Alternative currencies to replace Bankers and their usury money

As I've watched this Occupy movement unfold, I've been scrambling to try to figure out where it was coming from. Never in history has there been a movement with no leader and no particular agenda. This was just beyond comprehension until I found out it was started as an Anon Op. Now I've been trying to learn everything about Anonymous I can. As long as the bankers can channel the people's energy with bank money, the outcome of all that energy output is a foregone conclusion. Bank money allows for us to farm the land, educate our kids, build empires, fight wars, etc, etc, but with every action we accomplish using bank money the bank is guaranteed to get its cut of the wealth we produce per virtue of the interest charged on the use of their money. "Their money"- its our credit they use to make "their money". We can render the banks irrelevant by simply accounting our own credit and using that as our own money. It is my hope that Anonymous can spread and protect the knowledge of how to do this so that it becomes common knowledge. -So common that the people of #Occupy soon simply step out of the banker's world and into into one of their own creation. And then the rest of society will have a choice- manage their transactions using a money that liberates them or to manage their accounts with dollars that keep them tied in knots and at each other's throats.

I just posted the following over on WITP. It's a continuation of some ideas I've been trying to present and flesh out over there. I've been lurking over here to try to get a sense of things and what Anonymous is and what it is not and what you here would like it to be. I really like you guys and the ideas you kick around. Thanks so much for the invitation and for creating this oasis from the noise of WITP! If you've never heard of the LETS alternative currency, I hope you can kinda sorta get the idea out of this post:






p { margin-bottom: 0.08in; }

To review:

When products are brought to market to
be sold, a corresponding amount of money must also be available in
the market to facilitate the movement of those products from seller
to buyer. Michael Linton's LETSystem allows a buyer to use credit to
create money to match the value of the product whose ownership is to
be transferred. Money is created out of credit at the point of sale,
making money in the LETSystem an ideal medium of exchange- available
when exchange is desirable. The idea is that the quantity of money
equals the quantity of trade at any given time. This kind of money is
intended to naturally maintain a constant market exchange rate for
itself. It is not issued for any purpose other than to exchange the
ownership of wealth in the market. When less commerce is happening,
there is less money needed and less money created. There is also no
destruction of money according to any debt-repayment timetable. If I
have a negative balance in my account, it can stay negative
indefinitely. Now, I can only spend it down as low as my line of
credit allows me to. But a static negative balance can sit there
without hurting the system or anyone in it. No interest accumulates-
I am not in debt to the system administrators (let's call them the
Credit Clearing House). They have given me no loan. Positive balances
(within limits- we'll get into that) also do not hurt the system, and
they can sit in an account without harm to anyone just like the
negative balances that created them. Remember, a positive balance is
not “money supply” and does not cause inflation- this kind of
money is only a medium of exchange when it is offered in exchange for
value in the market. Only the amount of money being offered for
exchange in the market at any given moment has to balance the amount
of wealth being offered for exchange in the market in order for the
money to maintain a stable market price relative to the values of
everything else exchanged in the market. I suspect that last sentence
was awkward and confusing...

Trying again-
The medium of exchange is supposed to
represent a standard unit of value compared to everything else being
bought and sold in the market. Michael Linton likes to talk about the
unit of value like any other unit of measure, like inches. If anyone
can use inches at anytime, we can build objects measured in inches
that all fit together. Multiple people all using the same standard of
measure allows for girders to be built in different shops and still
get assembled by yet a different crew on a job site. But unlike
inches, money units get transferred when wealth gets transferred at
the point of sale. Michael Linton's LETS allows those units to be
created at the point of sale- just enough to both make the transfer
happen AND to describe how big the transfer is. But only people who
contribute enough wealth to the market to keep from maxing out their
line of credit are allowed to describe and make transfers of wealth
from the market to themselves. This prevents people from taking
wealth out of the market without eventually replacing it. When they
replace the wealth they have taken, they then match the money they
originally put in the market with the new wealth. The money returns
to its point of origin. Wealth to be exchanged and money to exchange
it with are always in approximate balance in the market no matter the
volume of trade in the LETSystem. There is always enough money to do
the job of exchange among the honest contributors but there is not
enough money for the dishonest to replace wealth with just so much
empty money. There is never inflation.

The Credit Clearing House does not give
loans and does not charge interest. Their job is only to do the
accounting of the credit/debit balances of the users of the system.
The Clearing House earns it's own credit in the system by managing
the credit of the members and charging a fee for that service.
Different Clearing Houses can experiment with whatever fee schedule
they find most effective at producing a healthy and useful system.
The fee is charged by the same simple process of debiting the
transactors' accounts and crediting the account of the Clearing
House. The Clearing House is selling a service just like anyone else
in the system. Some Clearing Houses may charge a fee per transaction
recorded, some may charge a monthly fee for the use of the service (a
subscription fee) and some will become a bit more sophisticated and
useful by offering "lending exchange" services for a fee. A lending
exchange is useful for getting the savings of the community's most
successful sellers of wealth back into circulation. Remember, credit
is earned by selling value to members of the community. As a member's
positive balance increases, so does his line of credit. Since the
successful member's positive balance is made from the negative
balances of other members, he needs to get that balance circulating
again to keep from shutting the system down. A positive balance, as
mentioned earlier, is not detrimental of itself but excessive savings
are. A healthy system will provide an exchange for savings to be
loaned to members to acquire capital to increase their production and
thus increase their capacity to provide for the welfare of the
community. Such a system provides an exchange where loan seekers
(entrepreneurs, etc.) can post requests and offer terms for loans and
loan makers can connect with them.

And this pertains to your question
about wealth accumulation among the prosperous members of the
community, RavenPaige. The prosperous are lending their money as
investments in their fellow community members' future productivity.
Should that lending lead to a return on their investments? This, of
course, smacks of using money to make money. Lending is absolutely
indispensable for the health of a LETSystem- we can't just not allow
lending and expect the system to be more than just a hobby or club
for it's participants. We want the system to be as good at providing
for our shelter, food, and luxuries as bank money has been. It has to
allow success to build on success, allow money to work as capital for
the community to use to create and to innovate. But we don't want the
old saying “The first million is always the hardest” to be just
as true in the LETSystem as in the usury system. We don't want money
to “snowball” in the hands of the rich, accumulating more to
itself by virtue of its sheer mass in their accounts. Yes, the
motivated and prosperous will have more access to and use of the
resources of the world than will other people per virtue of their
accounted for contributions to the community. But they will still
have to produce real wealth in order gain more prosperity- I don't
think gain through simply lending ought to by accounted for by a
successful system.

But I know there are people who would
disagree with me on this point. Their point, I believe, would be that
the people who have already demonstrated their ability to provide and
sell wealth to the community should best be entrusted with the choice
of who to lend to- to best allocate investment resources for future
production. Perhaps this is true, but they already get to make that
choice anyway, because they have the money to lend. Should these
people get a return on their investment that then multiplies that fact?

Here are some other points to consider
for a system to decide how it wants to deal with the accumulation of
wealth:

• A lender's spending power is not
  diminished by the full amount of money she has loaned out. Her large
  credit line that reflects her large income is still fully available
  to her to facilitate her wealth acquisitions from the market.
  
• And yet, money loaned out may very
  well be spent by an entrepreneur who fails to ever produce anything
  of value. In that case, the investor's money would never be able to
  be re-paid to that investor. Lost money does not affect the credit
  limit, however. That is still based strictly on the member's ability
  to sell wealth to the community. So there is no risk to the lender's
  creditworthiness. So, although only the money invested is at risk
  there is still a risk factor associated with investment for the
  lender.
  
• The lender/borrower relationship
  is very different in this situation than the one we have currently
  when a bank grants a small business loan. The bank's interest is a
  drag on the venture and more likely to make the venture fail. The
  bank doesn't need for the venture to succeed, it just needs for it's
  loan to succeed. In LETS lending, the lender/borrower have the same
  goal- the success of the venture. The lender is no kind of parasite
  on the borrower, but more like a co-owner who can fail in a limited
  way along with the other owner of the business.
  

Therefore, I think the best solution
for lender/borrower is simple transfer of equity in the amount of the
loan. When the loan is repaid, equity is bought back. This
essentially is how Islamic lending works (or is supposed to work). In
Islamic lending, the lender (called the “seller”) starts with
full ownership and the borrower (called the “buyer”) buys equity
from the lender over time. But also typical of the Islamic loan is
the rent payment of the borrower/buyer to the lender/seller. It's
basically a rent-to-own system. I'm not thrilled with the rent part
of the arrangement- it amounts to nearly the same thing as interest.
(The difference is that rent is a nice flat linear function of time
and interest is exponential, and that is a big difference, but still-
rent is a means of making money off of owning rather than producing
and I'm not a fan of that.) In the case of investment in an
enterprise, I would much rather see a claim to income from the
investment in proportion to the equity in the enterprise shared by
the two parties. In this way, it could be standard practice for the
prosperous of the community to lend to and mentor those with good
ideas and no capital. Both parties can benefit from the arrangement,
but the lender eventually loses her claim to the profits of the
business as her equity stake is bought out according to the terms of
the loan. Obviously, people are free to agree to whatever they want
to agree to among themselves. If the lender and borrower still want
to continue their venture together after the terms of the loan have
been satisfied there's nothing stopping them from writing up a
permanent profit-sharing arrangement between themselves that is
accounted for by the Clearing House.

In the case of consumer lending, that
is to say lending to someone so they can buy a house or car or other
big ticket item on installment payments, an arrangement to share
profits from the loan is obviously out of the question. This loan is
not an investment. A house provides much needed shelter, but it does
not provide income to the person residing in it. Islamic lending
allows for installment buying by allowing the wealthy lender to first
buy the house or car in cash outright and then sell it to the actual
buyer on a rent-to-own basis. In LETS, I just don't see that as
necessary. The credit of all members is accounted for centrally by
the Clearing House. If the seller of a home were to have x amount of
money/credit transferred per month from the buyer's account, that
constant income would serve to enable a similar monthly transfer for
the seller to apply to a home they want to buy and occupy. The buyer
would not instantly own the home at the time of sale as is the case
today, but would be considered a tenant/owner. As a tenant/owner, the
buyer would have the use of the property. Equity in the property
would be transferred with each payment. 100% payment would = 100%
ownership.

One snaggy little detail in the case of
home ownership: what misfortune may befall a property in the hands of
a tenant/owner. I used to be a landlord during the crazy housing
bubble days. My tenants destroyed my property. Before I rented the
place out it had value. After I rented it out it had much less value.
A seller in today's world will tolerate a bank's usury to be free of
risk of what the next owner might do to the property. I'm proposing
that a seller keep proportional equity in the property sold and keep
the associated proportional risk to the property's value. And I
propose that fact serve as a natural incentive for sellers to be
careful about to whom they sell. I imagine creative people operating
within such a system will inevitably come up with screening services
and insurance/risk management schemes to deal with this reality.
Remember, sellers in such a system would not be under duress from a
bank like they are now, and not so desperate to sell. Buyers would
have an incentive to not be trifling nasty filth-people and after my
experience with my former tenants I'm not so sure that bothers me.

