Category Archives: Developing Alternatives

Mutual Credit: Questions & Answers

Posted on May 17, 2023 | 1 comment

Answers provided by Thomas H. Greco, Jr.

This post is adapted from a conversation I had with one of my followers in 2021. The questions that were posed are quite pertinent and wide ranging, and I think my answers will be of interest to anyone who wants to understand mutual credit clearing and/or is considering designing and implementing one. 

1. At the least minimum, how many businesses should be there in the network to begin tradingwith each other and should we be thinking about a maximum limit, if yes, then why and how?

It is not only a matter of numbers but also of variety of goods and services represented and the volume of sales. Conceivably, a mutual credit clearing network could begin with a single large trusted business that would have a large line of credit in proportion to their monthly sales volume, say a debit limit of 2 or 3 times monthly sales. All other members would need to earn credits before they could spend credits, they would have no line of credit until they had demonstrated their earning capacity within the network. But it would be better in many ways to have a number of “trusted issuers” who offer a variety of goods and/or services that are in regular demand, and who thus qualify to receive a line of credit.

In practice, commercial trade exchanges do not launch until they have a few hundred members that offer diverse goods and services, but in each case, the line of credit (debit limit) must be proportionate to their capacity to provide desired goods and services.

2. What are the differences in benefits for an issuing member, non issuing member?

An issuing member has been given a line of credit; they can spend before they earn. A non-issuing member does not (initially) have a line of credit; they must earn credits before they can spend credits. As they demonstrate their capacity to sell as well as buy, they may then qualify for a line of credit.

3. How can a non member of the network be a part of it?

A non-member can join the network to buy from, and sell to, the other members. Also, a non-member can be brought into the process by accepting vouchers issued by the network, as follows: It a member wishes to buy something from a non-member, s/he might ask the network administration to create voucher notes or tokens which they can draw against their account balance or line of credit. Those vouchers can then be offered as payment to a non-member vendor for goods or services. If the non-member is willing to accept them, the vouchers could then circulate outside of the network, but the voucher must have an expiration date to assure that the credits they represent will be returned to the network ledger when they are used to buy something from a network member.

4. In India, we have a savings culture as most people are still conservative when it comes to their money and also because there are major future investments for parents and families because culturally they are responsible for  getting their children educated and married both requiring a lot of money. In that context, won’t people be uncomfortable in having just a medium of exchange and not able to save the currency which is a general tendency.

Surely, people need to save, and there are many ways to do that already. Savings can take the form of real assets, like precious metals, collectibles, tools, equipment, land, buildings, machinery, etc., or financial assets like corporate shares, bonds, savings deposits at a bank, etc.

Those ways remain available and assets can be acquired with an alternative currency as well as with conventional currency from anyone willing to accept the alternative currency in exchange for those assets. In the early stages, it is more likely that an alternative currency will be accepted for real assets than for financial assets, most of which must be acquired from banks and other institutions that are part of the dominant fiat money system. As I’ve suggested in my books, as a credit clearing exchange develops it can add savings mechanisms to it exchange services. Those who have surplus credit balances can shift them to their “savings” account just as people do now by shifting balances from their checking account to their savings account at their bank or credit union.

5. When the network reaches different sizes of member businesses like 20, 50, 100, 500, 1000: In these instances, how should the credit allocation be thought about, will it change according to the size or the types of businesses in the network, how to decide what number of possible issuers can issue at one time meaning how to think about the maximum credit issuance in a network?

I’m not sure what you’re asking here. The overall amount of credit that exists within a network at any one time will adjust itself according to the amount needed to complete all desired trades so long as account balances remain within allowed limits. Each account will be evaluated individually to decide its debit limit by applying a standard algorithm that is based mainly upon the sales volume of that account but also may include other factors such as the type of goods and services it provides (essential necessities that are in constant demand, or not), reputation with customers and/or suppliers, overall indebtedness (and risk of insolvency), sales trends, etc.

It is expected that most account balances will remain well within allowable limits but still provide the members with adequate liquidity. Those that are chronically close to their limit will be assisted in finding new customers and sales possibilities and/or developing new products and services that are in demand. 

6. In India, in the informal sector (which is minimum around 60%), a transaction happens either fully in cash or partly in cash (not shown in records for tax purposes) and partly cheque/ bank transfer/ net banking etc. What needs to be done in such a scenario?

Under the present circumstances, government policies are typically antagonistic towards small and micro-businesses, and support market dominance by large corporations. It is hard to fault anyone for trying to avoid tax liabilities by using paper cash and other anonymous payment options. But the evident recent trend has been toward the elimination of cash by governments. Governments and banks everywhere seem determined to force a shift of monetary and financial transactions onto channels that allow every transaction to be tracked, and upon which taxes and fees can be levied. Furthermore, the complete replacement of cash by such digital currency systems will further tighten government control over how you spend your money, or whether you will be allowed to access it at all.

Mutual credit clearing is not intended to be a means for avoiding taxes. Rather it is a way of providing an economy with liquidity (a means of payment) that is independent of the banking system and supplemental to the supply of political money. See my web post, There ain’t no such thing as a free lunch: Principles of Credit, Exchange, and Finance, especially Addendum 2.

It is crucial to personal freedom, the survival of small businesses, and to local self-determination that such independent payment systems be established and reach significant scale prior to the complete centralization of money power into the hands of the political, banking and corporate elite.

7. Also in our informal sector, we have a data problem because most businesses are not incorporated hence most of them don’t maintain balance sheets which are public and can be trustworthy (again one problem being that they don’t want to show their actual income in order to avoid high taxes), so in that case how do we as an exchange operator could trust the issuing members?

