Beyond Money

1
Beyond Money

• A Workshop

2
Todays Goal

• To explore how we improve your communitys
  quality of life via a healthier local economy

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Outline

• Explore some of the Lakewood issues
• Basic issues around money
• Problems with the current system
• Other monetary systems that Lakewood could be
  using

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Who Is Tim Inkpen?

• Involved in Community Currencies since 1989
• Worked for 4 years supporting the network which
  handled most of the Canadian Currency
  transactions
• In the process of formed a non-profit that will
  assist communities in becoming sustainable.

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Lakewoods Issues?

• What Are The Top Issues?

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Would Having More Money Help?

• Then Why Doesnt Lakewood Just Create Some?

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What is the thing we call Money?
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Money is simply a medium of exchange

• Money is based on FAITH and BELIEF
• The Houses of this faith are the Banks and other
  Financial Institutions

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Loss of Faith Lead to currency collapse

• Examples Germany 1923
• Argentina -2001-2002
• Southeast Asia 1997
• Russia 1998
• United States 20??

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Questions

• Is anyone familiar with any religious text in
  which God or any other deity creates money?
• Is anyone aware of any scientific theory (Note
  despite claims to the contrary Economics is not a
  science) that claims that money is a naturally
  occurring phenomenon?

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Where Does Money Come From?

• How is it created?

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Fractional Reserve Banking (Simplified)
Person A deposits a 1000 Government cheque in
Bank 1
Person B buys the car from Person C who then
deposits the 900 in Bank 2
Bank 1 creates 900 of new money, to Person B so
they can buy a car
Bank 2 now creates 810 in forms of loans to
other people
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Fractional Reserve Banking (Simplified) Cont.
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Problems with Current System

• Control of System lies with National
  International Bodies
• Interest
• Money is traded as a commodity
• Doesnt stay within the local community
• Expensive to user while adding little value

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Control of System lies with National
International Bodies

• Most decisions made in Washington
• No allowances are made for the specific needs of
  different parts of the country
• One size fits all
• No local input
• Heavily influenced by international bodies such
  as the World Bank which represent the Banking
  Industry

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Current US Fiscal Issues

• US deficit at record highs (over 7 trillion)
• US is increasing its debt by about US1.2 billion
  a day
• How to pay for the sunset years and medical costs
  of about 77 million baby boomers getting set to
  retire
• America's long-term budget shortfall is
  approximately US43 trillion, about four times
  the size of the nation's economy, and more than
  20 times the federal government's annual tax
  revenues

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The Problems With Interest

• Ensures that there are always winners and losers
• It discourages cooperation
• Endless Economic Growth which leads to boom
  bust cycles
• Concentrates wealth in hands of very few
• Growth imperative -

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More problems with Interest

• Narrow definition of what has economic value
• Encourage mass ecological destruction
• People are forced to work long hours because
  family time has no economic benefit
• Encourage views that are short-sighted not
  sustainable

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Money as a Commodity

• US dollars (like all currencies) are traded just
  like stocks bonds
• 98 of all currency trading is purely speculative
• Value of US dollar heavily influenced by currency
  traders outside of government control
• People should control the value of money NOT
  Banks or Money Traders

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Doesnt Stay in Local Community

• Most taxes are Federal State
• Banks Corporations are international (i.e.
  Walmart)
• Very little of the money generated in a community
  ends up back in that community

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Banking System expensive to users while adding
little value

• Outside of authorizing the credit the lender
  offers no real value to the borrower
• Takes no real risks since the loan is backed up
  by tangible assets (i.e. car, house)
• Users/merchants pay fees for debit/credit cards
  transactions that costs the banks relatively
  little to operate. The banks add nothing to the
  actual transaction. Same transaction had no fee
  10-20 years ago.

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Lack of Imagination is the saddest poverty of the
all
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Rethinking Money

• Lakewoods Perspective

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What Are Community Currencies?

• Medium of exchange created by and for the local
  community

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Advantages of Community Currencies

• Gain large measure of economic autonomy
• Interest free
• Encourages local production
• Enhances quality of life
• Currency stays local

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Past Issues Around Some Community Currency Systems

• Cant Pay Taxes with CCs units
• Few successful systems
• Most are unprofessionally run and organized with
  no proper business plan
• Most do nothing to attract businesses
• Most are stand-alone systems rather than part of
  system attempts to address specific community
  issues

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Mutual Credit Systems

• First modern Mutual Credit System was LETS (Local
  Employment and Trading System) created by
  Michael Linton in Comox Vally, British Columbia
  in 1983
• Over 2,000 LETS systems in operation world wide,
  mainly in UK, New Zealand Australia
• Uni-Lets (Global Lets) www.unilets.org

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Another Type Of Mutual Credit System

• Goods and Services Exchange (GAS X the fuel of
  the new economy)
• Developed by Tom Greco myself
• Deals with keys problems with LETS such as credit
  limits, designing the system to make it
  attractive to local government businesses etc.

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What Is a Goods and Services Exchange?

• It a community currency that reduces all
  transactions to a a simple debit/credit system
• Every individual and organization has one or more
  accounts on the system
• When a transaction action takes place, one
  account is debited, another is credited
• The system itself Is always balanced

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A Simple Example

• Bob uses 50 GAS X credits to buy a large basket
  of organic apples from Ginas Farm Coop.
• Bobs account is debited 50 credits and Ginas
  Farm Coop is credited with 50 credits.
• Bob now has committed himself to putting 50
  credits back into the system and Ginas Farm Coop
  can now has 50 credits to spend in the system.

