Readers: This is going to be a bit difficult to follow I expect, AND it seems like the most direct way that I can raise these issues about community currencies. This Dutch community currency is only a good example of a very shallow understanding of what is needed in the way of monetary reform. This is an example of the strong current of pop-economics within the conversations about community based currencies and exchange systems.

I believe that at least half of the people involved in these systems are only invested to the level of "good intentions." This is may seem odd at first, and because much of conventional economics is also based upon ignoring economic history and actual practice. What is substituted within conventional monetary theory is typically a version of faith based economics which serves as a cover story to mask what the bankers are actually doing in addition to posing in high priced suits and having just disembarked from a limousine. The pop-economics of community currency and exchange systems tends to be just a variation on the conventional theme and mis-direction. When the mis-informed and those phobic to analysis show up to join the dance, the discourse gets a lot more scrambled. Thomas Greco is one of the prime purveyors of monetary mis-information, and has a fairly high level of visibility and acceptance among the pro-community currency/exchange crowd, and not without significance he has gained enough of a following to make a decent income. His first book was one of the worst written and poorly organized non-fiction books I have ever seen. 

The general process is that the majority seems to weigh in at the Gee Whiz level and thereby choses to avoid doing the necessary economic and monetary homework. What happens next is that a "Community" version of conventional and privatized money is created nominally to serve a "socially aware" process, established largely by declaration and not much else, with minor expenses levied. There are a number of these examples currently being promoted usually with the best of intentions and that the currency is intended to aid retaining wealth with their communities and to serve as a medium of exchange when the common currency becomes scarce. These programs tend to be not directed toward emulating what a reformed sovereignty based currency would be.

To a large extent this website originated out of a general need to improve the level of economic and monetary literacy, and that includes the community currency and exchange advocates. Thomas Greco, in my opinion is essentially a quasi-libertarian who seems to favor a "free banking" process as a monetary solution. He actually advocates imitating what the monopoly corporate banking interests are doing, though in effect competing with those interests.

 The problem with this Free Banking model is that the Free Banking period in US history had very high level of fraud, probably comparable on a per capita basis to the level of fraud by the Wall Street bankers currently in circulation. As long as "free" is cryptically equated with "democratic," and people get sucked into the confusion that is generated, then the process will explode and result in de-legitimating the real reforms that are desperately needed. In effect the deregulation of the banking industry created version of the free banking period only monopolized by the large corporate banking interests. Further, the Owen-Glass Act which established the US Federal Reserve in 1913 really only centralized the control of the banking "industry" into private control. In a different view it is the institutionalization of "Free Banking." Supposing that applying a "Free Banking" process to community currencies is a good thing, becomes a very bad idea, very much like cooperative boards and management who attempt to evade financial transparency and accountability.

Elaine Supkis is a blogger who I regularly read and have learned a great deal from. In my experience her analysis though often exuberant is always based upon hard core empirical analysis. As it happens she came across this article, which I had intended to not repost because of its numerous problems. But instead, using the article as a clearly bad example, will, I believe, have a lot of value. This is not going to make the uncritical cheerleaders of community currency and exchanges happy, because dealing with the criticisms will require them to get more serious about what they are doing. There is a whole lot of pretense that is thrown around as a way to defraud people from applying the appropriate standards and expectations. See my article entitled "Cargo Cults, Ponzi Schemes, and Cooperative," because a lot of the bizarre belief systems and fraudulent scheming applies to this mode as well.  

I will insert comments along the way as well, though deferring mostly to Elaine. She often uses a few unusual mythological sort of metaphors in her explanations. Be patient don't take them completely literally, but see first for how they are used to explain what can be otherwise complex ideas. My comments will be led by a "Tadit:" so at times there may three different voices being used. I advise going slow at first.
   this is the url for the original article

http://www.henrymakow.com/dutch_barter_system_angers_ban.html

  Elaine S.- I found yet another story about a group of people trying to take the role of governments and banks by printing money themselves and handing it out, for a profit. This is illegal, of course. Only governments or the international bankers who control governments get to do this. {Tadit: This is not entirely true, if a membership based exchange association can be used as an analog} And this story from Holland is about a trio of young men who want to print money and then exchange it for Euros, is a great way to explain the flaws and dangers of banking systems in general.

savethemales.ca – Dutch Barter System Challenges Bankers

My name is Anthony Migchels and I am the initiator of the “Gelre,” the first Regional Currency in the Netherlands. My organization is a foundation, not for profit, not a company, because I believe credit should be a public facility, serving the people that actually OWN the credit, instead of milking them dry with what is rightfully theirs. The Gelre foundation is run by a board of three.

