Brits coin new currency

Uncle GroOve · #1 10.09.2008, 15:53

So, them brits are always up to some-a-things, innit?

This small community has chosen to issue it's own currency.
It's less of an odd piece of new than what you think - it's a direct replay (correct me if I'm wrong) of what the first US colonies did.

Just trying to figure out what kind of far reaching monetary consequences this would have if all the local townships would follow the example... Hmm...

http://edition.cnn.com/2008/WORLD/eu...ncy/index.html

Paul

swissotter · #2 10.09.2008, 16:01

i faintly remember reading about this in some other place...sorry, can't remember. but it is interesting....like a barter system....
i wonder how currencies will evolve in the future....i often think of the value of things going up or down. In the future, i am sure we will be bartering with plain old food and water, when we start to run out?

which reminds me...got to stock up on the old spam in my nuclear shelter....

Swiss Cheddar · #3 10.09.2008, 16:01

LOL, if i lived there i would buy as much as possible with the 10% discount and then when the discount scheme is over i would just swap it back for a profit.

Uncle GroOve · #4 10.09.2008, 16:01

Actually the BuBa issued a study on "regional currencies" some 2 year ago, looks like deep stuff for when I have some more time on my hands:

http://www.bundesbank.de/download/vo...0643dkp_en.pdf

Paul

pat · #5 10.09.2008, 16:05

Basel has similar pro-innerstadt system with 20 and 50 "Franc" notes, that can be used in many of Basel shops:

http://www.pro-innerstadt.ch/

Pat

peachy · #6 10.09.2008, 16:09

This is simply a voucher, it's not legal tender.

pat · #7 10.09.2008, 16:12

	Quote:	peachy
	This is simply a voucher, it's not legal tender.

So is the Lewes system - from the linked CNN article:

	Quote:
	The Lewes Pound is a basically a voucher worth one British pound

Dodger · #8 10.09.2008, 16:12

The French town of Collobrières (in Provence) uses it's own quaint regional currency: the French Franc (remember that?).

Story

swissotter · #9 10.09.2008, 16:15

	Quote:	Dodger
	The French town of Collobrières (in Provence) uses it's own quaint regional currency: the French Franc (remember that?). Story

this must be what i was thinking of! thanks

Uncle GroOve · #10 10.09.2008, 16:15

Well, if all the community agrees to use it to settle the various transactions - for physical goods and services - then it requalifies itself to a step above being a "simple voucher" (i.e. something you can convert into one or a very limited amount of goods).

It'll be interesting to see how it evolves.

YMMV

Paul

peachy · #11 10.09.2008, 16:24

	Quote:	Uncle GroOve
	Well, if all the community agrees to use it to settle the various transactions - for physical goods and services - then it requalifies itself to a step above being a "simple voucher" (i.e. something you can convert into one or a very limited amount of goods). It'll be interesting to see how it evolves. YMMV Paul

It's like a Reka cheque basically, nothing more glamorous.

pat · #12 10.09.2008, 16:27

A bit more info from the Lewes pound website: http://www.thelewespound.org/

	Quote:
	The Lewes Pound is a complementary currency that will help raise awareness that spending money locally builds wealth and resilience in our communities. There is nothing new about the Lewes Pound. In fact, Lewes had its own currency between 1789 and 1895. Complementary currencies have existed since the beginning of civilisation, from the bead money of Papua New Guinea, which still exists, to the WIR, established between the World Wars and now used by 16% of Swiss businesses.

Pat

Uncle GroOve · #13 10.09.2008, 16:32

	Quote:	peachy
	It's like a Reka cheque basically, nothing more glamorous.

Are REKA (WIR) cheques are sunject to seigneurage - an issue which sets many libertariarians in a fit of anger?

Curious really - I'm not challenging your response, BTW...

Paul

Deep Purple · #14 10.09.2008, 18:30

	Quote:	Uncle GroOve
	This small community* has chosen to issue it's own currency.*

The 'small community' is actually the County Town of East Sussex.

As you say, this is not a new adea. Many communities have tried similar bartering schemes.

