Issuu on Google+

Creating Complementary Currencies To Improve and Empower Communities Thomas H. Greco, Jr.


Common Problems of Community Economies  Local producers are forced to compete with outside producers that are subsidized, enjoy political privilege, or are not required to play by the same rules.  Terms of trade are dictated by outside buyers or sellers who dominate markets.  Money that comes in, goes quickly out again.  Resources and wealth are siphoned off by absentee owners. November 2, 2004

Thomas H. Greco, Jr.

2


A Rising Tide May Lift All Boats, But ‌ The Tidal Wave of Globalization Smashes All but the Biggest November 2, 2004

Thomas H. Greco, Jr.

3


Building Safe Harbors


How to Insulate, but not Isolate, the local economy to:  Reduce exploitation,  Enhance economic vitality,  Enable self-determination, and  Optimize the community's standard of living and quality of life? November 2, 2004

Thomas H. Greco, Jr.

5


There Is A Fundamental Need For Exchange Mechanisms that:    

Enable all desirable trades, Reduce business costs, Favor local suppliers, and Enable community control over its own economy.

November 2, 2004

Thomas H. Greco, Jr.

6


Liberating Exchange  Two Synergistic Approaches: • Mutual Credit Clearing Exchanges • Complementary Currencies

November 2, 2004

Thomas H. Greco, Jr.

7


Mutual Credit Associations and Community Currencies Provide Exchange Media That Are: • • • • • •

Abundant Community controlled Democratically allocated Interest-free Self-adjusting Stable and Sustainable

November 2, 2004

Thomas H. Greco, Jr.

8


Official Money Spent Quickly Flows Out of the Local Community $ Local Vendor Local Business or Municipality

$ Non-Local Vendor

November 2, 2004

Thomas H. Greco, Jr.

9


Community Currency Credits Re-circulate Within the Local Community Local Business or Municipality

November 2, 2004

Thomas H. Greco, Jr.

10


What is a Mutual Credit Clearing Exchange?  An association of buyers and sellers that provides for the direct settlement of bills due to one another, reducing or eliminating the need to use money as an intermediary payment medium.  It enables bills to be paid without the use of money. November 2, 2004

Thomas H. Greco, Jr.

11


How Does Clearing Work?  Ultimately, goods and services pay for other goods and services;  Money is just an intermediary device that can be dispensed with.  When you sell something, your account balance is credited (increased); when you buy something, your account balance is debited (decreased).  Remaining balances may be settled at periodic intervals, or may be carried over indefinitely. November 2, 2004

Thomas H. Greco, Jr.

12


Toward A Healthy Community Economy Mutual Credit Clearing  A group of businesses and/or local government entities can organize into a mutual credit clearing association to enable cashless trading among themselves.

November 2, 2004

Thomas H. Greco, Jr.

13


Mutual Credit Issuance and Circulation Mutual credit clearing association

Member - Issuers Member - Non-Issuers

Issuing members begin the process by buying from other members. November 2, 2004

Thomas H. Greco, Jr.

14


Currency Issuance and Circulation Mutual credit clearing association

Member - Issuers Member - Non-Issuers

Non-member users November 2, 2004

Thomas H. Greco, Jr.

15


Advantages of a Limited (Local) Circulation Currency credits must return to the issuer(s) for redemption. For this reason they are captive within the local economy and will not stray very far. Their recirculation within the local area provides a built-in “buy local� bias, which stimulates the entire local economy. They give local sources of supply preference over external sources. November 2, 2004

Thomas H. Greco, Jr.

16


An Example Suppose $100,000 worth of community currency credits are spent into circulation by the associated businesses.  That means that their collective cash expenditures have been reduced by $100,000.  That $100,000 remains in the community instead of flowing out to pay for imports. November 2, 2004

Thomas H. Greco, Jr.

17


An Example - 2  If the turnover is 10 times a year, that means $1 million in additional local sales.  If the rate of profit on sales is 20%, that will result in additional yearly profits of $200,000.

November 2, 2004

Thomas H. Greco, Jr.

18


An Example - 3  Further, the issuance of community currency credits will have enabled some interest-bearing debt to be retired.  If the interest rate on debt is 10%, the businesses will save cash interest costs of $10,000 each year. Every dollar’s worth of community currency credit issued means one less dollar that needs to be borrowed, and one less dollar that needs to be spent. November 2, 2004

Thomas H. Greco, Jr.

19


Typical Balance Sheet Assets

Liabilities

Cash

Notes payable

Other current assets

Other current liabilities

Fixed assets

Bonds outstanding Other long-term debt Surplus

November 2, 2004

Thomas H. Greco, Jr.

