I attended a meeting in Kilkenny that was attended by the Lord Mayor, members of the local chamber of commerce, members of Future Proof Kilkenny, an organisation promoting the use of a complementary currency in Kilkenny as well as several other potential stakeholders in the project.
There were two presentations given, one by a member of Future Proof Kilkenny and one by Richard Douthwaite, followed by a general discussion.
One of the points that evolved during the course of the discussions was the perceived need for a physical paper currency to be used alongside the electronic currency. It was felt that this would help the introduction of the complementary currency for several reasons including the fact that it mirrored the Euro which exists in physical notes and electronic form and physical notes are something tangible. It occurs to me that notes allow anonymous transactions which is favoured by Irish people and that people may have privacy issues with certain transactions.
This raises some additional questions that I attempt to resolve, however I would welcome other peoples' thoughts and observations.
If one makes the assumption that the 'main' Quids currency exists in electronic form then it is a reasonably easy process to see how notes could be brought into and out of circulation by converting electronic currency to notes in authorised locations (e.g. Credit Unions, participating Building Societies).
When a business or person accumulates more notes than they wish to spend in note form they can opt to convert them into an electronic balance in their account at an authorised locations (e.g. Credit Unions, participating Building Societies).
Notes could also be issued in exchange for cash on parity with the euro. Again this would allow people without an electronic account to purchase Quids.
People should be able to make a part payment using electronic and paper Quids.
Other questions arise: should shops have to take both electronic and physical Quids? Could you have some shops e.g. a newsagent who only accepts physical Quids?
In the case of someone offering a physical Quid note the change could either be given in a combination of euro coin and Quids notes or could be given entirely in the form of electronic Quids onto the customers Quids chip and pin card.
There are going to be issues and procedures to be developed in dealing with a paper currency notably:
issuing and control of notes in issuing centres
anti-forgery marks
removal and destruction of old notes
Here are a few additional thoughts:
There are probably higher costs associated with paper currency as the notes (depending on circulation velocity) would have to be replaced after a relatively short lifespan.
The most important and critical factor in establishing the complementary currency is to maintain the trust in the currency both that the notes are authentic and not liable to forgery and that the currency (both physical and electronic) is redeemable for goods and services.
There clearly would have to be some form of anti-fraud security device or mark (e.g. a hologram) on the notes to both ensure trustworthiness and to be seen to be ensuring trustworthiness.
A further security device could be a note serial number together with a 2-D barcode. The 2-D barcode could be a secret encryption algorithm of the note serial number thereby allowing people to independently check if the note was authentic using a bar code reader and a connection to the internet.
Ciaran
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Coexistance issues of paper and electronic Quids
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Coexistance issues of paper and electronic Quids
by cmulloy on Wed Jul 15, 2009 4:01 pm
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Paper Quids and demurrage
by Graham Barnes on Wed Jul 22, 2009 5:54 pm
If Quids in an electronic account atrophy due to slow spending (demurrage), how is this achieved with paper Quids? Couldn't someone convert elec to paper Quids for the purpose of preventing demurrage? i.e sit on Quids with no penalty.
Graham Barnes
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Coexistance issues of paper and electronic Quids
by cmulloy on Wed Jul 22, 2009 7:44 pm
Graham, What you say is correct.
I suppose the issue is is this issue likely to be used by people to escape demurrage? If this is percieved as a real issue is it possible to have demurrage on paper notes i.e. replaced every quarter (or some other variant), is such an approach feasible or advisable?
I suppose the issue is is this issue likely to be used by people to escape demurrage? If this is percieved as a real issue is it possible to have demurrage on paper notes i.e. replaced every quarter (or some other variant), is such an approach feasible or advisable?
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Coexistance issues of paper and electronic Quids
by mike3 on Thu Jul 23, 2009 11:00 am
In deflationary and/or inflationary times, a demurrage on money - computerised or printed - keeps a firm handle on the money system, so that mankind does not become a victim of its own invention. Remember Till Eulenspiegel's merry pranks? This is vital in a 'fiat' currency such as the proposed LQN, where units are backed by general acceptance rather than by a 'promise to pay'. In deflationary and/or inflationary times, a monetry system which applies a demurrage on money, whether online and offline - is enabled to maintain a firmer handle on the money supply and to beter maintain the currency value.
The question of applying demurrage to currency notes was addressed by Ml. Unterguggenberger in the successful Worgel experiment of the 1930's, where bearers were obliged to apply a stamp, purchased at the local post office, to the reverse side of each note, each month, for the note to remain valid. At that time the impetus was to discourage money hoarding. (As Roosevelt had said, "the man who saves five dollars puts another man out of work".) Whereas Austrian Central Bank notes of that time circulated on average a few dozen times before being withdrawn, the Ware notes circulated by a factor 20 times greater. (473 times) Stressful times?!!! The demurrage lvl was set at 12% pa or 1% per month.
Later, when Social Creditors came to power in Alberta they introduced this same methodology, but the system failed: not enough economic desperation motivating the users perhaps; too few and distant post offices; and the glue on the stamps (wups !) was too weak. Their monetory idealism hit the ground "not with a bang, but with a whimper." But they never gave up publishing their magazine to this day...
The provision of circulating currency notes is a vital element in any exchange network that aspires to social inclusivity, however much available the new technologies. Otherwise large swathes of the population will be excluded from active participation, and many casual convenient transactional types would likewise be excluded.
One reason why one would attempt to apply demurrage to printed notes is, as Graham Barnes points out, to prevent hoarding (and by implication, to stimulate circlation). Another is to maintain stability of value, and to ensure aginst inflation/deflation by perpetually adjustindg quantity of that notes in circulation.
Ithacca (NY State) currency notes rely on natural wastage, and more especially on tourists who take away notes as souveniers, to reduce their money supply by about 12% annually, allowing them to give grants of the same amount to help fund local community initiatives. This, on a micro scale, is what Abraham Lincoln termed the great creative opportunity: "The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity."
So how might Demurrage be applied to a Printed Currency?
Most, if not all, of the solutions are less than ideal. Some are more workable than others. Lets start with the most awkward:
1. Withdraw all paper currency annually /periodically and replace/re-issue with new notes, but deduct a usage fee (demurrage) in the process. (Ghengis Kahn did this, as Marco Polo reports. So did the Franken kings when they re-minted their coinage). Disadvantage: A network of premises with staff is required; the logistic are overhelming, and very expensive to implement.
