The future of money is mutual credit: Interview with Thomas Greco

We thought it fitting to lauch this blog with an interview with the originator of the term ‘Credit Commons’. Thomas Greco taught economics, finance and statistics for 14 years at Rochester Institute of Technology in New York, and is now an activist and consultant working on alternatives to the current money system. He also wrote the End of Money and the Future of Civilisation.

CCS: I came across this book around the same time as Matthew Slater’s credit commons white paper and Positive Money’s videos on how money is created. They completely changed the way I saw the world, and certainly how I thought about money.

Tom: I’m glad to hear that. That book you have in your hand, by the way, is the UK edition. The original edition came out a few months prior to that one, and the publisher Chelsea Green sold the UK rights to a company in Scotland that specialises in change-oriented materials. That book expresses pretty well my thoughts about what needs to happen. It includes a lot of history and theory about money and exchange, and builds on that to lay out some prescriptions for the future.

I’m not just saying this because I’m talking with you now Tom, but if I could only recommend one book in the world, this would be it. I think everybody should read this book. So I’m very excited to talk to you.

Thank you.

I’ll start with some basic questions. So – what’s wrong with the current banking system?

That’s a big question. I’ve thoroughly covered that in my books. I wrote 3 previous books to the one you showed. The first one was called Money and Debt: a Solution to the Global Crisis. In that book I laid out the results of my research into the current money and banking system, and the dysfunctional aspects of it. I guess to sum it up I’d say there are 2 basic things. One is that the current money system monopolises credit in the hands of big, multinational banks, and so getting access to credit is difficult. The second thing is, if you are able to get access to credit, it’s at a high cost, and under onerous terms. So you go to the bank and say that you need a loan to provide working capital for your small business, and the bank will say ‘well, sorry, but you don’t qualify unless you put up your house, your farm and your first-born child as collateral.’ So if you do get a loan, it will at high interest rates with onerous repayment terms. And when you find yourself in trouble with temporary liquidity problems, they will pull the plug on you rather than support you through the crisis. So there’s a conflict of interest between the lender and the borrower.

The other thing is that the current money system requires continual expansion of debt. If you look at the growth statistics for debt, both public and private, you’ll see that debt has been growing exponentially – and this is a simple mathematical fact, because compound interest is an exponential function, and banks earn interest on the interest. So when they do make loans, we have this problem with the continual compounding of interest and expansion of debt. Now one thing that very few people seem to realise – I’m about the only person pointing this out – is that this debt has to grow continually, and the only way it can do that is by banks finding ways to create greater indebtedness, either via the private or public sector. When the private sector is all loaned up, and can no longer take on any additional debt, the government steps in as the borrower of last resort.That’s why we see sovereign debt increasing continually around the world. In the US we’ve seen it grow to enormous proportions. In 2008, the US govt. debt was around 9 trillion dollars. Today it’s approaching 22 trillion dollars. That’s in about 10 years – more than doubled. This can’t continue indefinitely. We have this debt crisis – this real estate bubble that built up in the early 2000s, and then collapsed in 2008, and almost brought the whole global financial system down. We’re building up to another one – it’s inevitable. We have to find alternative ways of doing the exchange process, without relying on banks to make loans at interest.

You don’t think the current system can be reformed?

No. The political system has been so thoroughly captured by financial, banking, corporate, military, industrial interests – the global elite, if you will – that the political approach to reform is hopeless. There’s no way that that’s going to happen.

I tend to agree. So, just an overview – what’s mutual credit?