The crux of organizing a system to provide the exchange function is for actors in the economy, be they unincorporated businesses, corporations, or individuals, is in deciding whom or what to trust with a line of credit, and to what extent (how much credit). There are numerous factors that might be considered in deciding credit lines. Each commercial trade exchange has its own system for doing this. Here below is one example. I’m not saying that it is the “right” formula but it serves as an example of a few factors that might be considered. Of course, local circumstances must ultimately be considered in deciding which factors to include and how much weight should be given to each. In the circumstances you describe, reliance will likely need to be primarily upon the reputation a business has among its suppliers and customers, and estimates of business volume based on self-reporting and confirmed by observations. Along with establishing the mechanisms for facilitating the exchange of value, we need to be building communities based on face-to-face interactions and personal knowledge of those we are doing business with.

Recent scandals have show that even the audited balance sheets of public corporations may not be trustworthy. 

8. With the issuing principle, you explain in what quantity a business should issue its currency, but just to be sure, does that factor in the sales the business will have in rupees/dollars because that depends completely on the market demand.

At the beginning of operations of a mutual credit clearing exchange, there will be no available data on the volume of sales within the exchange, so one must estimate that potential based upon a member’s sales volume in the rupee or dollar economy, AND the number and size of those exchange members who might be their customers.  

9. Will the mutual credit achieve its vision if a transaction is done partly through mutual credits and the rest through fiat (This I think will help people adopt the system because that way they might save in their own currency too and feel safe about it). How should we view this whether part payments will take us to the vision or no?

What you are referring to is called in the commercial trade exchange industry a “blended trade.” This is generally allowed on large transactions but discouraged on smaller transactions. Yes, members may feel more comfortable with blended trades, considering that they need to be sure of covering their cash costs, but it is a departure from the ideal. While a business must cover cash costs overall, cash costs need not be covered on each and every transaction. I recommend that, except on very large transaction amounts, the cash portion should never exceed 50% of the transaction amount. Sardex has used a sliding scale for the percentage of cash allowed according to the size of the transaction.

10. You said to recruit all members of the supply chain till the basic commodity producers, but the supply chain is not just national but international so in that case it looks very difficult until we have credit exchanges all over the world. I understood pretty much I think your regional economic development plan but for so many of the products which just can’t be import replaced, how will the development plan work?

Yes, of course that is the problem; the entire supply chain is not entirely local or even national. But it is important to drill down into the supply chain as far as possible to maximize the amount of transactions that can be cleared. Further, sustainable economics and community independence require that more goods and services be sourced closer to home. The present global economy has extended international trade far beyond the amount that is necessary or desirable, has favoured mega-corporations and industrial agriculture, is dependent upon the subsides and other support provided by national governments and  the banking system, is wasteful of energy required to transport goods long distances, and is, in real terms, unsustainable. The necessary transition back toward local production for local consumption requires “import substitution” which works in harmony with, and is stimulated by, the local control of credit and systems of mutual credit clearing.

We must begin with what is presently possible and build upon that. Ultimately, I envision the development of a global credit clearing network comprised of relatively small local nodes — an “internet of exchange” in which credit is locally controlled and managed, but globally useful for payments.    

11. Since the taxes are collected by the central government, how will taxation be affected because the central government would never accept it?

Of course, taxes must be paid in whatever currency the government demands, so every member must make sure that they earn enough in that currency to do so.

12. Will the issuers of the currency have the entire line of credit at once in the beginning itself? Or will it be slowly increased?

No, a line of credit is simply a maximum amount that can be accessed, i.e., the limit on one’s debit balance. Trade Credits in a mutual credit clearing circle can be thought as an internal currency. That currency is created only when it is spent into circulation. Prior to that it does not exist; it is not on the ledger. That is also true for conventional money that banks create by making “loans,” but banks pretend that money is a thing so they charge interest on the entire amount of a “loan” even if it remains a deposit in the borrower’s account and never gets spent.

13. Can’t businesses which don’t have regular demand for their products issue currency?

Imagine such a business that does not have a regular demand for their products asking you to accept their private currency as payment for something you are selling. Would you accept it? Why? Would you be able to spend it? Where?

A currency is created when the issuer spends it. What gives a currency value is the issuer’s promise to accept it back as payment for something they sell. If no one wants what they sell, no one will want their currency; it will have no value to anyone. An issuer of a currency must be ready, willing, and able to redeem their currency, not by giving fiat money for it, but by delivering the goods or services they have to sell.

14. How will the network work if there are no issuers and hence no lines of credit for any business to begin with and let’s say there are 20 diverse businesses in that network, the money gets created the moment there’s a transaction between a buyer and a seller as debit and credit in the system and likewise further, what are the effects of it?

It can’t. Some businesses must be assigned lines of credit, i.e., they must be authorized to spend before they earn. The total of debits (or credits) in a clearing system are the “money supply” of the system. No credit; no money/currency.

15. Can the currency be created based on a specific problem a small business faces, e.g., working capital shortage, or increasing employees’ salaries or a specific sector for that matter?

A currency is intended to facilitate the exchange of goods and services; it must therefore be created on the basis of existing goods and available services. A currency thus monetizes working capital (inventories and accounts receivable). Capital improvements, on the other hand, should not be the basis for currency creation because the goods and services that they are intended to produce will not be available until some later time, if at all. Investments in capital improvements must be financed out of savings.

16. In the beginning, should every business get a positive credit allocation regardless if it’s an issuing or a non issuing business?