We now have almost a hundred companies participating and the break even point should come at about 300, after that we can get an income out of it. But the real goal is, to hook up 66% of all companies in Gelderland, a province in the Netherlands with 1.2 million inhabitants and 60k companies. A GDP of about 40 billion Euro.

It is clear that interest bearing debt to a bank as money is a vicious hoax, but strangely enough, few have been developing a viable alternative.

Ellen Brown and the Money Master people, whom I both regard very highly, have reasonable propositions, but they are still considering reform at the state-level and that is simply not going to happen. Not here in Europe and not before having survived WW3, anyway. 

Tadit: my own preference is to start with an effort toward increasing economic literacy, and then reform at the state level is much more likely if the problems and the possible constructive alternatives are better understood. (end)

  Gelre returns: State Level real money implies the end of the New World Order Central Banking Vampires. There is Bernard Lietaer, but his biggest point seems to be that 'complementary currencies' complement the 'national' (banking, really) currencies. He has correctly analyzed the negative aspects of interest, but is completely oblivious (or pretends to be) to the nefarious nature of the powers behind the printing press. It is clear that real alternative currencies have only one goal: to destroy the credibility of humanities greatest plague and its metal based successors. The goal is clearly NOT to play second fiddle.

Tadit: Elaine covers the contradictions the these Gelre people are advocating below. end 

  Gelre: returns: I like Thomas Greco, who is very knowledgeable. He suggests mutual credit, facilitated by Market Players as a solution, but even he has not pinpointed what is to my mind the most crucial challenge for anybody wanting to create a viable currency, able to truly compete with Dollar or Euro . That challenge is as follows:

Barter units allow for interest free credit, but are not convertible to major currencies and convertible units don't allow for non interest bearing credit.
Combining these two features, convertibility and interest free credit, is essential for non state/non bank monies to have a real impact.

It is the way of the not so distant future :-)
 

Tadit: smileys in this sort of non-fictional context is in my opinion obnoxious, and doesn't excuse the mis-information. end

  Gelre continues: Most barter schemes have prohibitive transactions costs. Also, and even more importantly, they are not convertible to Euro/Dollar. They usually are OK for swapping excess inventory or goods and services with low marginal cost, but not for high powered capital intensive industry.

The Euro/Dollar/Pound based Berkshares (http://berkshares.org/) , Lewes Pound (http://www.thelewesPound.org/) and German Regional Currencies (www.regiogeldverein.de) are stronger, because they are based on national currencies: you give up a Dollar and in return you get a Berkshare, that can be spent within the network. In effect the Dollar remains in the network. Because there is a Dollar in the bank, companies can convert excess local currencies (units that they cannot usefully spend in the network) to Dollar/Euro The problem is, there can never be more of the local currency in circulation, than the supplying organization has Dollars/Euro in the bank. Therefore they cannot supply any credit. 

Tadit: this becomes a bit of conceptual quicksand in several ways. end

  Gelre again: This is also the basic architecture of the current Gelre. Another conceptual problem with this approach is that you are basing real, loving money on the most toxic commodity known to man: interest bearing bank debt as money.

Tadit: this is actually a bit of conflation, privately owned banks do have the capacity to issue asset based currency though bonds, and it is true that most of the currency they put into circulation has been debt based. Here he starts to slide toward promoting snake oil, as an alternative, mostly on pretending to not be a banking process. end

  Gelre again: There is also a legal problem here, in Europe, anyway: Believe it or not, but De Nederlandsche Bank (Dutch central bank,) run by Nout Wellink who is on the board of BIS and a member of the Trilaterals) shut down my on-line telebank service. A clear sign I was on the right track :-). They did so because of a prohibition on collecting 'reclaimable money' (a direct translation of judicial lingo, I'm not sure an English speaking lawyer will know what this means). 