I seem to have slid into a mire of
detail about lending and borrowing and what that would imply in an
enhanced LETSystem. I don't know of any systems out there that
currently do this. A lot of these thoughts I got from Tom Greco in
the last chapters of his “The End of Money and the Future of
Civilization”. That last paragraph about turning to insurance and
risk management businesses instead of to rent payments to deal with
the shared equity arrangement is my own thinking on the topic.
Important here is that it is indeed possible to work out the buying
and selling of homes without a bank creating money to facilitate an
outright sale with full ownership granted to the buyer on the spot.
(If you have ever had a home foreclosed, you may have noticed the
strange fact that the bank has to buy the home at foreclosure and
they have to pay for it on the courthouse steps with their own money.
HA! You thought they paid for it when the seller got his money.
Wrong- that money was created by your debt contract to the bank! That
debt contract has to be written off at foreclosure and that is why
the bank then has to then cough up their own money to pay for the
unpaid portion of the house. That confused the hell out of me the
first time I saw it! In LETS lending, let there be no such
bamboozlement.)

Let's see where was I going with all
this? Everywhere, so it seems. Oh, yeah- wealth accumulation and
whether or not that implies the creation of an elite owner class in
the LETSystem. To conclude- some folks will be more talented and
clever and lucky and all that than other people. A just money system
can allow for more wealth to be created by such people. It does not
stand in their way. If they create more for the community, they have
more claim to the wealth produced by the community. But we can
intelligently allow for prosperity without creating an owner class
that produces nothing yet still has claim on the wealth produced by
others. To keep the wealthy from saving money and thus producing
deflation, we keep it circulating via a healthy investment pool
service offered by the Clearing House. (There's also nothing to
prevent competing private investment pools from popping up and
getting paid for their service.)

Since there is a limit on credit that
expands with sales, there ought to be a limit on savings that expands
with purchases. If people are saving and not buying, their positive
account limit ought to go down. If they are buying and putting the
money into circulation, the limit on savings ought to rise.

Ok, quit screaming- I know you are used
to thinking of money earned as a permanent thing, and if you save it
it ought to be there forever until you want to spend it, right? But
savings kills money's ability to serve as a medium of exchange. At
least, savings of money kills the system. If you want to save
value you can lend the money to someone else. If you don't want to do
that, you can buy things that serve as a store of value, like gold
bars. But there has to be a limit on money savings if there is
a limit on credit (money creation). This money is not a commodity.
It is not traded, sold, or speculated against like a commodity. It is
a unit of value and in order to remain a stable unit of account it
must NOT behave like a commodity in those ways. The only limit to
supply of this money is the creditworthiness of the individual
community member. Supply cannot be manipulated by hoarding as can the
supply of a commodity. This money cannot serve as a store of value.
(This is from Tom Greco again, and he's spot on with this point!)
Money can reflect your creditworthiness- it can measure it in units
of account. But this money is designed specifically to not serve as a
store of wealth. (Ok, obviously it does serve this purpose within the
credit and savings limits of the accounts- the range between those
limits serves to facilitate trade- but not beyond those limits.)
Actually, this ought to not be very off-putting. Our current money is
a lousy store of value anyway, and rich people know that. It is
subject to inflation and speculation attacks on world markets.
Instead of having large stores of money like the Disney duck
character Uncle Scrooge, rich people use money to transfer assets to
themselves. Rich people today don't have stores of lots of money,
they have lots of wealth and use money to move it around.

Now let's say we've got a character
that keeps accumulating the credit of other people as money in his
account. He doesn't buy stuff with it and doesn't lend it out after
it goes over his savings limit. Ok, yes, he's a dork. What can the
system do to protect itself from this dork? Dare I bring up the “T”
word as a solution to anything? Ok, here it is. Taxes. That money
gets taxed into the account of the Clearing House to be spent on
building and maintaining public infrastructure. This is the last
revenue stream I can think the Clearing House might have, and it is
one that allows for endless spending! My next post will be on the
topic of the role of government in building public infrastructure and
otherwise serving the public good.

This is really good stuff! My only question is about the taxes part: if the only way to collect taxes is to tax the dork, and if no one is a dork, then how are community projects/public infrastructure funded? Or were you just saying that some of the taxes might come from the dork (basically just serving as a deterrent to those who might save too much)?

<blockquote style="margin-left: 1.18in; margin-right: 1.18in; text-align: left;">"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else." --
</blockquote>
<blockquote style="margin-left: 1.18in; margin-right: 1.18in; text-align: left;">--Frederick Bastiat



</blockquote>
So who was Frederick Bastiat? Who
cares? I'm not even going to look him up in Wikipedia before I use
his quote. This quote goes flying around the internet not because
Bastiat said it but because it resonates with what we all have
experienced to be true for all of our conscious lives. At end of my
last post I suggested taxation might be a means of keeping an ideal
credit-based money circulating and simultaneously provide a means of
funding the public infrastructure. But in all our experience,
taxation has been achieved through force. There can be no doubt that
taxes are universally collected via violence or threats of violence
by a government against its people. If people didn't fear their
government, who would pay taxes only to watch them be wasted? Now,
people do voluntarily give to organizations they have faith in-
Wikileaks is a great example. What a predicament, to be forced to
fund that with taxes that which you fund Julian Assange to expose as
wasteful and corrupt!




In every beginning economics course
students learn that in this world there are voluntary transactions
and there are involuntary transactions. Voluntary transactions happen
by agreement in the marketplace. Involuntary transactions happen when
there is no agreement between the two parties. The list of
involuntary transactions in the textbooks invariably includes theft,
extortion, robbery, deceptive contracts, and taxes. All practices on
the list are (at least at face value) forbidden by law except the
last one, which exists only as a function of the law. Which makes me
wonder about the legitimacy of the rule of law... At any rate, safe
to say it is almost unthinkable in our world today that taxes could
be anything other than a government-imposed involuntary transaction.





I'd like to turn things utterly upside
down here and draw your attention to an idea that Benjamin Franklin
wrote about in the 1760's- around two-hundred forty years ago.




http://franklinpapers.org/franklin/framedVolumes.jsp
(enter “Scheme for Supplying the Colonies with a Paper Currency”
into the search field at the bottom of the page to get the article)




In this paper, Franklin describes the
money system that Pennsylvania had in fact been using since 1739. The
paper money of Pennsylvania was issued in the form of loans made by
the colonial government to the people. And so this money had a clear
element of being put into circulation by credit monetization. These
loans were made to Pennsylvanians who:

1. Had land to offer as collateral
   worth at least double the value of the loan.
   
2. Used the loan money to improve the
   productivity of their farms and enterprises.
   
3. Promised to repay the loan in
   annual installments over a 16 year period with 5% interest.
   

Now, that second point was not
necessarily a condition of the loan, but an obvious consideration the
borrower had to keep in mind. Obviously, if the loan were to be used
to increase the borrower's capacity to produce and sell his grain, he
would have a much easier time paying it off than if he were to just
blow it all on booze over the next 16 years! A borrower's risk of
losing his collateral served to encourage his spending the money in
wise and productive ways, and indeed the productivity of Pennsylvania
grew in tandem with the issuance of the loan-money. This money was
NOT issued as a “helicopter drop”! The money therefore allowed
people to prosper and suffered and no inflation.





But what about the interest on the
loans? Did that not constitute an impossible contract between the
government loan office and the people of Pennsylvania? Well, it
kinda-sorta did at face value. You know the drill- the lender puts
the principal into the borrower's hands to put into circulation but
the borrower has to return principal plus interest. An individual
borrower can capture the principal plus interest from another
individual borrower but the collective borrower class can never pay
its collective principal and interest and thus winds up on an
accelerating treadmill of trying to borrow faster than the growing
interest payments. But in practice the mathematically certain
doomsday turned out not to be a reality after all. Franklin explains:




A great annual Sum continually increasing will
arise to the Crown for Interest,
to be apply’d to American Purpose.

It will operate as a general Tax on the Colonies,
and yet not an unpleasing one; as he who actually pays the
Interest has an Equivalent or more in [the use of the principal. But
the tax, if it can be so called, will, in effect, spread itself more
equally on all property, perhaps more so than any other tax that can
be invented; since every one who has the money in his hands, does
from the time he receives it, to the time he pays it away, virtually
pay the interest of it, the first borrower having received the value
of it (to use for his own profit) when he parted first with the
original sum. Thus the rich who handle most money, would in reality
pay most of the tax.




So the government takes on the role of
bank. The producers of the colony borrow money into existence to
facilitate their production. The producers of wealth provide the most
good to the colony and in turn benefit the most from their service to
the colony. They have increased the standard of living of the colony
and now are the wealthiest members of it. These producers pay 5%
interest on the money they use to facilitate their production. The
paid interest funds public works and eliminates the government's
need to impose any kind of involuntary transaction on the people to
fund itself! The go-getters pay
all the tax which they of
course receive from their
sales of wealth into the colony. The tax goes to the government who
then spends it back into circulation so the public again has that
money in its hands to return to the producers so they can keep
paying off both principal and
interest. The same money is allowed to cycle back and forth through
the government and the public as many times as it needs to to tick
off the interest payment, shilling by schilling. As
long as the government keeps spending it, it's available to be used
again for another interest payment.





Remember,
the rules behind the issue of a currency determine the social outcome
it produces. In this system
there was no coercion! If a colonist did not want to pay tax, he
could be perfectly happy enjoying his wage for his own use. But if he
wanted to get ahead, he gladly signed up for the opportunity to pay
the “tax”!




That kind of
government would render Frederick Bastiat's statement utterly false.
That was the dream of the American colonists- to free themselves from
economic oppression of the Proprietaries (who were complete assholes
in the case of Pennsylvania and viewed their colonies as their
personal cash cows) and the old goldsmiths' guild's “Bank of
England”.



CORRECTION CORRECTION CORRECTION!
The following paragraph is bogus. I screwed the pooch on that one. I was just re-reading Franklin's "Scheme for Supplying the Colonies with a Paper Currency" and this jumped out at me. Don't know how I missed it but there it is: "[These bills having thus full credit,
the government can issue, on occasion, any quantity for service, in
case of an American war, without needing to send real cash
thither, by hurtful contracts." So there it is. Franklin did advocate special case "Greenbackism" as "The Money Masters" claims.