An issuing business is, by definition, one that qualifies for a line of credit. The qualifications for a line of credit have already been discussed. Please note that in assigning lines of credit there are no judgements being made about anyone’s “personal” worth, but only about the value of the goods and services they offer to sell and the potential demand for their goods and services in the market. The line of credit monetizes the value of those goods and services in the form of trade credits that can be used to make payments to others within the system. Have a look at my monograph that explains that further, Liquidity and Monetization. This monograph defines key terms in the design and issuance of exchange media.

17. Continuing on the supply chain example given earlier, let’s say if a business has 50 SKU’S, out of those, for 20 SKU’S, the suppliers are locally available so there are dealings done with them, but not for the remaining 30, in that case should he keep different numbers for different products? Same goes for products with different margins: How will the business set the credit amount for each product in that case?

An SKU is an identifier of a particular product. Your hypothetical example says that a particular business needs to inventory 50 different items, of which only 20 can be sourced locally. I see no reason why different SKU numbers would need to be used. Those items that are available locally can potentially be paid for using trade credits, while those that are not will continue to be bought using the government fiat currency. The margin on each SKU item is not relevant.

Regarding the second part of your question, I presume you are speaking here again of blended trades. The business will need to work that out based on their experience. As I said before, cash costs do not need to be covered for each individual transaction but must be covered in the aggregate. This leaves room for the business to decide the cash proportion on the basis of marketing and demand considerations as well as financial ones.

18. Is it really right for us to charge the transaction fee on their money? And I couldn’t understand the brokerage fees and other ways of monetizing the service? This question of the business model has me bothering since sometime now both from the ethical and the practical standpoint.

A trade exchange, like any other business, will continue for some time to have some expenses that require cash payment, e.g., for taxes and goods and services that are not available within the trade exchange. Like every other business, it must therefore generate some cash income. As trade exchange networks grow, a larger proportion of the administrative needs can be sourced from the membership using trade credits and the cash needs will decline, then most of the revenues can be collected in trade credits.

19. If a business accepts partially in mutual credit, will the businesses decide how much % that would be and keep fluctuating it according to their needs, and if so, how will it affect other businesses?

Each trade exchange has their own policies about blended trades and, as I mentioned above, there are competitive considerations to be taken into account as well as the overall benefits of the credit clearing services. Businesses should be allowed to vary the cash percentage according to their needs but within certain limits specified in the membership agreement. See my model membership agreement as a possible starting point.

The IRTA  has, over the years, produced many policy recommendations for its member trade exchanges and many of its documents are available to the general public. I would recommend that you search their website.

20. You didn’t mention the maximum limit on numbers of businesses in one network?

That number will need to be determined in practice, with due regard to the need to maintain the personal aspect and high level of trust among the members in each local exchange circle (node), and the “Dunbar number” or “Rule of 150.” Here’s an excellent article that explores the question: Dunbar’s number: Why we can only maintain 150 relationships.

21. How will an issuing business actually ever know how much to issue because he will never know how much business is going to come through fiat money meaning how much inventory will he order?

An issuing member issues currency by buying from others in the circle, or in the wider network of circles. He is then committed to sell that same amount of value in return for the trade credits he issued. If trade credits are presented as payment he must accept them so long as he has credits outstanding (a negative balance on his account). He must have sufficient inventories to satisfy the total demand regardless of the form of payment tendered. Since his credit line was assigned on the basis of his likely sales, there should generally be no problem about his ability to deliver. Actual performance of each account must be monitored and action taken to prevent problems from developing.

22. How will the network adjust itself, as you mentioned in the document earlier? Are there real world examples on that?

I said the “volume of outstanding credit” will adjust itself. If there is very little buying and selling within the trade exchange then there will be very little credit on the books; as more trading occurs, more credits will (potentially) be created.

23. What do you mean by “businesses remaining well within allowable limits”?

Just what I said, “Each account will be evaluated individually to decide its debit limit by applying a standard algorithm that is based mainly upon the sales volume of that account but also may include other facts such as the type of goods and services it provides, reputation with customers and/or suppliers, overall indebtedness, sales trends, etc.”

24. What software platforms are available to use right away at low cost or even for free? How do i get started as quickly as possible with the software?

That depends upon the level of security you need. There are many proprietary programs available in the commercial trade exchange sector.

A few free options that I’m aware of include:
Cyclos (https://www.cyclos.org/products/). Version 3 is open source and free, while version 4 is free to try and more functional.

Community Exchange Network (CES) (https://www.community-exchange.org/home/) is a platform that provides free hosting for hundreds of local currencies and exchange systems worldwide.  

Community Forge (https://www.communityforge.net/en). “Community Forge is a non-profit organization that designs, develops and distributes tools around complementary currencies.”

25. What are brokerage fees?

Commercial trade exchanges typically employ brokers to assist users in finding both sales opportunities and ways to spend their trade credits. Usually, these services are included in the membership fees, but brokerage services may be billed separately.

26. Are there contextual factors you think should be understood before implementation?

Yes, launching a mutual credit exchange requires a lot of ground work in making contact with prospective participants, getting expressions of interest, and ultimately commitments to participate. It is helpful to work through established networks like business, social, cultural, and religious organizations. Publicity and news articles can help with recruitment and generation of a favorable attitude among the general community.  

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My conversation with Emily Peyton and Jim Hoag

Posted on May 7, 2023 | 4 comments

In this conversation we discuss our collective predicament and what people are doing to preserve our freedoms, assert our rights, and build a better world.

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Posted in Cryptocurrencies, Developing Alternatives, Exchange Design, Geopolitics, Politics

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My latest interview with Alasdair Lord

Posted on May 1, 2023 | Leave a comment

In this interview I provide a succinct description of the present central banking, interest-based, debt money system and its dysfunctional nature, the global crisis that it has created, and what we can do to transcend it.

