Proutist Economic Development

Community and Currency

Dr. Michael Towsey  2004 Proutist Universal 1

Monetary Decentralisation

•

The Future of Money

– Bernard Lietaer – http://www.transaction.net/money/book/ • Economic decentalisation requires monetary decentralisation.

• Each community should control its own money system .

Proutist Universal

Money - Central versus Local

Central bank

Community money system Proutist Universal

Community bank

Different Kinds of Money (1)

• • • Money is a community tool to catalyse community trading.

There are many different kinds of money systems.

Different money systems suit different purposes.

Proutist Universal

Different Kinds of Money (2)

• Traditional money: – 90% of money issued as interest-bearing debt; – created using the fractional reserve system.

• Producer currency.

• Stamp currency.

• Mutual credit.

Proutist Universal

Producer Currencies (1)

• Form of commodity money. • Workers are paid in money backed by output.

• Example 1 - 1920s Germany: – Hyper-inflation - a postage stamp cost billions of marks; – Miners were paid in money (wara) backed by coal; – Mine manager arranged for import of food that could be purchased with wara.

Proutist Universal

Producer Currencies (2)

• Example 2 - 1960s Ireland: – Problem: a banking strike – no money to pay workers; – Dublin brewery paid its workers in beer vouchers; – Vouchers could be redeemed at local pubs for beer, money or other goods.

Proutist Universal

Velocity of Money

• $1 can catalyse $10 worth of transactions.

• The velocity of money: – velocity = total transactions  volume of money.

• Prout Principle: keep money rolling, i.e. increase velocity!

• How?

Proutist Universal

Stamp Currency

• Community currency scheme started in Wörgl, Austria, in 1932.

• A small amount of money can exchange a lot of goods if it circulates rapidly (high velocity of money).

• Holder of a note had to buy a stamp each month.

• Therefore money spent quickly – no hoarding.

• Wörgl was first Austrian town to overcome unemployment.

Proutist Universal

Unemployment and the Nazi Vote Proutist Universal

Local Enterprise Trading System LETS • Founded in Canada – spread throughout world.

• LETS – an accounting system.

• For every credit there is a debit – zero sum.

• Mutual credit.

• Unit of money decided locally – bunya, reeky.

• Value tied to local currency – 1 bunya = $1 AUD.

• Facilitates multilateral exchange when bank money not available.

Proutist Universal

Community Currency Taking Off !

Proutist Universal

LETS, Maleny, Australia

http://www.mena.org.au/lets/ Proutist Universal

International Versions of LETS • • www.bartercard.com

www.ebanctrade.com

Proutist Universal

A Hierarchy of Currencies

• A hierarchy of communities requires a hierarchy of money systems.

International trade: barter, mutual credit, Keynes plan National trade: traditional debt money, producer currencies Local trade: producer currencies, LETS currencies Proutist Universal

The South America Experience

• • Curitiba bus tokens – favelas waste exchanged for public transport.

Favela

is a term commonly used in Brazil to describe areas such as shanty towns or slums. Proutist Universal

A South American Currency (1)

• Good or bad?

• Depends on what kind of currency and what for ...

• A South American currency like the Euro?

• A new currency for a South American trade zone?

Proutist Universal

A South American Currency (2)

• A South American currency like the Euro?

• Sweden rejected idea because ...

– shifts power from democratically elected governments to non elected institutions such as the Central Bank; – erodes ability of member States to implement local solutions to their economic problems; – makes it easier for TNCs to accumulate wealth.

• One year after adopting the euro, Portugal was forced to make massive cuts in public services and wages.

• Unemployment rose in Germany and France every month after adoption of the euro.

Proutist Universal

A South American Currency (3)

• • • • • • • New mutual credit currency for a South American trade zone?

If similar to Keynes Plan - good idea.

Operates independently of member country currencies.

Removes Venezuela from dependence on US $ and Euro.

Does not erode ability of member states to implement local solutions to their economic problems.

Requires an independent money standard such as terra – based on representative basket of traded commodities.

The Terra project is the launch of a commodity-backed Trade Reference Currency (TRC), a supra-national currency that works in parallel with national money systems. It is uniquely designed to provide a stable international mechanism for planning, contractual and payment purposes worldwide. – http://www.futureofmoneysummit.com/terra-project.php

Proutist Universal