One
side note: If you've seen Bill Stills film “The Money Masters”
http://video.google.com/videoplay?docid=-515319560256183936
you may remember Bill Still claiming that Pennsylvania simply printed
and spent into circulation money in addition to the loan money
Franklin describes. I have so far found no evidence for this in <--- Whoops! My bad!
anything I have read. I like the film, but some of the quotes
supposed to be from various founding fathers in the film have been
shown to be spurious or mis-attributed. And I believe his point about
Pennsylvania having printed
money with no credit basis to be inaccurate. While Still is correct
that a government can indeed survive without coercion imposed upon
its people, I wish he had been a little more careful with
the details. It's important
to get the details right if you want to design a functioning system. <----Even for me!!





One
other side note: In“The
Creature from Jekyll Island” by G. Edward Griffin, he claims that
interest is payable by the borrowing public for the same reason I
just described for Franklin's Pennsylvania. He says on page 131 (or
thereabouts) that since interest is counted as the bank's profit (and
the bank can of course spend
it's profit just like anyone would spend their income)
then that interest is spent back into the economy and
is therefore usable for multiple principal/interest
payments. The problem with
that idea is the only
way for anyone but a bank
employee (who gets paid of
out of bank profits, of course) to
get that interest-profit
money out of a bank is to get
it as a new
loan. This is the race to
accelerate borrowing faster than the rate of interest with which we
are so familiar. Banks spend nothing on infrastructure.
Sure, they may build the occasional skyscraper and give themselves
big bonuses to buy all the cocaine, hookers and single-malt scotch
they could ever want and that little bit of money does get one more
chance to circulate back to them. What do they do with the rest? They
invest it, of course. In the case of banks, the word “invest”
means to buy ownership and control of industry through the stock
market. It means to pump and dump their holdings and to lure all the
sucker clients of AmeriTrade
into an extremely probable
fleecing. It means to “naked short” otherwise productive activity
into oblivion. To
a bank, investment
means to create scarcity to increase the desperation for and
therefore the market price of its own holdings. It means to bind
production to an ever faster treadmill. And of course, they can
always spend their interest-profit on lobbying Congress to make sure
the involuntary transactions of their deceptive contracts with the
public are forever the law of the land.

ravenpaige wrote:This is really good stuff! My only question is about the taxes part: if the only way to collect taxes is to tax the dork, and if no one is a dork, then how are community projects/public infrastructure funded? Or were you just saying that some of the taxes might come from the dork (basically just serving as a deterrent to those who might save too much)?

I did the post about Benjamin Franklin's Pennsylvania to demonstrate that a government (the means of addressing the public good) can indeed be funded by non-coercive and mutually beneficial means. In that system, the taxpayer benefited at least as much from making himself able to pay the tax as the public benefited from the tax's payment. I believe successful Credit Clearing (LETS) systems can evolve to serve the public good beyond simply their accounting of the public's credit. This, as far as I know, is an untested idea but it's one I've been noodling around with. Let's suppose our aforementioned "dork" is gumming up the cashflow through just being too busy with real life to pay attention to how much money is in his account (we've all experienced this, no?). In his case (unlike most of us) his inattention has not caused him to be overdrawn but to have over-saved. The system's first priority is to keep its unit of account stable and to do this it must keep it available whenever it should be. Silvio Gesell https://www.youtube.com/watch?v=hxdPIOUTd2k invented the idea of 'demurrage" or money that depreciates in value over time to discourage savings and keep money available and circulating. I like the idea, John Turmel of Brantford, Canada hates it. https://www.youtube.com/user/kingofthepaupers#p/search/0/FoO7ZKx4cfA. I love John Turmel but we don't see eye to eye in every detail, I promise. My wife warns me not to "Turmel" at people, and I always try to keep that in mind. That YouTube clip serves to demonstrate that we need desperately for many systems to compete with each other so that the best ideas can be demonstrate themselves in the competition. Anyway, my own corn-ball approach to applying demurrage is to not apply it within the credit and savings account limits. Rather, I believe it would be most appropriately applied to money which goes over the savings limit and stays there for some specific amount of time. For example, if the "dork" is over limit for a month, 10% of the overage might be debited from the account and transferred to the public fund. My first idea was to simply transfer everything over the limit at the end of the month to the public fund, but I like the gentler approach of transferring a percentage over time. The overage is not therefore instantly zero, but rather approaches zero asymptotically over time.

But I despise everything coercive and authoritarian and I felt uncomfortable about the whole idea for a while. I was not comfortable with the idea that some committee within the Clearing House would be able to decide where to apply those funds- we know only too well where that power to allocate other people's resources goes. Then it occurred to me that there is no reason the person paying the demurrage tax would not be able to choose to what public project his money might be applied! Let's say the Clearing House creates a list of projects to be funded- roads, utility lines, schools, etc. When the "dork" first sets up his account with the system, he's asked to review the list of projects/programs and to proportionally allocate to the public works he believes in any future demurrage tax that may be taken from his savings overage. I can envision people actually choosing to not buy gold bars or other such stores of value in favor of simply paying the tax to support the causes they believe in.

But who makes up the list? We all know how lousy it is to have two choices both acceptable to an oppressive elite from which to choose...
I believe social networking sites have the answer to that. The Clearing House can host a forum or bulletin board where proposals for projects can be posted, bumped, discussed. The list would be a fluid one, changing with the contents of the bulletin board. Sure zillions of really dumb ideas would get posted, but who would fund them? Like on Reddit, the most popular (the most democratically appealing) ideas would bubble up to the top to get the most attention. Proposals that are clear in their means of achieving the public good they seek to address will be the ones trusted to receive funding by people who both trust them and believe in them.

I'm not talking about bureaucracies of Clearing House public employees being created to serve the needs the public votes on. What I'm talking about is the sorts of people who organize NGO's and non-profits today would actively look through the board, see what good they can do in the world and appeal to the demurrage paying public for their funding. If the public trusts them, they will get it. If they betray the trust, the money will be free as an eagle to fly elsewhere. Yeah, even the military could be a non-profit. The people could then choose to fund it as much or as little as the public's need for it is perceived to exist.

This system, I believe, lives up to the ideal proposed by Riegel of "Manarchy". Not democracy- not a clunky voting scheme where ballots are put together by the elite for the public to vote on. Not a corruptible republic where representatives distant from the people get incorporated into (or used as tools of) the tribe of the elite. But "Manarchy"- the rule of individual men deciding on the course of their society through their aggregate movements of money. It's a hive with no queen. It's a human organism of which individuals are its cells and every individual's values are considered as part of the aggregate functioning of the society. Individuals retain their individuality and that individuality counts in the society. And yet they enjoy a society not so much at war with itself all the time, where goals that might seem to oppose each other in our current system can find ways realize themselves and the society is free to evaluate and learn from their results when they do. Cool, huh?

If commerce were unburdened by ruinous interest, what good could be done by people for their fellows in the market? If good and benefit and the creation of plenty can be accounted for by an honest money (our dollars mostly account for and reward the creation of scarcity!), what beneficial activities might be engaged in that are "unprofitable" under usury money? I'll leave the answer to that to your own imagination. The thought experiment is worth working through for every monetary reformer. How little would be the need for funding of the remainder left undone by the market and the creativity of people in it under an honest money system?

Check out this brilliant little passage from E. C. Riegel's "Private Enterprise Money": http://www.newapproachtofreedom.info/pem/chapter11.html


Economic democracy is 100% democracy; political democracy is merely the rule of
the majority, leaving the minority forever tyrannized. However tragic it may be
to thwart the minority— which always contains the seeds of progress,
while the majority often represents decadence—political democracy can
nevertheless operate in no other way.


Economic democracy, as asserted through the money power in all of us, involves
no tyrannies or repressions. Each vote counts, and each voter wins the
election. Elections are held in every market place, and in every town and city
and farm, every hour of every day. When you exert your money power you cast the
total vote in that exclusive sovereignty which is YOU. John Jones, next door,
votes for the goods with the yellow label; you vote for the goods with the blue
label. Neither has to yield to the other —both win. The manufacturer of
the goods with the blue label may have the majority of the customers—but
that doesn't interfere with the yellow label manufacturer serving the minority,
no matter how tiny their number may be.


Because political democracy is unfair to minorities and economic democracy is
fair to all, the sphere of the former must be minimized and the sphere of the
latter maximized. This will be the logical consequence when we have asserted
our individual money power and depend less upon the political means of
attaining ends. Ultimately we will have complete separation of money and
state—and will thus have achieved harmonious operation of the twin
democracies.


Do you want to take part in this most fundamental of all revolutions to rescue
both the people and the Government from a fatal error? If so, you must first of
all have a one-man revolution within yourself by casting out doubts of your
inherent money power and fear from any quarter. This accomplished, gang up with
other like-minded revolutionaries on the intellectual plane. Start
talking— not in whispers, for this is a revolution in a fish bowl with a
loud speaker. It can't hurt anyone. We're not going to grab the government;
we're not even going to try to win an election. This is a cooperative and
evolutionary revolution—the ins are in and the outs remain as before,
unmolested in their way of life.

The point of these posts is to clear up the pernicious misconceptions about money that keep people from attempting to put together their own systems. The point is not to say: "Do it my way or you are 'fail'". The point is to call attention to the fact that money is a system of agreement between people. Money is not a commodity, but people can agree on using a commodity for their money (gold, cowrie shells, cigarettes in post war occupied Germany, etc.) The important part is not the commodity itself but the agreement to use it! Yes, some commodities work better than others, and a whole lot of people focus on that fact and hold up their favorite king commodity (gold- or silver for the Silverites of the late 1800's) as if that were the end of the investigation. Realizing it is the agreement that is king we are then free to come up with all kinds of agreement systems. We are free to go with credit accounting, silver coins, informal status accounting (gift economy), bearer currency (cash) created from credit accounting, bearer currency (cash) as a derivative of gold reserves (gold standard money), cash issued only on a promise to accept the same in trade, tally sticks or Lincoln's Greenbacks or other money issued on a tax basis, check carbons (this was done in Ireland during an extended shut down of the banks), stamp scrips such as the Waera (Woergl, Schwanenkirchen) blah blah blah, and yadda yadda. We are free to agree to use hybridized systems of any and all of the above. The point is we are free to agree to use the systems that best enable us to agree with each other in the market.

And yes, my other point of these posts is to explain the fundamentals of these systems in an accessible way so that folks reading this can intelligently build engines of trade that have a chance of working. Every time there is a financial crisis, it seems there are lonely souls out there who start to tinker with local money systems. Through the last hundred years or so it seems each has had to pretty much start from scratch without a good body of recorded experience to draw from. We all know how the first attempt at playing a video game goes- a very quick GAME OVER. When GAME OVER means trust in the system is dead, the founder of it doesn't get a second chance. His experience is lost in shame and not available for future generations to learn from.

