Category Archives: Emerging paradigm

Final Workshop Announcement—Innovative Finance and Exchange

Society is Exchange! – Frederic Bastiat.

All the perplexities, confusions and distresses in America arise not from defects in the Constitution or Confederation, not from want of honor or virtue, as much as from downright ignorance of the nature of coin, credit and circulation.
– President John Adams, from a letter to Thomas Jefferson (1787-08-25), in The Works of John Adams

As the time grows near I want to remind everyone that my workshop on innovative finance and exchange is set to begin in about 10 days time at Kalikalos Holistic Summer School in Greece (http://www.kalikalos.org/exchange-finance). It will start on the evening of 24 June and conclude on the morning of 1 July.

While it is described as a “course,” the format will be that of a workshop/colloquium in which everyone plays an active role in an intensive process of inquiry, discovery, sharing and collaboration aimed at:
1. achieving a deeper understanding of sound principles of credit, finance, and the exchange process, and,
2 developing action plans for the design and implementation of robust systems that can be widely proliferated and quickly scaled up to global dimensions.
3. assembling a knowledge base that can provide guidance to others on the same path toward achieving more equitable and sustainable economic structures.

There is still space available for those who feel moved to participate.
Details about the course, fees, and booking are at http://www.kalikalos.org/exchange-finance.
Some of the areas that we will explore include:

  • The essence, function, and forms of money
  • The concepts of currency, credit, credit clearing, liquidity, monetization, and basis of issue
  • Various models of private currencies and moneyless exchange
  • Value measurement and units of account
  • Exchange networks and inter-trading

Don’t let finances stop you as will be able to offer a limited amount of bursaries. Please write an application for that to our team at rachaeldavson@gmail.com.

We offer Greek participants who take part in the week-long workshop a discount of 30%.
The weekend Saturday, 25 and Sunday 26 is being offered to Greeks on a Gift Economy basis which means that you offer what you are able to give. If you want to participate on these terms please send a mail to: rachaeldavson@gmail.com.

I look forward to working with you.  –Thomas

Greenbacks, monetary reform, or revolutionary innovation?

I have long argued that the likelihood of getting government to do anything “good” about the money problem is near zero because the controllers of the present monetary regime are able to buy the kind of government they want that will keep in place the system that enables them to consolidate their power and increase their wealth.

Even if your proposal to restore the Greenback could be legislated into actuality it would only be a stop-gap measure and there would be negative side-effects. FDR ameliorated the 1930s crisis in a somewhat similar way and managed to get some progressive legislation passed, and WWII provided the war-bondsexcuse for massive government deficit spending (along with rationing and “bond drives” to control consumer demand).
Massive increases in productivity enabled a flood of consumer goods to enter the market after the war, and people had the money to buy them.

But in today’s world the old tricks will not be sufficient. We need a totally new system of money, banking and finance, one that is decentralized and interest-free. This will emerge by the design and deployment of relatively small credit clearing exchanges in which it is possible to build trust through personal relationships (verified identity and reputation of all parties, along with organizational transparency), and to allocate credit to members based on that and the market value of their output. At the same time, these credit clearing exchanges can be networked together to enable non-monetary payment on a global basis–a payment system that I describe as “locally based but globally useful.”

We will have an “exchange revolution” that is analogous to the IT revolution. Our micro-computers were initially isolated and had limited capabilities; now we have tremendous power right at out fingertips to do many useful things, and our local devices are linked through the internet giving us unprecedented access to each other almost anywhere and anytime, and almost unlimited amounts of information on most any subject.

Realization of this vision is close at hand.–t.h.g.