OK, let me give you an example. Let’s suppose you buy something from me and pay me with a cheque drawn on your bank, and I take that cheque to my bank, which is a different bank, and I deposit it in my account. That cheque goes through a process. Now your bank owes my bank, because they’ve cashed your cheque for me, or put that amount of money into my account. Forget for the moment that we’re using different currencies. Your bank owes my bank because my bank has taken your obligation, and they’re going to have to be satisfied by your bank. So this is just a matter of working out between themselves this process of claims. If you look back in time, we had something called the clearing house. In fact we still do, but to take it back in time, when things were more localised – let’s suppose we live in the same town, but we have different banks. The local banks used to collect the cheques at the end of the day and take them all down to a clearing house. Bank A, for example, would take in cheques that were drawn on Bank B, and bank B would take in cheques that were drawn on Bank A – so they had claims against one another. The clearing house existed to simply net out those claims. So Bank A might have claims of a million pounds against Bank B, and Bank B might have claims of 1.1 million pounds against Bank A. So the net is 100,000 pounds. That’s all they needed to transfer to settle their accounts.

If banks can go through that clearing process, producers and sellers can do the same thing. I call it direct credit clearing amongst traders. We don’t need to use bank-created money in order to pay one another. We can form a circle of traders, in which we simply keep a record of accounts. I buy something from you, my account is debited and yours is credited. My account goes down, yours goes up. If we’re in a circle of several hundred traders, you can take the credits that I give you for a purchase, and use those credits to buy something from someone else in the circle. Likewise, I can sell to someone else in the circle to clear my account. So it’s just a process of book-keeping. In mutual credit, instead of calling a negative balance a loan, we simply accept it as a necessary feature of doing business.

Now, businesses are in the habit of extending credit to one another on a bilateral basis. In a mutual credit clearing exchange we do this on a multilateral basis. So let’s say we’ve established an exchange, and that we have, say, 500 members. We’ll look at the sales record and financial condition of each business in that exchange, and we’ll decide to allocate lines of credit to some of the members, who have a good track record in terms of having sales of things that people want. Those that are in general demand will qualify for a line of credit – which means that they can spend before they earn. In other words, they can have a negative balance on their account. Of course, we put limits on these balances, both negative and positive, so that things don’t ever get too far out of line.

And is all this just theoretical, or are there working examples out there?

Oh, this has been happening for 50 years. There are commercial trade exchanges operating all over the world, and they do basically what I’ve just described. They recruit hundreds or thousands of businesses to be part of their exchange, and then they do moneyless trading with one another. The exchange operators keep a record of the debits and credits, and they allocate the credit lines to those that qualify, to the extent that they are creditworthy. We no longer need money, we simply use monetary units as a measure of the amount of credit given.

I was reading something by Tim Jenkin, and he said that really, before money, local people would trade with each other using a kind of informal mutual credit system. They would just keep tallies in their head. They wouldn’t barter, because that would mean finding someone who’s got what you want and wants what you’ve got, which may not be easy. So villagers would just do an informal mutual credit system in their heads. I think it’s actually a very old idea.

Yeah. Credit has always been the primary basis for exchange. We’ve allowed the banks to capture our credit and lend it back to us at interest. But it’s our collective credit that supports every currency in the world.

What do you think the potential is for mutual credit to contribute to the building of a new, non-extractive economy? In fact, do you think that building a new economy is even possible with the current money system?

No, the current money system is dysfunctional. It militates against equity and justice as well as peace, and so we have to decentraise power, and the only way we can do that is by decentralising control of credit. So what I envision is a mutual credit network in which credit is locally controlled and allocated, but is globally useful. So if we go one step further – I’ve described how a credit clearing system works – we can take hundreds and thousands of local credit clearing exchanges and network them together so that they do what the banks do – they clear obligations amongst themselves, behind the scenes, so that I can take the credit that I have in my local exchange, and use it anywhere in the world, just as I take the credit that I have in my local credit union, and use that anywhere in the world.

So this networking of local exchanges to create a global system – that’s ‘credit commons’ isn’t it?

Yes – I talk about reclaiming the credit commons. The credit commons is the collective credit that we all have and use, and we have to reclaim the credit commons from the banking interests. We’re reinventing money and banking, by decentralising control.

So money at the moment is a means of exchange, which is fine – but it’s also a store of value, and so some people are going to try to accumulate it.

