Alternative currencies, LETS, e-gold and counter-economics
I’ve been thinking about alternative currency ideas a lot lately for a variety of reasons.
- Several people of the left-decentralist inclination have an interest in Local Exchange Trading Systems (LETS).
- Austrian economics gives us plenty of good reasons to fear and despise central banking, such as the Federal Reserve System.
- Real ID is another giant leap in the direction of a cashless society lacking privacy.
- The agorist idea of counter-economics as anarchist revolution writ small (until it writes itself large) largely requires the ability to carry out transactions covertly and, hence, cash.
The thing is, rightist hard-money afficionados who go in for stuff like e-gold or the silver-backed Liberty Dollar don’t often associate and trade ideas with more community oriented LETS fans. The former tend to see the latter as impractical hippy-dippy types, while the latter tend to regard the former as irrational, fetishistic toward precious metals and anti-social.
Of course, many such stereotypes have some small kernel of truth to them. However, it would be a shame if people allowed cultural prejudices to prevent them from collaborating on building authentic civil society. Without frameworks for mutual support and economic independence, mass revolutionary defiance of the state will remain forever a pipe-dream.
Can one combine the better aspects of a LETS with the economic soundness of commodity currencies? I believe so. In fact, one might be able to do so on an initial shoe-string budget. Here’s one plan that I’ll toss out for comment.
- A local currency board would form as a joint stock company.
- Stock would be issued and the bulk of it used to buy the operating capital of the company, a major part of which would consist of e-gold. By acquiring and offering redemption only in e-gold, one cuts out a significant amount of overhead involved with storing and accounting for gold reserves. E-gold allows one to maintain, if one chooses, a transparent account that others may be given permission to view but not alter, making auditing of reserves “on hand” painless. That would be perfect for the gold reserve account of a local currency board.
- The company (the local currency board) would aspire to make a profit via selling advertising on the reverse side of the notes it issues.
- As a cheap anti-counterfeiting measure — the serial number, date of issue and similar meta-data for each note could be treated as a text message and then digitally signed with PGP, the signature affixed as a printed bar-code to the note. Most retail stores already have some sort of bar-code scanners and authenticating a bill then becomes a relatively minor software problem. True, that doesn’t verify the uniqueness of the bill — only that the printing on it was rightfully issued on one piece of paper at some point. Counterfeiters could still copy a legit bill — but one has that problem with statist money as well.
- All of a sudden — LETS activism, marketing of a locally owned business, seeking of investors for the business, recruitment of participating merchants to honor the new currency and canvassing for advertising sales all become one activity.
Okay, now tear it apart.
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I’ve been thinking about this recently too. I came up with a simple protocol for issuing, transferring, and redeeming electronic currency tokens. The tokens themselves could be embedded in any message, but verifying and properly transferring them would require the recipient to “phone home” to the issuer. However, identifying information need not be disclosed when doing so. The only information necessary is the secret key contained in the token, which is changed and re-issued to the recipient.
The only things the issuer needs are a webhost on which to run the software, something of value to back the currency, and a good reputation. This setup is easily manageable on a small scale, and would work well for local currencies (which, AFAIK, are generally not backed by anything, hindering adoption).
Using manual labor-hours (to be performed by the issuer) as a standard backing for these currencies has a number of advantages:
1) No need to buy gold. Those who have no money can still act as issuers.
2) No need to store/protect the backing commodity or pay someone else (e-gold) to do it.
3) Initial distribution of the currency is not limited to those who have money (dollars) to buy it. Since the labor tokens are an agreement to provide future labor, they can be traded for the same, at an exchange rate based on reputation.
With this model, however, individual issuers only have a small supply of labor (their own) to back their tokens with. Tokens would not be trusted very far outside of the circle of acquaintances in which they were issued. However, it does provide a fertile environment for the creation of labor banks.
Labor banks would act as a combination of currency issuer, currency exchange service, reputation tracker, and temp agency. These would buy the labor tokens of individuals (or signed paper agreements) in exchange for the bank’s own currency (either physical or electronic). This currency can later be redeemed for tokens issued by individuals (at various rates, based on rep), who will then perform the agreed-upon labor.
Anyway, that’s about as far as I got. I’m planning to create a prototype of the token-issuing web app whenever I get a decent chunk of free time.
Oh, one more advantage that I forgot to mention. Labor currency is effectively an interest-free microloan to the issuer, and should (I think) have similar economic effects.
That’s awesome!
BTW, are you familiar with Ripple?
Hey Brad - this is essentially what the radical decentralist/georgist Ralph Borsodi created in Exeter, NH in the early 70’s. It was called the “Constant” and it appears the only difference was that his was backed by a basket of commodities that included hard metals.
http://www.motherearthnews.com/Nature_and_Environment/1974_May_June/The_Borsodi_Constant__an_Inflation_Free_Currency
many people are not aware that Borsodi, a Georgist, was the editor of a magazine called “Free America” that attempted to unite catholic distributists from Britain with Southern Agrarians.
That’s fascinating! Thanks, Bill!
I have read a bit about Ripple. I plan to include a web-service API in token issuing software, so that verification/transfer requests can easily be issued by other programs. Modified to use this API, a Ripple server could make it easy to barter directly with the backing commodities of the tokens.
[…] The agorist idea of counter-economics as anarchist revolution writ small (until it writes itself large) largely requires the ability to carry out transactions covertly and, hence, cash. [Link] … […]
[…] The thing is, rightist hard-money afficionados who go in for stuff like e-gold or the silver-backed Liberty Dollar don’t often associate and trade ideas with more community oriented LETS fans. The former tend to see the latter as impractical hippy-dippy types, while the latter tend to regard the former as irrational, fetishistic toward precious metals and anti-social. […] Full Article […]
Isn’t e-gold an un-audited system? I’ve read that there is no check on the actual amount of gold in the vaults by a disinterested third party. Otherwise, it sounds really interesting.