Written by - Monetary policy and central banks become irrelevant. Monetary policy already seems to me to be an utterly outmoded means of trying to manage economies. The idea of a monetary policy that can cover both Germany and Greece, both Surbiton and South Shields, is ludicrous.
- National and private currencies may compete against each other rendering exchange rate policy and balance of payment concerns obsolete. They may also compete in function, as you may see different forms of money adopted across the economic functions of money.
- More flexible forms of denominating wages may substitute for the loss of nominal exchange rate flexibility. This has not happened yet, but the emergence of complementary currencies in Greece may mean that it is about to happen.
- The work of bank regulators may be made easier by heightened capital market disciplines. Yes, well…
- Deflation and financial crises may be more likely (at least during the transition period). He was spot on with that one.
He also said that since the introduction of fiat money and the demise of the gold standard, global monetary regimes have changed around once per generation and asked “why should that stop?”. A good point. But currencies issued by private companies are not the only possibility for overturning the current monetary arrangements. Another, that seems to be obtaining a degree of interest that it would have been difficult to imagine before the “crash” is complementary currency and, specifically, community currency. The was one of the reasons why I thought I’d pop along to The Second International Conference on Complementary Currency Systems in The Hague.
When I got there, I felt like a bit of sham to begin with, a bit like the undercover policeman who wrote the famous “McDonalds leaflet”. Most of the people at the conference were genuinely interested in building a vision of an alternative future and in using alternative and complementary currencies to establish a new and better form of society. When we were introduced to each other at the beginning of the conference, I got the impression that the delegates were pretty evenly divided between people working in local currencies, exchange currencies (the B2B-focused kind) and alternative (predominantly time-based) currencies. A fascinating set of interests.
I, on the other the hand, was looking for new ideas for products and services on behalf of the forces of reaction in our client base (ie, banks, schemes and mobile operators, mainly). I think that going with the grain and finding ways to make community currencies work with those businesses is a much better way to effect change. In other words, in places where the existing monetary infrastructure is no longer functioning, and where communities are turning to alternatives, can we find ways for our clients to help those communities and make money at the same time? I don’t see why not. And if you look around, as noted above, the post-crash landscape seems fertile ground for just such alternatives, as in the case of Greece, as alluded to above.
In this bustling port city at the foot of Mount Pelion, in the heart of Greece’s most fertile plain, locals have come up with a novel way of dealing with austerity – adopting their own alternative currency, known as the TEM.
[From Euros discarded as impoverished Greeks resort to bartering | World news | guardian.co.uk]
So why not have debit cards that can support TEM as well as Euros? Why not have TEM-based M-PESA for Greece? Why not use the technology that we already have to help these experiments flourish if they can help real people in difficult situations? If you look at Community Currencies in Action you see a lot of people working together in the space but you don’t see banks, international payment schemes and mobile operators. Why not? Isn’t there a win-win somewhere where I use a Visa card to spend TEM and a companion smartphone app to check my balance? Not only do I think it’s time to look at the world of complementary currency seriously, I think it’s time to look at it seriously in the light of the learning from the last five years of mobile, internet and other emerging payment systems.
I’m actually taking part in a CSFI round-table discussion on this topic next week. It will be at the London Capital Club, 15 Abchurch Lane, London, EC4N 7BW on Tuesday 2nd July from 12.30-1.15pm. Here’s the blurb:
For a brief, shining moment, we all got very excited about digital money, thanks to the Bitcoin bubble. Techies saw it as vindication of their conviction that, in the digital world, everything is possible – even private money. Neo-Hayekians saw it as vindication of their belief that there is no room for government monopoly – even in the realm of fiat currencies. And cynics (like me) saw it as confirmation that governments will make damn sure they kill any challenge to their monopoly on printing money before it poses any kind of serious threat – if necessary, by wheeling in the spectre of drug dealers and terrorists.
That said, the Bitcoin debacle has prompted more interest in virtual money – and, indeed, in mobile phone money. If we are promoting it in Africa, why not in the UK? Plus, there are advantages, even to governments. Why not have a currency with negative interest rates? Or one based on gold? Or an Islamic e-Dinar? The possibilities are endless – though (as a sceptic might say) so are the problems.