We all learn in school that money is three things – a medium of exchange, a store of value and a measure of value. But these things are contradictory. If you want something to be a medium of exchange, it should be spent. If you want it to be a store of value, it should be held. When you look at how we do things, we actually don’t use money as a store of value – that’s an incidental function that it performs as it acts as an exchange medium. When we talk about people having a lot of money, chances are they don’t have very much money at all. It’s like saying that they have lots of credits in their checking account. But you don’t. You typically take your exchange media, and you use it to buy a long-term claim, or shares or stocks, or something else in your investment portfolio. So when we talk about someone having a lot of money, we mean that they have a lot of wealth, and that wealth is typically in the form of stocks, bonds, real estate, collectibles, but not in the form of money.

And when wealth concentrates like that in very few hands, it always overflows into the governance system – into politics – and corrupts it.

Of course.

Would you say that we can’t really have true democracy when wealth is concentrated so much?

Absolutely, and Judge Brandeis (a noted judge in the US) said something to that effect a long time ago (he said: ‘We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.’)

So, with mutual credit, we can get what we need without actually having money – so that has huge implications for fighting poverty, doesn’t it?

Exactly. And in terms of measure of value – the third function of money that we talked about, this should be done with an independent, commodity-based measure. This is the way it used to be, when the US was founded. The US dollar was defined in terms of a specified weight of silver, and later on, it was defined in terms of gold. So if we had a measure of value that was independent of the currency, then we would have everything we need to rebuild the exchange system in a more equitable way. In my own work, I’ve laid out a market-basket of commodities as the most promising measure of value. If we take a basket of basic commodities, and define our unit of account based on those commodities, then we have an independent measure to keep our records and measure our credits with.

An economy based on mutual credit seems as though it would be a much freer market than what we have now, or actually, that any neoliberal could dream of. What we have now seems to be a corporate welfare state rather than a free market. Do you think that mutual credit is something that could appeal to the right?

Sure. There are libertarian elements on the right that have been proponents of choice in currency. They want government currency to have to compete with private currencies that are better managed. In 1989 I went to a conference in Washington DC that was organised by the Cato Institute, and the subject of that conference was choice in currency. There were a number of notable mainstream economists who were speaking in favour of choice in currency.

The Cato Institute is a right-wing think-tank, isn’t it?

It’s become pretty right-wing. It used to be more libertarian (NB: I think Tom might be using the word ‘libertarian’ in the way that Europeans normally do – as in anarchist, rather than anarcho-capitalist) – I think it still is, somewhat, but it’s shifted a lot to the right.

I’m happy to hear you say that, because I’ve often thought that mutual credit could be a bridge between left and right, instead of left and right fighting each other pointlessly while the entire corporate system just trundles on regardless.

It definitely is a bridge, because we’re not getting into ideological arguments which go nowhere. I’m not concerned about ideology. I’m concerned about practicality – what works, what’s going to make things better. As I said before, I don’t think we can reform the existing system, so it means we have to reinvent it, rebuild it from the bottom up.

I’m very excited to hear that, because I don’t want to get into a battle with the right, and I don’t think there’s any need to.

No, there isn’t.

So mutual credit is similar to the LETS idea – local exchange trading systems. But those schemes seem to have faded away. What’s the difference between mutual credit and LETS?

LETS uses the mutual credit clearing process, but there are problem with LETS. It was a stroke of genius that Michael Linton had in coming up with LETS – rediscovering the credit clearing process. It spread pretty rapidly around the world, and notably in the UK. The problem is that LETS was not business-based. It was grassroots and it was on the fringe. It wasn’t able to attract many business members. When it did, the businesses tended to be popular with everyone (think plumbers!), and they were accumulating lots of credits and finding it difficult to spend them. So you ought to allocate credit lines to the most popular members – the ones that have goods and services that everybody wants. That’s the way to prevent this pooling of credits in the hands of a few members.

