complementary currencies

There is no all-purpose currency. This is equally true of "legal tender"¹¹ (national currencies), LETSystems and Time Banks. All attempts to use one currency type for all purposes have failed.

The minimization of risk, waste and damage, and the maximization of inclusion, fairness and effectiveness, rely upon the application of currency models appropriate to the specific need(s). The importance of this point was recognized in the past and has been rediscovered and developed further in recent times.

There are many known currency models, and there is no reason to imagine that many more will not be be designed or developed in the future. It would be impossible (and rather pointless) to list them all here, not least because the full range of possible currencies is not applicable in all countries (ether because of legal constraints or because of the nature of the banking system).

The following table lists a small subset of the possible systems that might be applied usefully here:

The variety of currency types that may be supported, developed and facilitated through ROCT is certainly not restricted to those in the table above. In due course, a currency selection tool will be made available to assist in the identification of an appropriate currency for a specific purpose.

1. LETSystem: The "LETSystem Design Manual" (Michael Linton & Angus Soutar) specifies that the value of the unit will be equivalent to the national currency (legal tender) of the country in which it operates. Many local trading systems have departed from the pure LETSystem model and the term LETS has take on a wider meaning, encompassing many variations. The LETSystem places no restriction on the value beyond its equivalence to the national currency so, for example, the value placed upon individuals' time may differ significantly. For this reason many LETS have adopted time as the unit for services, and some may employ two or more units in parallel (e.g. to distinguish between human time and other copsts that may have gone into the production of goods or materials.

   The LETSystem was designed with simplicity in mind, not least to keep running costs to a minimum, but that simplicity has often brought its own problems. Many participants in LETS have tried to use it for purposes to which it is not well suited and have consequently been disappointed by its performamnce. As with any CC system, governance is a key issue. A well-governed LETS(ystem) should be able to provide interest-free mutual credit between its members, but confidence in the currency is a fundamental issue: members need to know that the credit they have earned can be spent on things they actually need, and that can be difficult to achieve. In order to allow a LETS(ystem) to function as anticipated in its original design, it is helpful to absorb into other CC systems (such as Time Banks) those functions to which it is less well suited but which in the past, for lack of any alternative, it has been expected to accommodate.

2. Human time: 1 = 1: Placing an equal value on human time makes any system very clear and easy to undertand. Time is not a suitable unit for all applications, but there is a wealth of evidence to demonstrate its superiority where the objectives are social inclusion and community cohesion (Time Banks).

3. The Local Credit Circle is an experimental design to provide interest-free credit within a closed group. It is intended to minimize the leakage of legal tender from a community and to encourage the local procurement of services. It incorporates many features from the LETSystem model but its time-delayed leakage functions are incorporated to encourage trading and a share reservoir protects is members from the risk of being unable to find the services it needs internally.

   The LCC provides interest-free credit in the short term, but after a delay (perhaps 3 months) the any non-zero account will start to "leak" towards zero. The "leakage" function may be a linear ramp, a progression of stepped changes, exponential (in effect delayed demurrage) or any other arbitrary monotonic function. The LCC will rely upon technology not available when the LETSystem and Time Bank models were introduced.

   The LCC model can be adapted to meet the needs of self-employed traders and SMEs, not-for-profit locally-focused organizations or individuals.

4. The term kWhF (= "kiloWatt-hour Future") has been used here to refer to a particular model of energy-backed currency outlined by Shann Turnbull in "Creating a Community Currency" (Chapter 21 of "Building Sustainable Communities", TOES 1997 & 1989) which outlines a scheme to support the development of community-owned renewable energy regeneration projects.

   This model inevitably involves considerable elements of delay since it relies upon the retention promissory energy bonds by banks or other institutions.

Because energy provides a universal physical measure, it is an ideal backing for a store-of-value currency.

Other energy-backed currency models have been proposed independentl by various authors, including Howard Odum and Buckminster Fuller.

5. In a member-to-member system the amount (the balance) held by one member (the payer) is decreased by a certain sum while the amount held by another (the payee) is increased by the same amount. The balance might be held as a number in a computerized account or member-managed account book, or it may be held in physical notes or token; the significant point here is that the sum of the payee's balance and the payer's account is the same after the transaction as before.

6. HourNotes are intended to be issued into circulation in sufficient quantity to achieve a particular objective quickly (such as a clean-up or repair operation, building a pond or reclaiming a piece of land). They are issued to those who undertake to the work, but within their limited life-span they may change hands, they may be redeemed for services or goods, or they may be "banked" in the Time Bank (which preserves time value indefinitely).

7. The various LETS models are all zero-sum systems, i.e. the accounts sum to zero. It the LCC model, accounts that leak do so into a system account used to subsidize its operation.

8. Where an issuance of HourNotes has been made to motivate and reward a particular activity of benefit to the community, it may be practicable to source material rewards (priced in hours) to augment time-measured rewards (such as file viewing, computer use, access to sporting facilities, etc.). Whether or not directly time-measurable, the rewards made available for such community-beneficial projects may reasonably be acquired from the surplus capacity of supportive businesses and partner organizations.

9. Suitable rewards for community-beneficial projects may not be immediately available.

10. For an exceptionally clear explanation of the distinction between the characteristics of exchange currencies and store-of-value currencies see Richard Douthwaite's "The Ecology of Money" (Schumamcher Society, 1999).

11. The law requires the acceptance of legal tender as settlement for any financial commitment. Currency not categorized as legal tender is not (in general) illegal, and may even be recognized in some sense within the law, but the law will not enforce its acceptance as settlement for any financial commitment.

This page Copyright © 2008 John Waters