ALTERNATIVE CURRENCY SYSTEM
===========================
by Frederick Mann
11/4/97
Introduction
------------
This is a proposal for an alternative currency
system to be developed, launched, and implemented
as a matter of urgency.
One of the reasons for urgency is that the
international monetary/financial system could
be a house of cards. The banksters in control
may be able to prop up the system to recover
from the current "Asian crisis," but they
may not be able to keep their system going
indefinitely.
I propose that the new system be roughly based
on the ideas of E.C. Riegel as described in 'The
New Approach to Freedom' and 'Free Enterprise
Money.'
Riegel called this type of system a "split barter
system." Currently there are numerous "barter
clubs" in operation. Strictly speaking, they are
generally not barter clubs in that they utilize
some "barter currency" as medium of exchange.
Some call this type of trade "reciprocal trade."
It is characterized by utilizing a medium of
exchange other than those issued by coercive
political agancies.
This is the fifth in a series of articles on the
Economic Means to Freedom. The first four articles
are available at <http://www.buildfreedom.com/eco1.htm>.
The emphasis of the Economic Means to Freedom is on:
(a) Building freedom, rather than "fighting tyranny"
or "fighting for freedom";
(b) Bringing about a massive shift of economic power
into the hands of individuals.
Disclaimer
----------
This article constitutes the dissemination of
information in accordance with the right to free
speech. Nothing in this article is to be interpreted
as legal, accounting, tax, currency, banking, or
investment advice. Anyone seeking such advice
should consult a properly qualified and accredited
professional. All readers of this article are
emphatically advised to obey all laws on Earth
and in the Universe to the letter.
1. Currency
-----------
"The pinnacle of power today is the power to
issue money." -- Thomas H. Greco Jr., author
of 'New Money for Healthy Communities' see
Appendix 2.
The currency of the new system could be called the
"Exchange Dollar" or "E$." Each member in the
system has the power to issue currency or E$s.
Riegel called this the "individual money power"
-- see Appendix 1.
Currency is created when an individual wants to
buy something, but doesn't have the necessary E$s
to pay for it. In this case, a transaction takes
place, the buyer's net balance decreases, and the
seller's net balance increases.
Currency is redeemed ("destroyed") when a buyer
with a positive balance buys from a seller with
a negative balance.
A principle of the system is that the total E$
balances of everyone in the system will always
be zero -- the total positive balances always
equal the total negative balances. Hence the
E$ is inflation-proof.
The currency is backed by:
(a) An initial 80% guarantee -- see below;
(b) The expectation that those with negative
balances will produce and sell products and
services to eliminate their negative balances;
(c) Default insurance -- see below;
(d) Allowing negative balances based on the
established trustworthiness of debtors -- see
below;
(e) The pledging of assets as collateral to
safeguard large negative balances -- see below.
For more information on E.C. Riegel and alternative
currencies, see Appendix 2.
2. World Business Exchange
--------------------------
The E$ system is to be managed and operated by
a group of individuals who form a business or
company called World Business Exchange (WBE).
WBE is responsible for the rules of the system,
managing and operating the system, maintaining
a system to determine creditworthiness of members,
processing transactions, providing default insurance,
etc. -- see below.
WBE should be "domiciled" in a venue, such as
Belize, which provides the greatest economic
freedom, privacy, and security. WBE should have
no physical office or assets in its venue of
"domicile."
3. Computer System
------------------
WBE would require a computer system to manage
and operate the system. Ideally, all transactions
will take place via Internet. However, it may
be necessary to allow for some transactions to
be manually presented to WBE for processing.
4. Initial Value and Guarantee
------------------------------
The initial value of the E$ could be set at FRN 1.00
(US$1.00). During the first six months of operation
of the system, WBE could guarantee that anyone with
a positive E$ balance can exchange those E$s at a
rate of FRN 0.80 for each E$.
5. Convertibility
-----------------
World Trade Clearinghouse (WTC) could be requested
to make a market for E$s. This would make the E$
convertible into gold, silver, platinum, and the major
currencies handled by WTC -- see <http://www.wtc-info.com/>.
[If you decide to open a WTC account, please specify
"AE001" as your sponsor.]
A major drawback of practically all other "barter
systems" (more accurately called "split barter systems"
or "business trade exchanges") and alternative currency
systems is that their currencies are not convertible
and that some members get stuck with large positive
balances they can't easily spend on products and
services they need or want.
