A currency for Christchurch taken seriously

John Campbell introduced the piece on RNZ’s Checkpoint with the remark, “A separate currency for Christchurch could be real. Is the city serious about it? Are they for real?”. He said he had done his own research and found the Bristol Pound in UK. And the Totnes Pound and the Brixton Pound.

Chair of the council’s Finance Committee Raf Manji explained there were 2,500 community currencies operating round the world, talked of his preference for the Bristol Pound because of its convertibility. Treasury and RBNZ need to be involved. Our plan is to launch it at the 2017 Social Enterprise World Forum. http://www.radionz.co.nz/national/programmes/checkpoint/audio/201795721/christchurch-could-soon-have-its-own-currency

The 1-3% inflation target is really a circulation incentive and we need to read Gesell instead

The other morning on the radio I distinctly heard a senior politician say that the economy wasn’t going well ‘because the inflation rate was too low at below 1%’.

I thought I was hearing things. Indeed someone coming to Earth from Mars might ask a few questions. Presuming inflation is a bad thing and it is now near zero, why then is the economy not going swimmingly?

Then I remembered what I had recently learnt – that economists had designed a 1-3% inflation target as an ideal because you had to have some incentive to spend today or the economy would seize up. You didn’t want inflation too high, but a low rate of inflation is acceptable and even necessary simply because otherwise people hold on to their money and nobody spends. They realise that goods will be dearer tomorrow – if only by a little – so they decide to spend now rather than wait.

Goodness, how few people know this. And how it is becoming exposed now that the inflation is below 1% in more than one of the developed nations.

Now land was taken out of the CPI in 1999 as you can see in this graph.inflation NZ

Yes the graph makes good sense. With land safely out of the CPI, economists can brag that their target has been achieved for a consistently long period. And you had the huge land bubble of 2002-2008 never recorded in the CPI and then again the land bubble of 2011 onwards completely out of the graph.

So putting aside this statistical sleight of hand, we also know now that the national currency must have a circulation incentive. (That is under the current currency design of money created as interest bearing debt)

As we collectively head blindly into a period of deflation of unknown length and pain, we must pay attention to the writings of Silvio Gesell, a far thinking German businessman who also lived during a Depression in the 1880s in Argentina. His book The Natural Economic Order has been translated and put online for all to read. Of him Keynes said “The world will owe more to Gesell than it does to Marx”.

Gesell realised that a businessman with goods is at a disadvantage from those holding money. While the goods decayed, rotted and generally went out of date as they waited for someone to buy them, the money retained its value. Those in possession of money were better off than those who had goods. He famously wrote: “Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron, evaporates like ether, is capable of standing the test as an instrument for the exchange of potatoes, newspapers, iron and ether.”

After decades of having loyal followers, during the 1930’s depression, Gesell’s theory was put into practice, but only briefly because the banks managed to persuade the government to stop it. It was in the small town of Wōrgl, Austria 1932 that the Mayor put aside 20,000 schillings and used them as backing for notes called Work Certificates. They paid their employees partly in Work Certificates. Each note had 12 spaces on the back and a stamp had to be stuck on every month to validate the note. To avoid paying for the stamp people spent the Work Certificates quickly. The currency was successful at reducing unemployment, so much so that people came from miles around to witness the Miracle of Wōrgl. It was in place 15 months before the government made it illegal and they went back to unemployment.

Confessions of a former localist

I think it would be forty years ago that I first advocated strengthening the local economy and about twenty years ago I began to believe that a local currency and a local bank were  necessary for this to happen. To help mainstreet we need local money

Wairarapa notes green-dollarsIf you are like me and fraternise with people in the complementary currency and peak oil movements you will have been told the line: “When there is a crisis, whether it is financial or a civil defence crisis, you will need local currencies to help you survive.” You are exhorted to help build an alternative economy where you trade with each other, start your own savings circle so you can lend to each other without interest, use a locally owned bank or credit union and so on.  So far, so good.

