Uploaded on

presentation held at the 2nd International Conference on Complementary Currency Sytems - at ISS - International Institute of Social Studies in The Hague - part of Erasmus University - Rotterdam

presentation held at the 2nd International Conference on Complementary Currency Sytems - at ISS - International Institute of Social Studies in The Hague - part of Erasmus University - Rotterdam

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
72
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
0
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Complementary currencies can be seen as alternative monetary systems to the official money. Except foreign reference currencies like the Dollar which sometimes substitute weak national currencies of small economies. The Dollar is in this case also a CC. But I will speak about complementary currencies which behave and benefits society different to the official money. Countless approaches for CC are possible but most of them would I roughly subdivide into 3 categories interest free money (Freigeld) Time accounts - local exchange time systems (LETS) barter trading systems - electronic market places page 2
  • 2. Complementary currencies are mostly used for local business cycles and therefore also called community currencies.called community currencies. Money of CC will usually be created by exchange of official money and therefore they are connected and strongly dependent from official money, also concerning price formation. But CC money can also accrue independently mostly by electronic market places. In times of non crisis they will mainly be used to support local business cycles. In times of crisis they are useful to keep daily life business running, when legal money tends to escapes into off-shore financial places and gets narrow as it usually does during deflationary crisis. Due to this CC‘s also sometimes called emergency money. As business cycles getting more and more global, community currencies might lose efficiency or let us say in a better way – it needs more and more time and efforts to reactivate local business cycles. A success like Woergl might not possible again in the same way. But as we know that CC‘s can support and stabilize activities of the real economy - so it could be reasonable to spend some thoughts onto transformation of this behavior onto a more global scale? page 3
  • 3. In the meantime it is obviously that our current monetary system - which is based on money creation by credits and interest rates - tends to lose stability in advanced time. Itmoney creation by credits and interest rates - tends to lose stability in advanced time. It increases inequality and lets people suffer. If we would want domesticate capitalism – domesticate capitalism means let work the capital for the people and not people for the capital – then it is useful to have look closer onto the nature of money and to think about alternative monetary systems. Therefore it is very important to work on CC‘s. You are in front of new economic thinking. One of the countless approaches is the neutralization of monetary systems. Orthodox economist says that money is a neutral veil and does not influence the activities of the real business, visible trading - it is only a medium of exchange. But this contradicts our daily life experience. To own money or not influences our decisions very strongly. Especially the big business starts to decide for us and can force us in situations which we don‘t want to have and which we can‘t influence as individuals – for example unemployment. It means, neutralization of money is something which we don‘t have, it is something which we would want to have, if want domesticate capitalism. But how we can reach this neutralization? Last conference I spoke about this subject presenting a CC with a absolute value and constant amount of money by declaration. I will explain this idea again – briefly. page 4
  • 4. Coming from the question „is it possible to find this absolute value for money“ Could I recognize only one answer and this answer is the total creating a complementary currency which represents the total, let us name this currency ANNA and let us give the never changing value or never changing money supply of ONE leads this complementary currency to the following statement... page 5
  • 5. .. one ANNA is equal to one common world If we transform this idea to the abstract world of money and numbers leads it to the equotion one ANNA is a equivalent to the total of world money supply page 6
  • 6. ... where World Money Supply represents the conventional currencies and behaves like this conventional currencies. It means, Coming from the paritcular going to the total needs addition. For example 1000 DOLLARS = 1000 *times one DOLLAR. ANNA behaves contrary , because ANNA does not allow additional money supply due to the never changing values of ONE. Coming from the total going to the particular needs division. This is not very practicable for daily use of money. But there are two points connecting this two monetary systems together. The first one I have already mentioned. It is the total – One ANNA is equal to WMS. The second one is the particular . One unit of a currency is equal to One divided by WMS expressed in this currency This can be used for monetary scaling And monetary scaling can be used as a currency exchange system page 7
  • 7. ... where the exchange rate is defined as the share of one unit of a currency onto ANNA... page 8
  • 8. ... and as a second important parameter, the share S of the complete currency onto ANNA... page 9
  • 9. As the first country with the first currency participate onto the monetary system of ANNA, the share S of this currency must be fixed This leads to the possibility to determine the exchange rate of this currency independently from other currencies. The fixation of the share S is a declaration of the country to participate into the System. It is also a declaration of the world community to accept this participation. It would be the birth of a new financial design page 10
  • 10. The exchange rate of the participating currency is fixed and can be only influenced by parameters in the divider of the equation for the determination of exchange rates.parameters in the divider of the equation for the determination of exchange rates. These parameters are money supply of the currency and the balance of trading described by foreign liabilities and foreign receivables or foreign money which will be lent from other counries and added to the money supply Or money which will be lent to other countries and subtracted from the money supply. It is a new way of monetary policy and means to take care about this divider. This kind of monetary policy remains completely in self determination and responsibility of the participating country and economy. It is different to the current situation which is dominated by the financial markets – the big money page 11
