manuel at gandalf.Berkele
01-05-1995, 05:56 PM
Following is the text of a proposal for a community time money system
that is being discussed in northern California. Versions of it have
been posted to several international lists in the last month.
There have been several partially successful efforts to develop
community monetary systems in northern California in recent years,
but they have eventually petered out. This proposal is meant to:
1) reflect the full range of concerns of the various groups that
have worked on alternative monetary systems here and
2) be broad enough to achieve a critical mass of support
in what is a large and dynamic area economically.
The ideas are applicable in other regions, so comments are welcome.
In its current form it is directed to those specifically interested
in community monetary systems rather than to a general audience,
so technical comments should be directed to me personally rather
than to the whole mailing list.
Thanks in advance for comments.
larens
+++++
Honest Money for the era of GATT
larens imanyuel
5 January 1995
The last fifteen years have seen the development of a pronounced dual
economy in the U.S.A., with an increasingly prosperous upper class
with wealth derived from large multinational corporations,
over an increasingly impoverished lower class of unemployed,
or marginally employed, workers. The creation of the new GATT
with a strong World Trade Organization promises to increase
the disparity of wealth between these dual economies. A prime effect
of GATT is to strengthen the control over intellectual property
by the large corporations. This increasingly allows the export
of production to the less economically developed countries.
The lower class in the U.S. and other highly industrialized countries
will find themselves increasingly having to compete with low paid
workers in these other countries.
The people in the lower tier economy to a large extent have negative
wealth under the current monetary system. Without tangible wealth
to establish major credit, and with the increasing domination of
intellectual property by the upper tier, people in the lower tier
will not have the means to develop appropriate products with which
they may support themselves in the global economy, and will be able
only to fall into greater poverty.
Over the last few years the interest in establishing alternative
monetary systems that would allow general prosperity has blossomed.
Dozens of mutual credit associations and currencies have been formed,
which have built a base of experience for larger efforts. The most
common element of these new systems is to establish labor credits as
the foundation of the money. This allows communities which have been
stripped of their property to reestablish their prosperity using
the resource which they retain - namely their skills. They generally
use newspapers and electronic bulletin boards to facilitate economic
transactions. Many of these systems are becoming known as "time money"
because their denominations are denoted in lengths of time.
The older LETS (Local Employment and Trading System) has been used
mostly in Canada and New Zealand. In the U.S.A. overt "time money"
systems have become popular in university towns. Ithaca, New York
is currently spearheading the distribution of ideas. Missouri
has backed the development of credit associations oriented toward
community service. Other systems have been developed with less
publicity, so the total number of operating systems is not well known.
The following proposal has evolved from discussions in the San Francisco
Bay Area over the last couple of years. It arises from the need
to develop a more cosmopolitan and well organized system for the area
than has been previously proposed. The reader is forewarned of its
currently turgid economic style and is urged to make helpful suggestions
and to participate in its further development.
Proposed Time Money System for northern California and Nevada
In the San Francisco Bay Area the advocates of alternative
monetary systems are presented with a great challenge.
Firstly, the area largely benefits (relative to most other areas)
from the current international financial order. One must
directly and successfully challenge the opportunities
of the existing system to be taken seriously. Secondly,
travel is heavy throughout the Bay Area and northern California.
One is presented with a natural trade area roughly the population,
area, and wealth of the country of Sweden. The advocates of
alternative monetary systems lie scattered in small clusters
throughout this large area. These clusters are not generally
economically viable for supporting an alternative monetary system
without long distance cooperation.
A two-tier organization is needed, with local groups providing
"soft", relatively personal associations; and an umbrella
organization providing "hard" currency for transactions with
the larger community, as well for trade between the local groups.
The extendability of the money to other areas is a local concern.
With the development of the GATT/NAFTA trading situation, there
is local interest in developing alternative trade organizations (ATOs)
for direct trade between cooperatives here and in other countries.
The current generation of ATOs develop markets here for products
from cooperatives in lesser developed countries, without developing
comparable trade in the reverse direction. This tends to aggravate
the problem of the dual economy that has developed here in the last
fifteen years. Direct trade with an alternative currency provides
a tool for building cooperatives here and abroad that can design
products appropriate for the lesser developed countries.
Having listened to the many issues being presented by the
advocates of alternative money systems, I propose classifying
them into five major points: privacy, constancy, accountability,
redeemability, and security. Following are my comments on what
I think are the appropriate starting points for a discussion
about the "hard" currency questions.
Privacy
This covers two different, but related issues. First is
that the new money needs to be "private" in the sense of
an agreement between individuals that is not state implemented.
Then it can operate independently from the current quasipublic
system. Otherwise the new system can't effectively compete
with the old, because it is bound by the rules of the old system.
(This, of course, is why the owners of the current central
banking system must try to convince people of the legality
of their de facto monopoly.) Because the new system is a compact
among individuals, it may be implemented in a relatively
decentralized manner.