2. Alternatively, apply a VALID UNTIL date to all notes. Result: popular resentment and rejection. Whereas it may be possible to apply a 'Valid Until' date on smaller currency denominations, from 5-units down to small 50cent notes, it is hardly fair to expect anyone to accept or hold a 20-unit note one day, only to discover that the following day that its worthless and invalid.
3. Alternatively, have every note carry a series of colour-coded frames along the side or bottom of the note with the YEAR(S) and the VALUE in each frame. Print the notes on polymer paper (as the combined Australin Lets systems have done since 2002.) They will stay fresh and useful for years.
4. (An elaboration on No. 3 above.) Color-code the currency notes in strips or vertical bars on the edge of the note (both sides). Each strip is printed with the YEAR(S) and VALUE. At the end of the outmost year, the end strip is trimmed off by the bearer, the note is now shorter, and the new time-period / value is displayed outermost. No ground network of premises or bank outlets is required. Only those carrying the notes would pay the demurrage fee.
EXAMPLE: In the following example the annual demurrage is set at 15% pa over 10 years.
A current 20-Credit note would state 2009-2010 in the of the outer-most bar, with the figure 20 printed in bold above and below. The next bar, differentiated in colour and smaller typesize, would carry the years "2011-2013" and the value "15." In 2013 it would become a 10-Credit note. Two years later in 2015 it becomes a 7.5 Credit note, and in 2017, a 5-credits note, valid for a further 3 years.
The life-span of the cash note in this example is 10 years. No individual would suffer a hurting demurrage via suddenly invalidating large denominations.
Polymer notes survive the washing machine (i've tested the aussie notes). If the notes carried a barcode, their more precise demurrage could be calculated automatically at the point of a lodgement to account, if the system allowed this. Postage lodgements (for a fee) could be facilitated.
If demurrage notes were carefully spent into circulation in respect of work done at community level (as in Lincoln's & Glover's models), they would represent real value at their point of issue (which is really at the moment of acceptance), despite not being backed by a 'promise to pay'. Lincoln's "greatest creative opportunity" would not then be lost.
The social values initiated at the point of money creation continue to be carried in all the transactions and relationships for the life of the currency. Respected money theoreticians like Bernhard Lietaer, Michael Rowbotham and Edgar Cahn all confirm this. The ethics, principles and morals of money creation have a structural dynamic effect on all subsequent relationships in society and ultimately shape our civilisation.
If the source is clean, the water is clean; if the source is poisoned, the stream is poisoned. Bank money - issued as it is for the private exploitation of debt, without reference to community values or issues of justice, equanimity, inclusion, fostering true personal fullfillment, community wealth - has built a 'civilization' on one chacra only : destructive competition, aquisitive insecurity, isolation, fear, delusional ambition and the illusions of success. Bank money by its nature is anti-social, lacking in all ideals or social values. It lacks vision, and "without a vision the people ill perish".
We have all been forced of necessity to adopt these vicious banking dynamics in order to survive. Will the LQN merely 'tied over' the crisis in banking by propping-up those values, social dynamics, systems and hierarchies that bank money has created? As it stands, the banks may welcome the LQN because it buys them time until they can issue their 'real' money again?
What of Lincoln's "greatest creative opportunity"? What of Glover's and
Unterguggenberger's examples. Is there an opportunity for the LQN to re-constitute the very ethical foundations of trade and community by the judicial spending of fiat currency into circulation on sound principles, through key community-building nodes, and so help to energize and re-structure a more resiliant, resourceful, healthier, mutually supportive society ? I certainly hope so.
The question of applying demurrage to currency notes was addressed by Ml. Unterguggenberger in the successful Worgel experiment of the 1930's, where bearers were obliged to apply a stamp, purchased at the local post office, to the reverse side of each note, each month, for the note to remain valid. At that time the impetus was to discourage money hoarding. (As Roosevelt had said, "the man who saves five dollars puts another man out of work".) Whereas Austrian Central Bank notes of that time circulated on average a few dozen times before being withdrawn, the Ware notes circulated by a factor 20 times greater. (473 times) Stressful times?!!! The demurrage lvl was set at 12% pa or 1% per month.
Later, when Social Creditors came to power in Alberta they introduced this same methodology, but the system failed: not enough economic desperation motivating the users perhaps; too few and distant post offices; and the glue on the stamps (wups !) was too weak. Their monetory idealism hit the ground "not with a bang, but with a whimper." But they never gave up publishing their magazine to this day...
The provision of circulating currency notes is a vital element in any exchange network that aspires to social inclusivity, however much available the new technologies. Otherwise large swathes of the population will be excluded from active participation, and many casual convenient transactional types would likewise be excluded.
One reason why one would attempt to apply demurrage to printed notes is, as Graham Barnes points out, to prevent hoarding (and by implication, to stimulate circlation). Another is to maintain stability of value, and to ensure aginst inflation/deflation by perpetually adjustindg quantity of that notes in circulation.
Ithacca (NY State) currency notes rely on natural wastage, and more especially on tourists who take away notes as souveniers, to reduce their money supply by about 12% annually, allowing them to give grants of the same amount to help fund local community initiatives. This, on a micro scale, is what Abraham Lincoln termed the great creative opportunity: "The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity."
So how might Demurrage be applied to a Printed Currency?
Most, if not all, of the solutions are less than ideal. Some are more workable than others. Lets start with the most awkward:
1. Withdraw all paper currency annually /periodically and replace/re-issue with new notes, but deduct a usage fee (demurrage) in the process. (Ghengis Kahn did this, as Marco Polo reports. So did the Franken kings when they re-minted their coinage). Disadvantage: A network of premises with staff is required; the logistic are overhelming, and very expensive to implement.
2. Alternatively, apply a VALID UNTIL date to all notes. Result: popular resentment and rejection. Whereas it may be possible to apply a 'Valid Until' date on smaller currency denominations, from 5-units down to small 50cent notes, it is hardly fair to expect anyone to accept or hold a 20-unit note one day, only to discover that the following day that its worthless and invalid.
