[p2p-research] How Open Money Ought to Work

[marc fawzi]

More thoughts:

The difference between this as a policy tool and the Affinity Matrix I had
described as part of the P2P Energy Economy (which matches buyers to sellers
based on their social, ecological and environmental values as well as the
product/service attributes) is that the seller puts their money where their
mouth is (as opposed to having to be transparent and accurate in their
policy objectives, or social, ecological and environmental values, which
creates a regulatory cost for enforcing the transparency/accuracy in
reporting)

So to understand your method more deeply, as a policy tool it allows a city
or community to have one policy goal at a time (or one set of policy
objectives) tied to each local currency (so there can be X local currencies
supporting X policy goals, where each goal could be made of several
objectives) and the city's central bank can change it's policy goal by
changing the exchange rate of its local currency relative to other local
currencies.

I see one potential issue with your method (and I may very well be wrong in
my understanding of how it work, so bear with me):

The method works well for sellers who can afford the cost of the incentive,
e.g. hybrid car dealers supporting a local currency tied to carbon
reduction.

But how would it work for sellers who cannot afford the cost of the
incentive, e.g. a non-profit restaurant that employs homeless people (I've
seen a few of those, one in AZ just a couple of weeks ago.)  They cannot
afford to accept a local currency tied to transactions that reduce
homelessness because they will make less money due to the high exchange
value of that local currency whereas the policy objective (for reducing
homelessness) requires that they make more money (to be able to support more
homeless people in their program)

In other words, sellers have to be able to afford the cost of the incentive
(which they carry by accepting the given local currency) but some sellers
especially small businesses cannot afford the cost of providing that
incentive, and if the big businesses can and the small ones can't then more
money (more of the local currency tied to the type of exchange the business
is involved with) will go to the bigger businesses, leaving the small
businesses with less business.

Also, in case of non-profits the method becomes paradoxical in nature: a
non-profit that employs homeless people accepting a local currency at high
exchange rate (in favor of the buyer) that is supposed to support reduction
in homelessness would do the opposite as it gives the non-profit less not
more money. They already have the good will of the community so they don't
need more good will, they need more money and so if it's possible to make
the local currency that is tied to homelessness have a very low exchange
rate (but high redemption rate, i.e. can be redeemed for cash at the central
bank at a high rate), i.e. the reverse of what would happen for the carbon
reduction currency, then that would work, too.

Does this make any sense?

Marc


On Thu, Mar 26, 2009 at 11:30 AM, marc fawzi <marc.fawzi at gmail.com> wrote:

> I find the idea of a contract (for acceptance of local currency) to be very
> interesting ....
>
> That's what carries it for me.. and it makes sense as a policy tool.
>
> But I still do not understand how in the absence of such a contract a
> seller would want to bear the cost of a broad social/environmental
> incentive, unless they are recognized for it and gain marketing/PR benefit
> from it somehow (which would make a contract almost essential as it verifies
> the seller's commitment in a formal and official manner not open to
> questioning and not open to seller applying their own rules on when to
> accept or reject local currency)
>
> If a seller does become a member and sign a contract then they get
> publicity and good will in return, so yes it makes sense but they have to
> get something out of it (PR and good will back from the community)
>
> This is very interesting!!!
>
> My next question would be how do we get started with this?
>
> Marc
>
>
> On Thu, Mar 26, 2009 at 11:08 AM, Ryan Lanham <rlanham1963 at gmail.com>wrote:
>
>> No seller has to accept anything they don't want to accept except legal
>> tender.
>>
>> The state issues its mandatory acceptance coupons (legal tender) so that
>> economic growth can occur.  That is their policy objective.
>>
>> The systems I describe allow anyone who wants to issue coupons the
>> capacity to achieve policy objectives.  It just doesn't allow them to make
>> the coupons mandatory for acceptance.  Call non-mandatory coupons, or
>> coupons that are mandatory only if a membership contract is undertaken,
>> alternative currencies, open currencies, local exchange currencies, etc.
>>  As with any P2P movement, the goal should be to allow free participation
>> in a transparent network (in this case, a currency membership).  Numerous
>> benefits can come from such participation:
>>
>> 1. I can gain assets (which are purchased with acquired alternative
>> currency at some price value)
>> 2. I can pursue local policy objectives (e.g. to get a better environment,
>> help local businesses, local farmers, etc.
>> 3. I can arbitrage the value of one coupon against the value of others to
>> change my policy objectives.
>> 4. I can achieve fungibility and liquidity for my currency with relative
>> ease within 1 day by trading at the network administrator's office.
>> 5. I can rapidly gain information (through the net) as to the values
>> realized for currency in issuance and in purchases.
>>
>> This is a powerful supplement to any other currency, whether it is
>> mandatory or not.
>>
>> What I describe is a range of systems that can be built in an integrative
>> open fashion to realize any number of instances of such currencies.  All of
>> them can be linked, and any of them can be separate...link of Ning Ring, a
>> Facebook group, etc.  It is the plumbing behind P2P associations that is
>> interesting.
>>
>> Ryan Lanham
>>
>>
>>
>> On Thu, Mar 26, 2009 at 2:42 AM, marc fawzi <marc.fawzi at gmail.com> wrote:
>>
>>> 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
>>>>>>
>>>>>> _______________________________________________
>>>>>> p2presearch mailing list
>>>>>> p2presearch at listcultures.org
>>>>>> http://listcultures.org/mailman/listinfo/p2presearch_listcultures.org
>>>>>>
>>>>>>
>>>>>
>>>>
>>>
>>
>
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