money hacking

Global warming is a concern for a lot of people. I’m one of them. There’s this dawning realization that puny humans can affect the big world in big and (as far as we’re concerned) permanent ways, that minuscule increments of waste CO2 (parts per million) can affect the world for a very long time. It’s a problem, and a lot of people are trying to figure out how to fix it (while all of us are busy making it worse, but still, it’s on our minds. Better than complete unconsciousness, though not by much).

We used to think of nature as this thing that was so big, and we as humans were so small, that exploiting what we found seemed acceptable, and wasting what we used was fine. There was a mindset that didn’t concern itself with a systems role for human actions. We didn’t worry about ‘closing the loop’ because we didn’t think we wasted or used enough to worry about it.

Now we think we’re so smart when we build with FSC certified lumber and bike instead of drive and try to measure and reduce our carbon footprint. And I think it’s a great thing.

But we don’t bring that same kind of mindset to all the areas we could, in particular economics. Even fairly sophisticated news sources don’t deliver important aspects of the big picture.

We talk about money the same way people of the 19th century talked about air:

  • it’s this stuff out there, that comes into and goes out of our lives;
  • we need it to survive;
  • it’s undifferentiated, all the same stuff. Different countries use different currencies, but it’s all the same basic idea, mutually exchangeable;
  • it’s always been there. No one invented it. It seems like part of how the world works, and how it should work;
  • we never ponder what it is, how it’s created, or how it’s destroyed.

And what’s saddest, I think, is this: if we developed some sophistication in our thinking about money, it would open up large opportunities for people to develop and sustain meaningful, durable prosperity for everyone.

We leave economic sophistication to, well, economists, but also bankers, traders, analysts: people whose business is money. The financial industry. But money is the business of all modern humans. It’s the very operating system of our civilization. Modern humans can’t function without money in a modern way. Many of us would starve and die.

And you haven’t read the manual. Or even skimmed it. You wouldn’t know where to find it. After all, it’s someone else’s job to know that stuff and handle it. They’re taking care of it… right?


No, they’re not. That’s what we call the ‘Great Recession.’ Blame Wall Street, blame Fannie Mae/Freddie Mac/the government; from the right or left, someone was too cravenly greedy or incompetent or shortsighted or all of the above.

And when we said ‘Let the financial people worry about all that complicated stuff,’ we trusted them. We did more than take out loans we couldn’t pay (though some did); we let them design the very architecture of our economy to enrich themselves at our expense. We let them assume a parasitic, heads-I-win, tails-you-lose role in the economy. When they do well, they profit. When they screw up, we have no choice but to bail them out, and they profit. Not a bad racket.

So what can you do? If you’re not willing to look into what’s going on and ask some questions about how money works or how it could work, not much. Maybe you’re a survivalist waiting for the big SHTF, and you’ll buy some land out in the country and a bunch of guns. Maybe you think the decline will be punctuated but slower, and you’ll scramble to get yourself on the happy side of the rich/poor line. But either way, you’re writing off any possibility of a future where prosperity is broadly shared.

I don’t think that’s necessary. If you’re smart and thoughtful, and you’re willing to do some homework, you could turn this crisis into an opportunity to help you and the folks around you get through the next few years. If enough folks do, maybe there’s hope for us all.

I don’t pretend to have all the answers. But I think there are some good ways to think about the answers people are coming up with, and I think it’s smart to educate yourself about the options. I think it would be smart to take action soon.

what is money?

This is the core question. If you don’t think a bit about what money is, you are left with the ideas of others, including all the fine-print aspects they’d rather you didn’t think about.

Money is: an agreement. There’s this stuff, maybe it’s paper with numbers on it, maybe it’s numbers in a bank’s database, maybe it’s strings of shells collected on a seashore. Whatever form it takes, there’s an agreement that it has value, and people accept it in exchange for things.

Sometimes that agreement has the force of law: that’s what ‘legal tender’ means. If someone pays you with a sufficient amount in dollars in the US, you can’t sue them for nonpayment. A court of law in the US won’t accept that.

Now, that doesn’t answer a lot of questions. Like, where does it come from? How does it get created/enter/exit the system? What does it do along the way? Are there different forms? How do they interact?

But it’s useful to think of it as an agreement because we make agreements all the time. ‘Let’s meet at the Cultural Center at six.’ ‘I’ll watch the baby while you go to work.’ ‘I’ll give you $60 for those shoes.’ It’s possible to make our own money agreements with your friends and business associates. Which basically means, starting a private currency.

Whoa, John. Is that legal?

