[p2p-research] How Open Money Ought to Work

[marc fawzi]

So wouldn't this offload the cost of the incentive from the government or
treasury (in case of tax credits) to the seller (who in the case of CO2
reduction technology could be a hybrid car manufacturer) because the seller
has to accept local currency at a higher exchange rate than they can sell it
for...?


On Wed, Mar 25, 2009 at 2:26 PM, Ryan Lanham <rlanham1963 at gmail.com> wrote:

> Marc,
>
> First, no offense taken, no worries there, ever.  The economics and
> especially the behavior economics of local currencies is pretty limited.
> We're all shooting in the dark and trial and error is the most likely way to
> gain knowledge.  That said, some theory of design is also worthwhile, and we
> do no a lot about Paypal, Ebay, FX trading, etc.
>
> I've tried to use existing models that work.  People trust MyC4 or Kiva
> models, the software is there and the means are understandable.  People
> certainly trust Ebay.  The interfaces to both are simple and easy to
> understand.
>
> Second, I think the basic questions of currency exchange are fungibility
> and liquidity.  What can be exchanged for what, when and how.  I started
> from a program that recognizes that currencies have value and can be traded
> like anything else.  One ought to maximize that within reason.  It creates
> safeguards against inflation and other woes and it crates incentives for
> good governance of LETSI systems.
>
> Third, the problem with fiat money is exactly that governments can play
> games--print too much money, goof up exchange rates, etc.  In short, they
> have monetary policy.  To minimize the local impact of such games and to
> assure demand exists for local policy aims (e.g. keep the small businesses
> going), localities need capacity to minimize the buffeting that
> international markets can bring to local functions.
>
> Control is achieved when you can set the scale and scope of your network
> and implement your own governance plan that promotes its own objectives.
> Bad plans will fail.  Good ones will endure.  A good currency governance
> plan for a currency is one that assures availability, usability and value
> preservation.  These ride on top of fungibility and liquidity.  I like to
> think of the old trading stamp models.  By X get some S&H green stamps.
> What you get for your S&H green stamps is all important.  That's where local
> policy can be made.  Yet there should always be a market in US$ for S&H
> green stamps.
>
> By floating local currencies and creating a liquid currency market,
> exchanges between LETSI networks can be normalized without actual
> distribution of goods and services across various LETSIs.
>
> Let's say Seattle cares about reducing carbon with its local currency.
> Therefore carbon reducing strategies trade at a premium to their value in
> the rest of the world by allowing a local currency the local currency to get
> high value for exchanges related to carbon reduction.  I can arbitrage that
> value in another local currency I care about by having my "central bank" in
> Seattle offer a good exchange of value of their currency versus one that
> encourages, say, reducing homelessness in New Orleans.  All this can be done
> without recourse to US dollars while still maintain liquidity and
> fungibility throughout the whole system.
>
> Here's what I've been thinking about in the Cayman Islands.  A health
> network.  Surplus health goods (e.g. health club services like training
> sessions, sessions with a dietician, etc. can be traded for local
> network scrip.  These can be exchanged at some floating rate for other types
> of currency--both "real money" and other items--like coupons for dollars off
> on certain types of healthy food.  Thus, a company can encourage healthier
> workers by giving them health scrip which the company can buy for dollars.
> People can then trade for really good value in health, or relatively modest
> real cash values.  Those firms that offer good scrip value do so because
> they want to encourage good health or use resources they have in quantities
> greater than the local market can consume.  In another case, let's say a
> philanthropist wanted to improve local health.  She could donate cash to a
> group to purchase health scrip that would then be useable only
> for health (or local business purchases or local conservation/green
> enterprises, etc).
>
> This enables a location to have 4-5 different types of scrip and accounts
> that are dedicated to a cause and yet fungible.  Churches could join
> together in health and family networks but not in conservation, if they were
> so inclined.  Yet conservation dollars could trade for real cash or health
> cash with relative ease.  The central bank could standardize its approaches
> to ppolicy by choosing the sort of governance they wanted to emphasize.
>
> Hospitals and phyiscian groups might take Health bucks in partial payment
> but not conservation bucks.  Yet I can trade conservation bucks for
> health bucks if the central bank has incentives to push that.
>
> Incentives are essentially schemes of coupons--the alternative scrip is
> really just a coupon.  Just as grocer create incentives for one sort of
> consumption or another through a newspaper, the central bank can finance and
> push various sorts of currency incentives--not JUST being local...but
> anything they want from energy efficiency to curing social ills.  It's all
> in the exchange rates.  Ride a bike to work, get 5 health dollars.  Each one
> is only work 20 cents, but you can get $5 off on a prescription or a trainer
> session at the gym.    The gym gets capacity use, exposure, etc.  Then gets
> health dollars it can use as a local incentive for its employees.  And so it
> goes.
>
> Ryan Lanham
>
>
>
> On Wed, Mar 25, 2009 at 3:11 PM, marc fawzi <marc.fawzi at gmail.com> wrote:
>
>> How does this money differ in its basic nature from the existing money?
>>
>> What are its propositions? (or deductively provable benefits)
>>
>> How does it work with respect to supply-demand economics? Does it enforce
>> scarcity by moving the price higher with demand? or does it move money into
>> increased supply?
>>
>> There are more questions but I'm not sure I'm asking the right ones until
>> I fully understand the context.
>>
