Community and Currency

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Proutist Economic Development

Community and Currency

Dr. Michael Towsey


Monetary Decentralisation

• The Future of Money – Bernard Lietaer


• Economic decentalisation requires monetary decentralisation.

• Each community should control its own money system.


Money - Central versus Local

Central bank

Community Community bank


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.


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.


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.


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.


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?


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.


Unemployment and the Nazi Vote


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


Community Currency

Taking Off !


LETS, Maleny, Australia


International Versions of LETS


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


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.


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?


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


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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