My apologies for not posting sooner. As usual, when I read what you've written, I generally have to take a day or two to mull it over and let it sink in until I can come up with any reasonable questions.

Ok, so I have a couple of things. First of all, I recently learned that the NYCGA of #OccupyWallStreet has an alternative currencies working group http://www.nycga.net/groups/alternative-currencies/

I recently joined there, and what I'd like to do is develop a proposal to present to them about creating a system for use by all of the Occupys and related groups around the world. I would suggest that you might want to join this working group also. Perhaps we should suggest that they read the information you've provided here, because from what I can tell, we're (or at least, you) are way ahead of where they're at in learning about this.

Second, a question. In the different systems you've described, there doesn't seem to be a clearly defined way to maintain a currency exchange with other world currencies. So how does this work in, and is it possible?

I'm not sure if you're familiar with Second Life? http://secondlife.com/whatis/index.php?sourceid=0912-wisl-affiliate&siteID=UO85MF6im_8-_3yohbA6RxmxYhSMAxx4CA

I got interested in Second Life a few years ago, mainly looking into business applications. At that time, anyway, I decided it wasn't developed enough/mainstream enough to be really useful. It was, however, used quite a bit during the last presidential campaign, and has been used by some colleges as a teaching environment. Interesting stuff. I actually only stopped investigating it because my computer's video card decide to die on me, and since it takes (or took) a lot of graphics memory to work well, I was effectively shut off when my graphics card died. But I digress.

One of the more interesting aspects of Second Life was that they maintained an exchange for their in-world currency with other world currencies. So you could, for example, earn money in Second Life then go to the exchange and trade for USD, which you could then use to pay your rent IRL. Some people actually did make a living developing real estate in SL, which they then converted to dollars.

Watching SL currency was very interesting. They had many of the same problems we have in the real world: corruption, currencies schemes, and so on. They actually "predicted" the world meltdown, as they had a similar meltdown a few months before Bear Stearns.

Anyway, I have it in my mind that any alternate currencies that hopes to truly compete with other world currencies would need to have that type of exchange. It should likely have a floating exchange rate (although I guess it could also be pegged to the USD, like China does). But I don't understand all of the implications of how that would work. Would a currency exchange automatically then require interest/usury just to keep up with the other currencies? This is where my mind gets boggled again.

Anyway, your thoughts on this would be much appreciated. And would you consider working together to pull together a proposal/business plan or whatever for NYCGA?

I'm not an economist; I'm a marketer. But I believe there would need to be a strong marketing component to this. After all, money ends up being about trust, and that ultimately is the job of marketing. So on that note, I will leave you with a proposed name for this new currency, which might give a hint as to where my marketing mind is going: P.I.E. units (people's international exchange units) aka Occu P.I.E.s.

ravenpaige wrote:My apologies for not posting sooner. As usual, when I read what you've written, I generally have to take a day or two to mull it over and let it sink in until I can come up with any reasonable questions.

Ok, so I have a couple of things. First of all, I recently learned that the NYCGA of #OccupyWallStreet has an alternative currencies working group http://www.nycga.net/groups/alternative-currencies/

I recently joined there, and what I'd like to do is develop a proposal to present to them about creating a system for use by all of the Occupys and related groups around the world. I would suggest that you might want to join this working group also. Perhaps we should suggest that they read the information you've provided here, because from what I can tell, we're (or at least, you) are way ahead of where they're at in learning about this.

Second, a question. In the different systems you've described, there doesn't seem to be a clearly defined way to maintain a currency exchange with other world currencies. So how does this work in, and is it possible?

I'm not sure if you're familiar with Second Life? http://secondlife.com/whatis/index.php?sourceid=0912-wisl-affiliate&siteID=UO85MF6im_8-_3yohbA6RxmxYhSMAxx4CA

I got interested in Second Life a few years ago, mainly looking into business applications. At that time, anyway, I decided it wasn't developed enough/mainstream enough to be really useful. It was, however, used quite a bit during the last presidential campaign, and has been used by some colleges as a teaching environment. Interesting stuff. I actually only stopped investigating it because my computer's video card decide to die on me, and since it takes (or took) a lot of graphics memory to work well, I was effectively shut off when my graphics card died. But I digress.

One of the more interesting aspects of Second Life was that they maintained an exchange for their in-world currency with other world currencies. So you could, for example, earn money in Second Life then go to the exchange and trade for USD, which you could then use to pay your rent IRL. Some people actually did make a living developing real estate in SL, which they then converted to dollars.

Watching SL currency was very interesting. They had many of the same problems we have in the real world: corruption, currencies schemes, and so on. They actually "predicted" the world meltdown, as they had a similar meltdown a few months before Bear Stearns.

Anyway, I have it in my mind that any alternate currencies that hopes to truly compete with other world currencies would need to have that type of exchange. It should likely have a floating exchange rate (although I guess it could also be pegged to the USD, like China does). But I don't understand all of the implications of how that would work. Would a currency exchange automatically then require interest/usury just to keep up with the other currencies? This is where my mind gets boggled again.

Anyway, your thoughts on this would be much appreciated. And would you consider working together to pull together a proposal/business plan or whatever for NYCGA?

I'm not an economist; I'm a marketer. But I believe there would need to be a strong marketing component to this. After all, money ends up being about trust, and that ultimately is the job of marketing. So on that note, I will leave you with a proposed name for this new currency, which might give a hint as to where my marketing mind is going: P.I.E. units (people's international exchange units) aka Occu P.I.E.s.

Ok, thanks for the direction to http://www.nycga.net/groups/alternative-currencies/. I'm lurking over there right now to see what's being discussed.

I know someone who knows a LOT about virtual currencies in virtual game worlds and how they have come to be exchanged for dollars/euros. I forwarded your post to him... I was never much interested in W.O.W. money and the virtual things people bought with real money, but I should have been. Of course I can buy +3 magic imbued armor with Federal Reserve Money... Getting ahead in the virtual world takes a lot of time and if I can simply help someone out with their IRL mortgage payment they of course will be glad to help me out in the virtual world with virtual objects they have created. I've got some studying to do.

In my next posts I want to continue from from that "Credit Clearing" idea to something I think is even better, something I call "Benefit Accounting". That's the ideal beyond the ideal of credit clearing, as far as I can imagine it. As Steven R. Covey says in his 7 Habits of Highly Effective People: "Begin With the End in Mind." Once we have the theory behind achieving that end, it's easier to plan out and to flesh out the practical steps that will get us there. Then I'll be hitting the very practical currency schemes that people can put into place locally to achieve specific goals, such as using alternative currencies to help pay the mortgage- which is something we all need in order to get free. Your point about exchange ability from alternative currency to national currency is a tricky one- we will certainly deal with that thoroughly a few posts down the road.

Yes, I totally do want to work together to put together a plan/proposal that people can copy and implement anywhere. If the NYCGA were to beat it up and point out the flaws and help with the refining of the plan, that ought to make it that more likely to succeed.

In this discussion, we started with the so-called "gift economy" or "abundance economy" of tribal peoples. I prefer to call it the "status economy" or the "contribution economy". Maybe we could call it GACS- an acronym made from all those possible names. Yuck- "GACS" sucks almost as bad as Riegel's name for his LETS-type currency "Valun" (value-unit). We'll stick with "gift economy" for now, even though that is a somewhat misleading name for it. At least people can look it up under "gift economy" for further study.

Then we pointed out briefly that people respond to people with money a bit like they respond to the respected members of the old tribes. Specifically, people with money get to decide what happens in society. People with money get to claim wealth out from the production of society. People with money allocate the resources of the society. People work for people with money. But they don't usually dig it. The respect-based part of the worker's psyche wants to punch the teeth out of the boss s/he works for, and the boss in turn has no great affection for the owner s/he has to keep happy. But this is our usury money that creates this result. This money is issued by the banker at the top based on the banker's evaluation of our or our government's creditworthiness. Creditworthiness is defined as the ability to produce and sell value into the market to recapture other people's bank money from the market to return to the bank. This top-down or pyramidal structure of money is what keeps us dependent on the guy above us in the pyramid for our daily bread. The only way to gain a claim on the produce of society is to engage in activities that enhance the pyramidal power structure. Those activities may be either constructive or destructive to our social equals in our town or abroad, but they always re-affirm the pyramidal power structure. And this structure of course fosters the dependency and abuse and resentment we all feel.

Then we had a look at LETS/Valun/Credit Clearing. In that system, people are once again free to contribute to each other laterally. They can buy and sell and trust and honor each other's credit (or not, as needed!) without having to first go beg a bank to put money into circulation. This utterly destroys the pyramid. We talked about how the collective movements of credit allow the people in the system to create and contribute much like they would in a gift economy. But they can also apply the credit abstractly to people they do not personally know to have contributed. The available credit in the account of the stranger is all a seller needs to know to feel safe in making the sale. In the gift economy, the trust gained from contributing to the tribe was non-transferable. If someone didn't know your reputation, they would have to start from scratch with small extensions of credit (gifts, as they are seen by economists who call them "gift economies") and build the relationship over time. In Credit Clearing, trust in the system to correctly evaluate the reputation of the buyer is what makes the credit transferable between strangers. Actually, in our usury money scheme we use today, it is this same trust in the system that fools us into giving our best to those who abuse us most. Usury money is so close to the real thing that it gets us to treat it as the real thing, much to our detriment. It's just like the artificial pheromone that leads the wasp not to it's natural functions but into the wasp trap. Credit is real money, and usury has just enough of the credit element to keep us tied in knots- willing almost to resort to barter with metal coins to escape it. But anyway, credit money allows us to break down tasks into smaller and smaller parts on which more and more people can specialize. Extreme specialization is not possible in the gift economy. Look around the welding shop where I work: all kinds of modified tools and "homemade" conveniences can be seen made from found objects. We can modify found objects in just one or two steps to create something with added value. Just like the Apache or the Sioux who turned sticks and stones into bows and arrows, we turn simple metal scrap into our own more useful items. But also just like the Apache or the Sioux, we are helpless in our crew's little gift economy to smelt metal from ore and create any kind of steel, let alone cast it into ingots or mill it into bars. We can only modify what we find lying around. And a lot of LETsystems around the world seem to get stuck with that kind of limitation seen in the gift economy.

Then we talked about modifying the Credit Clearing exchange by expanding it into an exchange of investment. Thus, surplus claims to the production of a community get translated into new opportunities for creativity and contribution for those people with ideas but limited capital. In credit economies with an investment possibility, specialization through many, many iterations of
added value can happen and technology and wealth can be created. And for an encore, we threw in an exchange where people have the opportunity to request proposals from contractors to provide "public goods". In that exchange, such contractors bid on providing the public service and people with excess income fund these public works through 100% voluntary "taxation" we described earlier. And here we see a kind of gift economy again applied to the public infrastructure, and you can bet there would be some status and prestige that would go along with such giving just as in the Potlatch of the Kwakwaka'wakw tribe of the Pacific Northwest. With the desperation to pay the bank its interest and to pay the government its forced taxation gone, I believe such philanthropy would become the everyday realm of the average guy.