If they ever take off, they will get taxed as undeclared income. Without the actual cash, it could be difficult to confirm income and expenditure. The Government could take a dim view and charge what it considered to be a fair figure

Rod

Lob · #15 10.09.2008, 18:38

bring back Cowry shells, I say: Wikipedia reference-link

Shell-money

miniMia · #16 10.09.2008, 20:05

	Quote:	swissotter
	this must be what i was thinking of! thanks

Might have been this article IHT about Germany?
http://www.iht.com/articles/2007/02/...s/currency.php

	Quote:	Lob
	bring back Cowry shells, I say: Shell-money

I say we go back to glass beads and since I make them, I'll be the central bank!! This could be a much better plan than my plan to win the Euro millions!)

Nathu · #17 11.09.2008, 08:37

	Quote:	Uncle GroOve
	Are REKA (WIR) cheques are sunject to seigneurage - an issue which sets many libertariarians in a fit of anger?

I've read the Wikipedia article about seigneurage and am not much wiser now.

The value of WIR depends on the value of the Swiss Francs and the number of businesses that accept them. Also it is not intended that any private person or small business can convert the cheques back to Swiss Francs, but practically it is often possible if you agree to trade them at a small loss.

If that was the question.

chiguy · #18 11.09.2008, 10:50

An area in western Massachusetts has been doing this for a few years now with Berkshares. It's basically giving locals an incentive to shop locally, supporting local Mom-and-Pop businesses. Nothing wrong with that IMO.

Uncle GroOve · #19 11.09.2008, 14:08

	Quote:	Nathu
	I've read the Wikipedia article about seigneurage and am not much wiser now. The value of WIR depends on the value of the Swiss Francs and the number of businesses that accept them. Also it is not intended that any private person or small business can convert the cheques back to Swiss Francs, but practically it is often possible if you agree to trade them at a small loss. If that was the question.

I'll quote the relevant passage from the Wikipage, which might help you to see what I was indicating:
Ordinarily seigniorage is only an interest-free loan to the issuer. When the currency is worn out, the issuer buys it back at face value, thereby negating the revenue earned when it was put into circulation. Currently under the rules governing monetary operations of major central banks (including the central bank of the USA), seigniorage on bank notes is simply defined as the interest payments received by central banks on the total amount of currency issued. However, if the currency is collected, or is taken permanently out of circulation, the back end of the deal never occurs. Thus the issuer of the currency keeps the whole seigniorage profit, by not having to buy worn out issued currency back at face value.

Seigniorage can be seen as a form of tax levied on the holders of a currency and as such a redistribution of real resources to the issuer. The expansion of the money supply causes inflation. This means that the real wealth of people who hold cash or deposits decreases and the wealth of the issuer of the money increases. This is a redistribution of wealth from the people to the issuers of newly-created money (the central bank) very similar to a tax.

This is one reason offered in support of the creation of modern, independent, central banks whose primary objective is arguably to ensure the value of currency by controlling monetary expansion and thus limiting inflation. Independence from government is required to reach this aim - indeed, it is well known in economic literature that governments face a conflict of interest in this regard. In fact, "hard money" advocates argue that central banks have utterly failed to obtain the objective of a stable currency. Under the gold standard, for example, the price level in both England and the US remained relatively stable over literally hundreds of years, though with some protracted periods of deflation[citation needed]. Since the US Federal Reserve was formed in 1913, however, the US dollar has fallen to barely a twentieth of its former value through the consistently inflationary policies of the bank. Economists counter that deflation is hard to control once it sets in and its effects are much more damaging than modest, consistent inflation.

A seigniorage reform for the information age on a full-reserve banking base is proposed by Joseph Huber and James Robertson: Creating new money. They argue for the reappropriation by governments of the right of seigniorage now possessed by private banks. About 95% of new money currently issued takes the form of loans made by private banks to their customers. Huber and Robertson want to make this illegal. The creation of new money, both cash and non-cash should be the exclusive prerogative of the central bank. The latter should determine how much it creates in the light of the objectives chosen for the country's monetary policy and credit the new money to the government who will then put it into circulation by spending it.

However, it is important to reiterate that banks or governments relying heavily on seigniorage and fractional reserve as a source of revenue will find it counterproductive. Rational expectations of inflation will begin to take into account the bank's seigniorage strategy leading to hyperinflation which causes significant real damage to the economy. Instead of cashing seigniorage from fiat money and credit most governments opt to raise revenue primarily by other means, generally taxation.

Paul

Nathu · #20 11.09.2008, 16:05

WIR can't create money. They sell the cheques 1:1 and don't give interest. (Source)