Beyond Money

Everyone needs to be aware of the facts presented in this video. While it contains a pitch for investing  in gold and silver, the main message is the incontrovertible fact that  the days of dollar dominance are over and the impact of hype-inflation on Americans will soon become severe. The middle class is about to be wiped  out financially. It’s time to use our dollars to support the emergent Butterfly economy and withdraw from the caterpillar economy.

I’ve posted on this site another excerpt from my book, The End of Money and the Future of Civilization. This portion of Chapter 17 outlines my view of an emergent Complete Web Based Trading Platform. Click here or find it in the sidebar under “Resources, Excerpts.”

The book can be ordered from Chelsea Green Publishing, Amazon.com, or your local bookstore — t.h.g.

The pattern of bubble and bust created by the political money central banking system goes back a long way. This BBC photo essay, The Road to Hooverville, provides a graphic story of the first big cycle under the Federal Reserve.

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Originally uploaded by tomazgreco.

Organizer, Chris Lindstrom and others at the Burlington conference.

On Thursday, June 8, there was a conference, Complementary Currencies: Money for Local Living Economies organized by the E. F. Schumacher Society and held on the campus of Champlain College in Burlington, Vermont. Details can be found at
http://ccit.wji.com/tiki-read_article.php?articleId=65

Besides the keynote address by Bernard Lietaer, there were presentations by Krista Vardebash, Susan Witt, Annette Riggs, Paul Glover, Eric Harris-Braun, Arthur Brock, Julian Darley, and others. I gave a presentation on the state of the complementary currency movement. That presentation was recorded and I will try to get a copy of the audio record at some point to post on this blog. The power point slide show is available now on my reinventingmoney webiste.

This conference was preceded by three days of meetings of the Open Collective 2006 for the local currency community, of which I was able to attend only the final day. My input to that process included a report on the Swiss WIR Bank and discussion of their current practices and recent developments based on Philip Beard’s translation of the 1998 book by Tobias Studer and my conversation with Prof. Studer during my 2005 visit to Basel. I also helped to guide the exposition of the CES online trading network, for which originator Tim Jenkin gave a guided tour at long distance from South Africa via Skype. This was a remarkable use of this available web tool (Skype) to overcome half a world of distance to provide a presentation that worked as well as if Tim had been present right there in the room with us.

One of the attendees at both events was Phillip Dimitrov, a young project manager who is working with Daniel Evans of the XO barter software company in New Zealand. Phillip gave a presentation that described the XO software and its capabilities. It seems to be a very well designed and full featured program for managing credit clearing exchanges. XO is a proprietary product but it is being offered free of charge to non-profit organizations.

Frequent Flyer programs are what are generically referred to as “loyalty programs.” Their primary purpose is to stimulate customer loyalty, that is, to keep customers coming back to make subsequent purchases rather than going to a competitor. These programs typically provide the customer with some sort of rebate on purchases. These rebates are seldom in cash, and most often are in the form of vouchers that can be used as partial or full payment on subsequent purchases. Ideally, a voucher credit should be acceptable in payment on a par with cash, without restriction, but that is usually not the case. In an effort to maximize their loyalty effect and minimize their costs, the issuer of loyalty points, such as frequent flyer miles, will typically impose many restrictions as to when and how vouchers may be redeemed.

In the case of frequent flyer programs, only a certain number of seats are made available for frequent flyer awards on each flight, and often the number of seats so available will be based on the number of seats that are available as the departure date approaches. It is my experience that on some airlines booking must be made more than two months in advance in order to assure an award flight. If you desire a less restricted reservation, at least one airline, Delta, is increasing the number of miles required for an award flight. The normal number of miles for a domestic flight is 25,000, but few flights are available at this rate. If, however, you are willing o pay 50,000 miles, you can probably get the flights you want.

Considering the vast number of miles that the airlines have issued, it is probably safe to bet that this kind of “credit inflation” will only get worse as time goes on. The problem may be mitigated to some degree as the airlines recruit “partner” businesses to not only issue miles, but to redeem them, as well. But any such program that depends upon continual growth is a “Ponzi scheme.” Is that in fact the case with frequent flyer programs? It’s hard to say without detailed figures for each airline. The key question is, how long would it take the airline to fully redeem its outstanding issue of frequent flyer miles? The numbers that need to be looked at are (1) the number of miles outstanding in relation to (2) the number of round trip flights flown monthly or annually.

Another factor that bodes ill for FF programs is the fact that the competitive advantage that loyalty schemes are supposed to provide disappears when everybody starts doing it. Such was the case in years past with supermarket stamp programs like S&H Green Stamps, Top Value Stamps, etc.

One further point: is it proper to refer to frequent flyer miles or loyalty points as “currency?” Well, that depends on how you define “currency.” While they are to some extent transferable, they are not generally spendable. On the other hand, value can be obtained for them, but only from a limited number of entities, and only with restrictions. The technical and narrow definition of currency is “anything that is commonly accepted in payment.” On that basis, loyalty points, including frequent flyer miles, do not qualify. I would prefer to not muddy the waters with loose terminology, and would urge that frequent flyer miles be categorized as loyalty vouchers, not currencies.

From the desk of Bob Meyer at Barter News… 05/23/06

The World’s Largest Private Currency Continues To Soar!

Airline frequent flier miles (FFM) are without doubt the largest private currency in the world. Here’s a quick update on the ever-evolving currency and some of their future challenges ahead. (For a look at other type of private currencies see our Secondary Capital Section, www.barternews.com/secondary_capital.htm.)