Bitcoin, Blockchain Technology, and Crypto-Currency

There has been lots of chatter lately about bitcoin, blockchain technology, and crypto-currency. Everyone, including me, is trying to wrap their head around it all. This is what I’ve come up with so far:

  1. Bitcoin is a virtual commodity that is created by running some obscure algorithm. The people who get rewarded are the “miners” who burn up enormous amounts of computer time and electricity to create Bitcoin. That makes it akin to mining gold or silver—not a very useful pursuit, and like any commodity, people will prefer to use it as a savings medium or hedge against inflation rather than circulating it as a currency. Bitcoin is NOT the answer to the money problem.
  2. The important thing about blockchain technology is what it can do, what functions it can perform. You hear a lot about “smart contracts” and a secure trail of transactions. It seems to be something that is needed when using digital forms of contracts and transactions conducted over the internet, but provides no new functions compared to what has always been done with paper trails and records, but maybe I’m missing something.
  3. The term “crypto-currency” is ill defined and there is much confusion about the characteristics of such a currency and what it can achieve.
  4. The fundamental principles of reciprocal exchange still hold. The substance of a currency or payment medium is CREDIT. Claims still need to be authenticated and promises need to be guaranteed.

My grand, audacious vision is this:

TO ENABLE ANYONE, ANYWHERE TO USE WHAT THEY HAVE TO PAY FOR WHAT THEY WANT.

What they might have is skills, abilities, products, services and credit that is advanced by a circle of people who know them and trust that they are ready, willing, and able to deliver value on demand in the near term.

I have argued that the truly disruptive technology of exchange is a global network of small credit-clearing circles that provide “a means of payment that is locally based and controlled yet globally useful. It makes money and banks, as we’ve known them, obsolete.

My talk in Malaysia in October at the International Forum on Inclusive Wealth (http://ifiw.my/) will be on that topic and will build upon the framework that I laid out in my book chapter, https://beyondmoney.net/excerpts/chapter-17-complete-web-based-trading-platform/. –t.h.g.

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Solar Dollars: How to promote renewable energy by providing local liquidity

Solar Dollars: How to promote renewable energy by providing local liquidity
A concept paper by Thomas H. Greco, Jr.  Sept. 23, 2013 (rev. Dec. 13, 2015)

Preamble

In good times and bad, local economies find themselves short of liquidity. Communities always find that, to some degree or other, there is unused business capacity alongside unmet consumer needs. What is lacking is sufficient money circulating in the community to connect these unmet needs with the unused supplies. This situation derives from our banking system that is increasingly centralized and reluctant to provide credit to local businesses, especially the small and medium-sized enterprises (SMEs) that are the backbone of every economy. If and when banks do provide credit, it is on onerous terms, including high interest rates, burdensome repayment schedules, and the demand for collateral assets to secure the loans.

The defects and instabilities inherent in our system of money and banking increasingly appear to be insoluble. In the credit expansion phase, banks create asset price bubbles based on government guarantees, subsidies, or the expectation of government bailouts when the loans go bad; then, in the contraction phase, they become risk averse, choosing to invest in “safe” government securities rather than financing the legitimate needs of businesses in their communities, especially SMEs.

At the same time, industrialization and population growth are causing other problems including despoliation of the natural environment and climate destabilization. It is clearly desirable to shift our energy production from fossil fuels to renewable sources but the incentives for doing that have not been adequate to propel this shift quickly enough to stave off severe environmental, economic, and political consequences.

Solar Dollars (SD) are intended to address both of these problems simultaneously. SD can provide liquidity to the local economy while at the same time providing a strong incentive for energy providers to shift from fossil fuels to energy from renewable sources.

Q1. What are Solar Dollars (SD)?
A1. Solar Dollars are currency vouchers that are issued into circulation by a local Electric Power Company in some limited proportion to the annual amount of energy from renewable sources that the company is selling to its customers.

Q2. How are  Solar Dollars issued into circulation?
A2. Solar Dollars are spent into circulation by the utility as payment to suppliers and employees who are willing to accept them as partial payment for the goods and services they have rendered to the company.