5. Interest
-----------
I propose that interest of one-half-percent (1/2%) per
month be paid on negative balances to WBE, and that
positive balances receive one-quarter-percent (1/4%)
per month from WBE. WBE thus earns one-quarter-percent
(1/4%) per month on all negative balances. At the end
of every month, WBE adjusts account balances to reflect
interest payments and receipts.
It would be desirable for the E$ to not only gradually
rise in value compared to other currencies that are
being inflated, but also to at least maintain its
purchasing power.
6. Limits and Defaults
----------------------
Obviously, a weakness of the system is that someone
can buy products and services, building up a negative
balance, and then dropping out of the system and/or
disappearing.
For each member of the system, a limit negative balance
can be set, depending on the creditworthiness of the
member. This limit can be changed from time to time
to reflect the changing creditworthiness of the member,
based on criteria to be determined.
Rules need to be specified to determine what constitutes
a default. Members with negative balances are expected
to "pay off" or "produce off" their debit balances over
time.
Members may "pay off" debit balances by making payments
to WBE in gold, silver, platinum, or major currencies
at rates to be published by WBE on its website, or by
purchasing E$s on the "WTC market," should WTC decide
to make such a market.
7. Default Insurance
--------------------
A negative balance comes into existence when a seller
sells to a buyer who doesn't have a sufficiently positive
balance to pay for the item or service. The seller is
effectively granting credit to the buyer.
I propose that default insurance be paid in respect of
any additional debit to a negative balance (i.e., account
becomes more negative) resulting from a transaction.
Sellers have responsibility in granting credit. Buyers
have responsibility to eliminate their debit balances
over time.
I propose that buyer and seller each has to pay deposit
insurance to cover half of the amount involved. The
rates will be determined by WBE depending on the trust-
and creditworthiness of the buyer and seller, respectively.
WBE will maintain a fund to cover defaults. A member
who defaults is removed from the system and the amount
of the default is deducted from the fund.
WBE may also grant permission to others to provide
default insurance, subject to conditions to be
determined by WBE.
8. Credit- and Trustworthiness
------------------------------
A formula can be developed based on:
(a) References provided by existing members;
(b) Past performance;
(c) Other criteria to be determined by WBE.
A trust- and creditworthy index could be calculated
for each member and would be available to other
members.
9. Product/Service Listings
---------------------------
The WBE system would include a "buy register" and
a "sell register" -- respectively consisting of
products/services wanted and products/services
offered. This would make it possible for buyers
and sellers to link up.
A classification system will be necessary and the
registers would have to be searchable.
WBE will charge a fee for listings in the register.
10. Transactions
----------------
When a buyer and a seller agree to a transaction,
each will submit the relevant and necessary
information -- including verification details --
to WBE, wherupon the transaction will be recorded
and the necessary account balance adjustments
made, subject to limits not being exceeded.
11. Escrow
----------
WBE may want to allow for escrow transactions --
see WTC <http://www.wtc-info.com/> for examples
of how this might be handled.
12. Commissions
---------------
Barter clubs typically charge a commission of
10 - 15% on transactions. I recommend that WBE
charge a much lower commission, e.g., 2% - 5%
on the transaction amount paid by both the buyer
and the seller. There could also be a minimum
commission and a sliding scale depending on
the transaction amount.
The commission would be higher for manually
presented transactions that would involve
data entry by WBE.
13. Membership
--------------
Any individual, group, business, or company is
eligible for membership, provided they satisfy
criteria to be determined by WBE.
One of the criteria should probably be that
coercive agencies are not eligible for membership.
There should be a small membership fee -- maybe
of the order of E$10 per month -- possibly with
discounts for advance payments.
They could also be different classes of membership,
e.g., a special class for compnanies; or even a
number oc company classes, depending on size of
company. There could be a range of account classes,
paying different fees and commissions, with different
credit limits, etc.
(The membership for a company in a typical barter
club is several hundred dollars per year.)
14. Simulation
--------------
A skeleton computer system needs to be developed
as soon as possible, with the various percentages,
fees, etc. as variables. Then the system needs
to be simulated, using various assumptions and
parameters, to determine workability and
viability.
15. Pledging Assets
-------------------
There needs to be provision for an individual or
business to pledge assets as collateral for credit.