Tadit: though there are conspiracies involved in promoting mis-information about monetary issues, assuming that just because the establishment, as the enemy by fiat, doesn't thereby validate the supposed alternative .end

E.S. returns - These guys go off the edge of the cliff as they imagine their nifty scheme is being shot down by mean elites. It is, of course, an illegal scheme. The ethical problems it has are worse than the mainstream bankers for the obvious reason, this isn’t based on a government system and therefore, is unenforceable. This sounds like a circular argument.
But it is an important one! No paper money system can survive if it doesn’t have legal/government/police powers behind it! And it is very easy to abuse by these powers. This is inherent in the entire concept. If printing money and then handing it out like candy solves economic problems, we would never have economic problems. Everyone would simply print up free IOUs and hand them out.

Tadit: to be more specific here the governmental powers that Elaine is referring to is the legal definition of sovereign currency as legal tender, and thereby enforceable as the legal basis of paying debts, and the second governmental power is the acceptance of that legal tender for the payment of taxes. end

Elaine: Except over time, it would be worth less than the paper it is printed on which is why adding zeros as fast as possible is the only tactic that seems to work until you hit the mega-trillion zeros and run out of room. So far, no money creator has figured out that they could do what astronomers do, that is, have a tiny number next to the big number denoting how many zeros there are. The simplest way is to print money with the infinity symbol on it.

This is the Cave of Wealth and Death at work! Infinity and Zero are sisters. All paper systems trend towards using as many zeroes as possible and since adding numbers is easy, they all go to infinity. If money making isn’t restricted in some fashion. .
 

Gelre  returns - You can, however, manage reclaimable money if you give a paper voucher in return. This is a loophole designed for book vouchers and the like. 

Now we have only paper money in circulation. Of course, this law is to 'protect consumers' (wink wink). You have to realize this was going on last year, 2008. The people from the Dutch Central Bank are telling me they are very worried about the couple of thousand Euros that we manage as deposits for circulating Gelres. The same people that have been supervising and in effect organizing the credit crunch that has cost taxpayers in the west trillions of Dollars. 

Now, being confronted by men and women (kind and intelligent people!) in expensive suits destroying and enslaving the people I love, including myself, who are telling you they are protecting consumers by putting me out of business, kind of pisses me off BIG TIME. Brainwashed or not, you start to dislike them even more than you already did. Its probably not the same with everybody, but if somebody starts playing with my family jewels, smiling all the time and speaking very correctly gets me thinking. To be honest, it was an experience that inspired.

By creating a unit that combines both strengths, cheap credit AND convertibility, we believe it is possible to actually compete with Euro Creating money out of thin air that will buy Euro and eventually gold, it sure gets me excited :-)

We'll buy the world back :-))). we won't, but the people using the Gelre will! 
The only problem is: how to do it and inspiration makes answering this elusive question easy: you create convertibility not by reclaimable deposits, but by creating an open marketplace where your unit can be traded!

In this way, you create convertibility not by having Euro or Dollars deposited, but by more classical means: foreign exchange markets have been around for quite some time, but only for bank money Speculation is out of the question, because in the network 1 Gelre=1 Euro always.

My foundation simply always sells Gelre for 95 cents, so it is no use offering your Gelres for more.

And because 1 Gelre has a purchasing power of 1 Euro in the network, there is always a natural demand for Gelre because its buyer gets a de facto discount of at least 5%. Of course you want a stable rate for the Gelre, close to its target of 0,95 cents. This is achieved by correctly managing the amount of Gelre you issue. If you issue to many, people will dump it on the market and your unit goes down the drain: nobody will accept it if its rate goes down too much.

But you can, and we have, create a stabilization fund. Because we sell Gelre for 0,95 cents, we have Euro. We could simply pocket them, but then we would be ripping off the system. It would be a goldmine. Nobody would even notice, people are gullible, but the idea is to help, not to steal. No, the Euro we get in this way go into the stabilization fund and we use them to buy back Gelres if the rate goes down to much.

In effect this means we can almost guarantee a stable exchange rate. Almost, because every adult has to awaken to the fact that there is only one guarantee in life: you die. It is childish to look for guarantees from institutions. That is part of what is called 'arrested development'.

At this moment we are programming the on-line exchange. Its not complicated at all, thankfully.

