[p2p-research] Credit Unions

Mon Nov 17 15:26:50 CET 2008

Hi Martien,

I don't think your intervention would augment any noise level, so I copy the
list.

As you know, the wiki is based on opportunistic updating, not intentional
research, and so it means that the specific issue of credit unions have not
come up, but they are certainly a great  tool if they do not convert to
banks and hold their original ideals.

Below is what we have on various p2p oriented credit schemes.

I would be very happy if you could write up something on the contemporary
relevance of credit unions, for publication on our blog, particulary for the
period December 5 to 20; I would also be interested in an update on cyclos
and its use.

I'm copying Thomas Greco, indefatigable advocate of the credit commons, for
his eventual perspective.

and below the list of credit links, a great case study by Sepp H. on the
worgl shilling experience,

feel welcome to start a dialogue in the ning forum on this

Michel

   1. Mutual Credit <http://p2pfoundation.net/Mutual_Credit> (1,768 bytes)
   1: '''mutual credit system''', as applied in the LETS local exchange ...
   3: ...at the time of the transaction as a corresponding credit and debit
   in the balances of the two parties. The...
   15: ...ugh we do, and that's the behaviour that a mutual credit system
   develops in its users. So act now, then yo...
   16: ...p://www.transaction.net/money/glossary.html#mutualcredit)
   2. Credit Commons <http://p2pfoundation.net/Credit_Commons> (3,652 bytes)
   1: '''= synonym for [[Mutual Credit Clearing System]], i.e. cashless
   trading circles'...
   12: ... supports the credit obtained by the seller. That credit is
   essentially a supply of money that is created ...
   13: However, if that credit is simply a personal i.o.u. of the buyer, the
   ris...
   15: ...re still obliged under the agreement to honor the credit that is
   held by the seller. So the members collec...
   19: (1) the agreement under which the members of the credit clearing
   association operate,
   3. Mutual Credit Clearing
System<http://p2pfoundation.net/Mutual_Credit_Clearing_System>(158
bytes)
   4: See our explanation in the entry on the [[Credit Commons]]
   4. Rotating Savings and Credit
Associations<http://p2pfoundation.net/Rotating_Savings_and_Credit_Associations>(346
bytes)
   2: ... saving, in which the resulting sums are given as credit to a
   rotating pool of community members, either i...
   5. Credit Right <http://p2pfoundation.net/Credit_Right> (183 bytes)
   1: ...ore different from [[Copyright]]. Also written as creditright.
   3: See [[Creditright]]
   6. Credit and State Theories of
Money<http://p2pfoundation.net/Credit_and_State_Theories_of_Money>(794
bytes)
   3: Article: '''Credit and State Theories of Money''', by A. Mitchell
   In...
   7. Social Credit System
<http://p2pfoundation.net/Social_Credit_System>(6,338 bytes)
   11: ...tive their opinions of you and then assigns you a credit rating
   based on that on the premise that what you...
   12: ...a new public party venue. This is where 'social credit' comes into
   play. In Star Trek, if you have dis...
   13: ... behavior! And so we arrive at a system of social
crediteconomics. This might sound like a kind of commun...
   15: ...trial-resource-based-economic-systems-with-social-credit
   /2008/10/22)

To understand, let us flash back to the little town of Wörgl, in the
Austrian Tyrol.

*The time is July 1932, in the thick of the Great Depression. The Austrian
National Bank, following the directives of a group of central bankers
meeting in Washington in 1927, had engaged into a policy of deflation
without informing the public. *

*Michael Unterguggenberger (1884-1936), the mayor of Wörgl, was no
economist, but he had read Gesell during the semi-poverty caused by the
crises of 1907-08 and 1912-14, during which he had contracted the TB that
would lead him to the grave at 52. He knew the remedy, and set to work.*

* Money was scarce, industries were closing and unemployment was rampant.
The 1 500 unemployed of Wörgl (out of a population of 4 000), were knocking
in vain at the mayor's door for help.*

* After patiently briefing small entrepreneurs, shopkeepers and
professionals of the town, on 5th July he declared:*

"Slow circulation of money is the principal cause of the faltering economy.
Money as a medium of exchange increasingly vanishes out of working people's
hands. It seeps away into channels where interest flows and accumulates in
the hands of a few, who do not return it to the market for the purchasing of
goods and services, but withhold it for speculation."

 These words have lost not an iota of relevance, with the only proviso that
what accumulates in the hands of a few today is not a trickle of banknotes,
but the gigantic bubble described earlier.