This service could either be provided by WBE, or
by other institutions.
16. Privacy and Security
------------------------
Communication between members and WBE needs to be
encrypted, private, and secure.
WBE could provide a module enabling members to
communicate to each other via automatic encryption.
(WTC has such a module <http://www.wtc-info.com>.)
WBE needs to maintain confidentiality of all
transactions. WBE needs to be "domiciled" in a
venue that requires no financial reporting. Thus
WBE will not do any reporting to coercive agencies.
If any members want to report their transactions
to coercive agencies, that's up to them. A
potential problem that needs to be catered for
is the eventuality of one party to a transaction
wanting to report the transaction while the other
doesn't. At the time of entering into a transaction
this issue needs to be settled by mutual agreement.
17. Disputes, Mediation, and Arbitration
----------------------------------------
WBE, or one or more other entities, need to procide
for mediation and arbitration services to settle
disputes.
18. Additional Features
-----------------------
The WBE design team needs to analyze current barter
systems, particularly those on the Internet, to
determine what additional features need to be
incorporated in the WBE system.
19. Potential Markets for the WBE System
----------------------------------------
(a) Members of other barter clubs (WBE provides huge
advantages not available from the others);
(b) International traders;
(c) People involved in barter and countertrade;
(d) Businesses owned by freedom lovers;
(e) Freedom-loving individuals;
(f) Businesses with "expiring commodities" -- hotels,
airlines, radio stations, restaurants, etc. have
"expiring services" -- if the hotel room isn't rented
in time, the plane seat not sold, the radio advertising
not sold, the restaurant seat not occupied in time, that
potential revenue expires and can never be recovered --
"expiring service" businesses are hot prospects for the
WBE system;
(g) Businesses that would like to have access to an
additional market for their products and services;
(h) Professionals such as doctors, dentists, lawyers,
accountants, consultants, etc. with "expiring time"
-- if available time isn't being paid for by a client,
the potential revenue from that time is lost forever
and can never be recovered;
(i) People in the alternative currency movement.
20. Sales Force
---------------
WBE would need a sales force. Sales Reps could earn
a commission, calculated as a portion of the membership
fee as well as a portion of the transaction commissions
of everyone they enroll into the WBE system.
21. Growth and Decentralization
-------------------------------
If the WBE system becomes successful, it will eventually
become necessary to have decentralized local exchanges
in addition to "headquarters." I envisage that every
sizable city could have its own exchange. Local members
would be able to access the product/service registers
of other exchanges and transact with anyone else in the
overall WBE system.
22. Credit Cards and ATMs
-------------------------
Once WBE has become a viable operation, it will be
relatively easy to organize the necessary interfaces
with existing systems to enable members to use credit
cards for purchases and to withdraw cash at ATMs.
23. Coinage and Banknotes
-------------------------
I envisage that WBE will not get involved in the issuance
of coins and banknotes, though this option should remain
open. When it becomes feasible, some group or entity
needs to issue coins and notes representing an honest,
stable, inflation-proof currency. Ideally, this needs
to be done before current monetary systems collapse.
24. Participation
-----------------
If you're interested in playing a role in the development
of the WBE system, please contact Frederick Mann at
f-prime@activist.com and/or subscribe to the Advanced
Freedom Solutions List <mailto:afs-request@maillist.dundee.net>
with "subscribe" in the body of the message. The development
of the WBE system will be discussed on the AFS List. Subscribe
if you'd like to be kept up to date on developments.
Your feedback will be appreciated.
Appendix 1 - The Money Power In You
-----------------------------------
[Extract from E.C. Riegel's 'The New Approach to Freedom']
There is a treasure buried in your consciousness.
If you will dig it up from the debris of superstition
and fear that covers it you will gain a freedom and
self-mastery that will lift your life to a higher
plane.
This is the money power in you.
The power to create money with which to purchase
wealth, health and happiness actually lies dormant
within you. You have thought of the money power
as something remote from you and beyond your grasp.
You have dreamed of the good you could and would do
if you had money power. You have blamed others for
not accomplishing this good. You have blamed them
for evil economic and political conditions; for
unemployment, for poverty, for crime, for war.
It is quite logical to blame these maladies upon
the malfunction of the money power, but you have
not suspected that the money power resides in you
and because of your failure to exert it the world
is afflicted with miseries.