3. Alternatively, have every note carry a series of colour-coded frames along the side or bottom of the note with the YEAR(S) and the VALUE in each frame. Print the notes on polymer paper (as the combined Australin Lets systems have done since 2002.) They will stay fresh and useful for years.
4. (An elaboration on No. 3 above.) Color-code the currency notes in strips or vertical bars on the edge of the note (both sides). Each strip is printed with the YEAR(S) and VALUE. At the end of the outmost year, the end strip is trimmed off by the bearer, the note is now shorter, and the new time-period / value is displayed outermost. No ground network of premises or bank outlets is required. Only those carrying the notes would pay the demurrage fee.
EXAMPLE: In the following example the annual demurrage is set at 15% pa over 10 years.
A current 20-Credit note would state 2009-2010 in the of the outer-most bar, with the figure 20 printed in bold above and below. The next bar, differentiated in colour and smaller typesize, would carry the years "2011-2013" and the value "15." In 2013 it would become a 10-Credit note. Two years later in 2015 it becomes a 7.5 Credit note, and in 2017, a 5-credits note, valid for a further 3 years.
The life-span of the cash note in this example is 10 years. No individual would suffer a hurting demurrage via suddenly invalidating large denominations.
Polymer notes survive the washing machine (i've tested the aussie notes). If the notes carried a barcode, their more precise demurrage could be calculated automatically at the point of a lodgement to account, if the system allowed this. Postage lodgements (for a fee) could be facilitated.
If demurrage notes were carefully spent into circulation in respect of work done at community level (as in Lincoln's & Glover's models), they would represent real value at their point of issue (which is really at the moment of acceptance), despite not being backed by a 'promise to pay'. Lincoln's "greatest creative opportunity" would not then be lost.
The social values initiated at the point of money creation continue to be carried in all the transactions and relationships for the life of the currency. Respected money theoreticians like Bernhard Lietaer, Michael Rowbotham and Edgar Cahn all confirm this. The ethics, principles and morals of money creation have a structural dynamic effect on all subsequent relationships in society and ultimately shape our civilisation.
If the source is clean, the water is clean; if the source is poisoned, the stream is poisoned. Bank money - issued as it is for the private exploitation of debt, without reference to community values or issues of justice, equanimity, inclusion, fostering true personal fullfillment, community wealth - has built a 'civilization' on one chacra only : destructive competition, aquisitive insecurity, isolation, fear, delusional ambition and the illusions of success. Bank money by its nature is anti-social, lacking in all ideals or social values. It lacks vision, and "without a vision the people ill perish".
We have all been forced of necessity to adopt these vicious banking dynamics in order to survive. Will the LQN merely 'tied over' the crisis in banking by propping-up those values, social dynamics, systems and hierarchies that bank money has created? As it stands, the banks may welcome the LQN because it buys them time until they can issue their 'real' money again?
What of Lincoln's "greatest creative opportunity"? What of Glover's and
Unterguggenberger's examples. Is there an opportunity for the LQN to re-constitute the very ethical foundations of trade and community by the judicial spending of fiat currency into circulation on sound principles, through key community-building nodes, and so help to energize and re-structure a more resiliant, resourceful, healthier, mutually supportive society ? I certainly hope so.
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Re: Coexistance issues of paper and electronic Quids
by Graham Barnes on Fri Jul 24, 2009 3:36 pm
Immensely helpful and interesting (to me at least). Hope Richard will comment.
The electronic (non-printed) Quid is liable to demurrage at a dynamic rate. I guess the aim would be to demur (?) the printed Quids at the same rate. The (interesting) measures you list are all demurring (??) notes at fixed-in-advance rates. I'm not sure if this is a problem in principle rather than a problem in practice.
As far as propping up this ailing edifice, of course its an issue. Virtually all of the successful creative complementary currency initiatives seem to have been torpedoed by vested interests (governments, politicians, banks,..) as soon as the situation starts to return to 'normal'.
The radical-economists views seem to be that returning to 'normal' this time wont happen. Or wont happen for a long time.
Notwithstanding that, if there are strategic measures that could be built into any LQN to future-proof it, I would be very interested to hear of them.
The only thing more difficult than getting LQN going will be to keep it going.
mike3 wrote:One reason why one would attempt to apply demurrage to printed notes is, as Graham Barnes points out, to prevent hoarding (and by implication, to stimulate circlation). Another is to maintain stability of value, and to ensure aginst inflation/deflation by perpetually adjustindg quantity of that notes in circulation.ed; the logistic are overhelming, and very expensive to implement.
<snip>
We have all been forced of necessity to adopt these vicious banking dynamics in order to survive. Will the LQN merely 'tied over' the crisis in banking by propping-up those values, social dynamics, systems and hierarchies that bank money has created? As it stands, the banks may welcome the LQN because it buys them time until they can issue their 'real' money again?
The electronic (non-printed) Quid is liable to demurrage at a dynamic rate. I guess the aim would be to demur (?) the printed Quids at the same rate. The (interesting) measures you list are all demurring (??) notes at fixed-in-advance rates. I'm not sure if this is a problem in principle rather than a problem in practice.
As far as propping up this ailing edifice, of course its an issue. Virtually all of the successful creative complementary currency initiatives seem to have been torpedoed by vested interests (governments, politicians, banks,..) as soon as the situation starts to return to 'normal'.
The radical-economists views seem to be that returning to 'normal' this time wont happen. Or wont happen for a long time.
Notwithstanding that, if there are strategic measures that could be built into any LQN to future-proof it, I would be very interested to hear of them.
The only thing more difficult than getting LQN going will be to keep it going.
Graham Barnes
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Fri Feb 06, 2009 5:35 pm
Coexistance issues of paper and electronic Quids
by Fabio on Fri Jul 24, 2009 8:46 pm
First of all I'd also like to express gratitude for mike3's contribution. It resonates within me and I think this is the spirit who also drives me in this project.
After re-reading Ciarans initial post, as well as mike3's and Graham's replies, it struck me that I think we are dealing with two different pair of shoes.
The electronic version of the LQN, as far as I understand, is not a classical demurrage system. It actually tries to manage the whole quid supply. It makes adjustment in both directions, increasing and decreasing the amount, by operating at ACCOUNT and TOTAL QUIDS level.