*The municipality issued its Bestätigte Arbeitswerte (Certificates of Work
done) at par with the official Schilling.*

In so doing, Unterguggenberger had no idea that he was *correctly defining
money for the first time in history.* "Certificate of work done" is what
money should have always been, but was prevented by Croesus' multiple
incantations. When it comes to defining money, economics textbooks, manuals,
treatises, and learned tomes offer up to *four separate definitions* of
money's functions, blissfully unaware that *four* definitions are
*no*definition, in other words that money is endowed with functions
that it
should have never been endowed with.

*Every certificate (the object representing the monetary unit) expired after
a month unless a stamp worth 1% its nominal value was affixed to it to keep
it circulating. The stamps could be purchased at City Hall, which in turn
accepted the certificates in payment of taxes.*

Let us take stock. This feat could be painlessly repeated by any
municipality in the world right now, without having to wait for the bubble
to burst. What would its most difficult step be? Without doubt, the
briefing: *convincing people* that the only function of a lubricant is to
lubricate and therefore to circulate, not to stagnate in one's pockets,
under mattresses, or in banks.

*No one was obliged to accept the certificates. The alternatives were:*

*• Deposit them in the municipal bank at 0% interest. The bank, in order not
to pay the demurrage charge, got rid of the certificates at once, either by
lending them or by paying for salaries and invoices for public works. *

*• Exchange them with official Schillings at a discount of 5% on the nominal
value.*

*The municipality printed 32 000 units of certificates, but in practice
issued less than a quarter of them. Circulation averaged 5 300 units, i.e. a
derisory two Schillings or less per person, which however gave work and
prosperity to Wörgl and environs far more than the 150 Schillings/person
issued by the National Bank of Austria. As Gesell had predicted, velocity of
circulation was what mattered: changing hands some 500 times in 14 months,
against the 6 to 8 times of official money, 5 300 units of certificates moved
goods and services for 2.5 million. City Hall, by emptying its coffers as
fast as citizens' taxes filled them, built a bridge on the Inn, tarmacked
four streets, repaired sewerage and electric installations, and even
constructed a ski-jump. To have an idea of purchasing power, the mayor's
monthly salary was 1 800 Schillings.*

*At the beginning some smiled, others cried foul or suspected
counterfeiting. But prices were not going up, prosperity was increasing all
round, taxes were being paid promptly when not in advance, and immediately
re-invested in public works and services or paid out in salaries and
municipal purchases.*

*Sneers soon turned into jaw-dropping, and jests into desires to imitate.
Early in 1933, the 300 000 citizen of the Tyrol and Kufstein were about to
extend the experiment to the whole province.*

*Meanwhile Wörgl had become a centre of pilgrimage for European and American
macro-economists. All were eager to see the "miracle" of local prosperity
defying global unemployment and stagnation. Did they go to learn? It is
doubtful, given the most complete silence about Gesell in the faculties of
economics.*

*Mammon did not sleep. Unterguggenberger had wisely refrained from calling
his certificates "money," for he knew that by doing so he would have
incurred the ire of the National Bank.*

*On 19th August 1932 Dr Rintelen, on behalf of the Austrian government,
received a delegation of 170 mayors headed by Unterguggenberger. He had to
admit that the National Bank had deliberately reduced the emission of
official money from an average of 1,028 million Schillings in 1928 to one of
872 million in 1933. He also had to admit that the certificates made sense
and that there was no valid reason to interrupt the experiment.*

*But Mammon had his own "scientists" at the National Bank, intent on
"proving" that the experiment had to be verboten. Here are their
"scientific" reasons:*

*"Although the issue of relief money appeared fully covered by an equal
amount of official Austrian notes, the supervising authorities, starting
with the area administration in Kufstein and following with the government
office of Tyrol, must not allow themselves to be satisfied.(emphasis added)
As a matter of record the borough of Wörgl has exceeded its powers, since
the right to issue money in Austria is a privilege of the National Bank.
This is stated in Art. 122 of the bylaws of the Austrian National Bank.
Wörgl broke that law."*

 The last statement is false. Wörgl did not break the law. What its
certificates, fully backed by official money, had done, was what the
Sorcerer's Apprentice had done with his broom: multiply the number of units
so as to match their circulation to the needs of the real economy.
Conventional money is *designed to prevent that,* not to favour it.

*The prohibition went into force on 15th September 1933. Wörgl appealed. The
case reached the Supreme Court, which faithful to Mammon quashed the appeal
and ended the experiment.*

* Unemployment, poverty and hunger returned. An obscure Austrian immigrant
had begun to attract attention in the Bavarian Bierhalls: Adolf Hitler. It
is impossible to affirm, or to deny, that the Second World War could have
been avoided by listening to Gesell. It is a fact that Hitler rose to power
with the votes of the unemployed.*

Analysing the Wörgl experiment permits us to break the spell of the
incantations:

• Free Money makes it impossible to live off the work of others. Its
exclusive function (medium of exchange) makes "rich" not him who has money,
but him who has (non-financial) skills. Parasites either get the ravens to
bring them food or starve.

