The man who invented the Euro

I am much obliged to Paul Nollen, with whom I have been having a discussion about the Basic Income concept, for pointing me at Bernard Lietaer. Here is how Professor Lietaer's Wikipedia entry begins:

Bernard Lietaer is an economist and author who was one of the designers of the Euro. He studies monetary systems and promotes the idea that communities can benefit from creating their own local or Complementary currency, which circulate parallel with national currencies.

Here is what Professor Lietaer has to say about himself on the website of one of his organizations:

Bernard Lietaer is the author of the forthcoming "Of Human Wealth" and "The Future of Money" (London: Random House, 2001), has been active in the domain of money systems for a period of 25 years in an unusual variety of functions. While at the Central Bank in Belgium he co-designed and implemented the convergence mechanism (ECU) to the single European currency system. During that period, he also served as President of Belgium's Electronic Payment System. His consultant experience in monetary aspects on four continents ranges from multinational corporations to developing countries. He co-founded one of the largest and most successful currency funds becoming its General Manager and Currency Trader. He was Professor of International Finance at the University of Louvain; and is currently Visiting Professor at Naropa University in Boulder, CO. He is the co-founder of ACCESS Foundation, (, an educational non-profit whose objective is to communicate best practices in the domain of complementary currencies. He is currently a Fellow at the Center for Sustainable Resource Development at UC Berkeley.

So this is the man who co-designed the ECU and the Euro, implemented the ECU, ran the Belgian EPS, and founded and ran one of the largest offshore currency trading funds (Gaia). He is also (according to his CV) a member of the Club of Rome, a Fellow at the World Academy of Arts and Sciences, a Fellow of the World Business Academy, and a Founding Member of the Global Futures Forum. He must be a pretty serious financial expert. Let's have a look at his intellectual efforts.

Complementary currency (Terra TRC, ACCESS Foundation and

The Terra TRC site appears to have received little attention since 2004, and contains little content. The same goes for the ACCESS Foundation. carries more detail.

The theme uniting these sites - complementary currency - is uncontroversial at its simplest level. Complementary currencies operate in parallel with national currencies and can be used instead of the latter where all participants in a transaction are willing to accept them as a valid alternative. Lietaer quotes Alan Greenspan predicting the resurgence of private currencies, and he might also have pointed out that Friedrich Hayek proposed a return to private currencies, though in this case, it was instead of, rather than in parallel with, national currencies. Anything which people are prepared to accept as a token of value for the purposes of exchange can be considered a complementary currency in some sense - greenshield stamps in the past, or Air Miles and other reward schemes (e.g. Nectar) nowadays would be examples.

More controversial are the sorts of complementary currencies about which Prof. Lietaer enthuses, and his claims for their economic capabilities. They include:

Ithaca HOURS and Time Dollars

These are currencies, denominated in hours of work, which are created on demand. So if you perform a service for me, we can agree that I will pay you in terms of a commitment to supply a certain number of hours of work in return. Ithaca HOURS are more flexible and convertible, being linked (backed?) to a dollar-value for a nominal hour of average work, so that non-skilled work can be valued at a lower number of HOURS per hour than expert work, whereas Time Dollars are simply an agreement to exchange like for like.

For all its pretensions at sophistication, this effort at denominating value in terms of units of labour is merely repeating the mistake at the start of Marx's Capital, from which the rest of his nonsense flowed - the labour theory of value. These currencies may not be saying that the value of a product is proportional to the labour that went in to it, but they do repeat the mistaken assumption that the value of a unit of labour can in some way be derived from the amount of time that is spent on the task. Like Marx, they try to work round different capabilities with notions of "average work" against which non-average work (the vast majority, presumably) will be measured and valued as a multiple or fraction of an hour of average work. But also like Marx, it ignores the impossibility of quantifying this accurately, mutually and in advance.

I think my hours are worth more than yours. You may not agree. If we negotiate a compromise, I can compensate for your undervaluation of my time by working less hard. You will be tempted to do the same. How will we hold each other to account? And even if we both work hard for the agreed period, if one of us underestimated the difficulty of the task, or is operating at less than our peak abilities on the day (tired, pre-menstrual, emotional, hungover, etc), resulting in the task being incomplete or to an unsatisfactory standard at the end of the period, what is the person who agreed to the exchange to do? An incomplete task may be worthless, and he might not have agreed to the original transaction had he realised that the cost would actually be higher than was thought at the time. But he can't take it back now - he'll have to contract for more time or leave the job undone.

Lietaer is even aware of this Marxian flaw, but thinks he has overcome it. "By leaving it to the negotiating parties to fix the number of 'standard' HOURs of common service a particular service requires, one solves the problem of having to pre-determine the value of everyone's time, as was attempted unsuccessfully under the Soviet planning system." That's right, Bernard, that's all you need to do to overcome the disadvantages of the Soviet planning system. If only the Russians had been as smart as you, to spot this simple solution.

Then there is the question of fungibility. Just because I want something from you, doesn't mean that you have a need for my services in return. Our services need to be tradable, so that, if I pay you with my time, you can then exchange my offer of my time with someone who has something you do want. But it's pretty hard for you to know whether the people you want things from will have a use for my time, and if so, when that would be and how much they would value it at. There's no guarantee or even likelihood that this will all balance out in the end - it's quite likely that some people will be left holding hours that no one wants.

And having mentioned the question of when someone might want to take up my hours, let's examine the claim that "Given that there is no interest on HOURS, the built-in incentive to discount the future found in national currencies is reduced but not reversed." You could be sitting on my hours for quite a while until you or someone else has need of them. I might be dead, or otherwise incapable of providing the service by then. Someone else may have come along who could do the job twice as well for half the hours. Risk, opportunity cost, time preference - none of this has gone away simply because you have invented a system that is so inflexible that it can't practically pay interest. If anything, the natural rate of interest for this mechanism is likely to be higher than that for a more flexible currency. This isn't an advantage, it's an explanation of why this currency is bad value.