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Posted in Banking, Developing Alternatives, Finance and Economics, Geopolitics, Government, Prescriptions

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2023 April Newsletter — The state of the world, and what’s being done about it.

Posted on April 28, 2023 | Leave a comment

In this issue:

  • Private and complementary currency systems: purposes, principles, practices, and performance.
  • Peace or Empire?
  • Disturbing Thoughts (about the economy)

Private and complementary currency systems: purposes, principles, practices, and performance is now online.
 
            In October of last year (2022) I gave a remote presentation to the 6th Biennial RAMICS International Congress in Bulgaria. RAMICS is the Research Association on Monetary Innovation and Community and Complementary Currency Systems, which includes both academics and practitioners. In my illustrated presentation titled, Private and complementary currency systems: purposes, principles, practices, and performance, I provided a concise summary of key points and fundamental principles that need to be understood in order to transcend the dysfunctional and destructive political money system by decentralizing the control of credit and creating honest and effective, non-political exchange media. Here is an abstract of its contents.  
 
Through the generous assistance and editing work of Ken Richings, the presentation is now available for viewing on YouTube.
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Peace or Empire?
 
            Dennis Kucinich at Rage Against the War Machine
At the February 19 anti-war rally in Washington, DC, former US Congressman Dennis Kucinich made an inspired call for peace, justice, compassion, and an end to corruption in government. I don’t believe that any reasonable person of good would disagree with his message. In a subsequent message, Can they ‘repeal’ the dead? Ask Orwell, Kucinich recounts the criminal invasion of Iraq by the US in 2003, the lies which were used to justify it, and its tremendous cost in material resources and lost lives. Another major consequence has been an erosion of trust in the US government both at home and abroad.
 
            Graham E. Fuller, in this recent post, outlines the Long Term Implications of the US destruction of Nordstream 2 Pipeline.
 
            The achievement of peace in the world requires mutual respect and good faith negotiations, but unfortunately, peace is not the goal of those who have for some time been in control the US government under administrations of both parties, rather, they are bent on achieving “full spectrum dominance” and have chosen to restart the Cold War in hopes of weakening Russia and forcing it into line with the agenda of the New World Order in which the Western powers control all the Earth’s resources. If you want to get a more accurate picture of what’s actually been going on in eastern Europe, pay attention to former Marine and UN nuclear weapons inspector, Scott Ritter starting with his post, Give peace a chance.
 
            Economist Michael Hudson adds his voice to the matter, arguing that Germany has become an economic satellite of America’s New Cold War with Russia, China and the rest of Eurasia.
 
            And to round out the story of why the world is now on the brink of an unprecedented catastrophe, listen to the ever insightful Noam Chomsky, still sharp and coherent at age 94, speak about Putin, Ukraine, China, and Nuclear War.
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Disturbing Thoughts (about the economy)
 
            John Mauldin is “a visionary thinker, a noted financial expert, a New York Times best-selling author.”  I’ve been a subscriber to his Mauldin Economics newsletter for at least a couple years. This edition seems particularly important, especially the section titled, “We’re Going to Have a Crisis.”
 
Citing the recent bank failures and the government’s decision to insure even the uninsured depositors, Mauldin observes that deposits will inevitably be withdrawn from smaller banks and placed in banks that are considered “too big to fail.” He argues that a major change is needed but that, “Our political system is sadly not up to the task. The current structure is all we have, and it won’t improve until a crisis forces change.” He quite emphatically concludes that “…the situation demands changes. Which means—and I don’t say this lightly—we’re going to have a crisis which will give us that change.”
 
Mauldin continues with an analysis of the developing crisis, particularly with regard to small banks’ exposure to declining asset values in commercial real estate.  You can read the entire newsletter at Mauldin Economics.
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            In April the Sonoran desert blooms, the fragrance of orange blossoms fills the air along with that of creosote bush, Palo Verde and a host of other plants. The winter chill has gone and the summer heat has not yet arrived. It is a particularly pleasant time to be here. I hope you are enjoying your home turf as much as I am mine.
 
Thomas

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Posted in Basic Concepts, Developing Alternatives, Exchange Design, Politics, Prescriptions, The state of democracy

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Upcoming event: Exploring the Sustainability Challenge with Thomas H. Greco, Jr.

Posted on February 14, 2023 | Leave a comment

It should be clear by now that there are many aspects of our present civilization that are neither just and equitable nor sustainable. But in the midst of the deepening global mega-crisis we have the opportunity to re-imagine and reinvent the systems and structures that are failing us, particularly those of money and the exchange of value. In this event we will discuss practical ways to pay and be paid without the need to use the kind of money that we are accustomed to, ways that can empower our communities by rewarding those who produce and provide real value. Sign up today at Eventbrite.

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Posted in Developing Alternatives, Exchange Design, money, My activities, Prescriptions

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2023 Winter Newsletter–Answers to the Money Problem, and the state of the World

Posted on February 2, 2023 | 1 comment

In this isssue I describe what private currency vouchers are and how they can help solve the money problem that I’ve been writing about for the past 35 years. Here’s the full table of contents:

  • Private Currency Vouchers, an Answer to the Money Problem
  • History and current events
  • Other Historical Documentaries
  • Taming the corporate beast
  • It is 90 seconds to midnight
  • Pasta with broccoli

You can read the entire newsletter here or here. Subscribe to receive my future occasional newsletters.
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Private Currency Vouchers: an Answer to the Money Problem

Posted on January 16, 2023 | 7 comments

Unlike, government and central bank fiat currencies which promise nothing but their acceptance as tax payments, private currency vouchers promise to be redeemed for real valuable goods and services. If the issuer is trustworthy and can be counted on to honor their pledge of redemption, their currency vouchers can provide traders with an exchange and payment medium that is superior to government and central bank fiat monies. Such honest currencies are neither novel nor odd, but have a long history and are an absolute necessity for the decentralization of economic and political power and the emergence of a peaceful and equitable social order.  