Naturally all this needs to be managed correctly. And of course the idea is very simple. But also revolutionary. A breakthrough that has the potential to create very powerful currencies that can compete globally and locally in many diverse networks against the far to expensive (because of interest) '(supra)national' currencies.
 

Tadit: for all of the exuberance I don't "see" the revolutionary idea.  end

 

Gelre again: We have chosen a regional scope, because one of our main goals is to stop centralization of power. Since most local economic area's are 80% self sufficient, it is natural that they are monetarily as well.

Tadit: not necessarily so historically. end

  Gelre again: And because 'The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it' and also because 'the process of money creation is so simple, it repels the mind' transparency is essential in any real money system.

Tadit: while this is true declaring "Presto" or "Abracadabra" also doesn't make it appear. This where the Gelre people start imitating the reality of privatized banking. But really it seems that their goal is to imitate privatized banking, only under "benign" control. Exchanging one set of magicians for another doesn't newcessaritly result in a better and mre transparent process. end

  Gelre again: Therefore we have created the Gelre monitor, which reports real-time to all parties involved, on-line, all the key indicators of the Gelre. Turnover, amount in circulation, percentage that is taken by the issuing organization for costs, number of participants, etc, etc. All this information will be available with just a few mouse clicks.

End of this year, maybe early next, our new system will be on-line, hopefully. And it is going to work. Despite the many unknowns to the public. You know why? Because we are going to print some money and GIVE IT AWAY!
 

E.S returns.- This is how gnomes are created: the guys launching this new currency scheme are all very noble and sweet and want simply to share the wealth. Then, one paragraph into the story, things change. This trio of mini-gnomes want to make a profit! HA.  As I read this story, I began to see how easy it is to lure people into imagining they can make pieces of paper more valuable.

That is, this trio of young scamps are going to ape their elders, the guys who created the entire banking system in the first place. Nothing these guys are doing is anything new. And the hazards that plague the money creation system is very much part of the technical system these guys think they created, themselves.

That is, this is nothing new. Except for one key element: it is being done by people who don’t already control the government. No paper money system ever survives without the backing of governments and the law. And military muscle. That is, there has to be enforcement systems. For example, these guys printing this Gelre stuff can’t stop counterfeiters. All governments have to have very elaborate detection/enforcement systems to stop simple counterfeiting. 
 

Tadit: a side point here is that the Argentinean community currency system of the 2000 to 2002 period was in part brought down by counterfeiters.  People in general brought along the old ideas about money and wealth, and the people organizing the process didn't act to prevent counterfeiting in some way. end

Of course, the true problem is the ‘counterfeiting’ is embedded inside of the credit creation system which is why paper money loses value even if it is carefully protected from illegal printing presses.

  Gelre returns: - We are going to give away millions of Gelre (1 Gelre = 1 Euro). Why not? We print it for nothing! We don’t use that money to stuff these piggy banksters, but we hand it over to the people!! And they can spend it at the businesses that join. These businesses can actually convert their Gelre income to Euro (at a small cost).

E.S. returns - HA. So, they print money and give it away, Robin Hood-style? And then the lucky recipients can rush out and exchange it for services. Then, the businesses can go to these Robin Hooders and get it turned into euros but only if they take a haircut? Whereas, if someone does business with euros, this charge is not made. 

Of course, if these guys hand out millions of this counterfeit money (yes, it is counterfeit) people will want endless counterfeit money so they can rush out and buy stuff. The problem here is obvious: this will turn the Robin Hood paper money into Zimbabwe dollars. At first, the businesses are happy, taking a haircut so long as they can swiftly turn it into euros.

But eventually the ‘bank’ run by these guys runs out of euros to redeem. The haircut will get bigger, very fast.

Tadit: this will become a high speed ponzi scheme, very quickly. end

Gelre returns - We are going to play Santa Claus and all that money is going to circulate forever, continuing to create business. A skyrocketing Gelre Economy in the depths of a very severe depression. Nobody can get a Eurodime, but we give away millions of Gelre!! 

E.S. returns- The Western culture is plagued by the Santa Claus concept. Our economic systems are hinged to this belief system to the point, it creates a series of immense waves of commerce that get worse each decade. In my grandfather’s childhood, there was barely any Christmas at all and virtually no present giving even in the upper classes. 