Q3. Why would suppliers and employees want to accept SD instead of taking all that is owed to them in US dollars. What makes Solar Dollars valuable?
A3. SD are valuable because the company stands ready, willing, and able at all times to accept SD back as payment for the electric services it provides, or for any other payment owed to the company. SDs represent credit obligations of the issuing company that are solidly backed by the energy that it produces and/or sells.

Q4. What’s the point? What can be accomplished by such a project.
A4. There are several advantages that derive from a project of this sort, including the following:
1. Financial and Economic Benefits
*  Vouchers, such as SD, that are spent into circulation provide an interest-free source of working capital to the issuing company. As such, they provide significant savings over the interest costs on bank loans.
*  Vouchers spent into circulation by a trusted entity such as a local utility company provide the local community with home-grown liquidity, i.e., a supplemental means of payment that is independent of the monetary policies of banks and central government, providing the community with a greater measure of self-determination and making the local economy more resilient.
*  Vouchers, such as SD, that are spent into circulation by a trusted issuer can change hands many times between their issuance and their redemption, thus stimulating local business.
*  Home-grown liquidity based on the production of real goods and services provides sound exchange media that stays local and encourages local economic development. Locally issued currency vouchers, by their nature, stimulate local production and prosperity because they tend to stay within the community, and even if they do range more widely, must ultimately come back home to be redeemed by the issuer when accepted as payment for utility bills.

2. Environmental Benefits
*  Anyone who is concerned about problems like global warming, pollution, depletion of fossil fuels, the ill effects of resource extraction like fracking and offshore drilling, will want to encourage a shift to renewable energy sources. Accepting the company’s own solar energy vouchers as payment will provide that encouragement and help move the company toward the goal of providing more of its energy from renewable sources. The more renewable energy the company produces or distributes, the more Solar Dollars it will be allowed to issue, providing it with a greater amount of interest-free credit.

3. Public Relations, Publicity, and Image
*  There has been for some time a great and growing amount of media interest in stories about community currencies, local self-help initiatives, green energy, and alternative finance. This innovative project can provide a tremendous image boost to the utility company, the municipality, and the state, and establish the region as a hub of creativity and innovation. As the significant benefits of the project become apparent, all the involved entities will gain in prestige, and other communities will follow its lead.

4. Educational Benefits
*  A private local currency that is spent into circulation by some trusted issuer like an electric utility is an important step in promulgating new memes and weaning the public away from their illusions about political currencies, like the U.S. dollar, as the only way to pay bills or settle accounts.

Q5. What form will Solar Dollars take?
A5. We’re talking about using the credit of the local utility to provide local liquidity. That can manifest in a variety of forms: Paper vouchers or coupons, stored value cards, prepaid debit cards, or ledger credits that can be accessed with cards and point of sale card readers, or via mobile phones. There are advantages and disadvantages to each of these and it will probably be advantageous to use some combination of these forms depending on the local availability and cost of the required technologies.
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Technical note

The essence of a currency, its form of manifestation, and methods of transmittal are three separate things. This point must be thoroughly understood by anyone who contemplates the issuance of a currency.

The essence of a currency is credit, it is the issuer’s i.o.u. or promise to reciprocate, i.e. to provide real value and accept his currency back as payment for whatever products or services he sells.

A currency can manifest as a paper note, a number in a ledger (written or computerized), a smart card balance, etc.

It can be transmitted hand to hand or electronically.

Of course, the same concept that has been articulated above for SD issuance could be applied to monetizing ANY locally produced goods or services, like locally grown organic farm produce, that we wish to promote and are in general demand.
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2015 Fall Newsletter

In this edition

  • Back in the USA
  • My latest article: 50 Ways to Leave the Euro: Greece and the Global Crisis
  • Raising the debt ceiling—again…, and again…, and..!
  • Seizing an Alternative—conference recordings
  • Homage to Peter Etherden
  • The case of Iceland – Is democracy more important than financial markets
  • Gates Foundation chooses Cyclos for E-pay Innovation Award

Back in the USA

I’ve been back in Tucson since early October, resting and recuperating from five months of travel and an exhausting summer tour of Europe. I’m corresponding, writing, advising and waiting to see what new opportunities might present themselves.