So what sorts of entities can be trusted to keep their promises, how do they put their currencies into circulation, are such currencies legal, have such currencies ever been issued before? In brief, a currency voucher is spent into circulation when the issuer offers it as payment to a supplier, employee or a creditor, who accepts it as such. In the United States and most other “free” countries, private currency vouchers are entirely legal and there are numerous historical instances of their issuance and circulation. These questions and many other details have been fully answered over the years in my various writings and presentations, most of which have been posted or linked on my website, https://beyondmoney.net/.  Particularly relevant are my book, The End of Money and the Future of Civilization, as well as my 2021 presentation, Transcending the present political money system–the urgent need and the way to do it, and my 2021 webinar series, Our Money System – What’s Wrong with it and How to Fix it.

A few years ago I wrote up a proposal for a private currency voucher that I call the Solar Dollar which attracted some significant interest. My intention was twofold, one, to provide an independent payment medium for a local community, i.e., a currency that can be created outside of the banking system and thus empower participants in a local economy by compensating for shortages and mal-distribution of government fiat money, and two, to incentivize the shift of energy production, sales and usage toward solar and other renewable sources of electric power. My hope was that some electric utility company somewhere would implement the plan and become a model for others utilities to follow. That, unfortunately, has not yet happened but I am confident that it, or something like it, eventually will. In the meantime, I’ve continued to publicize it, and in 2021 I was invited to give a presentation titled, Solar Dollars–Empowering Communities While Powering Communities With Renewable Energy, for a virtual conference that was sponsored by the Zero Carbon Lab at the University of Hertfordshire (UK). Later that year, under the good auspices of Professor Ljubomir Jankovic, my original white paper was revised and published with the title, Solar Dollars: A Complementary Currency that Incentivizes Renewable Energy, in the academic journal, Frontiers in Built Environment.

Overall, the primary objective of my work has been, and remains, the decentralization of financial, economic, and political power. The most promising strategy for achieving that is the design and deployment of private credit currencies that are spent into circulation by trusted issuers that are ready, willing, and able to redeem their currencies promptly for the real goods and services that are their normal stock in trade. By breaking the credit monopoly that the banking cartel presently holds, and empowering producers and sellers of real value, it then becomes possible to reverse the longstanding trend toward ever greater power and wealth in the hands of the global elite who have captured the machinery of finance, economics, and government.

The Solar Dollar is a special case and example of a private credit currency issued by a trusted producer and provider of real value, but similar objectives could be achieved by companies in other lines of business, for example, by:

  • The issuance of local Farm Produce Dollars that would be spent into circulation by a single local farmer or jointly by a cooperating group of local farmers and ranchers, or by
  • The issuance of local Shelter Certificates that are spent into circulation by a single local owner of rental property or jointly by a cooperating group of local owners of rental property, or by
  • The issuance of Service Certificates by a local provider of some sort of professional or household services, or jointly by a cooperating group of such service providers, or by
  • The issuance of currency vouchers by all of the above producers/providers and others  who band together to cooperatively issue a sound complementary currency under a common “brand.” Such a currency would provide a means of payment that is not only independent of the banking system but solidly backed by the combined production and distribution capacity of all participating businesses. (Many “community currencies” have been created over the years in many places around the world but virtually all of them are  “sold” for government fiat currencies which defeats the main objective of creating a currency that is independent of government and the banking system).

All of these currency vouchers or credits are able to circulate as payment media throughout their local communities to enable trading despite any scarcity or unavailability of official money. There are many historical and contemporary examples of such private credit instruments, so most of what I’m suggesting has already been shown to be workable. The main problem I have observed is getting producers of real value to recognize the power they already have and to exercise it on their own behalf and that of their communities.

In his 1944 book, Private Enterprise Money, E. C. Riegel made that point very clear, saying:

“The stream of political monies from the beginning to the present day runs deep and dirty, yet to suggest that money can spring from any other source is to surprise if not even to dismay. So has tradition dulled men’s senses. No matter how often the state fails to supply a virtuous money system, men rush back to it in desperation and beg it to try again. Indeed, until we learn that the money power resides in us, we must abjectly beg the state to give us an exploitative system because we cannot return to a moneyless civilization. Yet, no matter how often and earnestly the state tries to provide a true money system, it must fail because of an inherent antipathy between the money issuing power and the taxing power. A money issuer must be a seller who bids for money, not a taxer who requisitions it in whole or in part, as politically expedient and without a quid pro quid.” — pp. 25-26.

Political democracy cannot work without economic democracy; and the money power is the franchise of the latter. — p. 35

It is the false concept of political money power that converts citizens into petitioners, and makes government a dispenser of patronage instead of a public servant. This power of patronage utterly destroys the democratic system of government – since the people cannot be both petitioners and rulers.” — pp. 78-79

Throughout my career as a monetary theorist, educator, and advisor, taking up where Riegel and others have left off, I have tried to influence producers, entrepreneurs, and social organizers toward effective action based on sound principles of credit allocation and management. But superstitious myths die hard and old habits are difficult to break. The great majority of people remain in thrall to official currencies. That is what the oligarchs depend upon to keep us in debt and under their control. I have learned to be patient and await the changes in financial, economic, and political conditions that will open people’s minds to adopting self-help and cooperative approaches to getting our needs met, specifically, the need for free and fair exchange of value in the marketplace.