[Explainer: If the popular businesses have a line of credit, they can spread that credit around by making purchases. Then the credits they receive back from sales simply offset the credits they spent to begin with, so there’s no increase in positive balances – their balances simply become less negative. If less popular (or non-productive) members are given credit so that they can buy before they sell, they run up negative balances and the popular, productive members run up positive balances. So it’s a good idea to give popular businesses a line of credit.]

A lot of members were doing LETS as a sideline. They might offer things like massage or guitar lessons – things that may not have been too important in people’s lives. They were luxuries rather than necessities.

And they might have been done for free otherwise, anyway?

Many of them, yes. But commercial trade exchanges were different. They were organised for businesses. And businesses are there every day, ready and willing to sell you what you want. This makes a huge difference. But even commercial exchanges have some notable flaws or dysfunctions, and I’ve written about that in the book you showed earlier.

And just briefly, what are those flaws?

Well, there’s the inadequate allocation of credit lines. You have to have a proper algorithm for allocating lines of credit to the members. That is, who should be allowed to purchase before they sell? To what extent should their account be allowed to go into debit? A lot of trade exchanges will be overly generous to recruit members into the exchange. They might give credit lines equivalent to 6 months of sales. That’s excessive, so you end up getting into trouble, with members having excessive debit balances. Also, a lot of exchanges trade on their own account – they might go deeply into debit on their own account, beyond anything that’s reasonable. There’s also lack of transparency. Most trade exchanges are operated as for-profit businesses, and they don’t make their numbers public. These are some of the problems associated with commercial credit. And finally, failure to connect these exchanges together, to create some sort of global utility that I spoke about earlier.

Why do you think they don’t want to do that? Wouldn’t that increase their profits?

They’re stuck on a sub-optimal plateau. These are proprietorships mainly, and the operators are satisfied with the small amount of profit they’re making, plus they don’t want to risk revealing their client base, or having their members be able to go outside to access goods and services elsewhere. They have a false idea that they have to keep everythiing local. We want to keep control local, but we want to make the credit globally useful. There is a process that we need to go through in order to bridge that gap.

We’re coming at it from completely the opposite direction. We want to ultimately build a co-operative global credit commons. But how do we achieve this global credit commons? If you had the power, what would you do? How do we go about it?

We have to build one node that is optimised, and I’m hoping that Mutual Credit Services will provide that node, and follow the prescriptions that I’ve laid out in my book, to avoid the problems I’ve just mentioned. Once we have an optimal node, and we can demonstrate the effectiveness and the efficiency of that node, then others will want to replicate it. Then we can network together those replicated nodes to enable trading over a wider area. If we do this right, this will proliferate rapidly. We’ll have the virtuous circle that networks desire to create.

Is it better to start at the UK level, or to start smaller nodes and then network them up to the UK level, or maybe a bit of both?

I think we have to map the territory, to see who is offering what for sale, how wide an area we need to encompass to get a broad enough selection of goods and services to make the exchange useful. If you make it too small you have too narrow a range of goods and services. If you make it too large it becomes difficult to manage. We need to discover by trial and error the optimal size for a node. This will vary from one place to another, depending on the businesses and industries that are in that area. And it doesn’t need to be necessarily geographically based. It could be based on a community of interest. It might be best to start with groups that know each other and have some commonality, like, for example, religious groups or social organisations.

A possible commonality is the co-operative sector.

I think it’s important that we take in small and medium-sized enterprises as well as co-operative businesses. We might have a list of values and ideals that we subscribe to, that we’d like people to endorse as they become members.

Would you like to see other forms of money too, and if so, what kinds – and how do we get states to accept mutual credit as taxes, for example?