The other part of privacy consists of not having independent
transactions reported to third parties. This type of privacy
is better developed in Europe than in the United States.
It may be naturally implemented in a system that is private
in the first sense. This right of privacy is coupled, of course,
to the obligation of making all the decisions necessary to
the success of the new monetary system.
Constancy
Once an agreement is made on the definition of unit value,
people can rapidly start putting the new monetary system into effect
by issuing temporary monetary instruments using the newly defined
unit value. Both long-term trends and short-term oscillations
in value need to be addressed. This requires a variable
monetary supply indexed to specified sets of commodities.
On philosophical grounds, economic tools exist to improve the quality
of human time. On practical grounds, human labor is the largest class
of commodity; and thus it is best suited to damp out oscillations.
For both reasons labor time should be the long-term index.
Short-term oscillations can best be damped by choosing a "basket
of commodities" available on commodity futures' markets, excluding
the most variable ones, and leaving a residual set that matches
the trend of the labor index. To inhibit the manipulation of commodity
prices, a set of rules for the monetarization of long-term storage will
eventually be needed. This might be pursued through sealed warehouse
contracts in which warehouse contents are immediately sold as
commodity futures. This would allow the contract information
to be public knowledge, thus minimizing insider information and
inhibiting the use of the system for private speculation.
This overall approach can satisfy both the demand to eliminate
the inflation inherent in the fiat currencies, and the oscillations
inherent in the value of gold due to its inelastic supply.
An appropriate amount of fluctuation in labor pricing would exist
to inhibit supply rigidity.
To insure a good statistical base for calculating a labor index,
the monetary rate can be set nominally equal to the wage rate
for casual labor within the most developed areas. Thus it will be
roughly equal to the minimum wages of the more developed countries
and comparable to the average wages of those areas heavily involved
in international trade. I propose $4.80/hr. on 1 January 1995 as
the starting value. This closely corresponds to one troy oz. of silver
or six grains of gold per hour on that date.
Accountability
Given a constant value unit for money, better principles of
accounting may be used, such as triple entry bookkeeping in the sense
of recording operational profits separately from capital gains.
This separates internal economic forces from external ones, making
for better managerial decisions and creates the necessary data
to make assessments against speculative profits in the interest
of economic justice. This standard of accountability is far above
current practice and needs to be brought to people's attention
in the general discussion of monetary issues. It allows extending
the scope of current antispeculative practices, such as
urban land value taxation, espoused by Henry George.
Redeemability
To effectively control its supply, money needs to be rapidly
redeemable in the commodities in which it is defined. For
a labor defined currency this implies the existence of mutual
credit associations which can issue certificates of labor
up to limits defined by mutual agreement between associations.
Banknotes can then be issued against these certificates.
The internal communications systems of the credit associations
provides the ultimate basis for rapid redemption of banknotes
in services. Intermediate exchanges for the certificates
themselves also need to exist to facilitate transactions.
Electronic fund transfers by the credit associations
would mitigate the need for banknote issuance and redemption
by providing an alternative form of monetary circulation.
Security
A successful monetary system must provide security against
a full range of methods of theft. A system of currency with
machine readable serial numbers provides a good level of security
intermediate between the old paper and metal currency, and that
of future "smart cards". A set of thin plastic cards using
holographic embossing would cost about twice as much as the old
currency, but only a tenth as much as smart cards. The thin
plastic cards could be easily handled, would easily defeat all
but the most professional attempts at counterfeiting, and would
be easily traceable because of the frequent recording of serial
numbers. In the future, electronic copies could be circulated
using electronic purse cards, while leaving tangible certificates
and notes in security vaults.
Convenience of handling is a great advantage of plasticized cards.
A stack with four denominations can be sorted into four stacks
in several seconds, if the denominations have slight rotationally
symmetric differences in shape. A good denomination system
is to use values of 1, 3, 10, and 30 in minutes and hours.
The hours' denominations would cover the range for banknotes
needing standard security features ($4.80 to $144 currently).
The minutes' denominations could be on half-sized cards, as they
would not need sophisticated anti-counterfeit measures.
Rounding values to one minute (eight U.S. cents currently) is
appropriate for the economically developed countries. Poor areas
could produce seconds' denominations from local materials.
Denominations of 60 hours and up should be a separate system
of more desirable monetary instruments (certificates of deposit, etc.)
to inhibit the hoarding of the main currency.
The front-end costs of such an approach can be covered by several
thousand people. Assembling such a group of initial supporters should
not be a problem, if the proposal is put in the proper form.
In this light, comments are particularly requested.
larens imanyuel
manuel@stat.berkeley.edu
University for the Earth
2155 Acton Street #3
Berkeley, Calif.