My tour of Europe included presentations, interviews, and/or workshops in Greece, Italy, and Ireland. As recordings of my presentations become available, I will be posting them on my website https://beyondmoney.net/. So far I’ve posted interviews from Athens and Sardinia, and the slide show from the workshop I conducted in Athens. The audio of my August 28 Dublin presentation, The Liberation of Money and Credit, can be heard at https://soundcloud.com/flanagankev/thomas-greco-dublin-august-28-2015.

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My latest article

Common Dreams has just published my latest article, 50 Ways to Leave the Euro: Greece and the Global Crisis. In this article I provide my prescriptions for how Greece (and other countries) might relieve their impossible debt burden, and I describe ways in which domestic liquidity can be created apart from the euro regime and without inflation. You can read it here. I’ve also posted it on my website as a PDF file.

As an aside, in addition to Greece’s economic and financial problems, the country has been overwhelmed by a flood of refugees and migrants. It is reported that more than a half million have arrived on Greek islands just in the past 10 months. This refugee crisis that is now threatening all of Europe is a direct result of the destabilizing actions by the Western powers attempting over the past several years to reshape the politics of the Middle-east and North Africa. Their agenda goes way beyond oil, but few people are paying any attention. Former Reagan administration official Paul Craig Roberts is one of many sources that provide deeper insights, for example in his article, The Re-enserfment of Western Peoples.

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Raising the debt ceiling—again…, and again…, and..!

Every few years the U.S. Congress goes through the charade of debating whether or not to raise the limit on the government debt. In the end they always do. According to Wikipedia, “the US has raised its debt ceiling (in some form or other) at least 90 times in the 20th century.[11] The debt ceiling has been raised 74 times since March 1962,[12] including 18 times under Ronald Reagan, eight times under Bill Clinton, seven times under George W. Bush, and five times under Barack Obama.”

Why continue the pretense that there is any choice about it? Why can’t the government balance its budget and why does the national debt keep increasing? The real answer, which I wrote a quarter century ago, will probably surprise you. To learn what it is, see my recent post at https://beyondmoney.net/2015/10/15/why-cant-governments-balance-their-budgets/.

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Seizing an Alternative—conference recordings

Recordings made at last June’s Seizing an Alternative conference at Pomona College are being compiled and made available at the Pando Populus website. These include several sessions from Track 6: Political Collapse in which I participated.

Session 1 featured presentations by John B. Cobb, Jr., Ellen Brown, and Thomas Greco. In this recording, John Cobb’s introduction is followed by Ellen Brown’s presentation (starting at minute 6:45) and Thomas Greco’s (starting at minute 22:24 and ending at minute 44:15). A Q&A session runs from minute 44:15 to the end. In my portion I provide a brief overview of private currencies and exchange systems and present some of my early prescriptions for addressing the Greek debt crisis.

Session 7 featured presentations by Ellen Brown, Thomas Greco, and Kevin Clark. My presentation begins at minute 27:18 and ends at minute 54:30. In it I answer the fundamental questions about money and the exchange process, and how to reclaim the credit commons. _______________________________________________

Homage to Peter Etherden

I was very sad to learn recently that Peter Etherden has passed away. Peter was one of my very good friends with whom I always enjoyed visiting and discussing our mutual interests. I’m glad that 2169889106PEI got to see him a few weeks ago in London just prior to my return to the U.S.

I first met Peter in 1986 in Zurich where we both attended the Fourth World Assembly that was organized by John Papworth. Over the subsequent years we corresponded regularly and we were able to meet several times during my visits to England. One of my fondest memories is of my visit in 2002 when he and his partner Connie lived aboard their boat in Rye harbor. During that visit the three of us sailed across the English Channel to Bologne where we spent a few days at mooring in the harbor. I also recall 2001 when my then partner Donna and I visited Rye and the four of us went off to explore Devon and Cornwall, a very beautiful part of Britain.

