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Proutist Economic Development
Community and Currency
Dr. Michael Towsey
 2004 Proutist Universal
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Monetary Decentralisation
• The Future of Money – Bernard Lietaer
– http://www.transaction.net/money/book/
• Economic decentalisation requires monetary
decentralisation.
• Each community should control its own
money system.
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Money - Central versus Local
Central
bank
Community
bank
Community
money system
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Different Kinds of Money (1)
•
Money is a community tool to catalyse
community trading.
•
There are many different kinds of money
systems.
•
Different money systems suit different
purposes.
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Different Kinds of Money (2)
• Traditional money:
– 90% of money issued as interest-bearing debt;
– created using the fractional reserve system.
• Producer currency.
• Stamp currency.
• Mutual credit.
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Producer Currencies (1)
• Form of commodity money.
• Workers are paid in money backed by output.
• Example 1 - 1920s Germany:
– Hyper-inflation - a postage stamp cost billions of
marks;
– Miners were paid in money (wara) backed by coal;
– Mine manager arranged for import of food that
could be purchased with wara.
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Producer Currencies (2)
• Example 2 - 1960s Ireland:
– Problem: a banking strike – no money to pay
workers;
– Dublin brewery paid its workers in beer vouchers;
– Vouchers could be redeemed at local pubs for
beer, money or other goods.
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Velocity of Money
• $1 can catalyse $10 worth of transactions.
• The velocity of money:
– velocity = total transactions  volume of money.
• Prout Principle: keep money rolling, i.e. increase
velocity!
• How?
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Stamp Currency
• Community currency scheme started in Wörgl, Austria, in 1932.
• A small amount of money can exchange a lot of goods if it
circulates rapidly (high velocity of money).
• Holder of a note had to buy a stamp each month.
• Therefore money spent quickly – no hoarding.
• Wörgl was first Austrian town to overcome unemployment.
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Unemployment and the Nazi Vote
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Local Enterprise Trading System
LETS
• Founded in Canada – spread throughout world.
• LETS – an accounting system.
• For every credit there is a debit – zero sum.
• Mutual credit.
• Unit of money decided locally – bunya, reeky.
• Value tied to local currency – 1 bunya = $1 AUD.
• Facilitates multilateral exchange when bank money not available.
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Community Currency
Taking Off !
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LETS, Maleny, Australia
http://www.mena.org.au/lets/
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International Versions of LETS
• www.bartercard.com
• www.ebanctrade.com
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A Hierarchy of Currencies
• A hierarchy of communities requires a hierarchy of money
systems.
International trade: barter, mutual credit, Keynes plan
National trade: traditional debt money, producer
currencies
Local trade: producer currencies, LETS currencies
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The South America Experience
• Curitiba bus tokens – favelas waste exchanged for public
transport.
• Favela is a term commonly used in Brazil to describe areas
such as shanty towns or slums.
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A South American Currency (1)
• Good or bad?
• Depends on what kind of currency
and what for ...
• A South American currency like
the Euro?
• A new currency for a South
American trade zone?
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A South American Currency (2)
• A South American currency like the Euro?
• Sweden rejected idea because ...
– shifts power from democratically elected governments to nonelected institutions such as the Central Bank;
– erodes ability of member States to implement local solutions
to their economic problems;
– makes it easier for TNCs to accumulate wealth.
• One year after adopting the euro, Portugal was forced to make
massive cuts in public services and wages.
• Unemployment rose in Germany and France every month after
adoption of the euro.
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A South American Currency (3)
•
New mutual credit currency for a South American trade zone?
•
If similar to Keynes Plan - good idea.
•
Operates independently of member country currencies.
•
Removes Venezuela from dependence on US $ and Euro.
•
Does not erode ability of member states to implement local solutions to
their economic problems.
•
Requires an independent money standard such as terra – based on
representative basket of traded commodities.
•
The Terra project is the launch of a commodity-backed Trade Reference
Currency (TRC), a supra-national currency that works in parallel with
national money systems. It is uniquely designed to provide a stable
international mechanism for planning, contractual and payment
purposes worldwide.
– http://www.futureofmoneysummit.com/terra-project.php
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