This sort of situation is exactly the reason that money - normal money, real money - evolved from commodity exchanges. If people want to barter each other's time, that is their business. But to claim some inherent advantage in this half-baked scheme is to view history and progress backwards.


Supposedly a more robust currency, but still denominated in HOURS, with all the accompanying disadvantages. It shares the supposedly beneficial feature that as much of the currency is issued as is needed. The claim is that this avoids the problems of fiat or commodity currencies where insufficient money (due to the issuing authority's lack of information about required levels) can lead to an unnecessary suppression of economic activity. This is a splendidly naive view of money from a supposed expert. It assumes that money has an intrinsic value, as opposed to a value relative to what it can purchase. It may be true that many people think this way, and that such a misconception provides structural barriers to revaluations. Unless one has reached a point where the units of currency cannot be sufficiently subdivided (which is unlikely now that money is not valued by taille), there is no such thing as a shortage of money, just an unrealistic valuation of money. There will be winners and losers from any revaluation, but that is as important a part of the market process as any other adjustment in valuations.

An added insult in this system is the introduction of demurrage - a time-related charge to punish people for holding the currency. It is effectively a negative interest rate. So not only do I have to agree, if we have to trade in this currency, that I will accept units of your time that I may not want immediately if ever, but I will also have to accept that my entitlement to your time will be diminishing the longer I have to wait to find a use for it. My reply to anyone who invited me to trade in such a currency would be short and not very sweet. This may account for the comment that "At this point, we're not aware of any complete operating ROCS systems." Well knock me down with a feather.


Currencies like WIR and LETS are denominated in a national currency rather than in time, but provide closed and less flexible trading opportunities. If people want to trade for monopoly money or chunks of cheese, that is up to them, but it is an illusion to imagine that this somehow offers an advantage over using the currency against which this currency is denominated. The interesting thing about the WIR story, which has been running for longer than most, is how the participants were forced, one step at a time, to accept all the realities of a normal currency. In which case, why bother with the complementary one?

Other currencies are indicated in Lietaer's presentation on the subject (e.g. Fureai Ticket, Eco Money, Mall Point, Due Bill), but I haven't tried to find out exactly how they work. It is clear enough that these complementary currencies serve only a psychological function for those who think there is an advantage in doing things differently, and not any practical benefit.


I could not find any mention of Lietaer (a "Founding Member") on the GFF website.

Fellow at the CSRD at Berkeley

But you are asked not to contact him there in any way - his email address and other contact details are away from Berkeley (

Visiting Professor at Naropa University (NU)

NU "is a private, liberal arts university in Boulder, Colorado, which was founded in 1974 by Chögyam Trungpa. It is one of the few major accredited Buddhist-inspired universities in North America." NU practices "contemplative education", which is "a philosophy of higher education that infuses learning with the experience of awareness, insight and compassion for oneself and others through the practice of meditation and contemplative disciplines."

Chögyam Trungpa, Rinpoche, its founder, "was born in Tibet in 1940, a lineage holder of both the Kagyu and Nyingma Buddhist traditions." NU's "lineage holder is the Sakyong, Jamgön Mipham Rinpoche, the eldest son of Chögyam Trungpa, Rinpoche, the university's founder. Sakyong literally means 'earth-protector'... The Sakyong is married to Princess Tseyang Palmo, daughter of His Eminence Namkha Drimed Rabjam Rinpoche, head of the Ripa lineage. He has written two books, the national bestseller Turning the Mind into An Ally and Ruling Your World... In addition, the Sakyong is a poet and an artist... and is head of Shambhala International."

One of its first schools was "The Jack Kerouac School of Disembodied Poetics". The next year it added the following degree programs: "BA degrees in Buddhist Studies and Visual Art, the MA in Psychology, an MFA in Visual art and Expressive Arts Certificates in Dance, Theater and Poetics."

The psychology program is in the field of "Contemplative Psychology" and "supports students in self-discovery, inner wisdom, and the development of interpersonal skills. The program is founded on the mindfulness/awareness teachings of Buddhist and Shambhala lineages, world wisdom traditions, and western psychology. Students choose a concentration in Psychological Science; Psychology of Health and healing; Somatic Psychology; or Transpersonal and Humanistic Psychology."

Undergraduate majors now include:

Early Childhood Education - "This department focuses on a non-sectarian, yet distinctly Shambhala Buddhist, approach to teacher education."

Environmental Studies - "This program welcomes students who feel drawn to study, celebrate, and serve the earth. The program integrates the disciplines of natural science, ecology, horticulture, systems theory, ecopsychology, service learning, sustainable living, and wilderness rites of passage."

Music - "At Naropa University, the practice of music encompasses the whole musician while focusing on the expressive world of the heart."

It offers the following graduate programs: Contemplative Education, Contemplative Psychotherapy, Environmental Leadership, Indo-Tibetan Buddhism, Interdisciplinary Studies, Master of Divinity, Religious Studies, Transpersonal Counseling Psychology, and Somatic Counseling Psychology.

The personality types that they expect to attract to their "intellectually diverse student population" include The Artist, The Spiritual Seeker, The Activist, The Caregiver, The Bookworm, The Poet, and The Environmentalist. The character descriptions and the programs to which each is suited are enlightening.


This, then, is the intellectual foundation and strength of the Euro. Collectivist, tree-hugging, cod-psychological, antiquated yet new-age spiritualist balderdash. How could it possibly fail?