I think there’s the possibility at municipal level, and maybe even at the state level for credit clearing credits and private currencies to become acceptable in payment for fees and taxes, but we don’t need to go there initially. If we can get the business community to start trading amongst themselves without money, it will put pressure on municipalities to accept those credits as well. But yes, I’d like to see more private currencies, that will demonstrate that government-issued money, or central-bank-issued money is not the only viable currency. In fact, private currency can be more robust, more valued that government currency because it has to stand on its own merits. It won’t have the protection of legal tender status that’s established by law for conventional currencies. So for example, you could think of frequent-flier miles issued by airlines – if they were made easily transferable from person to person, they could serve as a private currency. If they were issued properly they might prove to be more reliable than even conventional currencies like pounds or dollars.

What’s changed since you wrote your book, the End of Money and the Future of Civilisation, 10 years ago? Do you think we have a better chance of success now?

Yeah – I think with the financial meltdown and the after-effects of that, and with people becoming better informed about alternative exchange, mainly through Bitcoin and other non-governmental currencies, people have begun to pay more attention. Talking about Bitcoin and blockchain, this has opened people’s minds to other possibilities besides conventional money, but I don’t see Bitcoin as a solution in the long-term. Blockchain technology might have a role to play in the future of the exchange process, but Bitcoin is basically a virtual commodity. It has many of the characteristics of gold, and that’s well brought out in Nathaniel Popper’s book Digital Gold. It has the same properties as any commodity, although it doesn’t exist in physical form – it’s just numbers in a computer.

It uses an awful lot of electricity as well.

Yeah, that’s one of the negative features of it – it takes a lot of energy to produce it. And like gold, it has very little use value, and very little exchange value. Most gold is held in vaults, so we dig it out of the ground and then we put it in another hole in the ground called a vault. Likewise with Bitcoin, it takes a lot of energy to produce it, and it just sits there. Most people use Bitcoin as a speculative medium, or as a hedge against inflation of conventional currencies. It serves better as a store of value – very little Bitcoin is being used for payments. That’s the case with any commodity money. Most of the payments are done with credit.

Another reason I’m interested in mutual credit is in case of societal collapse, when money doesn’t get you anything any more, people can fall back on mutual credit locally, and still trade and still produce goods and services, and survive. And actually, even if the electricity grid goes down, you can still do mutual credit with pen and paper.

Exactly. And we have precedent for this. During the Great Depression the problem wasn’t that we didn’t have labour available, or that we didn’t have the factories, machines and raw materials. The problem was the financial system. There was an insufficient supply of money in circulation, and that’s what put the monkey wrench into the economic works. So people resonded with lots of alternative exchange media, called scrip. There were hundreds if not thousands of scrip issues that were put into circulation during that time, to provide some liquidity and make it possible for people to exchange goods and services, even though there wasn’t enough money circulating in the economy.In my earlier books I wrote about one example – there was a chain of stores in the western New York State area that issued what they called merchandise bonds. It was basically scrip that they used to pay their staff and suppliers, that would then be redeemed by them for merchandise bought from their stores. So private currency is an entirely viable approach to the exchange problem if you have it being issued by a reliable and solvent issuer, who has something to offer that people want.

Something similar happened in Argentina, didn’t it, at the end of the 20th century, when their economy collapsed. There was a big move to mutual credit then, wasn’t there?

Yeah. During the 1990s, when the Argentine government was pursuing a policy of dollar parity – they’d bought into the Washington consensus, that they ought to privatise all their government-owned resources, and keep their pesos at parity with the dollar. I was there in 2001. This was at the height of the social currency movement. You could go to the ATM, put in your card and choose to draw pesos or dollars. I was indifferent because the peso was trading one-to-one with the dollar at the time. But of course after the government sold off all their assets to northern companies, which then raised prices, made big gains and sent them back home, turning in their pesos for dollars, one-for-one. Then the Argentine government could no longer sustain parity with the dollar, and so the peso declined by two-thirds. This is the game that’s been played over and over again. They get businesses, people and governments drawn into the debt trap, and they end up in debt bondage.

The Argentines did come up with their own system. They called it Treque. They had Treque exchanges – trading clubs with hundreds of members trading goods and services every day.

