Category Archives: Exchange Design

Beyond Money—Learning the basics of value exchange

We need to get beyond the confusions and obfuscations that surround the concept of money.

To do that we need to distinguish between what money is, i.e., its essence, and what money does, i.e., its functions. Conventional definitions of money, the ones that are universally taught in schools and universities, tell what money is supposed to do, not what it is.

The essence of money is credit. It is the issuer’s i.o.u. or promise to reciprocate, i.e. to provide real value to the market and accept his currency back as payment for it.

With that in mind, we can begin to make sense of money and effectively address the problems that arise from conventional forms of money.

Conventional thinking lists money as having these functions:

  • Medium of exchange—what we use to pay one another.
  • Store of value—what we use to save our temporary surplus.
  • Measure of value—what we use to quantify the market value of all the things that we buy and sell.

But, as I have argued for almost 30 years, these are separate and distinct functions that need to handled by distinct and different means. (For more about that see my book, Money and Debt: A Solution to the Global Crisis, Part III).

Let’s focus on the exchange function, for this is the fundamental and proper role of money, and this is where attempts to solve our global financial and economic problems must begin. Anyone who has studied my work will know that I have thoroughly articulated these concepts in my books and my various presentations. But theory and practice develop together, each informing the other, and finding ways to improve the process requires that we look at both.

Over the past several decades, numerous innovations in the exchange function have emerged, including virtual commodities like Bitcoin, LETS systems, community currencies, and commercial trade (“barter”) exchanges.

Of these, the greatest market success has been achieved by commercial trade exchanges which enable their member businesses to buy and sell without using conventional money. Rather, trading is enabled by using the members’ own credit in a process called credit clearing which simply offsets debits from purchases against credits from sales. (For a more complete description of how this works, see my book, The End of Money and the Future of Civilization, especially Chapter 10).

Over the past 40 years, much has been learned from the operation of commercial trade exchanges, and while they have achieved some modest levels of success, they have barely scratched the surface of the potential market for credit clearing services. It remains for exchanges system designs and procedures to be optimized and standardized and for local exchanges to be networked together into a vast moneyless marketplace.

The trade exchange industry has two trade associations that have been instrumental in helping practitioners to share information and in promoting standards and best practices. These are the International Reciprocal Trade Association (IRTA) and the National Association of Trade Exchanges (NATE). But over the past year a new voice, Bartertown Radio, has emerged that seeks to disseminate the knowledge and wisdom of practitioners to a wider audience. Its mission is to provide an “Educational Program for Business Owners, Entrepreneurs, Barter Exchanges, Owners or New Owners of Barter Exchanges or anyone interested in Alternative Economies.”

Broadcasts are archived and can be accessed on demand at the Bartertown Radio website. Particularly relevant is the April 18 broadcast featuring Richard Logie, a man with 20 years of experience as a trade exchange operator and software platform developer. During that interview, Richard shared his experience and knowledge about a wide range of topics including the factors he considers in allocating credit lines to exchange members, how tax issues are dealt with, and ongoing efforts to establish and enforce good standards of operation. That interview with Richard will be continued next Saturday, April 25 at 11 AM Eastern time (UTC-5). Be sure to tune in at http://www.blogtalkradio.com/educate4barter/2015/04/25/richard-logie-part-2 .

Other archived broadcasts that may be of particular interest are the April 5 interview with industry leader, Harold Rice of the American Exchange Network, and the interview with yours truly from December 13, 2014. Besides operating his own trade exchange company for almost 40 years, Harold Rice has provided consulting services for entrepreneurs and other exchange operators. He is a fount of knowledge about the details of exchange operation and has special expertise in accounting and tax issues.

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Thomas Greco’s Presentation at The Institute of Noetic Sciences: The Evolution of Money and its Potential to Improve Humanity

On October 30, 2014, I gave a presentation, titled, The Evolution of Money and its Potential to Improve Humanity, at the  Institute of Noetic Sciences (IONS) in Petaluma, California.

I was greatly encouraged by the high caliber of those who attended and the quality and intensity of the discussion that followed.

The proceedings were video recorded by organizer and master networker, Sergio Lub, and can be viewed at this Vimeo site.

Youth Employment Scrip-Solving Two Problems at Once

In my 2001 book, Money: Understanding and Creating Alternatives to Legal Tender, I included a description of a proposed community currency I call Youth Employment Scrip.

This currency design is intended to provide the local community with a supplemental means of payment based on the labor that young people can provide to local businesses, non-profits, and government agencies, that normally could not afford to hire them.

Combined with presently available employment agency services, such a plan could help reduce youth unemployment while providing the entire community with additional liquidity that will help local businesses to sell some of their unused capacity.

For a complete description, you can view or download the entire chapter here: Money Chapter 22 YES

Thomas H. Greco to address Tucson business communty

I will be giving a free presentation in Tucson on August 18 to show local small businesses how to create liquidity based on their own capacity to produce desired goods and services.