(And we also saw that Benjamin Franklin proved that a government does not have to forcibly tax its people to do its job of providing for the public good, even without this idealized system of Credit Clearing Exchanges! All he had was a goof-ball land collateral scheme!)

So what's next?
Well, I still see one problem. Actually, Peter Joseph pointed it out to me in his film Zeitgeist: Addendum. He calls it technological unemployment. Sometimes technology creates a demand for labor that didn't exist previously. For example, Eli Whitney's cotton gin created a demand labor to pick cotton that had been previously too expensive to process to bother harvesting. And sometimes technology renders a particular kind of labor obsolete. Back to the cotton example, if technology would have been just a year or two quicker, mechanical cotton harvesting equipment would have rendered the bulk of slave cotton harvesting labor utterly obsolete and the slave trade would have been exposed as the total mal-investment it really was. The Southern plantation owners' millions worth of slave property would have been made worthless overnight. The slave market would have crashed and the South would have had a hell of an economic disaster on its hands. Sadly, the South Carolinians started plugging away at federal property in Charleston Harbor and instead of a valuable economic lesson in technological unemployment, the South had a hell of a disastrous war on their hands. Perhaps I'm exploiting this example to muse on the bitter ironies of what might have been...sorry. But back on track- let's say the people picking cotton had been migrant workers paid just enough money to keep them picking. They would have been out of a job and thus out of any claim against the production of society. If they start using a Credit Clearing system they can then employ each other and create real wealth to sell into the larger economy for bank money and use that to buy land. (I'll be talking about that in the next post where I deal with the question of currency exchanges between local and national currencies which is really why I mention it here.) But if they don't figure that out (which is extremely unlikely that they would) they have to try to acquire new skills to fit the new jobs the new technology is creating. In effect, they have to follow the next technological equivalent of the cotton gin that suddenly produces new work for masses of people to do. (As if work were some kind of resource for the working class!) As technology goes through this process of creating and displacing jobs with ever more technology, eventually the need for work in general to produce the basics of life gets reduced. Sure, what constitutes "the basics of life" increases with each technological advance creating new demand for new production, but each new advance needs fewer and fewer people to do the actual work of production. Old skills get devalued. A few displaced workers can try to gain the new skills needed by the smaller workforce required to maintain the technology. The rest can beg ever more desperately for any kind of work to justify their existence. Eventually at the nth iteration of this process, technology makes production of everything so efficient that nearly no workers are needed to produce everything that is wanted, so nearly no one can justify their claim to the abundance because there is nearly no opportunity to work to earn it. When we have to sell something for money before we can claim something by buying it with money, we would starve ourselves to death if we ever created unlimited abundance! The glaring absurdity of the situation would make one wonder at the point of technological progress under a system of money.

I'm going to try to get my thoughts clear on this idea as I can, but this one still makes my head hurt. It's kind of a rough idea still and it's way, way off beyond the foreseeable future, but here goes:

Well... what if we weren't simply unemployed when technology displaced our skills? What if instead we went "on call". Since the market could afford the old less efficient way of paying workers to do the jobs the old way before, it can obviously afford to keep paying them out of the efficiency gained by the new technology. Yes, I know, the accounting in our usury money system won't allow for that, but let's imagine a system that would. Let's say employers don't pay a wage to their employees but instead rent the benefit of a claim to their labor. If the work slows down, the claim continues to be rented in case the workers might be needed again. The workers are on call. How does the company afford this? They also enter into benefit contracts with their clients. Let's say I rent the benefit of having a car at my disposal from Chrysler. I pay for the benefit whether I use the car or not, and it's there when I need it. If I am dissatisfied with Chrysler's cars, I cut off benefit rental payment to Chrysler and start up a payment to Toyota. It's in both Chrysler's and Toyota's interest to keep their client's happy with reliable vehicles in order to keep the car benefit payments coming. It's also in their interest to provide the car benefit in the way that is least expensive to them. When they only make money on cars by selling new car units, it is in their interest to make the cars eventually fail in order to force people to buy new units. When a car that needs replacing becomes the manufacturer's expense, they have every motivation to make that car last as long as possible. They have every motivation to provide the most sustainable solution to the transportation problem that technology can invent. And because they have steady income from producing the accounted benefit instead of from selling "units", they can have their workers slow down and take some time off- to go "on call". This same kind of benefit accounting could work to replace health insurance. If we were to pay our doctors when we are healthy and to cut off payment when we are sick (when we don't enjoy the benefit of good health) then it would be in their best interest for their patients to have no health problems. Currently, our doctors are in a hell of a bind- they are supposed to make us healthy but will be punished with starvation if they do! I can imagine teams of doctors forming to best be able to provide for all specialities a patient might need, and patients shopping for a team to subscribe to, dropping any team they might not trust. This is the way to have our cake and eat it too, which is the whole point of having a cake in the first place.

When I talk about "paying" for a subscription to a "benefit provider" I'm envisioning ascribing an amount of my monthly own "benefit providing" income to those other people to whom I subscribe through the Clearing House. I don't really clearly envision the "benefit subscription" system to ever really replace the Credit Clearing system entirely. But for businesses that choose to make their services available on the "benefit subscription" system, they would then agree to make their employees payable on the labor benefit subscription system as well. That is to say, they would not be able to accept "benefit subscription" payment and then dump the employees- that would make no sense. The terms of being able to accept "benefit subscription" payments would require their employees to be on call and the Clearing House would treat them that way. The benefit subscription system would not be a money exchangeable for Credit Clearing money. They are simply too different in how they operate. Benefit subscription payment wouldn't be like money that would accumulate in an account month after month, but would operate as a level of claim per month that does not roll over any kind of remainder. The currencies are not exchangeable with one another but both can lay claim to goods and services in the market.

Anyway, the idea is not very well fleshed out in my mind at the moment. But the point of the idea is to align the objectives of the producer of a benefit with those of the consumer of the benefit. A natural consequence such a scheme is the end of planned obsolescence and other useless wasteful production common today. The point of such a scheme is to produce an economy that satisfies instead of one that teases.

Perhaps the enhanced LETsystem (Credit Clearing) can take care of a lot of those things anyway, but still, even in a LETSystem, the buyer and seller are involved in negotiation with one another. Benefit Subscription takes buyer and seller away from the negotiation paradigm and places them on the same team.

Benefit Subscription sounds a bit like what they do in Europe for their universal health care (from what little I understand). I believe the doctors are somehow paid, not according to number of office visits or services rendered, but rather according to a measure of patient "health." I don't have the details of this, but it makes sense, which is to reinforce the thing we value, which is health over illness care.

Well, my brain hurts too, so I'm off to think again about this. I don't really understand, for example, why the two must be kept separate. That is, I DO understand, but my brain needs to wade through all the implications of how those two systems would interact or might clash. So, I'll likely have more questions in a day or two. Thanks again for all of this!

I'm working on a more comprehensive post right now, and I'm trying to get it not to suck. It is trying just as hard to suck and be an incomprehensible mess, and now it is merely a battle of wills. I checked on YouTube for anything that might help- man, there's a WHOLE LOT more on alternative currencies than there was a year ago. These two clips seemed appropriate to our conversation. Sometimes an illustration is worth thousands of words, and the illustration is less likely to make someone's head hurt. (I suppose that's why we use prints in the fabrication shop!)

https://www.youtube.com/watch?v=YvegNqKcQ-g&feature=related
https://www.youtube.com/watch?v=3pH47531SbE&feature=endscreen&NR=1

One more thought about Benefit
Subscriptions. I don't see that they would work so well for items
that are inherently consumable such as food. It may well be possible
to subscribe to a network of grocery stores and restaurants on an
"all you can eat" basis. After all, the buffet model does
exist in restaurant business today. But it's not quite the same thing
as enjoying the benefit of some durable good like a car. When a
producer has to provide units over and over to satisfy a need that
keeps coming back (like the need to eat), 'per unit sold' accounting
that we practice today may well continue to provide the best service.
After all, we have every meal, snack and goodie imaginable available
to us now using this kind of accounting. But this 'per unit sold'
accounting also gets applied to things that ought to be durable, and
that forces the producers of such things to treat them as if they
were disposable. Only the sale of the unit is counted toward the
credit of the producer, but the benefit continues. The producers of
such items are at a huge disadvantage compared to the producers of
consumables, even though they provide benefits that are just as
valuable. So I really see a hybrid of both systems operating side by
side as the best way to allow for the best satisfaction from both
kinds of production. One side note, I was talking about this idea
with a friend last summer and he said his lawn care service operates
in this way. He pays for a healthy lawn and they do whatever it takes
to make it so. Since they want to save money, they do it right to
avoid problems rather than base their business on always fixing
problems. So this kind of accounting can even happen under our
current money system. However, for it to really be a viable way of
doing business, the benefit accounting circuit ought to be completed
so the benefits accounted for can cycle around again. What I mean by
that is that a guy who gets paid by the hour has to give up an hour
for each quantity of dollars he earns. He exists in the 'per unit
sold' accounting system and for him to pay dollars that cost him so
dearly in terms of his time to a guy who gets paid to minimize his
labor expended is a disproportionate burden to the wage earner. He
has to do a very different thing for his dollars than 'benefit
subscription' guy. If he could go on the 'benefit subscription'
system as an employee and save the his company from wasteful
production that wastes his time, then his pay could be in terms of
the same unit as the other people offering services through 'benefit
subscription'. American health insurance is a big fat horrible mess
in part because it is sold as a benefit people subscribe to, but
doctors are paid on a 'unit sold' basis, and the money paid out by the
insurance is almost always on a grinding 'unit sold' basis. Drugs
would make sense as 'units sold' except the motivation then becomes
to sell units rather than to cure anything. What would happen to
prescription drugs if drug companies were paid on a 'benefit
subscription basis'? I believe the drug companies would try to sell a
lot smaller quantity of drugs and focus instead of getting only the
most appropriate and effective drugs prescribed for any given
patient. It's something to think about, at least. Perhaps the
accounting for credit earned “per unit sold” can just as well be
represented by the same unit as credit earned by “benefit
subscription”. At any rate, different currencies can be specially
designed to account for different things, and they can all work
together in a society. And now- segueing into your point about being
able to exchange one currency for another...well- that's really
tricky business.