Well, it depends. In some countries, no. Germany, for example, though there are some projects they are allowing to proceed. In the US, a few things are important:

  • make sure it can’t be confused with US dollars–currency notes should be visually distinct. I wouldn’t even use the word ‘dollars’ at all. We aren’t talking about counterfeiting;
  • don’t use the words ‘Legal Tender;’
  • pay your taxes. You’ll probably have to pay them in dollars (at least for now). If you can get a local taxing body to join your agreement, all the better.

That’s as much as I know about it. If you’re concerned about getting in trouble, consult a lawyer. IANAL.

wait–money is an agreement?

Yes. That’s it.

Maybe it’s pervasive. If you’re surrounded by people who don’t accept the same currency you do, that would be hard to keep up, unless you’re a survivalist. Maybe under ‘legal tender’ laws the word ‘agreement’ isn’t quite right, because you’re not really free to decline. But with the way things are going these days, you might want some other choices available to you. And anything you and your friends and  business associates come up with will have to be just that, an agreement. Possibly a legal one.

But just to be clear: when you and those you do business with agree on a price, you’ve just defined the value of the currency you’re transacting in. That’s where that value comes from as a currency, and nowhere else. You can use dollars, strings of beads, cows, gold dubloons, or anything as long as you all agree to it.

If you use a commodity currency, your currency may have use-value, about which more later.

what does money do?

Money, as we currently use it, has three basic functions:

  • it is a store of value. So, instead of storing all the food you’re going to need after you retire, you have money in a retirement account to buy food to eat after you retire;
  • it is a measure of value. So, you can use it to compare value between items. An orange has a value of some number of dollars (in the US). A car has another value. You can compare them and assess the relative value of the two things;
  • it is a medium of exchange. So, if I have the right amount of dollars and you have an orange, I can exchange my dollars for your orange.

There are problems associated with using the same tool to do all those things, and different ways to deal with those problems. More on that later. Bernard Lietaer’s goes into those issues in some depth.

Next: Money hacking: the origination problem.


These are books and sites I have found useful in beginning this thought process. If you have suggestions, please post them in the comments.

Bernard Lietaer’s, especially Community Currencies

Thomas Greco’s The End of Money and the Future of Civilization

Jordan MacLeod’s New Currency: How Money Changes the World as We Know It has some interesting ideas about a generalized concept of currency

the Cyclos project

a complementary currency plugin for Drupal

geekcred p2p digital currency



  1. right on john. I love your discussion of money as an agreement. and how we’ve essentially allowed that agreement to be managed/brokered more and more by external parties who have no interest in the transaction but their own profit. I usually don’t “agree” with people of that mentality, but our shared currency and structure of investment almost demands it.

    I always like to remember that currency/money is indeed an agreement, but one which is transferable… the coin becomes the gesture… the representation of “agreement” …this massive distributed, cloud of “agreement”… blinking and folding and counting and marking an infinite number of tiny, “organic” interactions… … I’ve been around plenty of circles who tout the principles of bartering and trade… fair enough… but often I don’t have enough of what someone wants to get what I want from them… Not enough goats to buy a new horse and whatnot… so currency comes into play… the minute you step away from a person-to-person, two party agreement as to what this currency shall represent, you demand a third party officiator, or at least contract verified by a third party, to define and retain the value of tokens exchanged and promises made.

    Great coverage of some primary roles current “money” plays – as “store of value, measure of value & medium of exchange” … could it be we bring trouble on ourselves by lumping these together in a single, national currency?

    …I once was traveling in way back eastern Oregon… high mountain desert… I bought an old timer at a gas station a bite to eat… and he, having no “money,” gave me a tiny gold coin… half the size of a dime… an antique from Mexico… from the early 1900’s… for what woulda been about $15 worth of items… I tried to say ‘no’ but he insisted… what good was it to him, he asked. Maybe the coin is only “worth” 3 bucks… maybe it’s a replica… and maybe I could never find a “buyer” for it… doesn’t matter… It was the gesture involved that won’t ever leave me. That coin, that currency, has immense value to me. If ever it passes from my hand, the agreement involved won’t have much at al to do with the Mexican government, or their current political/economic interactions with the standard currency of this here country where we live and conduct our business…

    “money” is good for some things… but dangerous when we view it AS value. I think you’re dead-on in this discussion… as with most good hacks, it’s a response to a system that’s become so big it’s unwieldy, and the solution remains situation-dependent, creative and effective… defined & designed by the USER and participant for their distinct purposes…

  2. This is a subject of great interest to me, I’ll check out your references. So far, I’ve read Paul’s “case for gold” and The Mystery of Banking by Murray Rothbard both of which were big eye openers for me, but I’m still on the steep end of the learning curve.

