Alternative currencies, LETS, e-gold and counter-economics
I’ve been thinking about alternative currency ideas a lot lately for a variety of reasons.
- Several people of the left-decentralist inclination have an interest in Local Exchange Trading Systems (LETS).
- Austrian economics gives us plenty of good reasons to fear and despise central banking, such as the Federal Reserve System.
- Real ID is another giant leap in the direction of a cashless society lacking privacy.
- The agorist idea of counter-economics as anarchist revolution writ small (until it writes itself large) largely requires the ability to carry out transactions covertly and, hence, cash.
The thing is, rightist hard-money afficionados who go in for stuff like e-gold or the silver-backed Liberty Dollar don’t often associate and trade ideas with more community oriented LETS fans. The former tend to see the latter as impractical hippy-dippy types, while the latter tend to regard the former as irrational, fetishistic toward precious metals and anti-social.
Of course, many such stereotypes have some small kernel of truth to them. However, it would be a shame if people allowed cultural prejudices to prevent them from collaborating on building authentic civil society. Without frameworks for mutual support and economic independence, mass revolutionary defiance of the state will remain forever a pipe-dream.
Can one combine the better aspects of a LETS with the economic soundness of commodity currencies? I believe so. In fact, one might be able to do so on an initial shoe-string budget. Here’s one plan that I’ll toss out for comment.
- A local currency board would form as a joint stock company.
- Stock would be issued and the bulk of it used to buy the operating capital of the company, a major part of which would consist of e-gold. By acquiring and offering redemption only in e-gold, one cuts out a significant amount of overhead involved with storing and accounting for gold reserves. E-gold allows one to maintain, if one chooses, a transparent account that others may be given permission to view but not alter, making auditing of reserves “on hand” painless. That would be perfect for the gold reserve account of a local currency board.
- The company (the local currency board) would aspire to make a profit via selling advertising on the reverse side of the notes it issues.
- As a cheap anti-counterfeiting measure — the serial number, date of issue and similar meta-data for each note could be treated as a text message and then digitally signed with PGP, the signature affixed as a printed bar-code to the note. Most retail stores already have some sort of bar-code scanners and authenticating a bill then becomes a relatively minor software problem. True, that doesn’t verify the uniqueness of the bill — only that the printing on it was rightfully issued on one piece of paper at some point. Counterfeiters could still copy a legit bill — but one has that problem with statist money as well.
- All of a sudden — LETS activism, marketing of a locally owned business, seeking of investors for the business, recruitment of participating merchants to honor the new currency and canvassing for advertising sales all become one activity.
Okay, now tear it apart.
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I’ve been thinking about this recently too. I came up with a simple protocol for issuing, transferring, and redeeming electronic currency tokens. The tokens themselves could be embedded in any message, but verifying and properly transferring them would require the recipient to “phone home” to the issuer. However, identifying information need not be disclosed when doing so. The only information necessary is the secret key contained in the token, which is changed and re-issued to the recipient.
The only things the issuer needs are a webhost on which to run the software, something of value to back the currency, and a good reputation. This setup is easily manageable on a small scale, and would work well for local currencies (which, AFAIK, are generally not backed by anything, hindering adoption).
Using manual labor-hours (to be performed by the issuer) as a standard backing for these currencies has a number of advantages:
1) No need to buy gold. Those who have no money can still act as issuers.
2) No need to store/protect the backing commodity or pay someone else (e-gold) to do it.
3) Initial distribution of the currency is not limited to those who have money (dollars) to buy it. Since the labor tokens are an agreement to provide future labor, they can be traded for the same, at an exchange rate based on reputation.
With this model, however, individual issuers only have a small supply of labor (their own) to back their tokens with. Tokens would not be trusted very far outside of the circle of acquaintances in which they were issued. However, it does provide a fertile environment for the creation of labor banks.
Labor banks would act as a combination of currency issuer, currency exchange service, reputation tracker, and temp agency. These would buy the labor tokens of individuals (or signed paper agreements) in exchange for the bank’s own currency (either physical or electronic). This currency can later be redeemed for tokens issued by individuals (at various rates, based on rep), who will then perform the agreed-upon labor.
Anyway, that’s about as far as I got. I’m planning to create a prototype of the token-issuing web app whenever I get a decent chunk of free time.
Oh, one more advantage that I forgot to mention. Labor currency is effectively an interest-free microloan to the issuer, and should (I think) have similar economic effects.
That’s awesome!
BTW, are you familiar with Ripple?