Surely, the day will come, and is rapidly approaching, when the failures and demands of the dominant global central banking, political, interest-based, debt-money regime will become so clearly evident and abysmal that the only peaceful option will be for we-the-people to implement our own systems of exchange and finance grounded in our own initiative and judgment in allocating credit based on productive capacity and trustworthiness.

Diagram of the reciprocity circuit. Issuance, circulation and redemption of Private Currency Vouchers
Issuance, circulation and redemption of Private Currency Vouchers

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Posted in Developing Alternatives, Emerging paradigm, Exchange Design, Finance and Economics, Prescriptions, The Political Money System

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Bitcoin, Blockchain, and the end of money as we’ve known it

Posted on December 1, 2022 | 6 comments

Whether one likes it or not, the end of money as we’ve known it is at hand. From a more or less conventional perspective it may look something like what David G.W. Birch describes in his Forbes article, Payments In The Metaverse Will Be Huge, But They Won’t Be Based On Cryptocurrencies (Or People), but my view is rather different. Still, Birch highlights the three main issues that we both agree are crucial: trust, security and privacy.

I long ago concluded that ALL of our institutions, systems, and structures of western civilization have been thoroughly corrupted by greed and the hunger for power which are reactions to false beliefs and artificial scarcities. I take that as given and try to avoid being distracted by it while trying to keep my attention and energies focused on what I think I can do to change things. What that has meant for me has been to learn everything I could about the money system as it exists — its inherent dysfunctions and dishonesties, and to discover and develop better ways of performing the functions that money is supposed to serve, especially the function of reciprocal exchange of value. The decentralized allocation and control of credit is the key to creating an honest, efficient, and sustainable system of exchange, and there are well established ways of doing that without the need for political fiat monies. Many of these systems, like the WIR Economic Circle Cooperative and the scores of commercial trade (“barter”) exchanges, have been operating successfully for many decades or longer.

What remains to be done are:
1. The optimization of the procedures and protocols used in credit clearing systems like the scores of commercial trade exchanges now operating in many countries around the world, such as the optimizing prescriptions I’ve made in A Model Membership Agreement for a Credit Clearing Service contained in my book, The End of Money and the Future of Civilization, and,
2. The development of effective ways of dealing with interference from governments, banks, and the vested interests that is sure to come when these competing systems become big enough to be perceived as a threat to the status quo.

I consider the wave of cryptocurrencies that has emerged since the launch of Bitcoin to be attempts to address the second of these objectives by providing virtual commodities that are generated outside of the government/banking system and to hopefully provide some degree of anonymity and privacy in value exchange transactions. Those motivations are all well and good but reverting to the use of commodities, either virtual or real, as exchange media takes us back to a more primitive stage in the evolution of the reciprocal exchange process, and unlike real commodities, they have no inherent use value other than their use as media for speculation. Add to that the fact that the primary motivation in the creation of most “cryptocurrencies” or virtual “coins” has been profit seeking by their creators, and what we have now is a milieu that is littered with “shitcoins,” corruption, and fraud. It’s very difficult and time consuming to dig deeply enough to evaluate each new entry into the field, and I see no advantage in doing so.

However, the use of blockchain technology that accompanied the creation of Bitcoin may have a useful role to play in a credit clearing network or private credit currency as a way to create exchangeable “token” vouchers that represent a claim upon real valuable goods and services that the issuer has promised to deliver. Such vouchers would be real currencies.

Questions that need to answered about any currency:

  1. Who is the issuer?
  2. What is the value basis upon which the currency is issued?
  3. In what units is the currency denominated?
  4. Is the issuer, ready, willing and able to redeem the currency?
  5. Is the issuer credit-worthy, reliable, trust-worthy?
  6. Do they have the goods on hand or sufficient service capacity to deliver promptly?
  7. What are the terms of redemption? In what form? When? At what rate in relation to the units specified (face value, discount, etc.?)
  8. In what form does the currency exist? Paper notes, Physical tokens, Digital tokens, Ledger entries?
  9. What other characteristics of the currency contribute or detract from its use as an exchange medium?

If you want a comprehensive overview of my work and my vision, you can get most of it in the presentation I gave last year for the University of Hertfordshire.
https://beyondmoney.net/2021/11/27/transcending-the-present-political-money-system-the-urgent-need-and-the-way-to-do-it/, and if you want a deeper understanding of “the money problem” and its most promising solutions please read my book, The End of Money and the Future of Civilization, which is even more pertinent today than it was when first published.


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Posted in Cryptocurrencies, Developing Alternatives, Emerging paradigm, Exchange Design, Implementation Strategies

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2022 September Newsletter – Economic Prospects and Exchange Innovations

Posted on October 5, 2022 | 1 comment

In this issue:

  • The Legacy and Vision of Dee Hock
  • My Upcoming Presentation: Private and complementary currency systems
  • My Latest Article
  • There once was a river …an allegorical tale of money and credit
  • Will 2023 Be the Year from Hell?
  • Central Bank Digital Currency, a the Totalitarian Nightmare

The Legacy and Vision of Dee Hock (b. March 21, 1929 – d. July 16, 2022)

I had occasion to meet Dee Hock in September of 1995 when we were both invited to participate in the first of a series of symposia titled Peace Building for the 21st Century, a semi-annual gathering that was jointly organized by the Institute of Noetic Sciences, the World Business Academy, and Pathways to Peace and convened at the Fetzer Institute in Michigan. When prior to the meeting I read that Hock was CEO of VISA International, a rather lofty position in the world of conventional banking, I wondered how his beliefs and objectives about money and exchange could possibly find any agreement with my own. I soon discovered that my pre-judgments about him could not have been more wrong. During the symposium he impressed me as being a man of integrity and vision, and more a “monkish” philosopher than a banker.