It's easy to convert inches into
millimeters, no? It's somewhat harder to convert German into English.
Usually it works out okay for all intents and purposes but some
German ideas don't translate well into English and simply get lost in
translation. And converting inches into gallons? Forget it. That's an
obvious absurdity. Different currencies are put into circulation in
different ways and account for different things just like inches and
gallons are both units of measurement but measure very different
things. At the very least, different currencies all measure at least
one thing in common- the value of an object sold as agreed upon by a
buyer and a seller. That value is represented by the sale price in
units of whatever currency is used to complete the transaction. So
all currencies seem at first glance to be merely different units of
value just like inches and millimeters are merely different units of
length. But because of the different rules governing how different
currencies are put into circulation, the different currencies
necessarily also reflect a summation of information about what's
going on in their circulation scheme. Information about both mining
productivity and levels of hoarding get summed up into the market
price of gold coins. The market price is a summation of all the
possible information baggage a currency carries with it. There's no
way to know if a price is what it is because of one particular factor
or another, but it is always because of the combined effects of them
all. Central Bank Notes carry information about investors' faith in a
nation's short- to medium-term ability to tax and spend in their
market price. Both metal coins and bank notes carry information about
people's belief about their respective abilities to serve as a store
of value. LETS is intentionally designed to have very little use as a
store of value and to communicate no such extra information. Of
course, the people using the currencies have no idea such information
is transmitted along with the currency. They just have some idea of
how much value other people are likely to give for it. The reason
currencies' values fluctuate in relationship to each other is a
function of people's response to these other data. It's like being in
a traffic jam- there's a reason up stream that the money has changed
its value compared to everything else but very few people will ever
know what that reason is. They just have to trade it at the new value
because everyone else does. The reason for the change, while seldom
fully known to any person, will always have to do with the extra
information built into the currency system.


Of course, there's nothing to stop one
person from trading 10 dollars for 1 Ithaca Hour. There's nothing to
stop that person for giving more than 10 dollars than the 1 hour/10
dollar face value equivalent of the Ithaca Hour if both parties to
the trade agree to it. But how do you trade a dollar for a unit of
LETS credit? LETS is designed to not behave as a physical commodity
that can be bought or sold. LETS credit is designed to communicate
the measure of value and hopefully no other information of any kind.
This is to preclude it's value changing in response to relative
scarcity as a commodity would. Within the LETS network, sure, one
member can buy another member's dollars with LETS credit if the guy
with dollars is willing to sell. Outside the LETS network LETS
credits have no meaning- they exist only as a debit/credit to an
account and the accounts exist within the system.


This situation is both a blessing and a
curse for Credit Clearing (LETS) users. The curse is probably easy to
see. LETS users find themselves always in need of products not
available within the system. They can't pay the mortgage, utilities
or taxes with their LETS credits. The burdensome need to pay these
particular items forces LETS participants to devote themselves full
time to earning national currency. LETS is relegated to a part-time
or hobby activity.


The blessing of separation comes from
encouraging people within LETS to find solutions within the network
they would otherwise get from China. Unburdened by interest and free
to agree to accept each other's credit, people within LETS can afford
to hire each other as neighbors, which they can scarcely do with
dollars.


And there's one other blessing of
separation- some protection from outside interference. You may have
noticed $100 bills bearing the image of Franklin are not at all
issued in the way he advocated. It should be apparent that Franklin's
method is vastly superior to central bank issue for fostering the
public good. So what happened to the good and beneficent money the
Revolution was fought to preserve?


https://en.wikipedia.org/wiki/Colonial_scrip


A primary problem was that monetary
policy was not coordinated between Congress and the states, which
continued to issue bills of credit.

So, first off, the information contained in the issue of the notes was not consistent.
Continentals issued in parity with production were mixed with those that were not. There
was no way to discern which had the valid issue information so all got dragged down together.


Another problem was that the British successfully waged
economic warfare by counterfeiting Continentals on a large scale.
Benjamin
Franklin later wrote:

<blockquote>The artists they employed performed so well that
immense quantities of these counterfeits which issued from the
British government in New York, were circulated among the
inhabitants of all the states, before the fraud was detected. This
operated significantly in depreciating the whole mass....</blockquote>
There's more
than one way to counterfeit. A more insidious method is to sell at
the present time promises to buy at a future time. If you are big
enough to be classified “too big to fail” then you have the power
to flood the market with promises sold as the real thing. Quantity of
promises goes way up for a brief period, demand does not, price goes
down and the real thing then gets bought by the "short seller" at the cheaper price. Since this
operation is profitable to the perpetrators, they have even more
power to do it again. Which is exactly what the banking elite did to
the American currency, parasitically riding it into the grave. Here's
a recent modern example of the same thing applied to stocks:

http://vimeo.com/3722293

Ok, I just got through going on and on about how exchanging national currencies is easy (because they are all the same "central bank" money) but exchanging alternatives is tricky. But of course it is not impossible or even something you really want to forever avoid doing. As mentioned before, LETS credits exist only within the LETS system, but giving them an incarnation as an exchangeable commodity "on vacation" outside the system is easy. If you want to add a cash option to your LETS, simply allow people to debit their account and print and give them a paper representation of that credit in nice small-denomination user-friendly bills. The word "bill" comes from the phrase "bill of credit". See how "dollar bill" relates to "doctor bill"? Both are statements of indebtedness, so naturally the same word applies to both.

Ok, how many times did we read the original Articles of Confederation of the United States (the constitution that was replaced by the U.S. Constitution in 1787) in U.S. history class? Yeah, I know- ZERO. Here's how the phrase "bill of credit" was used in the Articles of Confederation:

"The United States in Congress assembled shall have authority to appoint a
committee, to sit in the recess of Congress, to be denominated 'A Committee of
the States', and to consist of one delegate from each State; and to appoint
such other committees and civil officers as may be necessary for managing the
general affairs of the United States under their direction — to appoint
one of their members to preside, provided that no person be allowed to serve in
the office of president more than one year in any term of three years; to
ascertain the necessary sums of money to be raised for the service of the
United States, and to appropriate and apply the same for defraying the public
expenses — to borrow money, or emit bills on the credit of the United
States, transmitting every half-year to the respective States an account of the
sums of money so borrowed or emitted — to build and equip a navy —
to agree upon the number of land forces, and to make requisitions from each
State for its quota, in proportion to the number of white inhabitants in such
State; which requisition shall be binding..."

In the U.S. Constitution Article 1 Section 8 we see Congress retaining the authority to borrow money but NOT to emit bills of credit. The Greenbacks Lincoln issued during the Civil War were indeed unconstitutional, yet completely in the spirit of freedom represented by the American Revolution. Lincoln wasn't only going to only liberate the chattel slaves, but also take a stab at liberating the debt slaves as well, it would seem. Such is the true tragedy of his assassination.

In our LETsystem, people who don't feel comfortable with their every transaction with every other member being tracked and recorded might well prefer to make cash debits from their accounts. Cash lightens the workload of the accountants in the credit clearinghouse. So naturally the small per-transaction recording fee ought not apply to the users of cash, and it would be impossible to charge people for transactions paid anonymously in cash at any rate. Cash turns out to be cheaper for everyone. So cash certainly has an upside for lovers of both freedom and frugality.

We've already talked about one downside to cash- counterfeiting. The two forms of counterfeiting (physical printing and short-selling) destroyed the American Bills of Credit effectively nullifying the entire effort of the American Revolution. (I get so angry everytime I drive past one of those Values.com billboards depicting George Washington crossing the Delaware with the caption "By George, we did it!" We did not. We were merely jui-jitzued into a Pyrrhic victory, at best!)

So, if our system is small enough to to not threaten the banks (like the Ithaca Hour) and we use anti-counterfeiting printing techniques to keep the regular folks from outright printing fake notes, it's certainly ok to go ahead and use a cash option. But banks are rich enough to pay any "artisan" (in the words of Franklin) to clobber us. That, precisely, is why I'm turning to Anonymous for help. I really do want to build a system big enough to threaten the banks! I'm thinking there could be cryptographic information included in the serial numbers, like checksums and the like. I don't know how to do that, but there are may computer/data transfer experts out there supporting Anonymous who do. In the case of digital cash as well, Anonymous might be able to defend themselves. But even physical gold and silver get counterfeited by the short-selling technique. The investment banks routinely lend themselves oodles of money to drive the spot price of silver and gold down to make dollars appear more stable than they really are. But reality is a hard thing to surpress forever. In the metals markets, in the last decade or so we've seen premiums diverge sharply from spot price. It used to be that premiums for physical gold/silver were so low you could look at spot know about how much you would pay for real gold. But gold contracts (paper gold) have been abused so much that spot really only represents paper now. Spot price suppression has sometimes pushed the sale price below the production cost of silver, causing real silver shortages and the real price (spot+premium) to rise. Looking at precious metal premiums is a good way to measure society's unconscious awareness of systemic fraud. I only mention this because I believe the same thing *might* happen with LETS credits that become very popular and circulate outside the system as cash. Shorting might hurt them for a while, but *if* they can survive the short term, a premium might appear in the market for the real thing versus the spot price in the bankers' currency exchange markets. So counterfeiting is not necessarily a show-stopper. It is a gigantic royal pain, but it's not impossible to combat, even against the monster banks who succeeded in destroying the the American "Continental" issued under the Articles of Confederation.

What's the other downside to cash? Ithaca Hours routinely are bought and taken out of the Ithaca area by tourists as souvenirs. This exchange of dollars for Hours does not take money out of the local economy, but it does cause Hours to go out of circulation and makes the hours a less prominent part of the local economy. If the Hour had a cash-buy-in component, that would be no problem. An Hour would be printed for nothing and sold for U.S. currency. Real goods could be bought with these tourist dollars and made available for Hours, thus bolstering the usefulness and acceptance of the Hour. So, that deflationary "problem" for the Hours system really can be spun into a real bonus to the system, but I don't believe they have figured that out in Ithaca. Instead, they make Hour grants to local charities, which is just a fudge factor to make up for cash lost or departed out of circulation, and I'm not fond of crutches and fudge factors. But Hours are not issued as credit, so there's no accounting problem associated with missing Hour notes.

So let's say we are running a LETS with a cash component and our cash is leaving because it's so cool-looking that people are taking it, framing it and hanging it on their walls. The cash is a physical incarnation of a debit made against a credit account. That negative credit gets passed around to God-knows-who until it leaves with the tourist or is simply lost, burned in a fire or whatever. The bills cannot possibly return to circulate in the system and bring that debit back to zero. Over time, this effect nudges everyone in the system closer to their negative credit (overdraft) limits and may threaten to cause the same deflation and systemic shut-down that hoarding causes. Our anti-hoarding strategies can't work here because no matter how motivated people might be to spend the lost cash, they simply can't. What to do?