20


Possible Balance Sheet Assets

Liabilities Currency credits in circulation

Cash Other current assets Fixed assets

Bonds outstanding (reduced) Other long-term debt Surplus

November 2, 2004

Thomas H. Greco, Jr.

21


In What Form Do Community Currency Credits Circulate? Credits Can Have Various Manifestations  As paper notes or tokens • Circulate hand-to-hand

 As account balances that can be transferred via: • • • •

Checks Swipe cards -- Debit cards Smart cards or electronic wallets Online transfers

November 2, 2004

Thomas H. Greco, Jr.

22


Issuance and Circulation of Currency Credits Currency credits spent into circulation CC Workers

Business or Municipal Issuer

Suppliers Labor, services, supplies G&S

G&S

CC

CC

Merchants

CC=notes or credits

G&S=goods and services


Issuance

Business or Municipal Issuers

Currency Credits Outstanding

Redemption

The amount of currency credits in circulation at any time (the level in the “tank�) is determined by the relative rates of issuance and redemption. November 2, 2004 Thomas H. Greco, Jr. 24


A Community Currency Is:  Spent Into Circulation  By Local Businesses  Based on their Ability Produce Valuable Goods and Services

November 2, 2004

Thomas H. Greco, Jr.

25


• Community currency provides an alternative means of financing that is: • Available in sufficient supply • Locally created and controlled • Interest-free

• Does not depend on the banks, the Federal Reserve or the government. • Enables business to thrive on a smaller supply of scarce official money. • Enables the sale of (excess) productive capacity. • Enables local businesses to employ more of the locally available labor, skills, and resources. November 2, 2004

Thomas H. Greco, Jr.

26


Examples and Precedents USA, 1930’s Depression  Scrip (hundreds of kinds issued by businesses and local governments) Argentina, 2003  Provincial Currencies (up to 20 kinds in circulation)  Trueque Notes (community currencies about 100 types in use) November 2, 2004

Thomas H. Greco, Jr.

27


Provincial Currencies  Since the mid-1980’s, due to the lack of sufficient federal currency, many of Argentina’s 24 provinces issued their own currencies to meet their liquidity and budgetary needs.  By 2003, 20 provinces had issued provincial currencies of various types.  The province of Mendoza issued treasury notes backed by their oil royalties.  The province of Buenos Aires issued notes totaling one billion pesos. November 2, 2004

Thomas H. Greco, Jr.

28


People Begin to Create Their Own Solutions  The first “barter club” in Argentina was started in 1995 by 3 professionals seeking to create better social, economic and environmental conditions.  Within two years, other “trueque” clubs sprung up around the country, and began to organize into a network called Red Global de Trueque.  Trueque clubs issued their own currency -credito notes.

November 2, 2004

Thomas H. Greco, Jr.

29


A Successful Mutual Credit Clearing Association

The WIR business circle cooperative (Wirtschaftsring) was founded in Switzerland in 1934 as an answer to the money scarcity of the Great Depression, and still thrives after 70 years. Membership, at first completely open, was later restricted in order to build solidarity among the “entrepreneurial middle-class.� A balance between ideology, adaptability, and good business sense has enabled its long-term success. November 2, 2004

Thomas H. Greco, Jr.

30


Stages of Implementation 1. Organize a mutual credit clearing circle comprised of “trusted (business) members� having overdraft privileges. 2. Accept to membership diverse other participants who are not given overdraft privileges to begin with. 3. Persuade non-member local merchants to be currency users willing to accept and spend the currency that is issued jointly by the members of the mutual credit clearing circle. November 2, 2004

Thomas H. Greco, Jr.

31


Stages of Implementation 4. When the mutual credit clearing circle is functioning smoothly and the complementary currency has been widely accepted by the community, ease the restrictions on membership and extend the issuance privilege (overdraft privilege) to more members, 5. But determine credit limits on the basis of recent sales history and inventories of goods offered for sale.

November 2, 2004

Thomas H. Greco, Jr.

32


Operate the System as a Business  Charge fees that are sufficient to cover the costs of operation.  Some fees will necessarily be cash fees needed to cover unavoidable cash expenses.  Administrative and sales personnel should be paid, but a portion of their salaries may be paid in the community currency.  All salaries should be paid out of revenues generated from service fees.  System account deficits should be avoided or strictly limited. November 2, 2004

Thomas H. Greco, Jr.

33


Additional Information Sources  Money: Understanding and Creating Alternatives to Legal Tender, by Thomas H. Greco, Jr.  Explore the website: http://www.ReinventingMoney.com

November 2, 2004

Thomas H. Greco, Jr.

34


Thomas H. Greco, Jr. - Creating Complementary Currencies to Improve and Empower Communities