• Money loses all adjectives: "hard", "soft," "strong," "weak," cease to
have meaning; money is just money; the "intrinsic value" of the Wörgl
Certificates was nil.

• The American Dream can be pursued anywhere, the closer to home the better;

• "Raising public revenue" meant that the citizens deposited their surpluses
into the public coffers at 0% interest, and the public authority spent them
into whatever it saw fit; for capital public expenditure, i.e.
infrastructures that created new wealth, Wörgl was not given time to
introduce new money to match the growth of the economy. Had it continued,
this step would have become necessary. Put it another way, taxing and
borrowing (directly from the public, not from the banks) were unified into
one single operation. The municipal bank doubled up as revenue collection
centre. Were Free Money to be introduced at State level to kick-start a new
monetary system, the fourth function of Government would stand out: issue
new money when prices flag and withhold it when they rise.

• To invest, i.e. to dispose of large sums of money in one instalment, one
borrows it. Free Money makes it more attractive to lend at 0% than to hoard
at -6%. One asks for one's money back if and when needed.

• Credit becomes redundant. Credit was spawned into existence by the chronic
dearth of medium of exchange. With this as abundant as work done by
definition, credit ceases to be of use. Credit is deliberately confused with
money precisely by the forces that control it.

• For a country to develop, it has to issue as much Free Money as to satisfy
the equation FM x velocity of circulation = labour x materials.

• "Cheap" = done with little labour; "Dear" = done with a lot of labour.

On Sun, Nov 16, 2008 at 6:33 PM, Martien van Steenbergen <
Martien at aardbron.nl> wrote:

> Hi Michel,
>
> Lurking on the p2p research list, I see some dialogs on money and money
> systems. You know that it is my focus of interest as well. I'm actively busy
> in Netherlands to promote and adopt and adapt open money systems using
> monetary systems the foster collaboration rather than competition (as with
> our current interest-based system).
>
> Just the other day, I attended a conference organized by Strohalm (a Dutch
> busy and succesful foundation with complementarary currencies (cc) in South
> America; initiator and developer of Cyclos, an open source banking system).
>
> I ran into Rob Veldhuizen, executive director of Rabobank (Hilversum-Vecht
> en Plassen) and we talked about SMS payments, cc, demurrage and other
> things. The Rabobank's origin's is a very coop-driven one. See
> http://en.wikipedia.org/wiki/Rabobank.
>
> Some research then directed me to
> http://en.wikipedia.org/wiki/Credit_union and their much protested
> conversion to bank charters, giving the current banking system even more
> grip on their slaves, suffocating and depleting our world.
>
> I see no mention of credit union on the p2p wiki. Is there a reason for
> that?
>
> As we see bigger and bigger banks eating the smaller ones, we also see the
> need, emergence, and growth of cc and cc systems.
>
> As for your and my financial challenges: how can we set up our own cc
> system and corresponding ecosystem, attracting our peers and mindlike
> friends all over the world to join hands and scale it up?
>
> In the Netherlands, the awareness, interest and activists around cc and
> finding innovative breaktrhough ways to scale them up is rapidly growing.
> When we can focus and streamline these still separate activities, we may be
> able to present the world with a path to a Brilliant Millennium.
>
> I've sent you this message in private since I want to keep the noise level
> on the P2PRL as low as possible. But feel free to forward it to parties you
> see fit.
>
> Thoughts?
>
> Succes en plezier,
>
>        Martien.
>
>

-- 
The P2P Foundation researches, documents and promotes peer to peer
alternatives.

Wiki and Encyclopedia, at http://p2pfoundation.net; Blog, at
http://blog.p2pfoundation.net; Newsletter, at
http://integralvisioning.org/index.php?topic=p2p

Basic essay at http://www.ctheory.net/articles.aspx?id=499; interview at
http://poynder.blogspot.com/2006/09/p2p-very-core-of-world-to-come.html
BEST VIDEO ON P2P:
http://video.google.com.au/videoplay?docid=4549818267592301968&hl=en-AU

KEEP UP TO DATE through our Delicious tags at http://del.icio.us/mbauwens

The work of the P2P Foundation is supported by SHIFTN,
http://www.shiftn.com/
-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://listcultures.org/pipermail/p2presearch_listcultures.org/attachments/20081117/47987b8a/attachment-0001.html 