That impression was strongly reinforced when in 1999 I read Hock’s newly published book, Birth of the Chaordic Age (later republished as One From Many), which told his personal story along with the story of how the VISA organization came into being and became “the largest commercial enterprise on earth.” To give you a sense of what captivated me I will share just a few quotes from the book. In the prolog, Hock said, “We are experiencing and epidemic of institutional failure that knows no bounds,” and, “The organization of the future will be the embodiment of community based on shared purpose calling to the higher aspirations of the people.” Such an observation and expectation were quite remarkable and unexpected but consistent with my own observations and aspirations. Then, on the back of the dust cover I read, “We are at that very point in time when a 400-year- old age is dying and another is struggling to be born–a shifting of culture, science, society and institutions enormously greater than the world has ever experienced. Ahead, the possibility of regeneration of individuality, liberty, community, and ethics such as the world has never known, and a harmony with nature, with one another, and with the divine intelligence, such as the world has always dreamed.”

Such ideas could not have resonated more closely with my own, and as I delved further into the book I was delighted to find a great deal more of that sort of visionary, humane, and wise thinking and expression. I took some time to ponder all of that as I went about my own work trying to move forward toward the development and implementation of innovative systems of exchange and finance that would embody the values and aspirations that Hock and I seemed to share. Then, in January of 2001, I wrote to Hock and was pleased when he responded a couple weeks later.  Rather than try to excerpt the essence of each letter, I think it appropriate to present each in its entirety (I don’t think Dee would mind).

Dear Dee,

I’ve been meaning to write you ever since I finished reading your book almost a year ago. I guess my procrastination is due to the fact that I was not, until now, clear about what I wanted to say to you, or how to say it so you would take it seriously.

Certainly, praise is due. The Birth of the Chaordic Age is a masterful story, but, of course, it is more than a story, it is a philosophical treatise – and a work of art, studded with gems of wisdom. (In that, your monkish, contemplative bent is evident). I’m most grateful to you for seeking out these gems and fetching them back for us to admire and use. I especially like your four ways of looking at things – how they were, how they are, how they might become, and how they ought to be. It serves me well in the research I’ve been doing, and serves to remind me of why I’m doing it.

 I am in full agreement with the testimony of your vision which appears on the back of the dust cover. I believe that, in the present era, the thing that is “trying to happen” (as Willis used to put it) is a fundamental shift from elite rule (command and control) to a more participatory, democratic, inclusive, just, equitable, and sustainable order. This means that, in addition to our own spiritual and interpersonal work, there is a need for thoroughgoing restructuring of our institutions and the emergence of networks and communities which will supplant limited liability corporations and much of the government bureaucracy.

As I approach my 65th birthday, I have a sense that my most important work is yet to be done. Despite your great accomplishments, I have a sense that that may be the case for you as well. Of particular relevance for me is the area of money, banking, and finance. This is where I think I can make a major contribution, and this is what I want you to know.

You have the distinction of having been the leader who guided the development of the world’s first global payment system. Yet, you express dissatisfaction with the outcome. It doesn’t satisfy me either. You say (on page 193),


“I could think of no way to fully realize the concept by including merchants and cardholders as owner-members. The slightest hint in that direction raised a storm of opposition. We should have included them. Perhaps, with more time, tenacity, and ingenuity we could have.”

Well, storms of opposition should be expected when those in control are asked to share power. The bankers have been a privileged class for a long time. Why should they give up such a powerful and lucrative position? There is only ever one compelling reason – because they can see that it is in their best interests to do so, and they have the courage to let go. Are you ready to show them the economic “magna carta?”

For the good of the people and the planet, the monetary system must be changed and economic power must be more widely dispersed. The key lies in the payment system. There is plenty of ingenuity being applied to the “money problem” within the current grassroots transformational movement, within the commercial “barter” business, and within the realm of emerging internet commerce. Proper leadership can draw out sufficient tenacity. And, time? Well, “carpe diem.” “The future is not about logic or reason. It’s about imagination, hope, and belief.” (p. 152).

Can you envision a federation of credit-clearing circles which include everyone who wants to be a member? Which is democratically organized and operated? Which allows each person the power to monetize some of their own resources and productive potential without having to pay interest to anyone?

It is my hope to assist in launching such a system. I believe that it is possible to assemble, right now, sufficient talent, resources, and commitment to get the job done. This could be your prototype socio-economic chaord which would demonstrate to everyone the kind of model needed for 21st century organizing.

I have no illusions about the willingness of bankers’ to accept such systems right now, but I must do what I can to harmonize how things might become, with how they ought to be. If we can create the seed crystal, the rest will take care of itself.

What do you say?

Tom Greco

About two weeks later I received this reply:

Dear Tom:

Thank you for your most kind, thoughtful letter. Indeed, people in position of privilege and power cannot be expected to surrender it to others, especially when no better alternative has emerged which the public trusts and demands, which captures the imagination of the powerful and privileged, ameliorates their fears, and which is allows them to make an orderly, safe transition. Power is never given, it is always taken. How to take it without destructive confrontation and brute force is the perpetual problem. In my view, that can only be done by creating new concepts which do not attack and destroy the old, but transcend and enfold them.

There is no doubt in my mind that more than enough intelligence, communication capacity and experimentation has already emerged to allow such new concepts to be devised and implemented. However, to transcend and enfold a system that is already global, ubiquitous, deeply entrenched in all societies and organizations and embedded in the consciousness of the whole world is not something that can be done by any one person, or even a narrow segment of them. Nor do I have any illusions about the desperate need for better means of exchanging value among all people. We have had much contact over the years with many people in emerging systems of barter, local currency, internet commerce and alternate currencies – Bernard Lietaer, Hazel Henderson, James Fierro and a host of others.

