How difficult would it be to convince business to adopt a new currency?

hatrickpatrick · 05-08-2012 5:44pm

Jonny7 wrote: »

They've been debating and discussing this for centuries, there is no quick or easy fix, no "new" ideas. We will always have to buy houses (debt) and companies and countries will always have to borrow (debt)

That's not what I was getting at though. In the current situation, private banks have a monopoly on money creation. So in practice, I could be willing to work, I would want to buy a house, and a developer could be willing to build one for me - and all the necessary physical skill and raw materials could be available for the job - but the only obstacle standing in the way is that the bank is not functioning as it should be, ergo the developer goes out of business AND a whole bunch of potential customers are homeless.

In this scenario, it seems obvious to me that money supply < goods and services potential. Isn't it supposed to be =, not <?
The extension of my theory on all this is that the current method of issuing new currency - by creating debt - is inevitably doomed to give us crashes on a very regular basis. When you have a system in which there is always more interest owed back to banks than people actually have circulating in the economy, the only winners in the long run are the banks themselves.

It just boggles my mind that we have the technology and know how to build things, we have people willing to buy them, but an artificial concept which we created to facilitate trade is in fact impeding it, because those charged with managing it are not doing their jobs properly. It seems obvious to me that what we need to do is reform the concept of currency and what it actually means, rather than reducing trade to fit the currency model.

hatrickpatrick · 05-08-2012 5:45pm

The Corinthian wrote: »

It's not so much practical uses as practical use. The use of commodity money has been around since the classical period and it does work, however there are some practical limitations; for a start, there's not enough gold in the World to replace the present money supply

And my argument here is that currently, the money supply does not match the capacity we have to produce things, so essentially it's the same problem but on a smaller scale.

murphaph · 05-08-2012 10:04pm

hatrickpatrick wrote: »

In the current situation, private banks have a monopoly on money creation. So in practice, I could be willing to work, I would want to buy a house, and a developer could be willing to build one for me - and all the necessary physical skill and raw materials could be available for the job - but the only obstacle standing in the way is that the bank is not functioning as it should be, ergo the developer goes out of business AND a whole bunch of potential customers are homeless.

...but nobody might be willing to pay you for whatever it is you would be willing to do. In the case of a house purchase, some form of credit will be required for most people and the credit issuer (be it a bank or whatever you'd replace them with) would look at the likelihood of you being able to repay the credit. Some people will be less likely to be able to repay than others and will not be offered credit.

I think we need banking reforms and possibly to establish some system outside of the banks so that people can get paid and pay others without relying on credit issuing banks that can go bust because they lent irresponsibly or were otherise badly run. People would have to pay to use such systems obviously as they would not generate any income from interest on loans etc. Banks could then lend outside of this "core" system to their heart's content and if they went bust, they'd have absolutely no impact on the day to day functioning of the economy so no government would ever have the excuse that they are systemically important, therefore we should pum x billion of public money into them.

edanto · 07-08-2012 10:31pm

Very interesting thread. Particular kudos to TC, several very interesting posts.

@hatrickpatrick - if you're interested in learning more about setting up a local currency or meeting people that are involved in various local currencies, you could do worse than take up this invitation from Feasta. The invite to join came to me by email, I don't have time to get involved, but it's an open invitation to anyone interested.

The Foundation for the Economics of Sustainability
"Designing systems for a changing world"

Invitation to join the Feasta Currency Group

This message is sent to the extended Feasta email list, as a one-time invitation to join the Feasta Currency Group if you are interested in pursuing a currency initiative in your locality.

What is the Feasta Currency Group?

It’s a primarily online Community of Practice (CoP) for local currency advocates (and would-
be advocates) to share experience and information around the development and implementation of local currencies – initially via a Facebook Group and a group email list.

Why have a separate group?

Because it sometimes makes sense to share and develop incomplete ideas and preliminary plans of action with input from peers before going completely public. Feasta covers a very broad range of economic sustainability issues – not all Feasta followers are interested in the way designer currencies can impact local economies.

Is this solely about developing The Liquidity Network (LQN)?

No. The FCG is committed to developing and detailing the ideas behind the LQN, and getting
them into practice, but we do not see this as a competitive process. We want to engage with local currency advocates as their own ideas develop, help them to articulate objectives for their currencies, co-design and develop tools for understanding local economic circuits, and watch and learn from their dialogues with their peers.

Does the CoP include national as well as local initiatives?

This will depend on the interests of the members. The FCG sees the potential reintroduction of national currencies in europe as an extension of local currency discussion. The distinction is perhaps between activism and policy-influencing and at present the FCG is more committed to the former. But CoPs belong to their members.

Do I have to be a member of Feasta?

We aren't going to police this, but we'd very much appreciate it if you were. Membership is a small price to pay to support Feasta's wide ranging work programme, and the small central admin team at Cloughjordan.

So how do I sign up?

Just reply to this email [currency<at>feasta.org] and we'll keep you posted.

The Corinthian · 08-08-2012 11:47am

hatrickpatrick wrote: »

That's not what I was getting at though. In the current situation, private banks have a monopoly on money creation.

If you'd like to read back, I have already pointed out that this is not actually true.

So in practice, I could be willing to work, I would want to buy a house, and a developer could be willing to build one for me - and all the necessary physical skill and raw materials could be available for the job - but the only obstacle standing in the way is that the bank is not functioning as it should be, ergo the developer goes out of business AND a whole bunch of potential customers are homeless.

Other than the fact that however much you might be willing to work, no one may have much interest in your services (already covered by murphaph), you seem not to understand the value of credit.

If you wanted to buy a house, how will you do so? More to the point, the developer, architect or builder may be willing to build it, but how will you pay them? Can you afford the price of the house in one payment? Or can they afford to accept payment over a period of time?

After all, say from conception to moving in it takes two years to build your house - in that time your developer, architect or builder has to pay for materials and labour within that time frame. If you can't match that, then you're asking them essentially for credit. And if you can't pay, what then? They go bankrupt or 'sell' your debt to collectors?

Currency aside, what you're describing is what generally happens in business already. Suppliers will often give you credit. Sometimes customers will not pay and you end up having to take legal action or selling the debt. And sometimes, the cash flow issues that will ensue will cause your company to go under.

And that's with companies. Now apply the same model to individuals. The only people who'd end up benefiting, TBH, would be lawyers and debt collectors.

And historically this is how it used to work - half of Roman law was about dealing with bad debts - and this is why banks, as centralized clearing houses for credit, developed.

It just boggles my mind that we have the technology and know how to build things, we have people willing to buy them, but an artificial concept which we created to facilitate trade is in fact impeding it, because those charged with managing it are not doing their jobs properly.

Whether a currency is made of gold or bytes, it's the confidence in that currency that matters. It's not about technology, but about psychology.

It seems obvious to me that what we need to do is reform the concept of currency and what it actually means, rather than reducing trade to fit the currency model.

Perhaps, but so far you've not really suggested any viable reform of currency.

hatrickpatrick wrote: »

And my argument here is that currently, the money supply does not match the capacity we have to produce things, so essentially it's the same problem but on a smaller scale.

Actually, not the same thing; the money supply is there, it's just trapped by an over cautious market. And I say market, rather than banks, because ultimately it's not their money; fund managers, for example, can only invest what's been put in their portfolios, but if people are pulling their money out and buying gold instead, then there's not much they can do.

How difficult would it be to convince business to adopt a new currency?

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