Details can be found at:  https://beyondmoney.files.wordpress.com/2014/08/2014-tucson-flyer-local.pdf
Even if you don’t live anywhere near Tucson, I’m sure this will be of interest to many in your network so please help to get the word out. Our communities cannot afford to be complacent. We need new creative approaches to economic development, and locally controlled exchange alternatives are a key requirement to future prosperity, resilience, and a sustainable world.

This presentation will be recorded and made available on this website following the event.

Thomas H. Greco

Phone-to-phone payments already bringing massive changes to Kenya

Try to imagine what your life would be like if you had no bank account, no credit or debit cards, and no cash, and on top of that, you lived in a country where poverty, crime, and corruption were rampant. I’ve never been there, but by many reports Kenya is just such a place. How do people cope?

As in other places, like India and Thailand, that I have visited, it seems that the majority of people in Kenya are micro-entrepreneurs who eke out a living by producing and selling products or services of some sort. And, like everywhere else, having a means for exchanging those goods and services and “paying” each other is crucial to survival.

Ultimately, as private currencies and moneyless exchange mechanism proliferate, we all will have numerous payment options.  The Bangla-Pesa project operating near Mombasa is one such model that is now being replicated in Nairobi and other parts of Kenya. But even technologies that only provide new ways of paying with national currencies are proving to be beneficial in many ways.

Kenya’s Safaricom company has led the world in implementing phone-to-phone payments with the M-pesa. All it takes is a text message from the buyer’s phone to the seller’s phone to make a payment. Almost everyone in Kenya has access to mobile phone service and they may draw cash from their accounts at any of the 45,000 independent agents scattered around the country.

A recent Business Week article documents the ubiquity of this payment mechanism and its positive effects in such diverse areas as security, renewable energy, crowdfunding, and economic development . You can read it here: Ten Days in Kenya With No Cash, Only a Phone.

When mobile phone payment systems include complementary currency options, the beneficial effects will be multiplied manifold. — t.h.g.

An open letter to the Financial Times

Dear Martin Wolf,
Your article, Strip private banks of their power to create money, highlights some of the problems of the global money and banking system, but falls short in the proposed solution.

The problem is not private money creation, per se, but the monopolization of credit (money creation) in the hands of a private banking cartel and the collusive arrangement between bankers and politicians.

In today’s world, banks get to lend our collective credit back to us and charge interest for it while central governments get to spend more than they earn in overt tax revenues, relying on the banking system to monetize government debts. These two parasitic drains on the economy, interest and inflationary government debt monetization, create a growth imperative that is destroying the environment, shredding the social fabric, and creating ever greater disparities of income and wealth.

Turning over the money monopoly to politicians (what I call the “Greenback solution”) will not change things very much. It will be the same people wearing different hats. The political process has been so thoroughly corrupted and taken over by this small elite class that political approaches to solving the money problem have no chance of passage anyway. I articulated that argument a few years ago in my Alternet article, The End of Money: Take Power Back From the Money and Banking Monopoly.

True solutions must emerge, and are emerging, from society and from associations of small and medium-sized businesses. Money is first and foremost a medium for facilitating the exchange of goods and services and other forms of real value, but the exchange function can be effectively and efficiently provided outside the banking system and without the use of conventional political money. This is being done for associated businesses through credit clearing exchanges and through the issuance of private currencies or vouchers by businesses that produce real value. Both approaches have the capacity to provide exchange media that can be used by general public as well.

So, rather than ban private issuance of currencies, such private issuance needs to be proliferated and encouraged. There needs to be competition in currency so that there will be a sufficient amount of exchange media, and so that political currencies cannot be abused without losing patronage in the market. Rather than establishing the state as the money power, we need to have a separation of money and state. That argument is more fully developed in my latest book, The End of Money and the Future of Civilization.

Best wishes,

Thomas H. Greco, Jr.

Excitement mounts over upcoming IRTA Convention!

The International Reciprocal Exchange Association (IRTA), the premier association of the commercial “barter” industry, has been for more than forty years promoting the interests of small and medium sized enterprises by assisting its member trade exchanges to provide them with liquidity and effective opportunities for moneyless trading.

Since 2005, IRTA has been reaching out to the wider grassroots community of researchers, developers, and organizers of private currencies and complementary exchange mechanisms and has broadened its advocacy to include them.

The upcoming 34th Annual International Convention of the IRTA in Las Vegas will provide a unique opportunity for social entrepreneurs and monetary activists to further consolidate programs of cooperation with the well-established commercial “barter” sector of the moneyless exchange movement. The Convention will be held from Sept. 19 thru 21 at the Venetian Resort in Las Vegas.

Along with IRTA President and experienced trade exchange operator Annette Riggs, and Rob van Hilten, Executive Director of QOIN, a consultancy for community currencies, I will be a panelist in a Saturday session (September 21) titled Understanding Diverse Exchange System Models: From Bitcoin and Berkshares, to Transparent Credit Clearing Networks. This session will consider three basic topics of discussion:

Bitcoin, the good, the bad, and the ugly.

The benefits and limitations of cash-based local currencies.

The emerging global exchange network.

There is still time to register for this important event. You can get details about the convention program and secure your place by visiting the IRTA website at http://www.irta.com/.

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