The Exchange Revolution
TAKING COMPLEMENTARY CURRENCIES AND MONEYLESS
TRADING TO A NEW LEVEL
Primary Reference Taking Moneyless Exchange to Scale:
Measuring and Maintaining the Health of a Credit Clearing SystemBy T. H. Greco. International Journal of Community Currency Research 17 (A) 19-25 <www.ijccr.net>
Explains the causes of (1) the “pooling” of credits, (2) stagnation of circulation, and (3) failure to thrive.
Prescribes policies to be applied in credit allocation. Describes metrics that are important in assessing
the performance of individual member accounts and in monitoring the overall health of a credit clearing system.
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Find it here…
Greek translation needed.
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GiftVoluntary, free
Reciprocal ExchangeEqual exchange of value between two
parties by voluntary agreement.
CoercedAppropriation
theft, robbery, extortion, taxes.
Transfer of Value
FORMAL – MONEY------------------------------------
INFORMAL
Promising Developments
Free and independent approaches to exchange based on voluntary participation involving
◦ Grassroots organizations◦ Cooperatives◦ Business Associations◦ For-profit enterprises ◦ Municipal and provincial governments◦ NGO’s
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Why Complementary Currencies?Decentralized Exchange and Payment Options Can Provide: Greater local community resilience and
self-determination. Insulation against systemic monetary
dysfunction and instability. Greater harmony, equity, social justice,
and quality of life for all.
Currency SOLD for cash Toronto Dollars, Salt Spring Dollars, Berkshares,
Brixton Pounds, Bristol Pounds Currency DISTRIBUTED with no formal
obligation to reciprocate Ithaca HOURS and many other hour-based
currencies Currency SPENT into circulation as a
credit obligation LETS, WIR ,TEM, Mutual Credit Clearing Systems,
Tucson Traders, Commercial Trade (Barter) Exchanges
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Types of Complementary Currencies
8
GrassrootsVoluntary
Social Action
CommercialFor-profit
Business-to-BusinessExchange
Main Currents of Alternative Exchange
Barter Exchanges
Trade Exchanges
Mutual Credit/LETS/TEM
Community Currencies 24 July 2015Thomas H. Greco, Jr.
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Evaluating A Currency Questions That Should Be Asked
Who is the issuer? How is it issued into circulation? What is the basis (foundation) of issue? What is the amount currently in circulation? What are the terms of the (explicit or implied) contract
offered by the issuer to the users of the currency, i.e., ◦ What does the issuer promise? ◦ What is the form of redemption? ◦ What are the limits, if any, on the amount that may be issued? ◦ What is the duration of the contract? Is there an expiration
date? ◦ Are there any fees, conditions, or limitations associated with
redemption?
1. Assure reciprocity2. Maintain the value of system
credits or currency3. Provide desired goods and
services at everyday prices (same as cash prices)
What an Exchange System must Achieve
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What Makes a Currency Credible and Sound? Spent into circulation by trusted issuers, On the basis of goods and/or services available in
the market, Amount issued must be in proper proportion to
anticipated sales or revenues. The issuer must agree to receive the currency in
payment at par (face value) without restrictions. Others must be free to refuse the currency or
accept it at a discount from par. There must be no forced circulation (legal tender).
Open and transparent operation and management, including the amount of credits or notes in circulation.
Requirements for a Sound Currency or Credit System
Proper basis of issue of credit Rapid rate of credit reflux (circulation) Competent, honest, and transparent
management Revenues adequate to cover operating costs Effective oversight and participation by the
members/users
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NetworkHub
Cashless Trade
Network
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The next generation of moneyless exchange must address:
Design issues – System Architecture Management issues Financing Implementation strategies Marketing Obstacles and Possible Threats Context and Timing
“Change occurs when there is a confluence of both changing values and economic necessity, not before.” -- John Naisbitt
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A Business Plan
1. Optimize exchange system architecture,2. Greatly expand the membership foundation of
small businesses and existing social groups,3. Allocate credit to members according to their sales
volume,4. Adopt uniform standard operating procedures
among exchanges to assure5. Trade credit value equalization6. Organize local trade exchanges into wide area
trading networks7. Adopt convenient point-of-sale payment
mechanisms
Credit Clearing—Realizing the Full Potential
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Why Community Currencies Often Stagnate and Fail to Thrive
Failure of reciprocity (non-redemption)◦ System design deficiencies
Improper basis of issue
Over-issuance
Lack of clear agreement between issuers and users
◦ Management issues Lack of accountability and transparency
Inadequate management procedures and controls
Overreliance upon volunteer administrators
Failure to respond to internal or external threats
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Why Community Currencies Often Stagnate and Fail to Thrive (Continued)
Scale and scope◦ Failure to achieve critical size of the participant
base
◦ Too narrow an assortment of goods and services being offered
◦ Failure to attract participants from all levels of the supply chain (production/distribution circuit)
◦ Failure to gain wide acceptance within the established business community (especially locally owned SMEs).
