The Power of Civil Money
by David McCarthy
I would like to revisit the related ideas of civil credit
and civil money this month. The reason for that is that the Hudson Valley
Current, which is a working embodiment of these principles, is now in beta
testing, and we have about 30 members trying it out. That’s pretty exciting for
those of us working on the Current. But for this project and others like it to
succeed, people need to get a clear understanding about why it’s not just some
sort of cool experiment. We need to see how it works—and for that matter, what
money is in the first place.
It has been said that there are really only two kinds of
money. The first kind is commodity money. That traditionally has meant gold and
silver, but also things like salt or sea shells have been used. Then there is
money based on credit and debt. One early form of paper money was a hybrid of
these two, since it was issued as certificates of deposit at a goldsmith for
gold. People had faith in the bills since they were redeemable in actual gold.
The bill itself represented a credit for a certain amount of gold.
Over the years, the gradual historical trend toward
government-issued money has complicated the subject considerably. Though that’s
an interesting topic, I’d like to sidestep it here because, well, civil money
itself sidesteps government-issue altogether. To understand this, we need to
look at the basic—and very simple—nature of credit-based money.
Money that is issued on the basis of credit depends, by
definition, on some degree of trust between people or in a society. I say “some
degree” because an example of this could just be an IOU that I give to a friend
for $10 or maybe a bag of apples. In that case, the trust is just between that
friend and me. Now, if we had another friend who knows and trusts both of us,
that IOU could very conceivably be exchanged with him or her for some
equivalent service, and presented to me to pay off the debt. In that simple
example, the IOU is civil money. Note that the “money” disappears when the debt
is paid.
The Hudson Valley Current is nothing more than an expansion
of this example. It is a system of civil credit operating in a local system of
known and trusted members, organized by a nonprofit organization. The
accounting takes place via a web-based credit clearing system. When I deliver
goods or services to a member, I get a credit, denominated in Currents (the
value of which is set equal to a dollar). The buyer of my goods gets an
interest-free debit. A small transaction charge helps cover the cost of operating
the system. The buyer offsets the debit by selling his or her goods and
services into the network.
Just as an atom in the physical world is composed of
particles with positive and negative charges, credit-based money is an “atom”
of credit/debit. In a mutual credit network, the sum of all the accounts at any
one time will be zero. The amount of money in the system is just the sum of all
the positive balances, but that number doesn’t matter much. What is important
is that there is enough money provided for the purposes of the members—and the
system is designed to do just that. The money itself is simply a dynamic
process, a Current if you will, that facilitates needed transactions. To be
sure, managing such a system requires careful oversight and account controls,
but the fact that it is a local system of known parties will help to keep
things in balance.
So now we’re ready to see the power of civil money:
• Like any local currency system, it strengthens the
relationships of locally owned businesses and individuals. Local money
circulates locally by its very definition.
• Bringing money creation down to the local level will help
us weather the storms and instabilities of the global and national economies—especially
of credit and financial systems. Inflation or deflation, which may have nothing
to do with the productivity of our local economy, can be sidestepped by using a
currency that is based on direct delivery of goods and services.
• Short-term, interest-free operational credit removes all
kinds of barriers to prosperity for ordinary people and small businesses. You
will find a whole new network of trading partners. They will be able to afford
your services, and you theirs. If you see this, you’ll
see how it can help you. But at the same time, using such a system benefits the
whole community. In short, it’s a way of practicing altruism while helping
ourselves at the same time. If that’s not win-win, I don’t know what is.
neweconomics@countrywisdomnews.com
www.hudsonvalleycurrent.org
Recommended reading: The
End of Money, and the Future of Civilization by Thomas Greco
Posted by Chris Hewitt
on 12:21 PM.
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New Economics
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This is a super concept. Thanks so much for publishing the article and providing resources to follow up with.
Wampum !!