Complementary currency

Pi^2

A complementary currency is a currency which operates in parallel with another currency, usually a national currency.

This idea could be of some use to our country in our current economic situation.

For example, the government could re-print the Punt. Get a number of indigenous businesses and retailers to accept said currency as payment for goods and services. The incentive for them should become clear in a sec.

Now incorporate the Punt into social welfare. So instead of 196 euro a week. The individual on the dole receives say 150 euro plus 60 pounds (1 euro would equal 1 punt) so they'd be getting more value.

Now all these punts can only be used within Ireland, stimulating Irish business and growth. They cannot be put into a bank and they cannot be exchanged by a consumer for Euro. It is simply cash to be spent.

The businesses who receive the Punts can exchange them with the government for Euro. They won't make much, if anything, on the exchange. But it would increase sales and stimulate our local economy.

More local jobs, more tax, more money in circulation. This leaves Irish people with more real Euro to play with after they have used up their punts on essentials.


My example might not be great, but there are definite positive aspects to introducing a complementary currency.

Discuss

Edit: I do realise how crap and unsustainable my example is. I possibly shouldn't have been so generous with the welfare and probably should have made the businesses and retailers pay a small percentage of earnings to reflect their increase in revenue as a result of the system. But the point is that there are alternatives out there to be looked at.

ei.sdraob

I was joking last few months here that the govt could introduce a dual currency system, would really hit the unions in the balls and not break the CPA

I also had a thread on local currencies (very similar to what you have above), some interesting reading in there

Pi^2

Thanks for that link. It is indeed interesting reading. And I hope this attracts more attention to your thread and maybe gets a bit of momentum behind discussing this topic.

Money is just a concept to keep us working and spending on the fruits of the work other people do. There are alternative systems.

3DataModem

You are basically describing food stamps... also why would a company pay staff with these?

Sleepy

I don't think the OP is suggesting that the companies should. I think the idea is that welfare and PS Salaries could be paid in this fashion.

keithclancy

There you go .. head off to Tescos with that now:

Slozer

Pi^2 wrote: »

(1 euro would equal 1 punt)

This would not work since there would be a flight from the devaluing currency and eventually we would end up using the one currency. If you are suggesting that the exchange rate should remain constant - what's the point?

shannonpowerlab

Slozer wrote: »

This would not work since there would be a flight from the devaluing currency and eventually we would end up using the one currency. If you are suggesting that the exchange rate should remain constant - what's the point?

What about the starting point of 0.5 euro = 1 Punt

Merge back again once Punt catches up with Euro.

ardmacha

What about the starting point of 0.5 euro = 1 Punt

Merge back again once Punt catches up with Euro.

I think your sums are wrong there.
More a case of IR£1 = €2 and remerge when the Euro caught up (a week later).

anvilfour

Just wanted to bump this thread as I have been reading about what was achieved via "The Worgl Experiment".

Certainly I think it would be an excellent idea to pay benefits and government salaries in local currencies on a city by city basis.

Part of the beauty of what happened with Worgl was that the paper notes decreased in value each week unless you either bought a stamp for 1% of the face value and affixed it, or simply spent it. Naturally most people chose to spend the money quickly.

It certainly wouldn't encourage people to save or invest but so long as you could change the local money back to Euro at your local Credit Union would there be any harm in trying?

Iwasfrozen

anvilfour wrote: »

Just wanted to bump this thread as I have been reading about what was achieved via "The Worgl Experiment".

Certainly I think it would be an excellent idea to pay benefits and government salaries in local currencies on a city by city basis.

Part of the beauty of what happened with Worgl was that the paper notes decreased in value each week unless you either bought a stamp for 1% of the face value and affixed it, or simply spent it. Naturally most people chose to spend the money quickly.

It certainly wouldn't encourage people to save or invest but so long as you could change the local money back to Euro at your local Credit Union would there be any harm in trying?

I can't imagine that being very popular. How do I save for a house deposit when I can't put the notes in a bank and the value decreases in value every week?

If you can guarantee I can swap for Euro every week at no discount it's fine but if for whatever reason people can't swap, there'll be riots.

Slydice

I remember reading a couple of years ago that a Greek village started a parallell bartering system: http://www.bbc.com/news/business-17686384

Greek town develops bartering system without euro

12 April 2012 Last updated at 06:20 BST

As Greece wonders whether its debt crisis will eventually spell its exit from the euro, one town in the centre of the country, Volos, has formed an alternative local currency.

While googling for it, I see there's been talk in the last week of the country using a parallell currency:
http://www.bloomberg.com/news/articles/2015-06-01/could-a-parallel-currency-help-save-greece-from-drowning-

Could a Parallel Currency Help Save Greece From Drowning?
Desperate times call for desperate measures. But this one may be a little too desperate
by Peter Coy
June 1, 2015 — 8:00 AM BST

As Greece's financial plight worsens, an odd idea keeps popping up: a parallel currency alongside the euro that would circulate inside Greece and be used to pay for anything from taxes to food and clothing. Even German Finance Minister Wolfgang Schaeuble has said that Greece may need a parallel currency if talks with creditors fail, people familiar with his views told Bloomberg.

anvilfour

Slydice wrote: »

I remember reading a couple of years ago that a Greek village started a parallell bartering system: http://www.bbc.com/news/business-17686384


While googling for it, I see there's been talk in the last week of the country using a parallell currency:
http://www.bloomberg.com/news/articles/2015-06-01/could-a-parallel-currency-help-save-greece-from-drowning-

Slydice,

Many thanks for these excellent links, I have been thinking that a parallel currency would be a good idea for Greece.