One of the concepts we think will take shape within the Terra Civitas movement is something we call, for want of a better term, the “resource commons,” a coming together of people with financial expertise of all kinds, new and old, to reconceive and bring into being new concepts of organizations and instruments that “result in more equitable distribution of power and wealth, improved health and greater compatibility with the human spirit and biosphere.” That is, I think, precisely what you refer to, albeit in other terms.

We are simply overwhelmed with response to chaordic concepts. Opportunities to create such organizations in various fields already exceeds our present resources and capacity. This is not something we can, at the moment, call into being. The initial interest and impetus would have to emerge elsewhere. We might act as a catalyst, a “strange attractor,” to put in terms of complexity theory and would gladly lend what legitimacy and expertise we could.

I have no doubt that with sufficient commitment from a design team of the right thirty or forty people and a hundred or two others to critique the work and reasonable resources, a “chaordic, fractaled organization” for the purposes you envision could be conceived, perhaps even implemented, before the end of 2002.

Again, many thanks for your thoughtful letter and kind comments about the book. With all best wishes,

Dee

Of course, 2002 came and went and twenty years later we are still seeking allies, supporters and resources, and wondering what else it will take to make this grand vision a reality, but surely its time will eventually come. That is not to say that progress has not been made. Promising innovations and improvements in exchange processes and moneyless payments have been made in both the grassroots and commercial “barter” realms, and I continue to work with several of those groups and individuals.  

Numerous Dee Hock obituaries have been published online including the VISA website and Market Watch, and you can glean much more of his wisdom from Dee Hock’s webpage which is still accessible.

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My upcoming presentation

I’ve been invited to be a keynote speaker at the 6th Biennial RAMICS International Congress in Bulgaria, October 27 to 29. RAMICS is the Research Association on Monetary Innovation and Community and Complementary Currency Systems which includes both academics and practitioners.

My illustrated presentation titled, Private and complementary currency systems: purposes, principles, practices, and performance, is slated for Thursday, October 27. It will summarize what I have learned over more than forty years of research and experimentation in this field, and describe what must be done to realize the full potential of decentralized private and community exchange mechanisms. You can see the full abstract here. For various reasons, I am planning to deliver my presentation remotely from Arizona. This congress promises to be exciting and productive, and if you wish to participate you can find program details here and register at https://ramics2022sofia.sciencesconf.org/registration.
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My Latest Article
My latest article, The Money Economy Is Not the Real Economy: “The Global Banking and Financial System is Fatally Flawed,” was published last week by Global Research, and recently republished on Medium.
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There once was a river …an allegorical tale of money and credit
One of my most popular posts has been, There once was a river …an allegorical tale of money and credit. If you missed it when I first published it, you may want to check it out. I’ve used metaphor to try to show how we have all become slaves to money and those who control money. Using water to represent money, I’ve also tried to show that we the people can free ourselves and take back control by thinking outside the box to end our fixation on political fiat money, and deploy better ways of enabling the exchange of real value that our own labor and creativity produce.

Every metaphor, of course, is limited but I am hoping that readers/listeners will come to understand that there are alternatives to conventional money that we can use to reduce, and eventually eliminate our dependence upon conventional political fiat money. Credit is the foundation of an honest system of exchange and we have the power to give credit to each other in accordance with our own values and objectives, outside of conventional banks and without charging interest. You can access the story on my website (audio with transcript) or on YouTube (audio only).  

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Will 2023 Be the Year from Hell?
Noted economic forecaster, Martin Armstrong, says it will and makes a very convincing case in this interview on Greg Hunter’s USA Watchdog podcast; and it is very instructive to see the remarkable story of Armstrong and his work in the documentary movie, “The Forecaster,” if you can get hold of it. Amazon.com says “This video is currently unavailable to watch in your location,” but you can watch the trailer on IMDb and buy the DVD here. The movie includes the story about the persecution he suffered at the hands of the US government, being imprisoned for 7 years without a trial, and eventually forced to plead guilty to regain his freedom.  

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Central Bank Digital Currency, a the Totalitarian Nightmare

If that isn’t enough to get your attention and stir you to action, this article, Just Say No to CBDCs, by N.S. Lyons clearly describes the nightmare world the technocratic oligarchy has prepared for us and will very shortly pressure us to accept. Some difficult choices are in prospect.

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Despite the gloom and doom that these present circumstances portend, I believe humanity has never been in a better position to create a world of peace, freedom, and conviviality. As Mahatma Gandhi said, “When the people lead, the leaders will follow.”

Thomas

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Permission to reprint contents from this newsletter in whole or in part is granted on the condition that full credit is given and a link to the original source is provided. – t.h.g.
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Posted in Developing Alternatives, Emerging paradigm, Exchange Design, Finance and Economics, Geo-politics, Global Economy

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Reprising Beyond Money Podcasts

Posted on September 10, 2022 | Leave a comment

During 2019 and 2020 we recorded a series of ten podcast interviews with leading experts and social entrepreneurs who have been working on developing and implementing improved means of exchange aimed at making the economy more equitable and ecologically sustainable. Each podcast is valuable in its own way and the series in total provides an excellent overview of what one needs to know to get a proper start to working in this field.

Among practitioners, Will Ruddick and his associates at Grassroots Economics continue to make exciting progress in developing Community Inclusion Currencies and organizing exchange circles throughout Kenya and other parts of Africa. Our September 2019 discussion with Will is a treasure trove of information about their innovative work that will be of great value to others who aim to organize similar exchange alternatives. Listen to it here.

The entire podcast series can be found here.

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Posted in Basic Concepts, Developing Alternatives, Exchange Design, Exchange software, Implementation Strategies

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