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Questions about Example

• How does Bob get the credits?
• Where does Ginas Farmers Coop spend its credits?
• How and where are the trades actually recorded?
• What is backing the system?
• To answer these and other questions it useful to
  look at how the system is set up

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To be Successful A Community Currency System
Needs

• A clearly stated purpose
• A governing structure, knowledgeable advisors
• A solid Business Plan
• Good Project Planning
• A target audience
• A source of money / resources to run and expand
  the organization
• Good communications, marketing and sales
  strategies and tactics
• Solid Leadership
• A good working relationship with other community
  organizations

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Important Principles

• Focus on quality of members and of goods/services
  offered on the services not the quantity
• The system must be self-funding
• It is NOT a charity or a social service
  organization
• Run it as a cooperative so that all members have
  role in how the system operates

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Starting the System

• Six or seven respected local businesses who are
  mainly service providers
• Two or Three high profile non-profits that offer
  valued services (i.e. YMCA)
• These would be initially be the only issuers of
  credits on the system (i.e. individuals or
  organizations allowed to have negative balances)

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Criteria for Initial Businesses

• Well respected, quality oriented
• Financially stable
• Not see GSX system as some kind of tax avoidance
  scheme
• Must be willing to work with others to ensure
  that the GSX system benefits the entire community
  not just themselves

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How to Determine Credit Limits

• How much value a person or organization adds to
  the community and at what frequency

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Examples of Credit Limits

• Tina sells large boxes of home baked cookies for
  10 credits
• On average she sells 10 boxes of cookies a month
  for a total of 100 credits
• She also does math tutoring for another 200
  credits for a total 300 credits every month
• She has been with the system over 6 months and
  her numbers are consistent so her credit limit
  would be 300 credits

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How Transactions are entered

• Completely Electronic with three ways to enter
  transactions    a) Web based    b) Electronic
  smart cards    c) Telephone/Cell phone
  tele-banking
• No paper currency is used since it is awkward and
  to easily counterfeited

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Mixing Transactions

• Most transactions will involve a mixture of GSX
  credits and money
• It is in communitys best interest to get as many
  goods and services on a 100 GSX credits as
  possible
• If the City participates in the system, it could
  offer the same or even more services without
  increasing taxes

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How The System Pays For Itself

• Membership Fees
• TransactionsNotes-Its is in everyones
  interest to control cost while allowing the
  system to expand-All members will have a direct
  incentive to come up with new ways of reducing
  costs

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Brokerage

• Brokers ensures that credit keep moving
  throughout system
• Ensure that no balance become too high or low
• Find out what new goods and services are needs by
  the system and bring then into the system
• Paid small commissions
• Used by commercial barter systems

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Long Term Investing

• For long term savings people will have an capital
  account
• They can use these credits to invest in local
  businesses in return for a share of the profits
• This money can also be used for long-term
  improvement on parks and public land

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Intersystem Trading

• There are two layers of GSX systems1) Local2)
  World-Wide GSX Global System
• The World Wide system functions in a manner
  similar, to existing credit card systems.
• Membership to the world wide system is restricted
  to members in good standing of officially
  recognized local exchanges
• These exchanges have to been up and running for
  a period of at least one year and meet a number
  of other criteria before receiving recognition.

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Intersystem Trading How it works

• The GS X  has regional officers who personally
  meet with various exchanges and ensure that they
  are legitimate enterprises
• Officers also help coordinate CC systems who were
  interested in working together
• Officers are paid from fees paid by the local
  exchanges.
• Officers have extensive experience in CCs as well
  as business and community economic development.

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Qualifications for Joining the World Wide System

• Have been fully operational for at least one year
• Be run as an incorporated cooperative
• Have audited books that  can be produced on
  demand
• Do all their transactions electronically with no
  physical currency
• Be run as a serious, professional organizations
• Impose credit limits on its members
• Be self financing (existing without government
  grants and other external sources of capital)
• Effective means of dealing with users who have
  high positive and negative balances (i.e.
  brokerage)

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Other Rules

• Systems can be expelled from the system for
  compliance failure
• At the local level a physical ID would be needed
  to join the system (i.e. Birth Certificate)
• At the global level a type of electronic ID
  system is used
• Anyone caught breaking into the system would be
  banned from the system for life

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Actual Mechanisms of Inter-System Trading

• Individuals/organizations, not GAS X systems, do
  the trading directly among themselves.
• There are two layers1) Local GAS X system
  this is where the bulk of the trading is done2)
  The Global GAS X system where individuals obtain
  goods and services that are unavailable in their
  local communities
• The Global system works in a way very much like a
  combination of eBay and Visa

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What Needs to Be Done

• Rewrite Strohalm's Cyclos open source software so
  that it matches the GSX specifications,
  specifically fixing major security holes,
  enabling intersystem trading and allowing
  businesses with multiple offices
• Price Dual card readers and related equipment

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Workshop

• How a Goods and Services Exchange Could Work For
  Lakewood

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Complementary Options

• Matchbin.com (www.matchbin.com)
• Habitat for Humanity (http//www.habitat.org/)

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None of These options is a solution in and of
itself

• Monetary Systems do not exist within a vacuum
• To be successful, Community Currency Systems need
  to be a part of an integrated effort to deal with
  specific issues
• Will eventually require political change

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Books

• Paul Einzig Primitive Money 2nd. 1966.
• Bernard Lietaer The Future Of Money
• Thomas Greco, Jr. Money Understanding and
  Creating Alternatives to Legal Tender

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Service available to Lakewood

• My professional services in setting up a
  Community Currency System
• Provide on-going consulting as needed
• Provide Business and Technical Expertise in
  expanding the system

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How to Contact Tim Inkpen

• E-Mail tinkpen_at_sympatico.ca
• Skype tinkpen
• Phone [phone]

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Evaluation Forms

• Please Take a Minute Fill out a Form and give
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