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Monday, April 09, 2012

Thomas H. Greco, and Reinventing Money

Please read "Money and Debt: a Solution to the Global Crisis" as a primer.
The End of Money and the Future of Civilization
by Thomas H. Greco

I'm looking into alternative money and have come across a remarkable author who has simplified the entire subject into a cannon of concise and detailed and instructive books.

There are only three types of truncations of wealth between people:
  1. Gifts - voluntary transfers
  2. Taxes - involuntary transfers 
  3. Exchanges - reciprocal transfers, trade
Thom H. Greco is concerned with the nature of money as a medium of exchange for trade, and claims that our Governments monopoly upon the 'Credit Commons', the unique sovereign right to create money from nothing, has been abused and sold to the Banks, and this power should be decentralized and returned to the people who can control credit locally. The question is HOW do we do that?

Greco advocates two strategies to monetize the local value added to goods and services: Voluntary Grassroots Action to form alternative money credit unions, and for-profit business-to-business credit exchanges. His plan doesn't eliminate money or even U.S. dollars, but creates alternative currency and credit that can be exchanged for dollars, goods, or services, at the same value as dollars.

All systems of exchange must assure reciprocity, and maintain the value of system credits. They require a sound system of exchange, a proper basis of credit issuance (empowerment), a rapid rate of credit reflux (liquid cash flow), competent, honest and transparent management, effective oversight and consistent participation by members, with revenue adequate to cover operation costs.

These alternative monetary systems are popping up everywhere all the time, but they tend to fail for many reasons: design deficiencies, management issues, or lack of scale and scope. With a proper basis of issue, and balanced limits on how much money/credit is issued, a clear agreement between those who issue and those who use the new money can be achieved. Management should be fully accountable and use transparent systems (online), adequate procedures and controls, never over-rely upon volunteers, and respond quickly to any threats from external forces. Finally, a critical mass of participation must be achieved from the beginning, with a broad assortment of goods and services, within the full scope of the supply chain, and good acceptance within the broader local business community.

Each cooperative money needs a business plan, an implementation strategy, a living document that details the design, management, financing, implementation, and marketing of the issue. You must have initial buy-in from all parts of the supply chain: materials, manufacturing, wholesale, retail, labor.

There are many variable strategies for issuing new money, it can be sold for dollars, and redeemed for 90% of cash value in order to establish foundation of value. The credit can devalue over time if it is not spent. The members can be restricted to redeeming blocks of $100 credits or the initial creditors could be given bonus rewards if they achieve full repayment (like real-estate gifts). The money is best spent upon real-goods and value (food, material objects, value added wealth).

It is difficult to insure a high quality of service and responsiveness to clients without paid staff and a well funded start-up, but rapid reflux of credit flow to avoid stagnation is critical for the success of the system, so those who keep and maintain the system should receive compensation (they must be smart).

To fund this new money system the credit-union could charge membership fees, transaction fees, brokers fees, even sell advertising. There are many models around the world (need links).

The success of the venture depends upon its acceptance by the 'main-stream' community and a critical mass of small businesses in both scope and scale, so that members have a spectrum of goods and services. Essentially you need an entire economy supply-chain for basic needs to make the system sustainable: commodities, manufacture, wholesale, retail, and employees from each level.

Strategically it makes sense to have a phased implementation in the bio-region. Promote substitutes for imports and increase local demand from local sources. Organize a community clearinghouse association, the cooperative credit-union. Issue the supplemental regional currency, granting productive sources large credit and record this in the system as a debit to their accounts. Develop a network of trust, where social capital is invested in quality of life. Keep an independent value standard (real-estate), so that long-term contracts for commodities can be honored (see Appendix B).

The Marketing of the new money system is critical. It must be easy for people to use (digital money exchanged by cell phone). The local businesses must be used, no supply from outside the county. It may be possible to engage the non-profit community to accept these credits as donations and supply the businesses that donate to them with tax write-offs in return, and the non-profits could pay their volunteers with credits that can be then returned to the businesses as partial payment, completing the cycle.

Critical anchor stores must also be involved. Retail grocery, like Peoples'. Wholesale hardware supply, like ACE. Local manufacturers, like ? Commodity suppliers, recyclers and farms. Plus we need labor, people willing to accept payment, 10%-40% in new money credits.

I still have many questions:
  • Is this new money totally debt free? (If so, how do you pay for the logistics?)
  • Are people forbidden from charging interest on loans of this new money? (If yes, they what is their motivation for lending? Or perhaps no lending is allowed?)
  • Are 'fractional reserves' allowed if people begin banking and hoarding this new credit money?
  • Does the currency (digital?) have a time-limit, an expiration date, or a half-life, or does it renew every time it is exchanged?
  • How do you pick "the most productive members of society" to which you begin by allowing them to spend the new money into the economy and incur a debt by credit?
  • Is this new currency taxable? If so, how do you pay taxes?

Many notes: add a conflict mediation agreement, use private exchange (appendix A) and follow the UCC - Uniform Commercial Code, see ,, the Public Banking Institute, Ithaca Hours, time-banking, corporate barter (* when business expenses = profits, no taxes),