  3. Very interesting stuff! I always like to see the hacker spirit applied to new areas (I’m working on a hacker business series on the i3 Detroit blog).

    Certainly money is an agreement, but I think there’s more to it as well. After all, we agree that it has value, but the specific terms of that agreement are ever-changing.

    IMHO, potential is a crucial part of the picture. Specifically the potential to make stuff happen. If I give you a Foo Dollar and we agree that at any time you can give it back and receive a Foo in exchange, that agreement is only good as my potential to actually produce said Foo.

    For a more concrete example, the US Dollar has value because you can exchange it for 1. goods produced in the US, and 2. US treasury bonds (and other securities) that will return it with interest after time. Those agreements are subject to the ability of the US to produce valuable goods and make good on those bonds.

    I think the reason it matters is that agreements are thought of as being deliberate and between distinct parties, while the potential to make stuff happen is actually influenced by many many people who can’t predict the effects of their actions, as well as non-human influences like weather, and natural resources.

    1. Well, yes. What I hear you saying is it’s an agreement that has to have some flexibility to navigate the exigencies of the real world and deal with things like people who don’t live up to their end of specific exchange agreements. I have some plans to write about different ways to manage risk that I have seen.

  4. Money is not an agreement. You said it yourself, legal tender carries the force of law. Money stores and transmits the ever-changing abstraction of value, it’s just a vehicle. It’s been true since Adam Smith spoke of the paradox of diamonds and water, even well before. The ‘agreement’ is a facade on the abstraction of value, once you start to move away from barter, value becomes relative to the items in trade and the persons conducting them.

    Money is little like air. All of us would die quickly without air. There is no manual for air, there are LIBRARIES dedicated to money. Maybe the less ingenious and more urban would die quickly without money (doesn’t everybody grow a potato in a glass by age 7?), but the vast majority of acreage in this country alone yields enough food that we have, at times, had to pay people to stop producing it. Humans have long known that they can have a profound effect on the environment, the Irish learned from the Potato Blight, Malthus told us we’d consume our resources long before the Industrial Revolution, if we didn’t believe him, the Dust Bowl’s role in the Great Depression should’ve told us. Where people actually did starve because you couldn’t put wheat in the ground and get it to grow.

    I don’t disagree with creativity and invention, I support them whole-heartedly. Could money be changed? Sure. Is the system unwieldy? Yes. Is an infinite supply of “value” in a science based around scarcity coherent? Not really. But the fact that you claim to be educating people about money without even a nod to the people who actually did “invent” it (who invented the computer? programming? teh interweb?) and write the manuals makes me question the value of your re-invention. I’d like to think John Stuart Mill would be proud.

    1. Money is a lot of things. Like I also said, it’s useful to think of it as an agreement, especially now at a time when those who manage its central institutions have broken faith. As we educate ourselves about the designs they built we find problems in the details, and inherent inequities.

      In a crisis, do you want to hike out to the country and begin subsistence farming? Good luck with that; sounds to me like a great way to get shot. I also want to protect (and stand up for) the cosmopolitan, big-town values fostered in urban environments. Which I think entails enhancing urban adaptability, not commencing a career in subsistence farming. But that’s another debate.

      I’d love to go get a PhD in economics, but I don’t think there’s time. You don’t have to accept any currency other than dollars if you don’t want to. You can wait as experiments emerge and communities try to find new ways forward as things get worse. I’m more inclined to get involved now.

  5. John, I like this article. There are co-ops that have tried things like this: bartering with some sort of value matrix. The sticky wicket is picking the right co-op and a matrix that meets your needs, otherwise you could be the guy always giving product and not have anything useful to spend your money on. And, yes, you do have to pay taxes on it in real money.

    When I lead people through Lean concepts, I try to get across to them the value of time. Time is the one currency that is equal for everyone. That is, you cannot get more of it than there is and the playing field vis the measurement is level, egalitarian, and simple. The trick is to simplify your process/product to the point that you can utilize time most efficiently. Nobody is bigger than the game, but understanding the game and manipulating the speed of the game is the name of the game.

    Traditional currency is an infinite resource (you can always get more of it) in a finite game (a game with rigid boundaries in which the goal is to end the game with a defined winner), while time is a finite resource (you can’t make more of it) in an infinite game (trying to develop its shape for as long as possible and without hard limits).

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