[ox-en] Community currency
- From: "Paul Cockshott" <wpc dcs.gla.ac.uk>
- Date: Wed, 27 Aug 2008 22:14:22 +0100
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The venezuelan govt is proposing a law on community currencies,
these were the comments I made on the law after reading it last week.
After a quick read the law seems to be silent on certain key issues.
1. Who has the power of seigneurage over the communal currency. The bank of venezuela has the
responsibility of regulating it, but who has the power to issue these new monies.
2. The bank has the obligation to ensure exchange at the ratio 1/1 with the bolivar, how
will it do this if other organisations have the power to issue them?
For this to work one would need a communal bank for each area that was issuing the
currency, and this bank would have to have strict reserve ratio enforced with respect
to the Bolivars it holds relative to the communal units of currency that it issues.
The system is quite feasible with appropriate regulation, and the British currency
system works this way, and has done for some three hundred years,
so for example the banks in Scotland, Northern Ireland,
the Isle of Man and the Channel Islands are able to issue local currencies to
expedite local exchange. In Scotland the great majority of the currency circulating
is locally issued. However this is only feasible because the banks that issue the
currency are obliged to hold reserves of GB Pounds to back their issues of local
currency. In this they are no different in principle from other banks who issue
their own money in the form of credit cards, except that the Scottish and Northern
Irish notes are bearer bills.
It is possible that the Bank of Venezuela will issue detailed regulations relating to this.
The grave danger here is that a power of seigneurage will pass to local groups who will issue currency in an uncoordinated fashion. This will be inflationary and would in short order lead to that local currency loosing its value relative to the Bolivar. If on the other hand the central bank has an obligation to back these local notes, the net effect would be to accelerate the devaluation of the Bolivar itself, whilst in the process opening up huge opportunities for corruption on the part of those responsible for the issuing of the local currencies.
Conclusion
If the aim is just to increase local liquidity and provide credit for local enterprises which could not readily obtain it from central banking institutions there may well be something to be said for the proposal, provided it is properly regulated to ensure that there is no inflationary creation of money. However, such a policy is not in itself socialist, but perfectly compatible with capitalist economy, since a system very like this underlay the expansion of capitalism in Britain since 1700.
Paul Cockshott
Dept of Computing Science
University of Glasgow
[PHONE NUMBER REMOVED]
www.dcs.gla.ac.uk/~wpc/reports/
-----Original Message-----
From: owner-list-en oekonux.org on behalf of Stefan Merten
Sent: Wed 8/27/2008 6:44 PM
To: list-en oekonux.org
Cc: Stefan Merten
Subject: [ox-en] Re: Money as a dominant social relation
Hi Michel and all!
Last month (42 days ago) Michel Bauwens wrote:
This might be of interest to some:
*Report from Argentina - The Rise and Collapse of Red Global de Trueque and
the Social Money Movement*. Thomas H. Greco and Sergio Lub, May 27, 2003
at http://p2pfoundation.net/Argentine_Social_Money_Movement
Indeed the Argentine example is a good example for community
currencies and why they don't scale to structures bigger than a social
community. Under
http://p2pfoundation.net/Argentine_Social_Money_Movement#The_Problems_with_the_RGT_Creditos
there is a list of problems. They are all caused by the abstraction of
big societies - i.e. when leaving social communities. The underlying
problem here is in the human mind which can not be in solidarity with
someone who is too remote - especially not when your own life depends
on it (Brecht: "Erst kommt das Fressen, dann kommt die Moral").
In particular
6. The injection into the economy of huge amounts of counterfeit
credito currency
which is the result of the structural force embedded in the money
mentioned in
3. Primary reliance upon paper currency without adequate safeguards
against counterfeiting and falsification, and,
is the reason why you need a powerful authority who prevents
counterfeiting money. In a democracy the state is probably the best
authority for this one can think of.
Gr?ü?ße
Stefan
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