the plan for the future
May 1, 2012 - May 12, 2012
Author: Bart klein Ikink
This is a ready-to-go plan to start an initial experiment with Natural Money. Ready-to-go means that there is a plan and a computer system to support it. It does not mean that the plan and the computer system are complete. Along the way they may have to be adapted. If Natural Money becomes a success then the computer system will be able to cover all basic banking operations (current accounts, payments, savings, loans) and support up to a million Natural Money banks and a million Natural Money currencies in a worldwide network. The plan does not need many people or a large organisation, so it can start anywhere at any time.
If this money becomes a success then there will probably a clash between governments and money reformers. Governments cannot stop the spread of knowledge and the functioning of markets so their resistance will be futile. In a democratic society people should control the government and therefore the superior efficiency of this money can be a power tool to enforce democratic reforms. The most important one is a referendum law that will give citizens full control over their government. This will end the rule of the elite.
Currently there are a number of similar currencies and LETS systems but they did not achieve the success of Wörgl. In order to make the experiment a spectacular success, the following conditions must be met:
- the currency must be exchangeable in traditional usury money but exchanging it must be less attractive than keeping it;
- at least initially the currency has to be backed with traditional usury money;
- there must be an incentive to use the money in the form of a holding tax;
- the money must be attractive.
Those conditions have not been met in most situations and this is the reason why most experiments were not a spectacular success like Wörgl. There are two methods that can achieve the same goal, which is an explosive experiment that will spread like wildfire:
- a public currency: the currency is issued by a government like in Wörgl and the government accepts the currency for taxes;
- a private currency: the currency is issued by a community, a group of people like in Lignières-en-Berry or a corporation.
Public money: the Wörgl method
For more information see: Wörgl Stamp Scrip.
Meeting the conditions
In Wörgl the local government issued the currency. It met the conditions to make it a spectacular success:
- the currency was exchangeable in traditional usury money at a rate of 0.98 Schilling, but it was unattractive to do so because it could be spend at a value of 1 Schilling;
- the Wörgl currency was backed with a bank deposit of Austrian Schillings;
- there was an incentive to use the money because there was a holding tax of 1 percent per month;
- the money was attractive because there was no alternative. Schillings were hard to come by.
The Wörgl experiment became explosive because many towns and villages wanted to copy it. For this reason the central bank banned it. If the central bank had not ended the experiment everybody would use scrip money now.
Replicating the experiment
The Wörgl experiment itself was a complicated piece of financial engineering [+] but it came down to the following:
- a community (a village or a small town) must be willing to do the experiment;
- the community government must accept the money for the payment of community taxes;
- most businesses in the community must be willing to accept the money;
- it must be possible to exchange the currency into a regular usury currency.
If a community including the community government is willing then the experiment can start.
Private money: the Lignières-en-Berry method
For more information see: Lignières-en-Berry.
In Wörgl people had no other option but in Lignières-en-Berry a clever scheme was devised to make the money attractive. It was the following:
- people could buy the money at 95 cents to the Dollar/Euro;
- they could spend it as 1 Dollar/Euro because businesses accepted the money at that value;
- after one month they could exchange the money at 98 cents to the Dollar/Euro;
- they could also buy a stamp of 1 cent to make the money valid for another month so they could spend it as 1 Dollar/Euro again.
The situation in Lignières-en-Berry became explosive because:
- people bought the money because they could exchange it at a 3% profit at the end of the month;
- businesses accepted the money because it generated extra business and it could cost them no more than 2%, but if they did spend the money then there was no loss at all;
- at the end of the month most people chose to buy the stamp even though they could get back 98 cents because by buying the stamp they could spend the currency unit as 1 Dollar/Euro.
If no currency is returned then the profit is 1% per month excluding costs. If there are no costs and the profit is used to issue additional currency then 33% additional currency can be created each month. At the same time the money remains sound because it is backed by regular usury money.
This money spreads fast and the experiment in Lignières-en-Berry became explosive. It may have taken only a few months until the money had replaced usury money in France. For this reason the government banned it. If it had not been banned then everybody would use scrip money now.
