Jayson Funke wrote:
I would be most interested in hearing what other PEN-L'ers think
about the feasibility of using complementary currencies today (that
is, about the possibility of adopting them beyond local
community-based experiences and within the context of a global economy
tied primarily to the dollar). Below is brief descriptive excerpt from
a paper on the topic by a colleague of mine. Thanks! <
I don't know much if anything about this, but I have a small number of
comments.
...Today, CCS takes many forms: mutual non-credit, fiat, mutual
credit, and service credit-based. The mutual non-credit CCS is backed
by a commodity, and is centrally-issued. [3] One example of a mutual
non-credit CCS is a corporate scrip. This could take the form of
frequent flyer miles, or, in one case, "deli dollars." ... <
corporate scrip, frequent flyer miles, and deli dollars aren't really
money (as usually defined) because their liquidity (i.e., status as a
medium of exchange) is severely restricted. You can only use your deli
dollars at the deli, right? if so, it's really just a short-term loan
(or note) used to get over inadequacies with the banking system. The
exception would when you can easily trade in your deli dollars to pay
for goods and services. If so, they are more like the HOURS system
(see below).
You should remember that corporate scrip can be a (non-financial)
liabiltity. Company towns often paid their employees using scrip,
redeemable only at the company store, giving the company more power
than usual over its employees.
Another example of mutual non-credit CCS is the publicly-issued
variety. The case of Curitiba, Brazil illustrates the use of this
system.[5]... Jaime Lerner, the mayor of the town, may have opted for
a traditional welfare approach to the problem,...Instead, Mayor Lerner
tried a CCS solution. >He announced that public transportation tokens
would be made available to anyone who could pre-sort and deposit their
garbage and recyclables in bins outside the favelas. ...<
again this isn't really money, though it does get around credit
problems, as before.
Fiat CCS are similar to the dominant currency systems of the world,
in that they are not backed by anything except for the trust of their
participants.<
the "dominant currency systems of the world" are backed by more than
the trust of the participants. They are also backed by the power of
the state, something that seems much more important. If the government
accepts the fiat money and is expected to do so in the future,
everybody else will, too. (Supposedly, Pres. Jackson stopped accepting
paper money in return for state-owned lands. This led to a rapid
inflation of prices in paper terms, depreciation of the currency.) The
ability of the US government to tax us is behind its ability to avoid
"running the printing presses" to pay for expenditures. It also can
prevent significant counterfeiting, which could undermine the
purchasing power of the currency.
The HOURS system, developed in 1991 by Paul Glover in Ithaca NY, uses
the hour as the unit of account, which is valued at a set price of
$10. Additionally, HOURS are negotiable, so that different work can
take on different value depending on the transaction. Its membership
is 1,500-2,000 people, and its trade volume is now 6,000 HOURS per
month. The issuance of currency happens at association meetings,
where decisions are also made on grant-making for community
projects. An elected Board of Directors oversees the actual printing
process. Each new member gets two newly-created HOURS, and can then
receive two more every eight months....<
this is more like money (again as usually defined) than the types
discussed above because it's more liquid, but (despite the reference
to labor hours) it seems like it's linked to the US dollar using a
fixed exchange rate. It's a way of increasing the local money supply,
stimulating local business. It can work. But to the extent that it
affects the national economy (lowering interest rates below the
Federal Reserve's target), the Fed would counteract its effects.
In mutual credit CCS, all users are also currency issuers.
Generally, these systems have been adopted by either business
associations or communities. In enterprise-based mutual credit CCS,
firms trade with each other using credit, usually with the assistance
of an intermediary for-profit agency which serves as a clearinghouse
of all transactions and records.[8] The function of these systems is
to allow firms to trade excess or unproductive assets and thus raise
efficiency and profit. The benefits of membership, which comes with
an entrance fee and continuance fee, are new business relations, the
reduction of unit costs, the conservation of usable cash for more
vital expenditures, and the reduction of unproductive assets – also
known as "waste." ... The macroeconomic impact of this industry is
an increase in stability during recessions, when more productive
capacity goes unused and thus the trade of excess assets is allowed to
increase.
Mutual credit CCS focused around communities are known as Local
Employment Trading Systems (LETS),[9] and were invented in 1983 by
Michael Linton in British Columbia, Canada. These systems are
zero-interest, members-only, cooperatively run organizations that
usually serve individuals as opposed to businesses. Most accounts are
kept on computer, and maximum negative balances are enforced in order
to prevent abuses by participants. .... <
this type of system seems very similar to the original idea of the
savings & loan associations or mutual banks or credit unions. It's a
way of providing credit to small businesses (and sometimes
individuals) who are often snubbed (denied credit) by the commercial
banks.
The final type of CCS is the service credit system, which uses "time
dollars" as a unit of currency. Invented by a US lawyer named Edgar
Cahn, the service credit system awards one time dollar for every hour
of social service given by the system's participants. Accounts are
registerred in local computerized "Time Banks." ... <
again this kind of money seems a bit limited in its liquidity. This,
like the system of paying bus tokens for helping with garbage
collection, is a way of getting around credit rationing that prevents
government-type organizations from achieving their goals.
conclusion: these types of "money" seem in general to be solutions to
local problems of credit rationing ("imperfect capital markets") that
cause local recessions and stagnation. Because these types of problems
hit so many localities, I would expect that they would become more
general over time. However, to the extent that their effects are
general (i.e., macroeconomic), they will be counteracted by central
banks. I can expect that the commercial banks will also try to get
into the act and provide more local credit -- while using their
political influence to fight the local systems. In the end, I would
expect that these local credit systems would be limited to the
interstices of the world financial system rather than replacing it
(unless, of course, that system is abolished).
--
Jim Devine / "Capitalism without bankruptcy is like Christianity
without hell." -- Frank Borman
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