It was a huge percentage of the Argentinian economy, wasn’t it?

It definitely was. It was a lifeboat for many people, and when the peso collapsed and the economy went into freeze-up, the trading network also collapsed because there was a lot of fraud and impropriety going on. A lot of the clubs were clubs in name only. They would issue their own credito notes and go shopping at the trading clubs, with no intention of ever reciprocating. So really, we need to create mechanisms for reciprocal exchange, in this economic game of give and take.

And we have to do it with trusted players, don’t we?

Trust is always an essential feature in any trade system. You can’t eliminate trust. Even if we’re talking about blockchain and Bitcoin, you have to trust the process and the platform, and the exchange, if not the currency itself.

So the current economic system centralises power, which is always then bought or seized. With capitalism, it’s been bought; with the Soviet Union it was seized, and so on. Can an economy based on a credit commons keep power decentralised?

If people take responsibility. Freedom and responsibility are two sides of a coin. You can’t have one without the other.

And do you think that if we start to have success, there will be a fight-back by the banks and the extractive sector?

No doubt. That’s historically been the case. It means that we have to assert our money power, which is our power to allocate credit to each other, and we have to do it quickly.

Yes, having worked in the environment sector for 25 years, from an environmental perspective, things don’t look very good. I don’t think most people really understand the implications of climate change and biodiversity loss – and why should they, really?

It’s true – and as long as we have a political situation where we’re controlled by a small elite group globally, we’re going to have that continue. We’ve had an environmental movement for more than 50 years, and little or no headway has been made. We’ve been able to clean up certain areas but in the process we have the whole planet at risk with global warming and global pollution, the oceans being acidified, plastics etc. and it’s not going to stop until we put an end to this debt-based money system, which is driving everything. The compound interest formula is driving us to destruction.

I’ve been studying biodiversity loss, and we’re losing species thousands of times faster than the natural, pre-human rate. If we’re going to avoid ecological meltdown and even extinction or some vision of hell for humans we have to stabilise the global economy, and I don’t think that’s possible with the current money system. Can an economy based on mutual credit be stabilised?

Yes, I definitely believe it can. But it also means decentralising power – both political and economic power.

Which mutual credit will do as well – it will start to decentralise economic power, for sure.

It puts us on a path in the right direction.

So where can people keep up to speed on what you’re up to?

My primary website is That’s my active site. It has a wealth of information, and many important links. I have a secondary site called That’s an archival site which contains a lot of monetary theory sources and case studies and other important documents. You can go to to subscribe to my blog, and follow me on Facebook and Twitter – Thomas H Greco Jr is my name. That’s how you can keep in touch, and have access to materials that I’ve been collecting over 30 years.

I’ve been listening to some of your previous interviews that are on there. Very interesting. We’re talking with key people in co-operative housing, employment, transport, IT, land, the Permaculture Association. So when it comes to mutual credit, this vision of getting mutual credit to be seen as the natural exchange mechanism of the non-extractive sector – what would be your advice to that group of people? What would you like to say to them?

I’d like to say to them that they need to study up on the exchange process, and look at the current activity in private currencies and mutual credit clearing, and make sure they understand that, because that’s the fundamental approach that needs to be taken in order to make things better.


  1. Ecological destruction is not going to stop until we put an end to this debt-based money system. The compound interest formula is driving us to destruction. It militates against equity and justice as well as peace, and so we have to decentraise power, and the only way we can do that is by decentralising control of credit.
  2. The political system has been so thoroughly captured by financial, banking, corporate, military, industrial interests that the political approach to reform is hopeless. I’m not concerned about ideology. I’m concerned about practicality – what works, what’s going to make things better. I envision a mutual credit network in which credit is locally controlled and allocated, but is globally useful.
  3. It takes a lot of energy to produce Bitcoin, and it just sits there. Most people use Bitcoin as a speculative medium, or as a hedge against inflation of conventional currencies. It serves better as a store of value – very little Bitcoin is being used for payments.

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