A classic demurrage system operates by operating on SINGLE units - on single paper bills.
I am not sure this is compatible in the sense that equal rules can be applied to both. So I see three possibilities:
<ul>
<li> 1) The electronic version changes strategy by applying rules on single units</li>
<li> 2) The paper version changes strategy by applying rules on money supply (injecting/removing paper quids - not sure how this could work).</li>
<li> 3) The two system are treated as separate. Again, not sure what feedback this may produce. </li>
After re-reading Ciarans initial post, as well as mike3's and Graham's replies, it struck me that I think we are dealing with two different pair of shoes.
The electronic version of the LQN, as far as I understand, is not a classical demurrage system. It actually tries to manage the whole quid supply. It makes adjustment in both directions, increasing and decreasing the amount, by operating at ACCOUNT and TOTAL QUIDS level.
A classic demurrage system operates by operating on SINGLE units - on single paper bills.
I am not sure this is compatible in the sense that equal rules can be applied to both. So I see three possibilities:
<ul>
<li> 1) The electronic version changes strategy by applying rules on single units</li>
<li> 2) The paper version changes strategy by applying rules on money supply (injecting/removing paper quids - not sure how this could work).</li>
<li> 3) The two system are treated as separate. Again, not sure what feedback this may produce. </li>
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Sat Mar 29, 2008 10:27 am
Coexistance issues of paper and electronic Quids
by mike3 on Sat Jul 25, 2009 12:02 am
Thank you indeed for your encouraging responses, which I sincerely appreciate.
A variable online demurrage is not incompatible with a fixed paper currency demurrage, and Fabio's "two dfferent pairs of shoes" rings true and correct. The shoes may belong to the same individual, but they are very diferent shoes. For instance, higher paper currency demurrage and comparatively lower online demurrage might encourage more online transactions, if this were deemed desirable.
The thinking and experience of this writer has been influenced by the LETS mutual-credit trading model, but one in which a community 'debit' account (eventually) provided some necessary liquidity and thereby helped reduce the individual debt levels in the network - (thankfully, since the rigid mutul-credit model is hopelessly severe and self limiting.) It was was a kind of flexi-Lets if you like, on a very micro scale. Ironically too, many dormant bad debts increased the network's liquidity, providing too much slack and too much credit in the system in my view.
But those were pre-computer days with hopelessly delayed paper accounting (!) and we had no redress - no fees, no demurrage, no software and really no clue, and by the time we had it (partially) figured out the Tiger had arrived and dispersed the group in all directions...
In this context one might appreciate why encouraging online trading could be considered more advantageous: offline paper transactions don't pay transaction fees, and offline traders pay no account fees. Result : the community account suffers and is less enabled to provide liquidity - via grants to green initiatives and vital community-building projects; (nor to 'keep the money tight' by reducing grants/ levels).
On the other side, it is true that Paper currency (1) visibly helps to foster community identity (like BerkShares, Totnes Pounds, Ithacca Hours and Kenmare Youros for example). (2) Paper currency truly helps to publicise the online network - with enviable marketing efficiency: each note is an advert with many many viewers. And if paper currency issuance is focused on - or indeed limited to - 'matching grants' to the fundraising of key community groups, then (3) a near 100% acceptance and a near 100% Seignorage is attainable.
All of this is and was in the context of a mutual-credit dynamic to begin with, one in which fiat currency - and especially paper issue - was the outermost ring or 'outreach' of a system whose core was made up of units backed by a personal promise to reciprocate - a 'promise to pay'. All units begin life as 'promissory notes' backed by real goods and services. We had not discovered the usefullness of the Gift Certificate nor the Personal Voucher in establishing firmer 'asset backed' units.
But Lets systems had no problem with endebtedness. The debit-credit cycle was as as natural as 'give and take' or 'yin and yang'. It was the exploitation of debt that was seen as the key issue, not debt itself. In transactional dynamics, endebtedness is a temporary stage in the exchange cycle. But without a third dimension, namely a collective debit pool or community float account, the individual member's natural resistance to debt restricted the growth of the network. By the time we saw the positive implications of creatively managing a community account to reduce individual debt levels and expand the network, the momentum had been lost. For the time being at least.
A variable online demurrage is not incompatible with a fixed paper currency demurrage, and Fabio's "two dfferent pairs of shoes" rings true and correct. The shoes may belong to the same individual, but they are very diferent shoes. For instance, higher paper currency demurrage and comparatively lower online demurrage might encourage more online transactions, if this were deemed desirable.
The thinking and experience of this writer has been influenced by the LETS mutual-credit trading model, but one in which a community 'debit' account (eventually) provided some necessary liquidity and thereby helped reduce the individual debt levels in the network - (thankfully, since the rigid mutul-credit model is hopelessly severe and self limiting.) It was was a kind of flexi-Lets if you like, on a very micro scale. Ironically too, many dormant bad debts increased the network's liquidity, providing too much slack and too much credit in the system in my view.
But those were pre-computer days with hopelessly delayed paper accounting (!) and we had no redress - no fees, no demurrage, no software and really no clue, and by the time we had it (partially) figured out the Tiger had arrived and dispersed the group in all directions...
In this context one might appreciate why encouraging online trading could be considered more advantageous: offline paper transactions don't pay transaction fees, and offline traders pay no account fees. Result : the community account suffers and is less enabled to provide liquidity - via grants to green initiatives and vital community-building projects; (nor to 'keep the money tight' by reducing grants/ levels).
On the other side, it is true that Paper currency (1) visibly helps to foster community identity (like BerkShares, Totnes Pounds, Ithacca Hours and Kenmare Youros for example). (2) Paper currency truly helps to publicise the online network - with enviable marketing efficiency: each note is an advert with many many viewers. And if paper currency issuance is focused on - or indeed limited to - 'matching grants' to the fundraising of key community groups, then (3) a near 100% acceptance and a near 100% Seignorage is attainable.
All of this is and was in the context of a mutual-credit dynamic to begin with, one in which fiat currency - and especially paper issue - was the outermost ring or 'outreach' of a system whose core was made up of units backed by a personal promise to reciprocate - a 'promise to pay'. All units begin life as 'promissory notes' backed by real goods and services. We had not discovered the usefullness of the Gift Certificate nor the Personal Voucher in establishing firmer 'asset backed' units.