The theory is fine. Ignore the mainstream economy, get to know your neighbours and abracadabra you will be safe. Banks can collapse and they can have as many financial crises as they like but you will survive.

Some very good people have handed out this line of advice, and still do. I believed it and advocated it myself for years too. It is just that it is not enough and it’s not a really accurate story.

But if our economic system grinds to a halt, time banks and LETS systems won’t get us very far. They won’t buy us houses and they won’t provide investment capital for new sunrise businesses needed to produce jobs. They won’t clear up a welfare mess or stop wealth accumulating with landowners. They won’t stop investment banks from beguiling investors into buying fraudulent products. They won’t  rebuild a hospital or even perhaps fix a washed-out road.

These actions are for national politicians.

Yes I do know that there are a wide variety of local currencies and national complementary currencies that can match unmet needs with excess resources. I wrote a book on the subject. At the time, I researched and described as many of these economic tools for self-sufficiency in the book as I could, and there are even more nowadays.

But it is critical to go further in this quest, because no matter how many local initiatives that can be taken, there is still the necessity for initiatives at national level.

imgres-4So we need to scale up complementary currencies. At first I believed that if a local authority issued a local currency and accepted it for payment of rates, that would be as far as we could expect. It would do the job nicely. But others persuaded me New Zealand is a very small country those who have lived in Europe say our national really resembles a local currency. Besides, now that you are thinking about national politics you have to address the tax system.  And what about the growing power of the banks? Where would you keep your money that was safe?

About two years ago, after I had worked assiduously for years to start a local Transition Town and start a local timebank,  I had a Skype call from an Australian environmental economist that I once shared a platform with after my book came out. He  told me he was extremely concerned about the global situation. I said I was happy with my Transition Town work and my timebank work. He then reminded me that even if we in our town had reached a remarkable degree of self-sustainability, even if we could feed ourselves and clothe ourselves and provide energy for our transport and warmth, what would happen if hungry people from the neighbouring town invaded us?

Oh, that made me think. So it wasn’t long before I had left the Transition Town and timebank colleagues to soldier on without me and had turned my attention to national politics, that I finally addressed some of the national issues.

OK so what if we scaled up complementary currencies and designed a second national currency differently from the one we have now?  Yes, that is what I have been working on now for a couple of years and one of those efforts is on this site somewhere.

And I have also been working on the idea of linking that new national currency to a radical new tax and welfare system.  Those long years in the local currency movement have completely convinced me of the idiocy of income tax and I already knew that sales tax like GST hurt the poor more than the rich. When you see the administrators of tiny LETS systems struggling to persuade Inland Revenue that their trades should be free of tax, but this is only allowed if a plumber in normal life doesn’t do plumbing for his LETS trading. That is ridiculous. Then I saw the unfair rulings of IRD when barter companies pleaded with them to show mercy. Their good small businesses just had to go under.

Basically the new system would grow in the undergrowth of the older unbalanced economic system producing all the misery of climate change, poverty, instability etc.

That is what I am working on now with other people who can see the vision. It won’t be long now before we come up with a clear proposal. It is a systems approach.


Community Currencies encouraged

Community currencies.
Many trades do not require precious national currency or even a regional currency like an Auckland currency. At the community level a variety of currencies are possible and the X Party would encourage diversity. The recent spread of timebanks, where members in a community help each other and pay in Hours, is encouraging because it helps with building social capital and strengthens that community. Everyone’s Hours are equal. Organisations can join and teaching and learning can occur. The establishment of timebanks in every community would be encouraged so that people can exchange skills on an equal basis. Timebank coordinators would be funded. In this way community building can be fostered at local level for minimal cost.

Local Economic Trading Systems like the ones in Golden Bay and Wairarapa will be encouraged.

Local communities can establish local vouchers for the exchange of goods in their district. Local businesses would accept local vouchers backed by a certain quantity of goods produced in the area. One model for success is the Chiemgauer in Germany.