Here's an idea lifted from the Toronto Dollar in Canada. They have a national cash buy-in model with no credit component, so, although beneficial and useful, their money is far from the ideal I want to create. But, at any rate, they impose an expiration date on all the Toronto Dollars they issue. Expiration dates seem to be a pretty common feature in local currencies, actually. The holders of Toronto Dollars are free to bring in their old currency a month before it expires and renew it at face value. So, if you're paying attention to the dates on the money in your wallet and make sure to renew old notes, you won't lose any value. But, of course, some notes get lost or just don't get renewed in time and are then as good as lost. The Canadian dollars that were used to buy the Toronto dollars are no longer needed to back the lost Toronto dollars and are donated to local charities. So people who lose their Toronto Dollars can get a warm fuzzy feeling that they supported some good cause through their loss.

We can similarly impose an expiration date on cash withdrawn from LETS credit accounts. Cash that is not lost can be renewed as necessary. Cash that is lost will simply expire and the clearinghouse can simply credit all expired cash to wherever its members agree it ought to be applied. The system might decide to divide the expired cash into everyone's credit accounts equally. It might decide to credit the lost cash to public spending if the system is advanced enough to have some of the public works spending features discussed earlier. At any rate, expiration dates on issued cash is one useful way to add a means to make the necessary periodic accounting adjustment to deal with lost cash.

Damn, it's lonely in this forum. I can hear the echo of my keystrokes for days...
Am I crowding everyone out? Is anyone following along? I keep posting for you, ravenpaige. And I post because it's a great exercise in thinking out loud. When I've finished outlining all the possible/necessary/desirable features of a currency that can hold its own in a free market, I'll have the basis for a YouTube series with these posts as a rough outline. And I'll be ready to approach local accountants with a variety of workable plans for them to use to both increase their business and grow the local economy free of bank loans. And so will anyone who reads this, I hope! On with the next post- the meaning of a currencies' "redeemability".

So sorry for not posting. I have been following. After your last post, I thought, damn, I need to figure out how to get this information to more people. So I've been thinking about that for a couple of days.

So, I should be able to do this myself, but I find my time is always premium. What a frustration!

So here are some suggestions for you:
1. Twitter...do you have an account? Please let me know or set one up and I'll hook you up with others.
2. ampstatus.org Fundamental in the Occupy movement
3. Facebook. If you're on, PM me with contacts, and I'll send you all kinds of contacts/friends.

This needs to go further. We'll figure out how. Keep in touch.

Here's one guy who's doing his best to promote the idea. I just discovered him not too long ago. http://www.spokenword.org/program/1712073

I'll post that on the activist video link thread as well.

Yes, we do need some marketing. I don't know much about that. Here in Utah if you want to sell a new microbrew its very common to include the word Polygamy or make some other reference to Mormonism in its name. We have Saint Provo Girl (BYU reference), Wasatch's Polygamy Porter (search on Google images for the label, it's hilarious), Rooster's Polygamy Pale Ale, and even Five Wives Vodka made here in Ogden. Can you think of some common cultural thing we all understand as Americans that we can tie into? What he have here is an accounting product. It's not sexy like polygamy (ha ha). I thought the local Occupy would be all about the monetary system like the Silverites and the Greenback party of the 1800's. Not so. They have no clue. The want to protest the evil. I've not yet found a way to turn the conversation to solutions and alternatives- they still believe in the system. They just think bad people have taken advantage of it. I have not yet found the opportunity to explain that the system was set up in the first place by the same class of bad people they are protesting. But I'm trying to be and active get some respect within the group before I go putting people to sleep with monetary theory. I'm posting to the facebook page to try to shake things up and get the conversation started. One of our members has started a separate community improvement group and we're starting to talk more. But for now, I'm still the new guy and I know what that means in the context of the gift economy. Talking is asking listeners to extend credit. Listening is that credit and I have to do a lot of that to build up my account for some serious spending (talking) I plan to do. It would be cool to demo some systems in Ogden and document the progress along the way.

I do have a twitter account. I haven't found much use for it yet and I don't quite get the idea behind it, even though they talk about tweets on NPR all the time. It would probably make more sense if I had a cell phone. I'll pm you about that and about Facebook. Ampedstatus is awesome. Some coverage there would be great.

Yeah, economics isn't sexy. But let's see...a few tag lines, just throwing them out. I stole most of these:

The system's not broken, it's fixed.

A better world is possible.

Imagine there's no money...and no usary too.

Well, some beginnings. I'll have to work on condensing the thoughts better. As for twitter and such, I'll PM. It's really a useful tool, but you just need to find the right people to follow and know the right hash tags.

Ha- cool! I like the slogans. Well, here's the next post below. It's not as tight and concise as I'd like, but the process of writing it did pull my brain cells a little closer together.

Let's talk about redeemability. The idea that a paper (or digital) currency must have something behind it as “backing” comes from the old gold standard. Backing the paper with gold, that is to say offering to redeem the bank's paper notes for gold in the bank's vault, was more than anything really just a kind of gimmick to get people to trust something they otherwise would not trust and probably should not. The bank's real product was of course credit-money and not gold. If people gave credence to the credibility of a bank's credit-money, it was because they had faith in the bank's solvency and not all because they believed the money represented the bank's customers' contributions for the good of the community. Faith in a bank's solvency meant, of course, faith in the bank's ability to actually redeem its paper for gold hidden from public view in its vault. Of course, the bank had to evaluate and gamble successfully on the credibility of its borrowers in order to keep itself solvent, so the money really was credit-based and not just a paper representation of the physical gold. As people produced wealth and credit grew, so did the money supply to reflect the increasing trust and credit within the community. But the gimmick that got people to trust the money in the first place inevitably became the money's Achilles' heel. When boom times happened, all the banks could not possibly buy up each other's gold to all keep up their reserves for redemption. Some banks had to fail to make their gold available to the surviving banks who snapped it up to continue their lending. So failure was built into the gold standard system. Why did some banks not then abandon the gold standard and simply account for credit? Well, to be a bank, a would-be banking institution had to have a state charter (during the era of wildcat banking) or a national charter (after the National Bank Act of 1863). To qualify for a charter, the bank had to meet the reserve requirements and follow the gold standard. So while individual banks were indeed in competition with each other, there were no competing banking systems. The gold standard was an unquestioned systemic banking monoculture in the United States. Reserves and redeemability remained the unquestioned dogma of banking. (However, the Greenback, or U.S. Note, was not a banknote and not subject to the dogma of redeemability. U.S. Silver Certificates of course were all about the principle of redeemability. Sorry about the historical asides; now let's make some progress toward the point I really want to make.)

From this old practice persists to this day the notion that for a currency to have value, it must be redeemable for some commodity held in some kind of storage warehouse or vault, ever sequestered away to be ever ready for redemption. The Silverites did not escape this notion, only the particular commodity of redemption was questioned. This belief has long been a major mental obstacle preventing people from even considering creating their own currency. If it is taken as fact that for a currency to have trust it must have a redeemable "backing", then the task of first accumulating and then warehousing a hoard of such a commodity "reserve" before a currency can be issued is simply insurmountable. The thought of issuing a local currency is simply precluded by the impracticability of providing for the commodity backing, be that commodity gold, silver, crude oil, water, or wheat. Is backing, or redeemability of the currency for some standard commodity really necessary, though?

Earlier in the thread, we discussed the example of the experimental German Waera (Ware/Waehrung) currency. The whole idea of the Waera is implied by its name, which is a compound of the two German words "Ware" meaning, you guessed it, "ware" as in wares in the market for sale, and "Waehrung" meaning "currency". There was no redeemability of any commodity of any kind implied in the issue of the Waera. The currency was to be "backed" by trust that you could buy “wares” with it and not by any standard commodity like gold. In fact, the reverse side of the note marketed itself with the printed words, “Die Menschen leben vom Austausch ihrer LEISTUNGEN” - Humans live by the exchange of their PRODUCTS. (Leistung implies capability, productive capacity.) The note refers to itself as an “Arbeitsbestaetungschein”- labor affirmation/confirmation note. As cool and groovy as the idea behind it was, it didn't see much use in its first years. Public awareness of the Waera was rather high around Germany, actually, but awareness did not give the currency what it needed to really get into service. The Waera was issued on a national cash buy-in basis (like the Chiemgauer of today). Maybe people were stuck on the idea of giving up Reichsmarks which they could spend everywhere in exchange for Waera that had only limited acceptance, and possibly on the added nuisance of buying stamps monthly to keep them up to date. I'm not sure about this, but it's not difficult to imagine these factors might have been barriers initially. Of course, the Waera did eventually get enthusiastically accepted in two different locations. In each of those locations a big local employer decided to buy Waera and and pay their employees partially with those Waera. In one case, the employer was a coal mine and in the other the employer was the Woergl city government. The coal mine paid for labor with Waera and accepted Waera again in exchange for the valuable coal its employees mined out of the ground. That completed the money cycle, with the issuer accepting its own issue. Woergl it paid its employees in Waera and accepted it again as payment for the use of the city's valuable infrastructure its employees built and maintained. That “payment” was of course taken as taxes. Once again, the money cycle was completed with the issuer accepting its own issue. And in very short time, both places went from poverty to productive prosperity. So, it would seem, in Schwanenkirchen (the coal mining town) everyone quickly realized they could definitely get at least one thing they all needed with their Waera: coal. And that was the key to everyone else accepting the Waera for everything else for sale in the local market. Ironically, the currency specifically designed to not be redeemable for any commodity became universally accepted in the town when it was understood to be “redeemable” for coal. And it worked just as well in Woergl when it was understood to be “redeemable” for credit against the tax payments everyone had to make.

Let's take a step back and look at the situation in the light of these data points. Coal was not being deposited nor was currency loaned out at interest based on a “coal standard” at the coal mine. Nor was currency loaned out based on deposited reserves of city services in Woergl. And yet the currency was exchangeable for some universally necessary thing in both cases. We don't need a vault full of gold to use the principle of redeemability to give our local currency a boost. The gold standard version is really just a fraudulent contrivance to somewhat imitate and take advantage of the real principle, it would seem. There we have an institution which produces nothing and only offers redeemability for gold that it keeps loan-sharking back to itself. Since it doesn't really produce the value it claims to redeem its currency in, it eventually overextends itself and collapses in a bank run. The city, the farm, the trade union, the coal mine, etc. can all redeem the currency they might issue and never suffer a bank run. They simply have to spend the currency to get what they need to produce value and then accept their own currency in exchange for the value they produce.

When local currencies like LETS and others start up, the individuals extending credit/spending credit usually have very limited ability to produce value. They can produce the sorts of things they would be able to produce within a gift economy anyway- modifying found objects and materials in some simple way to add value. The LETS or other local currency often doesn't facilitate trade beyond what buddies in a hobby club would otherwise be able to do. Usually local currencies get stuck just like the Waera did at first and for all the same reasons. The trick is finding a way to complete the money cycle for a large number of people by providing for sale in your currency some universally demanded thing (or even a basket of some less-universally demanded things) that a large number of people need.