But Lets systems had no problem with endebtedness. The debit-credit cycle was as as natural as 'give and take' or 'yin and yang'. It was the exploitation of debt that was seen as the key issue, not debt itself. In transactional dynamics, endebtedness is a temporary stage in the exchange cycle. But without a third dimension, namely a collective debit pool or community float account, the individual member's natural resistance to debt restricted the growth of the network. By the time we saw the positive implications of creatively managing a community account to reduce individual debt levels and expand the network, the momentum had been lost. For the time being at least.
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Coexistance issues of paper and electronic Quids
by Geoff on Sat Jul 25, 2009 12:59 am
Hi everyone. Geoff Chesshire here. I must admit that I have kept very quiet, at least until now that I see an opening. In particular, the question of how demurrage of paper currency relates to periodic adjustments of ledger-based quid floats is quite interesting, as it relates to a deeper confusion between potential and actual money.
Credit is a form of reputation, and it represents potential money. It is an estimate of someone's capacity and reliability to issue and redeem money. In a system like LQN, as I understand it, this capacity is estimated using time-averaged volume of someone's buying and selling while they stay within a reasonable balance over some interval of time. I'm not sure what these two time scales are, but presumably they are in the range of several months. This means that credit is allocated according to (and reputation is based upon) a value system that rewards (1) maximizing trading volume as accounted using quid for the medium of exchange, and (2) maintaining fairness as measured by balance between buying and selling, using quid as the unit of account for market value. This design implicitly motivates people and drives the system to maximize overall trade in quid, just as measures of GDP motivate economic growth. It seems reasonable that the estimate of credit (and reputation) for each person should vary over time, waxing and waning according to their level of recent participation. I propose this waning of credit over time as a fair alternative to demurrage. I want to emphasize that this waxing and waning credit is NOT money, as I see it, so this ought not to be added and subtracted as adjustments to their trading account balance. Pre-loading an account with money seems to me like employing a mass-balance (scales) that has one side pre-loaded with an attached fixed weight.
Actual money is distinct from credit, as I see it. It is issued and redeemed as payment when real goods and services are exchanged. In the case of mutual-credit money, it is issued by the buyer, to the extent that he has not already received sufficient money issued by others wherewith to pay. In the case of centrally-issued money also, it is issued at the request of the buyer, e.g., by cheque, debit card or credit card. In either case, it should not need to be issued in advance. However, if someone really wants to use paper money, he could buy some in advance from a hole-in-the-wall. It seems to me that paper quid and LQN quid are two quite different animals; anonymous paper money is a commodity whose value and acceptability depends upon the reputation of the central issuer and not at all upon the credit of the user. Demurrage of paper money is essentially a tax paid to the central issuer, which might be quite reasonable if you consider all of the costs and risks involved in managing it. It is not the paper money itself that loses value over time through demurrage. Rather, it is the holder of this paper who loses when he must pay the tax.
From what I have said above, you can see that I am in favour of each account carrying two numbers: credit (reputation), and money (balance). I prefer the notion of credit with depreciation rather than money with demurrage. Actually, I favour more general multidimensional measures of reputation (for doing good, and not only for doing well), but that's another story altogether.
Something else that I have always wished to suggest is that lower limits for account balance (based upon credit) are fine, but that upper limits (also based upon credit) are also a good idea. So many local currencies get bogged down as a result of hoarding (just as mike3 described above), even though this may be unintentional and merely the result of a limited variety of offerings in the market. The result of such imbalance might be excessive competition and production of goods that nobody is buying, wasting labour and other resources and causing unnecessary systemic stresses. The present design of LQN, in which credit and money are added to one grand total, makes lower limits for account balance easy to manage, but makes upper limits almost impossible. Keeping credit and money as separate numbers makes it much easier to manage both lower and upper bounds for account balance.
Credit is a form of reputation, and it represents potential money. It is an estimate of someone's capacity and reliability to issue and redeem money. In a system like LQN, as I understand it, this capacity is estimated using time-averaged volume of someone's buying and selling while they stay within a reasonable balance over some interval of time. I'm not sure what these two time scales are, but presumably they are in the range of several months. This means that credit is allocated according to (and reputation is based upon) a value system that rewards (1) maximizing trading volume as accounted using quid for the medium of exchange, and (2) maintaining fairness as measured by balance between buying and selling, using quid as the unit of account for market value. This design implicitly motivates people and drives the system to maximize overall trade in quid, just as measures of GDP motivate economic growth. It seems reasonable that the estimate of credit (and reputation) for each person should vary over time, waxing and waning according to their level of recent participation. I propose this waning of credit over time as a fair alternative to demurrage. I want to emphasize that this waxing and waning credit is NOT money, as I see it, so this ought not to be added and subtracted as adjustments to their trading account balance. Pre-loading an account with money seems to me like employing a mass-balance (scales) that has one side pre-loaded with an attached fixed weight.
Actual money is distinct from credit, as I see it. It is issued and redeemed as payment when real goods and services are exchanged. In the case of mutual-credit money, it is issued by the buyer, to the extent that he has not already received sufficient money issued by others wherewith to pay. In the case of centrally-issued money also, it is issued at the request of the buyer, e.g., by cheque, debit card or credit card. In either case, it should not need to be issued in advance. However, if someone really wants to use paper money, he could buy some in advance from a hole-in-the-wall. It seems to me that paper quid and LQN quid are two quite different animals; anonymous paper money is a commodity whose value and acceptability depends upon the reputation of the central issuer and not at all upon the credit of the user. Demurrage of paper money is essentially a tax paid to the central issuer, which might be quite reasonable if you consider all of the costs and risks involved in managing it. It is not the paper money itself that loses value over time through demurrage. Rather, it is the holder of this paper who loses when he must pay the tax.
From what I have said above, you can see that I am in favour of each account carrying two numbers: credit (reputation), and money (balance). I prefer the notion of credit with depreciation rather than money with demurrage. Actually, I favour more general multidimensional measures of reputation (for doing good, and not only for doing well), but that's another story altogether.