It seems the economic moguls are not in favour of this idea:

"No, it's not a good idea, and no, it has no chance of happening," said Jacob Funk Kierkegaard, a senior fellow at the Peterson Institute for International Economics. Introducing it, he said, "would surely aggravate the other Europeans as well as the ECB. It would politically aggravate the situation that Greece is in." He called it "very primitive and naive, knee-jerk Keynesianism."

However the article goes on to state that a TAN would have real, tangible value. It could even be denominated in Euro, so I don't see why people would think of it as funny money!

If the people are worried about oversupply, there are also ways to limit the number of coins made... for example they could set up a cryptocurrency like the Bitcoin to award TANs to people - only a finite amount of Bitcoins will ever exist* so rampant fears of inflation would be groundless.

*Admittedly if the government were the ones running the mining software they could theoretically divide individual cryptocoins to make more but it would also be easy for any fool to see that's what they're doing.. also this would have no effect on the value of coins already owned by people... a 1 kg gold ingot has the same nominal value as two 500g ingots.

realitykeeper

The idea of a parallel Punt may have worked better before the ECB started QE. The QE program will continue to weaken the EURO for the next few months at least and probably beyond November because the program will most likely be extended into next year.

Cookie_Monster

As a business owner why would it be in my interest to have all the costs associated with a separate currency for something like this?

Slydice

Cookie_Monster wrote: »

As a business owner why would it be in my interest to have all the costs associated with a separate currency for something like this?

The feel I got from reading/watching about the other barter systems that were set up is that your customers may think they are (or actually be) getting stuff cheaper from you. There may be an element of truth in that cos it may eliminate VAT from the transactions. You might also get a higher volume of customers then and I think the idea of that is that more customers mean more profit even at a smaller margin.

alb

anvilfour wrote: »

If the people are worried about oversupply, there are also ways to limit the number of coins made... for example they could set up a cryptocurrency like the Bitcoin to award TANs to people - only a finite amount of Bitcoins will ever exist* so rampant fears of inflation would be groundless.

*Admittedly if the government were the ones running the mining software they could theoretically divide individual cryptocoins to make more but it would also be easy for any fool to see that's what they're doing.. also this would have no effect on the value of coins already owned by people... a 1 kg gold ingot has the same nominal value as two 500g ingots.

You can limit supply of a digital currency in a fairly trustworthy way as Bitcoin does as long as the system is decentralised - which means the government would not have control over it, in which case why not just use bitcoin itself.

Cryptocurrencies do not have to be limited in supply either. Bitcoin has a hard cap of 21 million coins, but some other cryptocurrencies don't - Dogecoin will inflate at a constant rate forever and others, like Freicoin, have even experimented with demurrage.

Alternatively you can have a government controlled digital currency, which is not a decentralised cryptocurrency. It appears Ecuador were recently the first to try this by launching a digital only currency that people can use with their mobile phones.

Regarding your comments about divisibility, it's not hypothetical, you can already divide bitcoins to 8 decimal places for example, but you are correct that this has no effect on value, as dividing money is not the same as debasing it by creating additional supply.

anvilfour

alb wrote: »

You can limit supply of a digital currency in a fairly trustworthy way as Bitcoin does as long as the system is decentralised - which means the government would not have control over it, in which case why not just use bitcoin itself.

Cryptocurrencies do not have to be limited in supply either. Bitcoin has a hard cap of 21 million coins, but some other cryptocurrencies don't - Dogecoin will inflate at a constant rate forever and others, like Freicoin, have even experimented with demurrage.

Alternatively you can have a government controlled digital currency, which is not a decentralised cryptocurrency. It appears Ecuador were recently the first to try this by launching a digital only currency that people can use with their mobile phones.

Regarding your comments about divisibility, it's not hypothetical, you can already divide bitcoins to 8 decimal places for example, but you are correct that this has no effect on value, as dividing money is not the same as debasing it by creating additional supply.

Alb,

I apologise for not being clearer, as you say a Bitcoin is currently divisible to 8 decimal places which already gives it advantages over regular fiat currencies.. what I meant to say was that if the supply of coins became scarce and there was consensus about updating the mining software it would be possible to divide the Bitcoin even further.. indeed theoretically even if there were only one Bitcoin left people could still keep making payments..

See also :

https://en.bitcoin.it/wiki/FAQ#Won.27t_loss_of_wallets_and_the_finite_amount_of_Bitcoins_create_excessive_deflation.2C_destroying_Bitcoin.3F