Postal Zone 94702
United States of America
Telephone: (510)548-5238
This post transferred from the cdb-l mailing list
that is being discussed in northern California. Versions of it have
been posted to several international lists in the last month.
There have been several partially successful efforts to develop
community monetary systems in northern California in recent years,
but they have eventually petered out. This proposal is meant to:
1) reflect the full range of concerns of the various groups that
have worked on alternative monetary systems here and
2) be broad enough to achieve a critical mass of support
in what is a large and dynamic area economically.
The ideas are applicable in other regions, so comments are welcome.
In its current form it is directed to those specifically interested
in community monetary systems rather than to a general audience,
so technical comments should be directed to me personally rather
than to the whole mailing list.
Thanks in advance for comments.
larens
+++++
Honest Money for the era of GATT
larens imanyuel
5 January 1995
The last fifteen years have seen the development of a pronounced dual
economy in the U.S.A., with an increasingly prosperous upper class
with wealth derived from large multinational corporations,
over an increasingly impoverished lower class of unemployed,
or marginally employed, workers. The creation of the new GATT
with a strong World Trade Organization promises to increase
the disparity of wealth between these dual economies. A prime effect
of GATT is to strengthen the control over intellectual property
by the large corporations. This increasingly allows the export
of production to the less economically developed countries.
The lower class in the U.S. and other highly industrialized countries
will find themselves increasingly having to compete with low paid
workers in these other countries.
The people in the lower tier economy to a large extent have negative
wealth under the current monetary system. Without tangible wealth
to establish major credit, and with the increasing domination of
intellectual property by the upper tier, people in the lower tier
will not have the means to develop appropriate products with which
they may support themselves in the global economy, and will be able
only to fall into greater poverty.
Over the last few years the interest in establishing alternative
monetary systems that would allow general prosperity has blossomed.
Dozens of mutual credit associations and currencies have been formed,
which have built a base of experience for larger efforts. The most
common element of these new systems is to establish labor credits as
the foundation of the money. This allows communities which have been
stripped of their property to reestablish their prosperity using
the resource which they retain - namely their skills. They generally
use newspapers and electronic bulletin boards to facilitate economic
transactions. Many of these systems are becoming known as "time money"
because their denominations are denoted in lengths of time.
The older LETS (Local Employment and Trading System) has been used
mostly in Canada and New Zealand. In the U.S.A. overt "time money"
systems have become popular in university towns. Ithaca, New York
is currently spearheading the distribution of ideas. Missouri
has backed the development of credit associations oriented toward
community service. Other systems have been developed with less
publicity, so the total number of operating systems is not well known.
The following proposal has evolved from discussions in the San Francisco
Bay Area over the last couple of years. It arises from the need
to develop a more cosmopolitan and well organized system for the area
than has been previously proposed. The reader is forewarned of its
currently turgid economic style and is urged to make helpful suggestions
and to participate in its further development.
Proposed Time Money System for northern California and Nevada
In the San Francisco Bay Area the advocates of alternative
monetary systems are presented with a great challenge.
Firstly, the area largely benefits (relative to most other areas)
from the current international financial order. One must
directly and successfully challenge the opportunities
of the existing system to be taken seriously. Secondly,
travel is heavy throughout the Bay Area and northern California.
One is presented with a natural trade area roughly the population,
area, and wealth of the country of Sweden. The advocates of
alternative monetary systems lie scattered in small clusters
throughout this large area. These clusters are not generally
economically viable for supporting an alternative monetary system
without long distance cooperation.
A two-tier organization is needed, with local groups providing
"soft", relatively personal associations; and an umbrella
organization providing "hard" currency for transactions with
the larger community, as well for trade between the local groups.
The extendability of the money to other areas is a local concern.
With the development of the GATT/NAFTA trading situation, there
is local interest in developing alternative trade organizations (ATOs)
for direct trade between cooperatives here and in other countries.
The current generation of ATOs develop markets here for products
from cooperatives in lesser developed countries, without developing
comparable trade in the reverse direction. This tends to aggravate
the problem of the dual economy that has developed here in the last
fifteen years. Direct trade with an alternative currency provides
a tool for building cooperatives here and abroad that can design
products appropriate for the lesser developed countries.
Having listened to the many issues being presented by the
advocates of alternative money systems, I propose classifying
them into five major points: privacy, constancy, accountability,
redeemability, and security. Following are my comments on what
I think are the appropriate starting points for a discussion
about the "hard" currency questions.
Privacy
This covers two different, but related issues. First is
that the new money needs to be "private" in the sense of
an agreement between individuals that is not state implemented.
Then it can operate independently from the current quasipublic
system. Otherwise the new system can't effectively compete
with the old, because it is bound by the rules of the old system.
(This, of course, is why the owners of the current central
banking system must try to convince people of the legality
of their de facto monopoly.) Because the new system is a compact
among individuals, it may be implemented in a relatively
decentralized manner.