>> It does sound like you've put a lot of thought into it. I'm just coming at
>> it from my own context (the P2P Energy Economy) which addresses the above in
>> a radical way (which may not be practical as what you're suggesting but it
>> is radical and new so I guess I'm trying to bridge evolutionary to radical
>> thinking by trying to understand thel aspects (if any) of what you're
>> proposing that are a radical departure from the kind of economy and currency
>> we have now.
>>
>> Marc
>>
>>
>> 2009/3/25 Ryan Lanham <rlanham1963 at gmail.com>
>>
>>>   I've been thinking a long time about LETSIs and Open Money lately.  I
>>> have a few thoughts on the execution of a larger scale scheme than those
>>> typically handled in current LETSI frameworks.  I'll throw them out here and
>>> welcome any feedback.
>>>
>>>
>>>
>>> 1.      Those who honor one or more types of local currency are members
>>> of a LETSI network.  Think of the old credit card honored symbols on
>>> retailer doors.
>>>
>>> 2.      A LETSI network, or more generally, the [exchange network] (in
>>> my example below, the hypothetical Bay Area Bucks Network) is a membership
>>> organization.
>>>
>>> 3.      Any person or organization making offers (or bids) in the
>>> [exchange currency] requires [membership] in the exchange network (like
>>> having an Ebay account).
>>>
>>> 4.      Scrip can be used by anyone whether or not they are a member so
>>> long as it is used at a member organization.  Scrip is essentially local
>>> legal tender as accepted by a member (e.g. for 50% of any bill or for all
>>> purchases under $20 US etc.)
>>>
>>> 5.      To get currency without being a retail member, members create an
>>> [ask bid]—like selling something on Ebay--for a good or service (or loan) to
>>> attain exchange currency.
>>>
>>> 6.      When an ask bid is accepted or a [counter offer] is made and
>>> agreed—like from an Ebay buyer member—a [contract] is recorded at the
>>> network administrators at a given [exchange price] set in the network
>>> currency.  The issuing person is the [asker], the one who accepts the
>>> ask bid or sets a counter-office that is agreed is the [offerer].
>>>
>>> 7.      There is also meta-market of local currencies with
>>> inter-currency pricing linked to other standards of value such as $US and to
>>> each other.  This central exchange point is called the [grand market].
>>>
>>> 8.      The [network administrator] is an entity responsible issuing
>>> currencies following a contract.  It could be a community foundation,
>>> chamber of commerce, group of market makers, etc.  It manages electronic
>>> account credit and debits and also trades scrip for electronic account
>>> debits.
>>>
>>> 9.      All contracts require that the offerer complete
>>> transaction comments within an agreed period based on the goods or services
>>> specified in the ask bid.
>>>
>>> 10.  The network administrator can freeze accounts of those who do not
>>> issue comments and/or investigate negative comments and resolve them as
>>> appropriate in the membership provisions.
>>>
>>> 11.  The grand market set of exchange prices is set once per 24 hour
>>> period to simplify administration of the participating networks.  For
>>> example, the Grand Market would publish that LETSI currency A is worth 0.2
>>> US dollars or 1 garden fresh tomato, 20 aluminum cans, 1.4 units of LETSI Z
>>> (etc.)
>>>
>>> 12.  Any participant in LETSI A could fulfill a contract be delivery in
>>> kind quantities of specified items to the network administrator (usually
>>> US$), but could be pounds of canned goods for a local food pantry, etc.
>>>
>>>
>>> 13.  As an example, Say someone wanted to issue 1000 Bay Area Bucks (a
>>> hypothetical network currency) to themselves in exchange for a large good or
>>> service (an ask bid).
>>>
>>> 14.   There would be known ways to use those BAB units publicized and
>>> supported by the network administrator (the catalogue) and the local network
>>> would encourage advertising schemes.
>>>
>>> 15.  I would put my ask bid (1000 BAB) up for offer to participants in
>>> the pool (the retailers, etc. would honor the bucks)...for, say 500 lbs of
>>> concrete ready mix.  I might just as well ask to borrow 1000 BAB in exchange
>>> for paying 20 US dollars every week for one year based on a standard
>>> contract noted in the ask, or offer a coupon for 100 hamburgers of a given
>>> type at my hamburger stand.  The list of asks would look very similar to a
>>> micro credit site (e.g. Kiva or MyC4) or Ebay sales items, etc.
>>>
>>> 16.  The BABs would only be unlocked if (and only if) another member
>>> accepted by confirmation online that the BABs I wanted for the good or
>>> service were contractually agreed.
>>>
>>> 17.  The member offerer might offer fewer BABs (e.g. 640) for the
>>> services or goods to the asker--in other words, there can be auctions.
>>>
>>> 18.  The asker then either choose to accept or decline an offer.
>>>
>>> 19.  Upon agreement, a contract is set (matched).
>>>
>>> 20.  The network administrator automatically issues network currency to
>>> the account of the asking member.
>>>
>>> 21.  The asking member who now has a credit to an account can go to a
>>> central facility to trade e-currency for scrip (essentially an ATM).
>>>
>>> 22.  The grand market allows movement of liquid commodities and
>>> currencies between local exchanges at daily set rates.  E.g. BABs to US$,
>>> ounces of silver, BABs to other LETSI currencies, etc.  The simplest model
>>> would be US$ but a range of grand market trades would likely quickly arise.
>>> A central foundation would manage the grand market.
>>>
>>> 23.  It would be straightforward to add charity or microcredit systems
>>> to this framework where a special rate of scrip could be moved to a
>>> charitable account, for example, in exchange for a credit card debit.
>>>
>>> 24.  The key supporting systems would include the catalogue of asks, the
>>> bank accounting system of e-accounts, the scrip tracking system, the grand
>>> market system, and ancillary tools like charity systems, microfinance
>>> systems, etc.  However, most things could be handled as a variation on
>>> the central catalogue system.
>>>
>>>
>>> Ryan Lanham
>>>
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>>>
>>>
>>
>
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