Peter was a diligent researcher and prolific writer whose interests were wide ranging. He will be greatly missed. Many of his research compilations and his writings under various pen names can be found at http://www.cesc.net/.

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The case of Iceland – Is democracy more important than financial markets?

In his 2012 CBC interview, the President of Iceland very articulately describes the situation as it played out in his country during the global financial crisis that began in 2008. He describes the ways in which the failure of Icelandic banks was handled, the strong reaction from the British and Dutch governments, the reasons behind his government’s actions, and what really is at stake, not only for Iceland but for every country in the world. See it at https://youtu.be/7zlzC_X MQzI.

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Gates Foundation chooses Cyclos for E-pay Innovation Award

In case you missed the news, as I did, the Social TRade Organisation (STRO) last year was chosen by the Bill and Melinda Gates Foundation to receive the prestigious E-pay Innovation Award for its Cyclos secure payments platform. Cyclos was chosen to receive the award over 9 other contenders from around the world. The $50,000 award was given at a ceremony at the annual conference of the Electronic Transactions Association in Las Vegas.

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Finally, as Thanksgiving day in the U.S. approaches, I’m reminded of how blessed my life has been. It is in the spirit of gratitude that I thank you for your support and wish you all a happy holiday season.

Thomas

The Financial Times discovers mutual credit clearing

Journalist Edward Posnett, in an article that appears this weekend in the Financial Times magazine, describes the origins and operations of Sardex, a mutual credit clearing exchange that I visited last month and reported on here.

Posnett’s article, The Sardex factor, is fairly well written and begins with the subtitle: When the financial crisis hit Sardinia, a group of local friends decided that the best way to help the island was to set up a currency from scratch. You can read the full article here.

While I consider Sardex to be among “the best of the breed” and a trade exchange model worth replicating, it is by no means unique. Posnett’s article is well worth reading but I fault it on two counts, first for ignoring the scores of similar commercial trade exchanges that have been operating successfully around the world for the past several decades, and secondly for failing to emphasize the crucial importance of the value proposition that mutual credit clearing provides—the provision of liquidity to a local or domestic economy, independent of the banking system and without the disruptive and destabilizing imposition of interest.

There are several well run commercial trade exchanges but as I said in my interview at Sardex, most trade exchange operators are too complacent and satisfied with their modest levels of business success.

The ‘special sauce” that seems to make Sardex stand out is the underlying values and social mission of the founders. Their primary purpose in launching their credit clearing exchange was to help improve the local economy of their home island. I hope that will continue to inspire their operations and development in the years to come.

They have tried to assist entrepreneurs in six or seven other regions of Italy to replicate their design and operations, but told me that the results have been disappointing. I’m speculating that it may be for lack of that “special sauce.” If that’s the case, then successful replication will require that they work selectively with social entrepreneurs who share the same values and mission of serving the common good.

That seems to be quite a rare breed right now, so these people will need to be nurtured through a process of selection and education–perhaps somewhat akin to what the Jesuits have historically done. The need is for people who have the right values, strong motivation, and technical competencies to create the new socio-economic paradigm.

The interview that I gave at the Sardex offices during my visit focuses on The Changing Picture in Complementary Currencies and can be viewed in the post below or on YouTube at https://youtu.be/epOebHTQpDI. The pictures that I took are in my online photo gallery at, https://picasaweb.google.com/112258124863172998784/201508SardiniaItaly?authuser=0&authkey=Gv1sRgCILAwtjOyOetvAE&feat=directlink.

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The changing picture in complementary currencies

During my August visit to the Sardex trade exchange on the island of Sardinia, they recorded (on August 13, 2015) this short interview. In it I cover a few important points on the liquidity problem and how commercial trade exchanges help to solve it.