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Currency SOLD for cash Toronto Dollars, Salt Spring Dollars, Berkshares,
Brixton Pounds, Bristol Pounds Currency DISTRIBUTED with no formal
obligation to reciprocate Ithaca HOURS and many other hour-based
currencies Currency SPENT into circulation as a
credit obligation LETS, WIR ,TEM, Mutual Credit Clearing Systems,
Tucson Traders, Commercial Trade (Barter) Exchanges
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DesignTypes of Complementary Currencies
The most empowering form of currency monetizes local value-added:
SPENT into circulation As a credit obligation By a single trusted issuer or by the associated
members of a credit clearing exchange, When real value (goods and services)
changes hands.Need to assess creditworthiness and set balance limits on each account.
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Design (continued)
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Credit AllocationPossible criteria
The sales performance ratio is computed by taking the average daily sales over some number of days and dividing that into the closing debit balance for the period.
Example: Maria has a balance of -200 and average
daily sales of 25.200/25=8 days to clear her balance.
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Performance Metrics
Need to provide high quality of service and be responsive to clients’ needs.
Need to provide adequate compensation to administrative staff and the system developers.(Should not rely too much upon volunteer labor).
Maximize Openness, Transparency, and Accountability.
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Management
Basic requirements Need to have adequate start-up capital. Need to generate sufficient revenues to
cover the costs of operation, including a Reserve account for “bad debts.”
Revenue sources
Service fees on
Membership, Transactions, Advertising, and Brokerage service.
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Finance
Need to be part of the mainstream community economy (Core SMEs)
Need to achieve critical mass SCALE – big enough to provide members/users
with significant number of buying/selling opportunities
S C O P E – wide range of goods and services available
Need to make participation easy, convenient, low cost and virtually risk-free.
Try to include all levels of the supply chain.
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Implementation Success Factors
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RetailersWholesalers
Manufacturers
Basic Commodity Producers
Employees/Consumers
Include all Levels of the Supply Chain
Thomas H. Greco, Jr.
• Phased implementation as part of a comprehensive bioregional economic development plan.
• May include rebate rewards/loyalty schemes.
• May be part of a “buy-local” campaign
• Attach credit issuance to community improvement or charity schemes, e.g., Community Way.
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Implementation Strategies (2)
1. Promote import substitution by connecting local demands with local sources
2. Organize a credit clearing association to provide a means of payment that is independent of any political currency or banking establishment
3. Issue a supplemental regional currency4. Develop social capital and basic support structures
that strengthen the local economy and enhance the community’s quality of life
5. Develop an independent value standard and unit of account
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A 5-stage Regional Economic Development Plan
Need to clearly state the value proposition:
Easier access to exchange credit (working capital) at no interest cost
A stable and sustainable means of payment that remains in the community
Reduced need for cash
Enhanced opportunities to sell excess capacity
More customers and additional cash business
A loyal customer base
Reliable non-cash suppliers.
Overall improvement in local prosperity and quality of life
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Marketing
Those that govern: money transmission, gift cards and other prepaid access
instruments, electronic funds transfers, anti-money laundering, counter-terrorist financing, gambling, banking and lending, and import and export restrictions.
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Laws and Regulations that need to be considered
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Universal acceptance within wide domains (national or global).
Easy exchangeability (well developed currency exchange markets).
Inertia - The public is habituated to their use. Lack of exchange alternatives. Recognition by, and support from
governments—legal tender laws, restrictions on competitors.
Their true costs and “side-effects” are obscured and unrecognized.
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The Main Features Of Political Monies That Make Them Dominant In The Market Are:
References and ResourcesExplore the website and blog:
http://beyondmoney.net http://www.ReinventingMoney.com
Read: The End of Money and the Future of Civilization Money: Understanding and Creating Alternatives
to Legal Tender especially Chapters 14 and 17 Money and Debt: A Solution to the Global Crisis
all by Thomas H. Greco, Jr. Flight From Inflation and Private Enterprise
Money by E. C. Riegel
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