Hey Brad - this is essentially what the radical decentralist/georgist Ralph Borsodi created in Exeter, NH in the early 70’s. It was called the “Constant” and it appears the only difference was that his was backed by a basket of commodities that included hard metals.
http://www.motherearthnews.com/Nature_and_Environment/1974_May_June/The_Borsodi_Constant__an_Inflation_Free_Currency
many people are not aware that Borsodi, a Georgist, was the editor of a magazine called “Free America” that attempted to unite catholic distributists from Britain with Southern Agrarians.
That’s fascinating! Thanks, Bill!
I have read a bit about Ripple. I plan to include a web-service API in token issuing software, so that verification/transfer requests can easily be issued by other programs. Modified to use this API, a Ripple server could make it easy to barter directly with the backing commodities of the tokens.
[...] The agorist idea of counter-economics as anarchist revolution writ small (until it writes itself large) largely requires the ability to carry out transactions covertly and, hence, cash. [Link] … [...]
[...] The thing is, rightist hard-money afficionados who go in for stuff like e-gold or the silver-backed Liberty Dollar don’t often associate and trade ideas with more community oriented LETS fans. The former tend to see the latter as impractical hippy-dippy types, while the latter tend to regard the former as irrational, fetishistic toward precious metals and anti-social. […] Full Article [...]
Isn’t e-gold an un-audited system? I’ve read that there is no check on the actual amount of gold in the vaults by a disinterested third party. Otherwise, it sounds really interesting.
[...] Some initial ideas by Brad Spangler and myself [...]
Have you heard of AOCS? http://www.opencurrency.com/
I just wrote a blog post (linking back to this one) that includes a recorded talk from the founder: http://justlive.us/physical/audio-aocs-alternative-local-currency-talk/
It’s based on real metal, but has a community-adjustable “unitary” trade value as well. In other words, one coin is face-value at “Fifty Community Trading Points” but is also a metal that can be turned into other currency at the spot price; so it’s a fiat/metal hybrid with flexibility. Each community can set what the “AOCS face value price” of items is, but the currency itself has an external, independent floor based on the spot price of precious metals.
I just found out about this currency at the talk, so I don’t have all the details from personal experience; but it seems like something worth looking into.
I’m generally supportive of of AOCS, but critical of the project as well. Two things…
1) When last I was paying attention, most of what I was seeing in the way of AOCS offerings seemed overpriced in comparison to the actual weight of bullion. Now, granted — that’s a market opportunity. If I had sufficient resources to compete, then if my speculation that they’re overpriced was true I would be able to eat their lunch. As it happens, I don’t have such resources and I have other things I want to work on besides organizing investors to offer a better alternative. But I could be wrong and we need this product type. So I wish them success, but I’m skeptical and looking forward to the market bringing better alternatives in the future.
2) The printing of a “face value” of arbitrary units is confusing and counter-productive in my opinion. Just stamp the bullion weight and precious metal content on the coins — i.e. “10 grams .999 Au”.
He addressed both of those questions, though unfortunately I didn’t capture the audio. From what I recall, here are his answers:
1. They up-charge by something like $3 FRN per coin; which covers the minting cost, plus $1 profit. The system as I recall, is that investors purchase a minimum 1000oz of silver (or gold equivalent) and send it through an AOCS-approved mint, with their own design; using the AOCS bulk discount but leaving the minting scraps for AOCS, as profit — which amounts to the $1-per-coin mentioned.
2. He sees the face-value thing as more of a suggestion, but also as an incentive to keep the currency in circulation; as opposed to dumping it for FRNs or hoarding it. In other words, even though the coin costs more than spot (and even with no profit it would, due to minting costs); you can use it within the trade community for more than the ~$15 FRN that silver is going for at spot on that day. This is also intended to keep the purchasing power relatively stable, as opposed to fluctuating by spot, which is many ways tied to FRN valuation.
He did say; though, that he’s pushing this in hopes of a day when merchants will price in metal-weights; but using a more familiar face-value style to acclimate people to the idea of precious metals as currency. He also mentioned that several communities are choosing to use spot, and ignoring or not minting a face value on their pressing of the coins. This means the users take a (potential) loss, but he doesn’t have any say-so in community methodology, and doesn’t attempt to influence that decision. Each of the coins DOES bear the weight and purity, so using that method is possible as it stands.
He seemed to make a logical argument for the fiat-hybrid nature of it; which was bolstered by the per-community flexibility. In other words, one community could charge 50 Value-Units for a widget they co-price at $30 FRN, and another could charge 50 Value-Units for a widget they co-price at $15 FRN; the former currently being more of a bargain for the purchaser, since 50 Value-Units is 1oz silver, which is at ~$15 spot. And the latter being near-spot, but not fluctuating daily. This may create a form of inter-community competition, which may help to self-regulate the value. All that said, if the market for Value-Units dries up overnight, the foundation value of the metal is still there.