  • 11. In fact is it a cross rating system via ANNA and allows to implement a geographically independent currency area It can start up with one currency and would also allow to end up with the implementation and participation of all national legal tenders. This currency area exist parallel to the FOREX and is connected to the FOREX for global trading Due to the neutralization is it possible to protect this currency area from the attacks of FOREX and the escape of money into off-shore financial places. page 12
  • 12. This new monetary design consists of the protected currency area with the neutralized national inside currencies and the undomesticated FOREX with the conventional outside currencies Especially for poor and suffering economies is it necessary to implement a intermediary exchange currency, which I called FENA. To make the inside national currencies with CC behavior comparable and exchangeable to the conventional outside currencies. FENA is the share of the outside currencies onto ANNA and represents the outside currencies as one currency with one exchange rate onto the inside markets As Vice versa FENA represents the inside currencies as one currency with one exchange rate onto the outside markets. page 13
  • 13. What are the benefits of this new monetary design?What are the benefits of this new monetary design? A neutralized currency area allows to implement national currencies with the behavior of CC. The important point is - these currencies can accrue and survive completely independent from the behavior of the FOREX and conventional currencies, but they are still connected to this FOREX and international trading It means 1) It is possible to implement national low interest currencies and national time account systems which offers the opportunity to use the effect of reconciliation, which is the ultimative solution for debt crisis 2) A neutralized currency exchange system balances foreign trading automatically. It is a exchange rate regime with self balancing exchange rates page 14
  • 14. What is the effect of reconciliation It is the reconciliation between the exchange rates of debtor and creditor currencies. Exchange rates in ANNA are related to money supply where the exchange rate of the interest based currency decreases in correlation to the exponential growth of money supply of this currency caused by the interest compound – as shown with the red (bottom) line in the picture. While the money supply and therewith the exchange rate of the interest free money keep more or less constant due to the absents of interest compound. A heavily indebted poor country which will run into insolvency and changes into a interest free national currency has only to wait for the decreasing exchange rate of the creditors currency. Nevertheless - the Debtor still has to repay the liabilities, but only in the absolute value of ANNA and the creditor get back the outstanding receivables, but only in absolute value of ANNA. It is more than fair for the creditor and debtor - it is this reconciliation. It interrupts the helix of geometrically growing debts and hinders the creditor to exploit the debtor. The effect of reconciliation devaluates interest based money in tax havens and reduces in a long term consideration the escape of this money into tax havens page 15
  • 15. balance of trading will be considered automatically by additional parameters in the divider of the equation for exchange rates As already explained - beside money supply are these 1. foreign liabilities = foreign money lent from other countries, which will be added to the money supply, which represents trading deficit 2. foreign receivables = money which will be lent to other countries and subtracted from money supply, which represents trading surplus It influences the divider in the following way if the number in the divider increases by increasing money supply or increasing foreign liabilities caused by trading deficit – exchange rate decreases If the number in the divider decreases by increasing foreign receivables caused by trading surplus - exchange rate increases It influences the price of currencies in the way to support balancing of foreign trading page 16
  • 16. It is also possible to transform the idea of neutralization onto currency area of the EURO. As the EURO is a strong currency, which does not need protection can it be done as aAs the EURO is a strong currency, which does not need protection can it be done as a inner European solution – it is a in between solution which uses the benefits of neutralization for inside trading but without protection against the FOREX It would lead to a reimplementation of national currencies, but in this case neutralized, for the national trading and the possibility to implement national currencies with the behavior of CC‘s. The EURO would still be needed for foreign trading like the intermediary exchange currency FENA. But contrary to FENA the EURO would be conventional traded on the FOREX with the usual ups and downs of exchange rates to outside currencies. The advantage of this solution is, that it does not need the approbation of the FOREX and outside countries, because the FOREX and the outside countries would see only the EURO and would not have any access to the new national currencies. It offers the already described advantages to balance the trading I within the European Union and to manage public debts by the effect of reconciliation. page 17
  • 17. This neutralization of monetary systems is a completely deductive approach - still at the very beginning. It would be nice to get a verification validation and consideration on a more scientific level. There are many topics to explore f. e. Verification and validation of the concept with the focus on •World money supply and exchange mechanism or simulation and adjustment of exchange mechanism f. e. •Response time of exchange rate determination •Influence of rounding errors •Expectations of exchange mechanism on market behavior •And so on I would be pleased if some students would be interest in a research on this topic and their institutes would accept this topic. 18
  • 18. page 19
  • 19. page 20