In Schwanenkirchen, it was labor that got the coal to market. In Woergl it was labor that built and maintained the city infrastructure. The currency was first spent to the employees in both cases. So was it really coal/city services that provided the backing for the Waera? Or was it really labor? It's kind of a chicken and egg problem- the labor doesn't do very well without coal to stay warm and a functioning city to live in. Neither of those can be provided without the labor.

When setting up a local currency, remember, labor is a mighty handy means to give it a “backing” boost. Even if your town council won't vote to accept their own currency for taxes and even if there's nothing else in universal demand that your community produces, there's always under-utilized labor lying around. But the labor won't accept the currency unless they know they can get their means of living for it! So there's the chicken and egg problem again. The Ithaca Hour bootstrapped its idle labor by providing a directory for people to sign into to list their skills and how many Hours they wanted to charge for their services. By charging Hours for their services, the people listing in the directory let other people know just what skills Ithaca Hours were useful to buy. At first there were just a few listings, but as people began to realize they could get those listed services with Hours instead of dollars, they started listing their own skills in the directory so they could get a chance to earn Hours to spend on those skills. At that point, it was a system of skill bartering with the huge advantage of a medium of exchange to split the barter into two halves. The first half of the barter was the selling of a skill to one person for Hours. The second half of the barter exchange could then be completed with someone else by tendering the Hours for that someone else's skill. As the skill set available for Hours became more and more diverse, the physical products created by that labor also became available for Hours. Then Hours became a currency useful to trade skills listed in the directory, but a currency useful for buying and selling (at least for part of the price) of everything else. Since everyone in Ithaca understands they can get labor from local contractors/specialists (everything from roofing to dentistry!) they gladly accept Hours when they sell things like vegetables in the farmer's market. The hospital in Ithaca accepts hours because they know they can use them to partially pay staff wages. Some landlords even accept them partially for rent payment. But why only partially? Well, the damn government only accepts dollars for taxes, and they punish you severely if you don't find a way to get those damn dollars so they can take them from you. And everyone still has to pay their damn mortgages to the damn banks who only accept their precious damn dollars. In my next post I'll talk about getting those damned dollars to cycle into your local currency system so you can pay your damned-all-to-hell mortgage and taxes.

As we get more and more kinds of labor (labor is not homogeneous like coal, diesel fuel, or other commodities) available for our currency the currency obviously becomes more useful. If we can get the labor of some producer of a universally needed commodity paid for in terms of our currency, and if we can get our currency accepted by that employer in exchange for that labor's products, our currency will be in really high demand really quickly. All other labor and everything else will soon be exchanged for it, without the long buildup time it would take for various labor providers to figure out what services they can afford to market in exchange for the currency as the directory gradually develops. Here's one way of marketing the currency to such possible currency-system-anchor employers. Many, many employers have some kind of safety incentive program or performance incentive program in place. Mine does, and they even use their own company safety-point currency with which employees are rewarded for safe work practices. My employer's safety points are worthy of Epic Fail Guy as a currency. All the items available to be redeemed with it must first be bought with the company's dollars from China. And mostly the items are nothing terribly useful or desirable. I suspect this is the case with many, many incentive programs out there. Once you have a directory of local labor started, pitch the local currency to employers to use in their incentive programs. Employers can use cash buy-in to get the incentive currency instead of spending money on Chinese redemption items. Employees will begin spending their new money with the people in the directory, increasing their sales and success. As time goes on, the company can be brought to realize they can afford to give bonuses and gifts in the currency, and then to supplement the employees regular wages with it. If the company decides to accept the currency as payment for its products, then it no longer needs to get it via cash buy-in. It can get all it needs for its incentive program simply from local sales of its products. But if the company doesn't accept the currency as partial payment for its products, they're stuck with cash buy-in, of course.

I said I'd talk about getting national currency to cycle through your local system in my next post, but there's already one means of doing so right there.

The most important principle about redeemability of a currency is this: producers of value can issue currency confidently (by spending it into circulation) because they can always redeem their currency issue for the value they produce. The more universal the value of their product, the more universally accepted will be the currency they issue in order to obtain the materials they need to produce that product. Universality doesn't need to come from one single issuer; it can come from a group of companies that together produce a good cross-section of things commonly sought in the market. And if all else fails, a currency can be issued by the members of a large and diverse pool of labor who agree to accept their common currency as payment for their skills. A small and humble LETS is much more likely to succeed if it begins with that end in mind and its members have their focus on building that diverse pool and a plan for extending their currency to businesses that produce more specialized and more intensely value-added products than simple individual LETS members can.

Sprung from the alternative banking workgroups in the Occupy Movement.

http://www.occupyfcu.org/?s=3Y3J

ravenpaige wrote:Sprung from the alternative banking workgroups in the Occupy Movement.

http://www.occupyfcu.org/?s=3Y3J

That's very, very good news. We don't need no stinking legislature to give ourselves public banking. Alert Ellen Brown!

As for getting a currency to be accepted, there are two ways to go. If you can get the currency to be accepted for one important thing everyone needs, then it will be accepted for everything else. But if you aren't already an oil tycoon, you can get a group of people to accept each other's credit for all the things they might produce. If the group grows to be big and diverse enough, that's as good as the tycoon option. Getting the group to that size before it dies on the vine is the trick. Individuals might be able to write great novels and paint the occasional masterpiece, but they can't cheaply produce anything of value. A small group of individuals producing only the kinds of things individuals can produce will starve if it does not grow into something more sustainable- something more creative and collaborative. Most small LETSystems are only able to offer the products of individuals which can never be low cost high value items. To get food and clothing cheaply enough to keep us alive we need specialized division of labor, and that is already found in productive businesses. You can start with a group of individuals, but you have to plan from the get-go to quickly make available in the group's currency the high-value low cost products and services only organized businesses can provide.

To expand the LETS into the retail sector, take advantage of "excess capacity" by any and every means. Offer to replace retail business' coupon ad campaigns with the currency. They list in the clearinghouse's directory their discount offers in terms of what percentage of "full price" they will accept in the local currency. You could even print up the directory with a few of the local currency notes printed in the back as "common coupon value notes" or some such. They can be equal in value or even identical to the LETS cash complete with an expiration date to keep them in circulation only temporarily. That would enable them to stimulate business like a coupon but also to circulate, and then to retire in order for future issue to be on a strict credit basis. The coupons could be accepted by the LETS clearinghouse as credit for clearinghouse service fees to pull them out of circulation before the coupon issue notes expire. Actually, such a coupon issue could be repeated as the clearinghouse feels it expedient as long as they are willing to eat their own freebee. In this way, the coupon issue is really a credit issue as well- the clearinghouse is spending its own credit on the public good and redeeming that credit with its accounting services.

Businesses today are hurting for cashflow- for currency! You can help their cashflow by first supplementing their payroll with the local currency in small ways. By small ways I mean to replace their safety incentive and bonus incentive program points and tokens with the local currency. As employees find they can spend the bonus currency locally, (both within the LETS group and for retail discounts) they'll be glad to get and spend the supplement. Businesses can then be encouraged to give raises in the local currency as part of the employees' regular wage. As businesses find out they can actually pay their employees partially with the currency, they can be shown that they can accept it from other businesses to help cover labor costs. In this way, the money can move up the supply chain, and local companies will prefer local suppliers who have need of the money to help them with labor costs. This is how labor *can* be the common need for which the currency might be used. This takes a committed marketing effort toward local business on the part of the currency's founders, and every little success has to be channeled into further successes. But it can be done.

Retail businesses who are "common coupon clients" of the system enjoy the marketing benefit of the "common coupons". Businesses who have discovered the ability to pay for labor enjoy reduced labor costs in terms of usury-dollars. These businesses can then be offered the accounting services of the LETS clearinghouse as it expands to handle business-to-business credit. The B2B LETS works exactly the same way as the P2P LETS, and the benefit of being able to buy and sell without bank issued interest bearing commercial paper ought to be obvious.

And of course, any employee who uses the currency can join the LETS credit clearing group as well.

This is how to expand a system to extend its usefulness to everyone. Now, the order these steps are taken in isn't necessarily of key importance. You could just as well start with the "common coupons" to get a retail excess capacity redeemability and then add the LETS to it. In that case, the coupons would have to be a "helicopter drop" just like regular ad coupons are. More would be issued than would be redeemed. But their value would be determined by their acceptance value as declared by the store just like a regular coupon. Would they be accepted as the currency of a formative LETS group? That depends- I believe it ought to work if the coupon issue gets scarcer as retail use of the coupons is increasing. That ought to encourage people to find the coupons from each other rather then to just expect them as worthless junk mail. If a means of exchanging the coupons through a group is formed and advertized in the directory as the junk-mail issue is being curtailed, people might just seek out the group to find out how to start earning through credit exchange the "common coupons" they had been using around town. Would this approach really work? I'd like to try it and compare it with an attempt to start with a group first. Some local system founders will already be well connected with local construction contractors and other productive individuals. They might want to start the group first with the idea of adding other components later. Some might start as lone wolves, with an idea they themselves pitch to local businesses to change their coupon ad campaigns, planning all the while to add credit clearing as the system gains momentum. Some might want to offer B2B credit clearing first, if they have personal trust relationships out on the golf course. Some might have a go at launching the whole thing at once as an integrated system. If a group of people start this and define their individual responsibilities
and who has what job in what department within the system, there's no reason that wouldn't be a valid approach.

The main idea here is to get the credit redeemable for a broad range of goods and services. The LETS takes care of redemption in terms of individuals' trades among each other, the excess capacity strategies broaden acceptance to retail, the labor strategies broaden acceptance out to labor in general which in turn moves acceptance up the production supply chain, and the B2B exchange gets the currency useful beyond just retail. And the savings and lending components of the system can be introduced to provide businesses with a means of financing capital expansion. Then, the system can start offering an additional accounting service to manage benefit subscriptions in a complete cycle so that employees can benefit from them just as much as the firms for which they work. And we can all go on vacation with increasing frequency and duration! And then the public services funding and voluntary taxation systems can be put in play to provide for an increasing value of public goods. Again, the order in which these services get added to the system isn't vitally important as long as their implementation strategies both make sense to the market at the time they are added and also compliment and lead to the addition of the other add-on system components.

The point of this integrated system of currency systems is to achieve both the ends of the gift economy and the monetary economy. That is to say, to get high-value low-cost goods into the market by enabling people to contribute, and not by keeping them chained to their production.

We just about have a system here that can rise up and stand on its own. The last big challenges are the problems of using an alternative currency to pay mortgage and government taxes. Both of those keep the banks in control at the end of the day. More on those problems next time.