Something else that I have always wished to suggest is that lower limits for account balance (based upon credit) are fine, but that upper limits (also based upon credit) are also a good idea. So many local currencies get bogged down as a result of hoarding (just as mike3 described above), even though this may be unintentional and merely the result of a limited variety of offerings in the market. The result of such imbalance might be excessive competition and production of goods that nobody is buying, wasting labour and other resources and causing unnecessary systemic stresses. The present design of LQN, in which credit and money are added to one grand total, makes lower limits for account balance easy to manage, but makes upper limits almost impossible. Keeping credit and money as separate numbers makes it much easier to manage both lower and upper bounds for account balance.
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Wed Feb 04, 2009 6:32 pm
Coexistance issues of paper and electronic Quids
by rdouthwaite on Tue Jul 28, 2009 2:11 pm
I've found the posts on this thread very helpful. I hadn't done any thinking at all about how a paper currency could be linked to the quid until Brian Dillon of Futureproof Kilkenny put the idea to Ciaran and I. My attitude up to that time was that people could use euro notes and coins for small transactions as issuing quid versions just added a complication I thought we could avoid. However, I now think that giving people the option of using paper quid notes is worth the effort as it should make a LQN system more public, useful, and accessible.
The discussion has made it clear that with the current LQN design, we are not proposing to use demurrage in the conventional sense as we will be adding quid to the most active electronic accounts and taking quid out of the slower ones. Most accounts will probably be untouched by these adjustments, whereas with conventional demurrage, everyone would pay a tiny rental charge on each unit in their account on a certain day. This clarification means that we've no need to worry about charging people for using the notes as a conventional demurrage system would,
However, it is possible that other problems might arise In our system, it's conceivable that some people might use some of their electronic quid to buy paper quid to improve the ratio between their average balance and their turnover either to save themselves from having quid deducted from a slow account or even to get their account into the high velocity category and thus qualify for an issue of more quid.
I think we can probably design the algorithm to make this extra issue hard to achieve so let's look at whether it would create problems if people switched to paper quid to avoid having a few electronic ones taken away. In the Kilkenny case, let's assume that they bought them through the Credit Union office. They would go in, insert their chip card into a reader, tap in their PIN and the amount they wished to buy. The electronic quid involved would go to the management account which would not trade but just keep a tally of the value of quid sold. This effective cancellation of electronic quid would raise the average velocity of the whole system, not just the account of the person buying the paper notes. The Credit Union would need to be paid in quid for handing over the notes. We need to consider whether its payment should come from a service charge added to the purchaser's payment or be considered as part of the operating cost of the entire system.
The purchaser now has two options. One is that he/she can spend the paper quid in shops or with other users. The other is that he/she can hoard the paper until they want to spend it. The first option is obviously fine. Are there any problems with the second? The answer, as far as I can see, is no. Their holding the paper does no damage to anyone. It need not necessarily mean that there is any less purchasing power in the electronic system because, as its overall velocity went up when the purchaser's electronic quid were cancelled, the managers would have been able to put more quid into the active accounts to compensate if they thought they were required. Similarly if, when the paper quid are spent, they are converted back into electronic ones by the shopkeeper who lodges them to his account, the system can adjust by taking more units out of the slower accounts.
So people hoarding paper notes should not present a problem since the system can adjust as they are issued and lodged back. All someone hoarding the system's notes will be doing is saying in effect “I have faith in this currency”. They will not be denying purchasing power to anyone else.
The discussion has made it clear that with the current LQN design, we are not proposing to use demurrage in the conventional sense as we will be adding quid to the most active electronic accounts and taking quid out of the slower ones. Most accounts will probably be untouched by these adjustments, whereas with conventional demurrage, everyone would pay a tiny rental charge on each unit in their account on a certain day. This clarification means that we've no need to worry about charging people for using the notes as a conventional demurrage system would,
However, it is possible that other problems might arise In our system, it's conceivable that some people might use some of their electronic quid to buy paper quid to improve the ratio between their average balance and their turnover either to save themselves from having quid deducted from a slow account or even to get their account into the high velocity category and thus qualify for an issue of more quid.
I think we can probably design the algorithm to make this extra issue hard to achieve so let's look at whether it would create problems if people switched to paper quid to avoid having a few electronic ones taken away. In the Kilkenny case, let's assume that they bought them through the Credit Union office. They would go in, insert their chip card into a reader, tap in their PIN and the amount they wished to buy. The electronic quid involved would go to the management account which would not trade but just keep a tally of the value of quid sold. This effective cancellation of electronic quid would raise the average velocity of the whole system, not just the account of the person buying the paper notes. The Credit Union would need to be paid in quid for handing over the notes. We need to consider whether its payment should come from a service charge added to the purchaser's payment or be considered as part of the operating cost of the entire system.
The purchaser now has two options. One is that he/she can spend the paper quid in shops or with other users. The other is that he/she can hoard the paper until they want to spend it. The first option is obviously fine. Are there any problems with the second? The answer, as far as I can see, is no. Their holding the paper does no damage to anyone. It need not necessarily mean that there is any less purchasing power in the electronic system because, as its overall velocity went up when the purchaser's electronic quid were cancelled, the managers would have been able to put more quid into the active accounts to compensate if they thought they were required. Similarly if, when the paper quid are spent, they are converted back into electronic ones by the shopkeeper who lodges them to his account, the system can adjust by taking more units out of the slower accounts.
So people hoarding paper notes should not present a problem since the system can adjust as they are issued and lodged back. All someone hoarding the system's notes will be doing is saying in effect “I have faith in this currency”. They will not be denying purchasing power to anyone else.
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Tue Feb 07, 2006 7:24 am
Embedding the LQN in sustainable community
by mike3 on Tue Jul 28, 2009 11:24 pm
I am concerned that the proposed LQN may fail to gain sufficient public understanding, goodwill, and the wider participation necessary to reach its true potential. To begin with, certin aspects of the proposals, such as "not owning the money in your account" is an alien concept and somewhat baffling to the average citizen.
Also, I think the notion of "returning your account to 1,000 quids before you can leave the system" is unrealistic and will be unworkable in practice. The possibility of widespread default flooding the system with liquidity causing devaluation and inflation is very real. This latter proposal is in efect calling "Zero" by the name "a thousand" by shifting the base line to the right, but the necessity of returning the account to the base line at the end of the day indicates that the LQN is in reality a mutual credit system.
