to the government (as opposed to a debt that the government contracts towards the central bank) and then, the state spends that money. As long as the central bank remains a "quasi-judicial" (like a 4th power, after the executive, the legislative and the judiciary) and independent entity, and as long as the money issued is consistent with the economic output growth of the currency zone, there should be no inflation. Of course, banks cannot be allowed to practice fractional reserve banking and MUST be allowed to fail (but still preserving some insurance to protect, at least partially, depositors). They should be allowed to fail because banks will always find some financial commodity that behaves like money and can trigger some inflation. But if they are responsible for that "money" and if it can bring their business down without possibility of being bailed out by the government or a central bank, then they might think twice before being stupid about it.

As for barter, I believe it is only realistically possible on a very small scale, in an environment where people are not very mobile (thus forcing people into long term relationships where betrayal is severely reprimanded not be punishment, but but some form of "shunning"). The reason is that bartering is never really "even". One party of a transaction or another is always a little "out of pocket" because it's extremely difficult to evaluate properly the "value" of something. But if it's so difficult to move out of the city or county or small locality one lives in, then the next time, the one "out of pocket" can redeem its "debt" by doing something for the other. There is no need for corporeal punishment for failure to comply since every member of that small society needs the other and being "shunned" might mean becoming destitute or even dead.

The next level of being really out of currency might be real communism. I do not believe it is possible at the current level of population and the scale of our societies, but on a very small scale it is possible. Basically, it's like bartering, except some important "public equipment" (like communes, lands to grow food, some public buildings, roads, libraries, schools) are built and operated by people for free (in exchange for the right to use those equipments for free). But, again, it can work only in very small scales where people cannot easily migrate and where "shunning" is a real threat to one's well being.

Anyways.... that's my 2 cents.....

Open Source Software to run a local currency/barter network.

http://project.cyclos.org/index.php?option=com_content&task=view&id=220&...

The people writing the software make their money via selling install services or via hosting the application for your group. $10 per person per year is what my memory says.

(The software does work BTW)

We would be looking at chaos within a week and complete breakdown of social order. We might maintain some measure of social order the first 2 or 3 days. I base that mainly on my experience during a hurricane, but somehow I think people would turn nasty much faster. The government wouldn't have enough time to act. The police wouldn't be able to control the population because all semblance of solidarity during crisis would disappear. Imagine 30,000 police versus 4,000,000 scared people who have been living paycheck to paycheck. No contest.

Cities would be on fire and in panic with the strong versus weak. Military overseas would be called home to restore order (actually we ALREADY have 20,000 troops deployed on US civilian soil just for this purpose). I'd recommend reading _KNOWN UNKNOWNS: UNCONVENTIONAL “STRATEGIC SHOCKS” IN DEFENSE STRATEGY DEVELOPMENT_ by Nathan Frier. The government is preparing for such an event due to a financial crisis or "other reasons".

Emergency responders would try to control things, but would fail quickly. As more and more desperation set in, the emergency responders themselves will be in survival mode and taking care of their families instead.

It wouldn't start out that way immediately, but it would happen as soon as they realize that they lost control. There would be looting very quickly. Many people would be in denial. Traffic jams and altercations as some rush for supplies or to exit the cities before things get too bad. The smart bet would be to fall back to safer zones, far into the country. Gas would be gone within a day in many areas. In other places they would try to turn the spigots off. Most people would be caught unprepared.

The safest spots would be far out in the desert or in very remote land that is much harder to access. Even 2-3 hours outside of the big cities, smaller towns will be overwhelmed with a humanitarian crisis. The smart ones will block roads and turn back the undesirables at militia gunpoint. Smaller towns are the one ones with a real chance of surviving and that's only to the extent that they can fight off mobs. And fight they would because there would not be enough to go around.

The cities would turn into war zones. Only the strong gangs, remaining police, or the prepared and organized survivalists have a shot. With the collapse of society, government, some scientists, and financial elite will huddle together in a network of government bunkers. They are prepared to wait out such a crisis for decades if need be, so long as they retain their power.

As military forces can be organized they will try to make a show of force and start taking over territory zone by zone. Their ultimate missions will be to round up all the survivors and escapees to put them to work or to imprison/re-educate.

If we were collectively more responsible, none of it would have to happen. We would all be prepared for a rainy day. We would have evolved more sustainable ways of living. Alas, our social evolution couldn't keep pace with the technological and so 95% of people may die at some point.

In a world without money communities would soon find their way to a replacement system reflective of their values and competencies. I've been studying the issue and here share my evolving ideas:

The best backing for a local alternative currency is current production, either goods or labor time. Credits can be created by being accepted into circulation for goods or labor. The money supply would thus reflect the real value present in the economy. Designing-in a declining value factor for a medium of exchange would stimulate spending not hoarding. The more variety and volume of transactions happening in a place, the more prosperous that place is. There would in effect be a discount for spending quickly and of course locally. This would be a real and ongoing local economic stimulus, bootstrapped.

At the start, people or businesses could buy credits with USD as desired. There could be an exchange operating all the time; but the USD are likely to fall against any local credit system based on real productivity of basic goods needed locally. Thus a local system could protect and buffer a place from the shocks of hyperinflation, or other financial disruptions. The system would have to start with a robust B2B barter exchange system within a large enough locality to provide the variety of products required, say county-size, as far as the local credits went. Larger scale transactions could take place in another system –USD, or within national or global B2B barter and exchange services which have been thriving on the side for years already.

The local alternative finance system described would need to be managed ongoing by a not-for-profit, transparent community organization, maybe a cooperative. Managers would look for and find the transactions needed to relieve any currency bottlenecks. That way, no business (such as a grocery store) would get stuck with too many credits without the ability to use them to buy stock. Imbalances, or bubbles or malfeasance would be spotted right away by the oversight team and dealt with. Vacant niches in the economy would quickly become obvious. Part of overall management would be getting needed production up and running to fill any gaps, providing financing and training, as needed.

The system could incorporate a savings and loan function with zero interest. As said elsewhere, interest just serves to drain energy away from doers to havers. It's not fair in the big picture. Instead of interest payments, savers could gain points which qualify them for loans or other benefits. Instead of paying interest on loans, borrowers could pay small amounts into their own savings accounts. This would increase the money supply based on real value added.

Trust need not be an issue if all transactions are available for viewing online by anyone. Personal names could be omitted for privacy; but the system would be transparent. No one person would stand to gain from the system --instead all would gain from it. Each local system would have to be at a manageable scale, so the data do not become overwhelming and hard to understand, and so capable of manipulation. All participants would understand the entire system –it advantages, its fairness goals, its operational nature.

There are more options than just either strong-man despotism or chaotic anarchy. As a society we are starting to outgrow both of these systems, although regression during stress could happen. The experience of the information age has now given us a kind of autonomy that readily coalesces into collaboration. The internet has been very leveling.

I don't think taxation from states or federal government will be much of an issue if there are major disruptions. Localities will more likely be on their own. In the meantime of course USD will be needed to pay taxes on gains.

It's possible to create alternative financial systems like this now while we have internet. A good idea is to get this up and running before we are critically stressed by shortages. We could be preparing now to provide local internet servers with renewable power sources.

Eventually we will do essentially the same thing as the internet even without the high tech, if necessary. It is another invention out of the box and into the culture.

What we would need to do is not replace money with anything... Thats a concept that will have your head spinning for days...