The other part of privacy consists of not having independent
transactions reported to third parties. This type of privacy
is better developed in Europe than in the United States.
It may be naturally implemented in a system that is private
in the first sense. This right of privacy is coupled, of course,
to the obligation of making all the decisions necessary to
the success of the new monetary system.
Constancy
Once an agreement is made on the definition of unit value,
people can rapidly start putting the new monetary system into effect
by issuing temporary monetary instruments using the newly defined
unit value. Both long-term trends and short-term oscillations
in value need to be addressed. This requires a variable
monetary supply indexed to specified sets of commodities.
On philosophical grounds, economic tools exist to improve the quality
of human time. On practical grounds, human labor is the largest class
of commodity; and thus it is best suited to damp out oscillations.
For both reasons labor time should be the long-term index.
Short-term oscillations can best be damped by choosing a "basket
of commodities" available on commodity futures' markets, excluding
the most variable ones, and leaving a residual set that matches
the trend of the labor index. To inhibit the manipulation of commodity
prices, a set of rules for the monetarization of long-term storage will
eventually be needed. This might be pursued through sealed warehouse
contracts in which warehouse contents are immediately sold as
commodity futures. This would allow the contract information
to be public knowledge, thus minimizing insider information and
inhibiting the use of the system for private speculation.
This overall approach can satisfy both the demand to eliminate
the inflation inherent in the fiat currencies, and the oscillations
inherent in the value of gold due to its inelastic supply.
An appropriate amount of fluctuation in labor pricing would exist
to inhibit supply rigidity.
To insure a good statistical base for calculating a labor index,
the monetary rate can be set nominally equal to the wage rate
for casual labor within the most developed areas. Thus it will be
roughly equal to the minimum wages of the more developed countries
and comparable to the average wages of those areas heavily involved
in international trade. I propose $4.80/hr. on 1 January 1995 as
the starting value. This closely corresponds to one troy oz. of silver
or six grains of gold per hour on that date.
Accountability
Given a constant value unit for money, better principles of
accounting may be used, such as triple entry bookkeeping in the sense
of recording operational profits separately from capital gains.
This separates internal economic forces from external ones, making
for better managerial decisions and creates the necessary data
to make assessments against speculative profits in the interest
of economic justice. This standard of accountability is far above
current practice and needs to be brought to people's attention
in the general discussion of monetary issues. It allows extending
the scope of current antispeculative practices, such as
urban land value taxation, espoused by Henry George.
Redeemability
To effectively control its supply, money needs to be rapidly
redeemable in the commodities in which it is defined. For
a labor defined currency this implies the existence of mutual
credit associations which can issue certificates of labor
up to limits defined by mutual agreement between associations.
Banknotes can then be issued against these certificates.
The internal communications systems of the credit associations
provides the ultimate basis for rapid redemption of banknotes
in services. Intermediate exchanges for the certificates
themselves also need to exist to facilitate transactions.
Electronic fund transfers by the credit associations
would mitigate the need for banknote issuance and redemption
by providing an alternative form of monetary circulation.
Security
A successful monetary system must provide security against
a full range of methods of theft. A system of currency with
machine readable serial numbers provides a good level of security
intermediate between the old paper and metal currency, and that
of future "smart cards". A set of thin plastic cards using
holographic embossing would cost about twice as much as the old
currency, but only a tenth as much as smart cards. The thin
plastic cards could be easily handled, would easily defeat all
but the most professional attempts at counterfeiting, and would
be easily traceable because of the frequent recording of serial
numbers. In the future, electronic copies could be circulated
using electronic purse cards, while leaving tangible certificates
and notes in security vaults.
Convenience of handling is a great advantage of plasticized cards.
A stack with four denominations can be sorted into four stacks
in several seconds, if the denominations have slight rotationally
symmetric differences in shape. A good denomination system
is to use values of 1, 3, 10, and 30 in minutes and hours.
The hours' denominations would cover the range for banknotes
needing standard security features ($4.80 to $144 currently).
The minutes' denominations could be on half-sized cards, as they
would not need sophisticated anti-counterfeit measures.
Rounding values to one minute (eight U.S. cents currently) is
appropriate for the economically developed countries. Poor areas
could produce seconds' denominations from local materials.
Denominations of 60 hours and up should be a separate system
of more desirable monetary instruments (certificates of deposit, etc.)
to inhibit the hoarding of the main currency.
The front-end costs of such an approach can be covered by several
thousand people. Assembling such a group of initial supporters should
not be a problem, if the proposal is put in the proper form.
In this light, comments are particularly requested.
larens imanyuel
manuel@stat.berkeley.edu
University for the Earth
2155 Acton Street #3
Berkeley, Calif.
Postal Zone 94702
United States of America
Telephone: (510)548-5238
This post transferred from the cdb-l mailing list