This being so, a simple interest-free overdraft for all would suffice, rather than confusing the the public with unfamiliar concepts like account velocity and demurrage. Why not simply a "variable overdraft, related to usage." Interest free, of course. That concept is attractive and easily grasped. It gives the user owneship and control; it simplifies and automates the administration. And starter credit could be reduced to safer levels.
For these reasons, for a long time I considered the proposed LQN to be too unfamiliar to find approval or widespread acceptance. This may well be the case as I write. But it seems there is a willingness to debate and change which is very encouraging, and gives hope that a sell-able and successful LQN structure may yet evolve.
The following idea addresses a different problem to the above, namely the problem of a new currency being something more than simply a "liquidity network" filling in for the malfunctioning banks. The idea is to place local fundraising organisations central stage in the LQN, and utilise a successful LQN as the 'seedbed' generate new more sustainable economies.
If local community groups such as youth groups, sports organisations, cultural events, green projects and local charities - were to become its focus and its 'raison d'etre', the LQN would put down good roots and grow 'organically' at ground level. This would not compromise its existing aims and functions in any way.
On the 'Practical Sustainability' course at Kinsale, Rob Hopkins would take students into a rural field and request a list of the natural resources available there. Student's perceptions were teased open and their awareness expanded. A list the 'length of your arm' would emerge, including an inventory of herbs, wild flowers, weeds and grasses, insects and wildlife, stone, soil, clay, sand, stone and slope, water, sunlight, shelter, aspect, access, vertical space, etc. These elements the foundation for subsequent permaculture design work in the field.
A few years later I facilitated a workshop at Kinsale with 2nd Year students there. This time the theme was human resources and exchange. As an exercise I asked each person to create a personal Gift Certificate (or 'Gift Voucher') as his/her contribution to 'a favourite local organisation' or charity.
The result was suprising. Certificates for honey and handmade pottery, for surfing lessons, home catering, furniture assembly, handmade jewellery, car maintenance etc., were created there and then. The class were enthusiastic to offer what they loved to do best. The local charity acquired a pool of valuable assets: fundraising without money. We explored the idea of online and printed credits giving access to the collective resource pool for several local organisations. This classroom activity was potentially breaking out into the real world, just as the Transition Town movement had emerged from the same classroom just a few years earlier.
A LQN 'community debit account' could top-up the fundraising efforts of key local groups (Rather than giving free hand-outs). Their Voucher-gathering would bring many new people and resources on board, thereby re-kindling skills, connections, and community spirit . Where the resources and goodwill are present, eveything becomes possible, despite the absence of money. The case of Guernsey highlighted by Louis Evan and Fabio Barone could repeat itself a thousand times at local and regional level using this approach.
Account fees, demurrage and transaction charges would no longer be perceived and felt as cold, abstract 'fiscal adjustments' but as genuine contributions to the local community account - for youth, for re-skilling, education and training in sustainability. Detractors would find it hard to undermine such a widely based, locally-supported philanthropic organisation.
I do of course understand the scale and the scope of the LQN, and the immediate liquidity challenges of the wider economy it seeks to address. But I also see here the opportunity to re-connect with community, to raise a new flag, a new ethic, to engage both hearts and minds, and encourage individual and collective resourcefullness.
And there is a further possibility - to commence re-building sustainable local economies on from the ground up, through retraining and education in the spirit of the Transition Town movement.
The LQN would not merely be supporting existing structures in the short term, but laying down the foundations for a new sustainable economy in the long term. If the LQN Trust were to be remoulded as - or embedded in - an educational charity, its potential effectiveness would be enhanced.
In our submission to Kinsale 2021 (the seminal document for the Transition Town movement) Diane Carton and I called this idea the 'Core' (an acronym for "Community Organisations Resource Exchange") of a new Network. But bank money was plentiful and Cyclos was then unavailable. Totnes developed the Totnes Pound linking directly to the Pound Sterling. The possibility of local currency focused on fundraising, fostering deeper community ties, skills and resourcefullness, remained unexplored. Perhaps now its time has come?
Also, I think the notion of "returning your account to 1,000 quids before you can leave the system" is unrealistic and will be unworkable in practice. The possibility of widespread default flooding the system with liquidity causing devaluation and inflation is very real. This latter proposal is in efect calling "Zero" by the name "a thousand" by shifting the base line to the right, but the necessity of returning the account to the base line at the end of the day indicates that the LQN is in reality a mutual credit system.
This being so, a simple interest-free overdraft for all would suffice, rather than confusing the the public with unfamiliar concepts like account velocity and demurrage. Why not simply a "variable overdraft, related to usage." Interest free, of course. That concept is attractive and easily grasped. It gives the user owneship and control; it simplifies and automates the administration. And starter credit could be reduced to safer levels.
For these reasons, for a long time I considered the proposed LQN to be too unfamiliar to find approval or widespread acceptance. This may well be the case as I write. But it seems there is a willingness to debate and change which is very encouraging, and gives hope that a sell-able and successful LQN structure may yet evolve.
The following idea addresses a different problem to the above, namely the problem of a new currency being something more than simply a "liquidity network" filling in for the malfunctioning banks. The idea is to place local fundraising organisations central stage in the LQN, and utilise a successful LQN as the 'seedbed' generate new more sustainable economies.
If local community groups such as youth groups, sports organisations, cultural events, green projects and local charities - were to become its focus and its 'raison d'etre', the LQN would put down good roots and grow 'organically' at ground level. This would not compromise its existing aims and functions in any way.
On the 'Practical Sustainability' course at Kinsale, Rob Hopkins would take students into a rural field and request a list of the natural resources available there. Student's perceptions were teased open and their awareness expanded. A list the 'length of your arm' would emerge, including an inventory of herbs, wild flowers, weeds and grasses, insects and wildlife, stone, soil, clay, sand, stone and slope, water, sunlight, shelter, aspect, access, vertical space, etc. These elements the foundation for subsequent permaculture design work in the field.
A few years later I facilitated a workshop at Kinsale with 2nd Year students there. This time the theme was human resources and exchange. As an exercise I asked each person to create a personal Gift Certificate (or 'Gift Voucher') as his/her contribution to 'a favourite local organisation' or charity.
