Community and Currency

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Proutist Economic Development

Community and Currency

Dr. Michael Towsey

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Monetary Decentralisation

• The Future of Money – Bernard Lietaer

– http://www.transaction.net/money/book/

• Economic decentalisation requires monetary decentralisation.

• Each community should control its own money system.

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Money - Central versus Local

Central bank

Community Community bank

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Different Kinds of Money (1)

• Money is a community tool to catalyse community trading.

• There are many different kinds of money systems.

• Different money systems suit different purposes.

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Different Kinds of Money (2)

• Traditional money:

– 90% of money issued as interest-bearing debt;

– created using the fractional reserve system.

• Producer currency.

• Stamp currency.

• Mutual credit.

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Producer Currencies (1)

• Form of commodity money.

• Workers are paid in money backed by output.

• Example 1 - 1920s Germany:

– Hyper-inflation - a postage stamp cost billions of marks;

– Miners were paid in money (wara) backed by coal;

– Mine manager arranged for import of food that could be purchased with wara.

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Producer Currencies (2)

• Example 2 - 1960s Ireland:

– Problem: a banking strike – no money to pay workers;

– Dublin brewery paid its workers in beer vouchers;

– Vouchers could be redeemed at local pubs for beer, money or other goods.

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Velocity of Money

• $1 can catalyse $10 worth of transactions.

• The velocity of money:

– velocity = total transactions  volume of money.

• Prout Principle: keep money rolling, i.e. increase velocity!

• How?

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Stamp Currency

• Community currency scheme started in Wörgl, Austria, in 1932.

• A small amount of money can exchange a lot of goods if it circulates rapidly (high velocity of money).

• Holder of a note had to buy a stamp each month.

• Therefore money spent quickly – no hoarding.

• Wörgl was first Austrian town to overcome unemployment.

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Unemployment and the Nazi Vote

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Local Enterprise Trading System LETS

• Founded in Canada – spread throughout world.

• LETS – an accounting system.

• For every credit there is a debit – zero sum.

• Mutual credit.

• Unit of money decided locally – bunya, reeky.

• Value tied to local currency – 1 bunya = $1 AUD.

• Facilitates multilateral exchange when bank money not

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Community Currency

Taking Off !

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LETS, Maleny, Australia

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International Versions of LETS

www.bartercard.com

www.ebanctrade.com

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A Hierarchy of Currencies

• A hierarchy of communities requires a hierarchy of money systems.

International trade: barter, mutual credit, Keynes plan

National trade: traditional debt money, producer currencies

Local trade: producer currencies, LETS currencies

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The South America Experience

• Curitiba bus tokens – favelas waste exchanged for public transport.

• Favela is a term commonly used in Brazil to describe areas such as shanty towns or slums.

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A South American Currency (1)

• Good or bad?

• Depends on what kind of currency and what for ...

• A South American currency like the Euro?

• A new currency for a South American trade zone?

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A South American Currency (2)

• A South American currency like the Euro?

• Sweden rejected idea because ...

– shifts power from democratically elected governments to non-elected institutions such as the Central Bank;

– erodes ability of member States to implement local solutions to their economic problems;

– makes it easier for TNCs to accumulate wealth.

• One year after adopting the euro, Portugal was forced to make massive cuts in public services and wages.

• Unemployment rose in Germany and France every month after

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A South American Currency (3)

New mutual credit currency for a South American trade zone?

If similar to Keynes Plan - good idea.

Operates independently of member country currencies.

Removes Venezuela from dependence on US $ and Euro.

Does not erode ability of member states to implement local solutions to their economic problems.

Requires an independent money standard such as terra – based on representative basket of traded commodities.

The Terra project is the launch of a commodity-backed Trade Reference Currency (TRC), a supra-national currency that works in parallel with

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