It was in May 1981, 25 years ago, that American Airlines introduced the first frequent flier program—a program designed to build loyalty among its passengers. No one envisioned what would eventually result from such a marketing idea.

Today more than 130 airlines issue FFM and 120 million travelers worldwide have accumulated 14.2 trillion frequent flier miles, according to editor and publisher of Inside Flyer magazine Randy Peterson. That’s enough FFM for 568,000,000 flights.

According to the U.K.s Business Guardian publication, a frequent flier mile has a value between 1-cent and 6-cents each. At 3-cents each, the 14.2 trillion miles have a value of $420 billion!

Frequent flier miles are major sources of revenue for the airlines. In the U.S., carriers annually sell about $2 billion FFM to other businesses to use as customer rewards. Thus, people who rarely fly have the ability to earn miles when using credit cards, taking out a mortgage, eating in restaurants, or buying flowers.

Interestingly—disconcerting if you really think about it—the sale of FFM is the most-profitable part of many airlines. Yet the actual cost of fulfilling these “free” tickets is minimal…less than $15 on average, according to an article the April Harvard Business Review titled “Your Loyalty Program is Betraying You.”

Joseph C. Nunes, associate professor of marketing at the University of Southern California’s Marshall School of Business and co-author of the Harvard Business Review piece, says in the short term the frequent flier mile programs are in good shape.

Longer term, however, could be a different story as credit cards and/or mortgage companies may one day wake up and say, “To heck with enticing customers with FFM. They’re costing us too much and consumers aren’t as attracted to them as they once were. We’re going to compete on price instead.” (That’s what happened years ago to the Green-Stamps-for-products redemption program.)

Additionally, fulfillment could become a major problem as airline fleets are decreasing in size. The legacy carriers of the world—such as United or American—had a combined fleet that was 22% smaller at the end of 2005 than in mid-2001, according to industry trade group Air Transport Association.

While there is little chance of fulfilling on 586 million flights as long as the industry continues selling $2 billion of FFM annually, the following story shows United is taking a small step in the right direction.

“Choices” Air Currency Launched By United

In an effort to make FFM more attractive, United Air Lines has launched a separate new form of air currency it calls Choices miles. The new program offers complete transparency in that there is no waiting, no black-out dates, and no seat restrictions or other conditions attached.

Choices can only be earned by using a Chase United Mileage Plus credit card. Although the miles can be used for flights on United, or hotel and car rentals, they must be booked online at www.united.com.

The Choice miles can also be used, at a penny-per-mile, toward payment of a previously purchased flight made at www.united.com. It’s only a matter of logging into the web site and transferring Choice miles against the billed airfare, i.e. the credit card balance is reduced when miles are credited against it.

Example: A ticket is purchased using a Chase Mileage Plus credit card via United’s web site for $299. When the bill comes you log on to united.com and transfer 20,000 of your Choice miles to apply against the $299, reducing your bill and ticket payment to $99. (Unlike a regular award ticket, you also earn FFM on the transaction.)

Thomas H. Greco with Prof. Tobias Studer in Basel, Switzerland in May 2005.

Prof. Studer’s book about the Swiss WIR Bank is now available in English. This excellent translation by Prof. Philip Beard of Sonoma State University, is a “must read” for any student of money, banking, complementary currency, or exchange alternatives. – T. H. Greco

WIR and the Swiss National Economy
by Prof. Tobias Studer
Department of Economics
University of Basel, Switzerland
Basel, 1998
Published by the WIR Bank, Basel

Title of German original: “WIR in unserer Volkswirtschaft”

English Translation: Philip H. Beard, Ph.D., Sonoma State University
Rohnert Park, California 94928
© 2006

The $3 download can be accessed/ordered at lulu.com, specifically, http://www.lulu.com/content/301348; a printed copy can be ordered at http://www.lulu.com/content/268895 for the price of $15.00.

What the world needs now is practical approaches to resolving the problem of power.

The key question is “who decides?” Right now, the process has been rigged so that a self-serving few decide for the many. How are they able to do that?
The key is MONEY.

Did George Bush and Tony Blair come begging to the people to donate money so they could attack Iraq?
Did they even ask us to pay higher taxes so they could fight this war?
Obviously, they did not. Bush even LOWERED taxes, especially for “his base,” the rich and well-connected.
How is it possible for expensive wars to be fought without raising taxes?

William Patterson and his cohorts figured that one out more than 300 years ago when the Bank of England was founded. They had no trouble selling the idea to King William III. The deal was this: The King got the money he needed to fight his war against France, while the financiers got the privilege of printing bank notes and lending them into circulation.
This perversion of the monetary system has since been “perfected” and spread almost universally to every country around the world. The power to control the creation and allocation of money (which is nothing more than credit) is the basis for all political power.
Until we do something about that, nothing much is going to change.

Fortunately, it is possible to restore “the credit commons” through voluntary, free market approaches. How? By establishing credit clearing associations that can be networked together worldwide.
LETS prototypes have given thousands some idea of how clearing works. Now we must take mutual credit clearing to the mainstream and build it to scale.
E. C. Riegel had the vision but not the tools; we now have both the vision and the tools.
Start by reading Riegel’s Private Enterprise Money. I hope to have the digital files posted at www.Reinventingmoney.com sometime soon. Also view my slide shows at www.Reinventingmoney.com and read the post below.