The result was suprising. Certificates for honey and handmade pottery, for surfing lessons, home catering, furniture assembly, handmade jewellery, car maintenance etc., were created there and then. The class were enthusiastic to offer what they loved to do best. The local charity acquired a pool of valuable assets: fundraising without money. We explored the idea of online and printed credits giving access to the collective resource pool for several local organisations. This classroom activity was potentially breaking out into the real world, just as the Transition Town movement had emerged from the same classroom just a few years earlier.
A LQN 'community debit account' could top-up the fundraising efforts of key local groups (Rather than giving free hand-outs). Their Voucher-gathering would bring many new people and resources on board, thereby re-kindling skills, connections, and community spirit . Where the resources and goodwill are present, eveything becomes possible, despite the absence of money. The case of Guernsey highlighted by Louis Evan and Fabio Barone could repeat itself a thousand times at local and regional level using this approach.
Account fees, demurrage and transaction charges would no longer be perceived and felt as cold, abstract 'fiscal adjustments' but as genuine contributions to the local community account - for youth, for re-skilling, education and training in sustainability. Detractors would find it hard to undermine such a widely based, locally-supported philanthropic organisation.
I do of course understand the scale and the scope of the LQN, and the immediate liquidity challenges of the wider economy it seeks to address. But I also see here the opportunity to re-connect with community, to raise a new flag, a new ethic, to engage both hearts and minds, and encourage individual and collective resourcefullness.
And there is a further possibility - to commence re-building sustainable local economies on from the ground up, through retraining and education in the spirit of the Transition Town movement.
The LQN would not merely be supporting existing structures in the short term, but laying down the foundations for a new sustainable economy in the long term. If the LQN Trust were to be remoulded as - or embedded in - an educational charity, its potential effectiveness would be enhanced.
In our submission to Kinsale 2021 (the seminal document for the Transition Town movement) Diane Carton and I called this idea the 'Core' (an acronym for "Community Organisations Resource Exchange") of a new Network. But bank money was plentiful and Cyclos was then unavailable. Totnes developed the Totnes Pound linking directly to the Pound Sterling. The possibility of local currency focused on fundraising, fostering deeper community ties, skills and resourcefullness, remained unexplored. Perhaps now its time has come?
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Sat Apr 04, 2009 1:01 pm
Coexistance issues of paper and electronic Quids
by rdouthwaite on Sat Aug 01, 2009 7:05 am
Beware - developing ideas!
Mike3 – and everyone else reading through the material about the Liquidity Network on this site – needs to recognise that they are following the development on an idea and that early statements about, for example, requiring people to return their account to 1000 quid before leaving the system may not represent current thinking. In this case, it doesn't. If someone was required to return their initial 1000 quid float, that float would be a debt, which would mean, in turn, that the LQN was not a debt-free currency system.
We obviously need to plan how the system is presented to the public very carefully. It would be a mistake – and unnecessary – to tell people that they don't own the units in their account. All that is necessary is to explain that they will be given as many quid as they need for their level of trading. If they are spending their quid quickly as soon as they get them, they will be given a few more. If they have a big balance in their account in relation to the amount of trading they are doing, a few will be taken away. We may, or may not, decide to explain that money needs to be kept scarce if it is to retain its value and by giving more to the people who are using it intensively and taking it away from those who aren't enables the right degree of scarcity to be maintained. That's it. If they knew they could spend the money in local shops, would we need to explain anything else?
Mike3's suggestion that some quid could be put into circulation by being given to community causes is a good one. This is one of the main ways that Ithaca Hours are issued. Those managing a LQN system should certainly consider it.
Mike3 – and everyone else reading through the material about the Liquidity Network on this site – needs to recognise that they are following the development on an idea and that early statements about, for example, requiring people to return their account to 1000 quid before leaving the system may not represent current thinking. In this case, it doesn't. If someone was required to return their initial 1000 quid float, that float would be a debt, which would mean, in turn, that the LQN was not a debt-free currency system.
We obviously need to plan how the system is presented to the public very carefully. It would be a mistake – and unnecessary – to tell people that they don't own the units in their account. All that is necessary is to explain that they will be given as many quid as they need for their level of trading. If they are spending their quid quickly as soon as they get them, they will be given a few more. If they have a big balance in their account in relation to the amount of trading they are doing, a few will be taken away. We may, or may not, decide to explain that money needs to be kept scarce if it is to retain its value and by giving more to the people who are using it intensively and taking it away from those who aren't enables the right degree of scarcity to be maintained. That's it. If they knew they could spend the money in local shops, would we need to explain anything else?
Mike3's suggestion that some quid could be put into circulation by being given to community causes is a good one. This is one of the main ways that Ithaca Hours are issued. Those managing a LQN system should certainly consider it.
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156Joined:
Tue Feb 07, 2006 7:24 am
Coexistance issues of paper and electronic Quids
by Fabio on Mon Aug 03, 2009 1:22 pm
Thanks for this clarification, Richard, quite important to point out - however this raises the question then for people reading these posts how to get the picture of the current state of thinking of the project, in order to contribute most efficiently.
Also, for me one really crucial issue remains, correlating to Geoff's post.
Feasta positions itself as an organization with the aim to
The LQN system, as Geoff points out,
I am concerned that the quid would readily be accepted by businesses for providing liquidity, but would not in fact improve the status quo of sustainable economics embedded in a natural world. Maybe this should not be discussed in this thread, but for matters of continuity I post here.
Also, for me one really crucial issue remains, correlating to Geoff's post.
Feasta positions itself as an organization with the aim to
...identify the characteristics (economic, cultural and environmental) of a truly sustainable society
The LQN system, as Geoff points out,
rewards (1) maximizing trading volume as accounted using quid for the medium of exchange, and (2) maintaining fairness as measured by balance between buying and selling, using quid as the unit of account for market value. This design implicitly motivates people and drives the system to maximize overall trade in quid, just as measures of GDP motivate economic growth
I am concerned that the quid would readily be accepted by businesses for providing liquidity, but would not in fact improve the status quo of sustainable economics embedded in a natural world. Maybe this should not be discussed in this thread, but for matters of continuity I post here.
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