Capital and profit
To set up a Lignières-en-Berry currency you do not need much capital. If you intend to issue 100,000 Dollar/Euro of currency units you only need 3,000 Dollar/Euro. People will buy the currency at 95 cents so they bring in 95,000 Dollar/Euro while you need 98,000 Dollar/Euro to pay them back.
It is likely that the operation will run at a profit because people have to pay a holding fee to keep the money valid. The profit can be used to the following ends:
- to issue additional currency. If the market becomes saturated, more people will return the money for 98 cents so the profit will disappear and the situation will stabilise.
- for the benefit of the community, for example poverty relief.
- it can be added to the value of the currency so the value of the currency will rise. This will make the money attractive for investors because charging interest is not allowed. If the currency rises in value then there is a compensation for the risk of lending money.
- a dividend for shareholders. Many people will not prefer this solution but in a free market this type of money can exist alongside public and community currencies.
A ban on charging interest or usury will make the economy more efficient [+]. It will eliminate risk in the financial system and make it more stable [+]. Interest on money or usury is a common underlying cause of cause of many destructive developments, such as the depletion of natural resources, poverty, social disintegration, the destruction of ecosystems and the financial crisis [+]. It is also a commandment of God so there should be no compromise on this issue [+].
The fast circulation of the scrip money generates extra employment. It can produce even more employment if employers and employees could agree on using it for salary payments. Some possible schemes are the following:
- the employer pays a regular salary including taxes but the employee agrees to return a part of his salary to the employer in exchange for scrip money.
- the employer pays a minimum wage including taxes and an additional amount in scrip money. This scheme could cause trouble as it results in reduced tax income for the government.
There are some risks that should be addressed:
- legal issues: the government has a monopoly on issuing money so the currency should be named "gift certificates";
- trust: the organisation behind the gift certificates must be trustworthy and transparent. This may require independent oversight and auditing;
- over issuance: if too many currency units are issued, the chance increases that gift certificates are returned at the end of the month, creating a loss of three cents per unit returned;
- traders: people that sell gift certificates at 98 cents should not be able to buy new gift certificates at 95 cents. This problem can be mitigated by limiting the issuance per person or issuing new gift certificates only once every two months. Preventing over issuance will also help to alleviate this problem;
- to reduce the risk of loss you could make the gift certificates available at 96 cents to the Dollar/Euro instead of 95 cents;
- or you could buy them back at 97 cents instead of 98 cents to the Dollar/Euro. In this way people will be more inclined to keep the money and pay the holding fee.
Basic Banking System
Stamping the public money or the gift certificates can be cumbersome. In the information age there are better solutions. This will require an administrative system like the Basic Banking System (BBS) of Naturalmoney.org. Counterfeiting may also become a problem but with an administrative system like the BBS this will not happen.
The Basic Banking System will be freeware available at no cost to everyone. It is a full banking system that provides all options regular banks provide to their customers (current account, loans, savings). Not all options will be used initially but they may be needed in the future if this type of money replaces the regular usury money. To make the system easily accessible a mobile phone application (app) must be built so people can pay each other on the spot.
If the money becomes a success then this can be handled using the Basic Banking System. It has been built it in such a way that it can cope with a worldwide adoption of similar currencies and the connection of all individual banks in a world wide network. The underlying technology is the Oracle database, which is scalable to any size, so the BBS will also be able to support large banks with millions of customers. The BBS is not complete and it needs improvement but is usable and ready-to-go.
Most people have a mobile phone or a computer and can access the BBS. Other people can use paper cheques that can be processed at the bank location. This needs to be done by hand at first. If there are security issues with the website or when it is attacked by hackers paper cheques can be used until the security issues have been solved.
You can check out the Basic Banking System here (it is hosted by Oracle so not all options will work but it gives you an impression of the system):
[Customer Banking System Demo]
The user manual can be found here:
[Customer Banking System User Guide]
There is an installation manual so you can instal it at home on your Windows PC and then all available options will work:
[Basic Banking System Installation Guide]