Complementary currencies

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Crash's picture
Crash
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Posts: 171
Complementary currencies

Hi all,

 

I just got email this from a friend:

 

Dear Friends,Forget rule of law versus no rule of law, forget capitalism versus socialism, protectionism or free-trade, or government intervention versus no government intervention....Please read the articles of Margrit Kennedy and Bernard Lietaer to learn clearly and simply why our current money system is as dangerous as it is. And send it to everyone you know who works in the City. In this evolution, the rich could stay rich, but gap between rich and poor would stop growing exponentially to the detriment of the planet and all of us. Human nature would not need to radically change, we would simply put a stop to the single most suicidally ridiculous game we have ever played: Compound interest = inflation, recession and economic instability. Check it out if you really want to understand how money works. http://issuu.com/margritkennedy/docs/art_forum_csr_international_1_/1?mode=a_p http://www.margritkennedy.de/index.php?modus=ART&inc=TER&lang=EN All the best in weathering the storm,

fombie's picture
fombie
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Posts: 16
Re: Complementary currencies

Hi crash, thanks for the links!

The first article is hard to read on the site that you link to. I found a more readable pdf version on the following site:

http://www.margritkennedy.de/pdf/ART_FORUM_CSR_international_1_2008.pdf

A highly recommend read!
Margrit Kennedy highlights some of the important misconceptions about money and points to "demurrage" as a possible solution. In particular she talks about a currency backed by a basket of commodities, where the bearer of the notes has to pay for the storage of the backing commodities. Think of it as a kind of dollar on a gold standard, except that for each dollar you have to pay a few percent per year for the costs of storage of the gold by the entity that emits the dollars.  

 

 

 

Farmer Brown's picture
Farmer Brown
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Re: Complementary currencies

 

While the final recommendation (a money based on commodities and global trade contracts) appears to bear merit, I do not understand why she did not mention fiat money even once in the first 3 sections of the article.  All three faults she desrcibes with our money are specific to fiat money.  Interest in and of itself does not require exponential growth.  It is only interest on debt-produced money which is itself interest-bearing, that demands exponential growth. 

pleaseremoveme's picture
pleaseremoveme
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Re: Complementary currencies

To start with: the fear of exponential growth in fiat money is ungrounded: if the value of this money is determined by use, what's wrong with using ever more of it? It just means the numbers change.

I'm studying demurrage as a way of stabilising the economic system, and making it more sustainable. But I found out that following Keynes theories, central banks use inflation as a form of demurrage. So I'm wondering how demurrage really is different form an inflationary monetary policy. Maybe it's just a question of control: it is easy for a central bank to increase demurrage, and hard to increase inflation, because the latter involves the co-operation of commercial banks.

By the way: the gold standard has proved no protection against economic turmoil throughout the 19th century. I don't believe returning to it is an improvement to the current credit money system. Returning to a gold standard is the surest way to plunge the world into a depression.

Farmer Brown's picture
Farmer Brown
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Posts: 1503
Re: Complementary currencies

woupiestek,

The turmoils in the 19th century, a time when gold backed the curency (booms and busts like we have now), were due to the practice of fractional-reserve banking, not to gold.  It doesn't matter what you base your money on if your banking system is going to be based on fraud, which is what FRB is.  

The Byzantine Empire was really the last economy to be based on gold w/o FRB.  It lasted 800 years.

Crash's picture
Crash
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Posts: 171
Re: Complementary currencies

Hi Fombie,

 

No worries, I really like the idea of backing a currency (or many different currencies) with actual physical goods. And different industries could use different goods, agriculture could use seeds, deisel and manure, construction could use wood, stone and hardcore etc. Smaller communities could use whatever mixture of storable goods they have and use, ie, seeds, wood, compost, bio-diesel, whatever. The idea intruirgues me and it would be good to see it in operation.

 

Also, stockpiling in times of plenty for use in times of need is a great idea as long as the institutions we set up are accountable and democratic and participatory.

 

In a LETS, you are backing the currency with labour at the end of the day and essentially this is the most raw asset, because all the items in the basket of goods are produced with labour.

 

LETS is also a demurrage currency because a small fee is payable to the scheme every month or year as a kind of tax to keep the scheme going, so you have to trade to keep a balanced account.

 

I think the two schemes could complement each other nicely

 

Crash 

pleaseremoveme's picture
pleaseremoveme
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Posts: 115
Re: Complementary currencies

Most of the explanations of the fractional reserve banking system I have found, are wrong and misleading. The only money that commercial banks can make is savings. The amount of money actually circulating, is still the amount that the central banks make, no more. Savings are counted as money, but they cannot be used for payment. The fractional reserve system has nothing to do with house prices going up way to high, or with an economy succumbing to it's own debts.

tomaquet's picture
tomaquet
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Re: Complementary currencies

 

Bernard Lietaer (one time central banker and currency trader) has a few interesting articles on his website:

http://www.lietaer.com/

His proposed solution to the current crisis is outlined in this article using the application of resilience theory. (Resilience theory basically states that resilience and efficiency are opposites and that we have to find a balance between them.)

http://www.lietaer.com/images/White_Paper_on_Systemic_Bank_Crises_December.pdf

scepticus's picture
scepticus
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Re: Complementary currencies

Here's a recipe for making a usable gold backed complementary currency ready for immediate use on the high street, without government intervention.

1) Choose your backing. Gold, commodity basket or mutual fund. Lets call the currency 'The Sound'.

2) Setup a business as a credit card issuing bank, called SoundBank. Offer prepaid credit cards loaded with a set number of your currency units. When a customer buys a card, SoundBank purchases the same $ equivalent of whatever the backing asset class is.

3) customers buy the prepaid cards, and take them to a store to buy something. The card identifies its currency to the POS terminal as Sounds, and the issuing bank as SoundBank. The VISA/mastercard system sends the purchase value in $ to SoundBank, which responds with the number of Sounds that currently equal that number of $. The customer gets the good, and the customers account at SoundBank is debited by the appropriate number of currency units. SoundBank then sells from its pool of backing asset to aquire $ which are credited to the merchant's account.

Note that if the backing asset class rises in price against the $, then all accounts at SoundBank will rise too. Similarly if the asset price falls. 

Now, why can't all those who want a gold currency simply setup this business? I don't believe that there are any laws against it. We already have GoldMoney, BullionVault etc. Someone just needs to issue prepaid credit cards and setup a card issuing bank which will invest in GoldMoney or BullionVault, or some commodity index tracking ETF.

Would there be any demand for it? 

 

 

 

 

 

Vanityfox451's picture
Vanityfox451
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Posts: 1636
Re: Complementary currencies

Hi Tomaquet,

I found Bernard Lietaer's ideas absolutely fascinating in an article topping a thread a little while ago. I've spread the ideas from it as thick and wide as I could. I'm sure many reading this thread will find value from it and use many of its methods in Transitioning in the future :-

 http://www.nexuspub.com/articles/2003/july2003/interview.htm

Take Care,

Paul

tomaquet's picture
tomaquet
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Posts: 16
Re: Complementary currencies

Hi Paul,

Thanks for the link - interesting article. I never thought I’d hear someone talk about currencies in terms of yin and yang!

I like Lietaer’s ideas a lot but I’d also like to do something to prevent private banks from controlling the main (competitive) currency. There seems something almost immoral about it, and they do such a bad job of it too!

Complementary currencies combined with monetary reform would be my preferred approach. See my other recent post regarding putting pressure on the G20 to include monetary reform on their agenda.

http://www.peakprosperity.com/forum/g20-monetary-reform-%E2%80%93-james-robertson/12919

Thanks again for the link!

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