There is a terrific panel for the day:
- Shann Turnbull is a serial entrepreneur and corporate governance activist in Australia, who founded the Green Money Working Group in the UK in 2012 (since re-branded as the SMWG), to provide liquidity for SMEs in the event of another financial crisis.
- David Boyle is a fellow at the NEF and the founder of the London Time Bank. He has written extensively on the future of money, the potential of virtual currencies and the need for local banks.
- Josh Ryan-Collins, who is also a senior researcher at the NEF, is founder of the Brixton Pound – the UK’s first urban local currency (which went mobile in September 2011).
And, of course, me. It’s free, so see you there. Pop over to the CSFI to register by emailing anna@csfi.org or by calling them on 020 7621 1056.
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers
There’s little point doing complementary currencies with the same people and systems who currently run the global economy. Some of us believe that ultramodern payment technologies are the key to making complementary currencies more acceptable, but I think it is necessary to think more outside the box.
Governments are not going to give alternate exchange media a level playing field until taxes due on such transactions can be paid within the local money. That depends ultimately upon whether and when elected representatives care enough about the titanic and deckchair- rearrangement effects of their money monopoly, to consider enabling specific other currency types sufficiently supportive of local charities auditably to do just this in order to cut their deadweight tax and spend on ineffective bureaucratic process out of the loop. Currently, (despite the fact in Coventry a charity has had to provide emergency food to 12,000 people in the last 18 months because government is too tied up in it’s own red tape to help), I don’t see this kind of radical reform as high on any politician’s priority list. Until it is, alternate exchange media will have various niche markets but these probably won’t become capable of being considered mainstream.
Thanks for this David, sorry I didn’t meet you at The Hague conference.
I’ve been working with local currencies for 20 years, coming from the whacky community end of the spectrum. I for one have always dreamed of the day when local authorities would get seriously involved in local currencies and welcome that that is now finally happening in the post-crisis atmosphere of openness to new ideas. See my article for the Guardian’s Local Government Network last week: http://www.guardian.co.uk/local-government-network/2013/jun/17/bristol-pound-local-currencies
Although people can pay their business rates in Brixton and Bristol Pounds now, it is still converted back into pounds to actually pay the council. So there is still a hurdle to overcome so that the local authority can actually commission local goods and services with the local currency it earns from business rates.
As to the involvement of banks and corporations, the field is wide open for a free market of competing currencies that can attract enough users to make them viable. The key for me is governance. The finance crisis was arguably a big-time failure of governance. It is no good creating CCs with little or no governance that are equally open to manipulation and speculation, which is one big reason in my mind for the failure of Bitcoin.
The best examples of local currencies with proven track records, including strong cooperative governance, are the 79 year old Swiss WIR Bank and the 15 year old Brazilian Banco Palmas.
For much more on all of this see my two books:
“Local Money – What Difference Does It Make?”
http://www.triarchypress.net/local-money.html
and “People Money – the Promise of Regional Currencies” http://www.triarchypress.com/pages/Regional-Currencies-People-Money.htm
Dave,
There’s altogether too much in this matter to cover in a short comment, and I found I couldn’t easily link from the comment box, so I’ve responded here – http://tinyurl.com/q9lgxog .
cheers, Michael
presumably you’ve heard of LETSystems, community way, and openmoney which take care of the problems you cite above, especially the issue of businesses making money, including banks – its astonishing how little attention has been paid over the last 30 years to understanding the fundamental and very simple idea that any community, any network, any association can create community currencies as needed – this was the core element of the LETSystem developed by michael linton in 1982 – what a different world it would be had it taken root and perhaps its not too late.
I for one was pleased to see David at the event.
Brands have a unique opportunity to help community groups become more financially sustainable if those groups can prompt members to solve their own problems. Doing so requires good incentives.
If brands could see community as a whole then they could liquidate spare capacity or excess inventory into rewards that incentivise this pro-social behaviour.
David’s clients could facilitate blended transactions in dual currency (£cash and community currency) and help consumer facing brands liquidate value from stock or capacity that otherwise perishes.
Community currencies have the potential to become a measure of contribution to society and the proof needed to boost a brands profile or an individual’s status. Linking contribution to entitlement is the only way governments are going to be able to manage our dwindling resources efficiently.
We need business to help us make the transition. Forward-thinking brands have an opportunity to support people and organisations that produce change, and deepen their engagement with customers in the process.
Welcome to our world, David. Let’s continue the conversation!