Fleeing Vesuvius. Gillian Fallon
Some may promise to deliver real things, like kilowatt hours of electricity, just as the pound sterling and the US dollar were once backed by promises to deliver gold. Others may be bonds backed by entitlements to a share an income stream, rather than a share of profits, as Chris Cook describes in his article in this book. Both these types of money will be used for saving rather than buying and selling. People will buy them with their regional currency and either hold them until maturity if they are bonds, or sell them for regional money at whatever the exchange rate happens to be when they need to spend.
These savings currencies could work like this. Suppose a community wanted to set up an energy supply company (ESCo) to install and run a combined heat and power plant supplying hot water for central heating and electricity to its local area. The regional currency required to purchase the equipment could be raised by selling energy “bonds” which promise to pay the bearer the price of a specific number of kWh on the day they mature. For example, someone could buy a bond worth whatever the price of 10,000 kWh was when that bond matured in five years. The money to redeem that bond would come from the payments made by people buying energy from the plant in its fifth year. The ESCo would also offer other bonds with different maturity dates and, as they were gradually redeemed, those buying power from the ESCo would, in fact, be taking ownership of the ESCo themselves.
These energy bonds will probably be issued in large denominations for sale to purchasers both inside and outside the community and will not circulate as money. However, once the ESCo is supplying power, the managing committee could turn it into a bank. It could issue notes for, say, 50 and 100 kWh which locals could use for buying and selling, secure in the knowledge that the note had real value as it could always be used to pay their energy bills. Then, once its notes had gained acceptance, the ESCo could open accounts for people so that the full range of money-moving services was available to those using the energy-backed units. An ESCo would be unlikely to do this, though, if people were happy with the way their regional currency was being run. Only if the regional unit was rapidly losing its value in energy terms would its users migrate to one which was not.
Conclusion
Up to now, those who allocated a society’s money supply by determining who could borrow, for what and how much, determined what got done. In the future, that role will pass to those who supply its energy. Only this group will have, quite literally, the power to do anything. Money once bought energy. Now energy, or at least an entitlement to it, will actually be money and energy firms may become the new banks in the way I outlined. This makes it particularly important that communities develop their own energy supplies, and that if banks issuing energy-backed money do develop, they are community owned.
As energy gets scarcer, its cost in terms of the length of time we have to work to buy a kilowatt-hour, or its equivalent, is going to increase. Looked at the other way round, energy is cheaper today than it is ever likely to be again in terms of what we have to give up to get it. We must therefore ensure that, in our communities and elsewhere, the energy-intensive projects required to provide the essentials of life in an energy-scarce world are carried out now. If they are not, their real cost will go up and they may never be done.
Working examples of both backed and unbacked forms of modern regional and community monies are needed urgently. Until there is at least one example of a non-debt currency other than gold working well somewhere in the world, governments will cling to the hope that increasingly unstable national and multinational debt-based currencies will retain their value and their efforts to ensure that they do will blight millions of lives.
Moreover, without equitable, locally and regionally controllable monetary alternatives to provide flexibility, the inevitable transition to a lower-energy economy will be extraordinarily painful for thousands of ordinary communities, and millions of ordinary people. Indeed, their transitions will almost certainly come about as a result of a chaotic collapse rather than a managed descent and the levels of energy use that they are able to sustain afterwards will be greatly reduced. Their output will therefore be low and may be insufficient to allow everyone to survive. A total reconstruction of our money-issuing and financing systems is therefore a sine qua non if we are to escape Vesuvius’ flames.
Endnotes
1. William R. Clark, Petrodollar Warfare: Oil, Iraq and the Future of the Dollar, (New Society Publishers, 2005), p. 31. See books.google.com/books?id=q6efPwhWIHUC&pg=PA31&lpg=PA31&dq=”us+saudi”+arabian+joint+commission+on+economic+cooperation+in+june+1974&source=web&ots=1hDQ7lQDEL&sig=ukyrXqNPUAhGdZaO155oC95sD-M#v=onepage&q=%22us%20saudi%22%20arabian%20joint%20commission%20on%20economic%20cooperation%20in%20june%201974&f=false.
2. Qiao Liang and Wang Xiangsui, both colonels in the Chinese army, wrote a book, Unrestricted Warfare, which appeared on the internet in English 1999 about strategies China could use to defeat a technologically superior opponent such as the United States through a variety of means including currency manipulation. Extracts from the book can be found at cryptome.org/cuw.htm.
3. Yanhui Zhang, Debt Crisis in the Third World (2003). See grin.com/e-book/39036/debt-crisis-in-the-third-world.
Liquidity Networks: Local Trading Systems Using a Debt-Free Electronic Currency
GRAHAM BARNES
No currency will work unless people accept it from each other so this novel money will be put into circulation as a way of rewarding those who are accepting and spending it most.
Around the world, conventional currencies such as the euro, the dollar and the pound are in short supply because of the current economic crisis. A liquidity network (LQN) is designed to ease this shortage by creating and distributing a supplementary debt-free currency so that businesses and individuals can trade locally without needing the conventional sort.
Money essentially performs three functions: it acts as a means of exchange, as a store of value and as a unit of account. A liquidity network aims to fulfil only the first of these. It would enable people to buy and sell goods and services in a specific geographic area. The generic name for an LQN’s electronic currency is the quid but each local system will probably give a special name to its own version. For example, the emerging Kilkenny LQN group has named their unit the Katz after a very successful local hurling team, the Cats.
As quid can be spent only inside the local area, a healthy quid supply will boost local trade. If euros become scarcer and scarcer, the relative importance of an LQN will increase. Quid will free up euros for “out-of-area” transactions and places with an LQN will become more competitive than those without.
Imagine if a million euros went into circulation in your town overnight but they were super-euros — euros that could be spent only in your area and which spawned extra super-euros in your account if you spent them quickly. A much higher level of trading would take place as the new currency passed rapidly from person to person and from business to business. This super-euro is the quid.
Liquidity Network Structures and Design
Each LQN will be run by a local organization within a framework and guidelines set down by a national support organization to which they all belong. An important function of both the local and the national organizations is that they recognize and reward Positive Behavior — behavior considered to be beneficial to the specific LQN or to the acceptance and success of the LQN movement in general.
The key aspects of the LQN design are:
• Accounts are not allowed to go into the red. Transactions are processed instantly and because there is no debt, there is no need for credit checks nor a legal process for debt recovery.
• Quid are given rather than lent into circulation, the only condition being an expectation of (defined) Positive Behavior by the recipient.
• Some Positive Behaviors — for example, spending one’s quid quickly after one gets them or dealing with an increasing number of people — are rewarded after the event.
•