You have the power; you have the responsibility.
The power and responsibility to banish poverty,
unemployment, insecurity, misery and war rests
entirely with you. You, in cooperation with
other intelligent persons, can drive economic and
political evils further and further from the area
of your life and ultimately they may be driven
from the face of the earth. You can do this by
the money power in you, expressed first in your
own prosperity and happiness, and radiating to
others. You can do it and you must do it. There
is no power outside of you that can bring these
blessings to you. Petitioning the Government is
like writing to Santa Claus.
You need no laws -- there is a law, a natural
law that governs your money power. You need no
government aid. You need only cooperation with
and from persons who, like you, have resolved to
exert the money power inherent in us all. This
power in each of us needs only the recognition
and respect of our fellows to spring forth and
exert its blessings. We need not petition
Congress and we need not waste time to denounce
bankers, for they can neither help nor hinder
our natural right to extend credit to each other,
and this is the perfect basis for a money system.
Banish monetary inferiority from your consciousness
and resolve to exert the dignity, the responsibility
and the power for personal and social betterment
that is rightly yours. Inspire others to join
these qualities with yours and out of of it will
come mutual action that will realize money mastery
and a richer life in a better world.
Appendix 2 - E.C. Riegel and Alternative Currencies
---------------------------------------------------
There are some references to E.C. Riegel on the
Internet. You can find them by doing a search,
using 'AltaVista,' for "+e.c.riegel" without the
quotes.
As far as I know, Riegel's 'The New Approach to
Freedom' and 'Free Enterprise Money' are out of
print. You may be able to obtain them from
libraries and used-book stores.
Riegel's 'Flight from Inflation' may be available
from The International Society for Individual Liberty
<http://www.creative.net/~star/>.
FLIGHT FROM INFLATION: The Monetary Alternative
by E. C. Riegel
A very well-written explanation of the nature of
money and inflation, has a good short U.S. monetary
history, and calls for a fully-private money system.
This book was well ahead of its time (late 1940's),
and predicted the inflation that has ravaged us since,
and ultimately, the complete destruction of the dollar
[still possible with today's rampant inflation via the
credit markets]. (hardcover) 168 pg. ........ $5.95
'Flight from Inflation' is also available from Thomas
H. Greco <http://www.gaia.org/ic/market/money/>.
NEW MONEY FOR HEALTHY COMMUNITIES by Thomas H. Greco, Jr.
This book:
* Is the how-to-do-it manual for local trading systems.
* Describes exchange alternatives which reward people
fairly and reflect the reality of an abundant earth.
* Shows how voluntary groups can revitalize local economies.
* Outlines the true nature of money and new approaches
to transforming money. New Money for Healthy Communities
takes the reader well beyond the rutted road of orthodox
thinking, describing in detail the essential features of
equitable and dynamic exchange systems, and shows how they
can be set up by voluntary local associations. It describes
both past and present examples of local currencies and
exchange systems, including their strengths, limitations,
and errors. It then proposes innovative ways of transforming
exchange, using mechanisms which are democratic, humane,
ecologically sound, sustainable, and implementable at the
grass-roots level.
New Money for Healthy Communities is based on thorough
research conducted by the author, a former professor of
business, over the past dozen years. It is well-illustrated,
footnoted, and indexed, and provides extensive lists of
contacts, resources, and references.
"New Money for Healthy Communities lifts the veil on the
secret power of money creation and lucidly explains how
alternative currencies can give this power back to those
who create wealth. It is destined to be a classic handbook
for community activists and all conscious people." -- Gordon
Davidson, co-author, Spiritual Politics, Builders of the Dawn.
1994. Paper, 216 pp, illustrated, index, $15.95 + $3 postage.
ISBN 0-9625208-2-9
Thomas H. Greco, Jr., Publisher
P.O. Box 42663, Tucson, Arizona 85733
(520) 577-2187. E-mail: circ@azstarnet.com
Considerable information on alternative currencies is
available on the Internet by searching "alternative
currency(ies)."
Copyright C 1997 ALL RIGHTS RESERVED FWO/TL HOLDINGS
Copyright Exception: Anyone is free (and encouraged) to
circulate this article in electronic form in accordance
with the generally accepted customs of netiquette, provided
the article is circulated in its entirety without any changes.
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