This has grown into a monster. Just like gambling, it rolls out of control and it is mostly negative in nature. It teaches the worst possible lessons. Instead of viewing wealth accumulation as a process involving labor and materials, it is all about magic and things appearing out of thin air.

Of course, this trio of free money makers wonder why governments don’t hand out money. Alas, governments are doing this! But they have to put it on a ledger. That is, it is the budget deficits and this money making is then sold to investors who expect to collect a fee…um, like these dudes want to collect a fee!

Gelre returns - Of course most of the Gelres we put into circulation will be lent out (without interest, but of course with some (very cheap) price, we have bills to pay) in a mutual credit kind of scheme, or sold for Euro (for the benefit of the stabilization fund), but a reasonably small percentage can be simply given away….

E.S. returns HA. I have written a large number of stories about how paper money is all about borrowing. If you read the fine print on a dollar, it says it this is script to pay off debts! One of the great problems of banking today is, the curb on paper money creation was supposed to be the bank’s ability to pay off loans EVEN when the borrower defaults. 

Of course, this has been hijacked. Banks at the very top of the apex no longer pay the price when they create money recklessly via lending and instead of going bankrupt, get 100% capitalization from the governments! So they roll merrily on.

The scheme of this Dutch trio is every bit as noxious as the main systems. And of course, the main systems must be reformed. But what these guys are offering are no reforms, it is identical and has the same and even worse problems.

Except over time, it would be worth less than the paper it is printed on which is why adding zeros as fast as possible is the only tactic that seems to work until you hit the mega-trillion zeros and run out of room. So far, no money creator has figured out that they could do what astronomers do, that is, have a tiny number next to the big number denoting how many zeros there are. The simplest way is to print money with the infinity symbol on it.

This is the Cave of Wealth and Death at work! Infinity and Zero are sisters. All paper systems trend towards using as many zeroes as possible and since adding numbers is easy, they all go to infinity. If money making isn’t restricted in some fashion. .

 Gelre returns - …In this way, you create convertibility not by having Euro or Dollars deposited, but by more classical means: foreign exchange markets have been around for quite some time, but only for bank money. Speculation is out of the question, because in the network 1 Gelre=1 Euro always.  

My foundation simply always sells Gelre for 95 cents, so it is no use offering your Gelres for more.

.And because 1 Gelre has a purchasing power of 1 Euro in the network, there is always a natural demand for Gelre because its buyer gets a de facto discount of at least 5%.. Of course you want a stable rate for the Gelre, close to its target of 0,95 cents. This is achieved by correctly managing the amount of Gelre you issue. If you issue too many, people will dump it on the market and your unit goes down the drain: nobody will accept it if its rate goes down too much. .

E.S. returns - Talk about silly! Of course, no one is going to get more for their Gelre paper money, it will always be offered at a discount. Since these guys are handing it out like Santa Claus, it will be fated to lose tremendous value over time. These Gilre guys don’t understand that they are not emotionally or intellectually capable of limiting these paper products so that it doesn’t lose value.

First off, they, themselves, will give themselves more and more of this paper money so they can buy stuff. At first, they will rationalize this. Running their new bank takes up time! And they are generous to everyone, handing out paper for free. Why not use it, themselves? And of course, this new tulip bulb business will see the usual effects of greed and the temptations of easy money created out of thin air.

Gelre returns- …..To be honest, the bankers couldn’t care less about the paper, if they can replace it by gold. Money is one of the few commodities that we can produce infinitely at virtually no cost. The art of the trade is to create plentiful money, without overdoing it. Even a limited amount of inflation is OK, as long as people are aware of it, are compensated for it and don’t save the money. 

E.S. returns - HA. Later in their own article, they admit everything. People misunderstand how bankers operate. The only reason they wanted gold was simple: it is LIMITED. And hard to get. And doesn’t vanish, tarnish or have other hazards. It can’t waste away. And being rare compared to other things, it can’t be debased easily. 

The discovery of the New World upended European gold markets. A huge tsunami of gold poured into Europe and there was inflation. Europe dealt with this by taking the gold and using it for international trade with China.

That is, gold is all about international trade. Usually, people don’t need gold for local transactions except in times of stress such as wars, droughts, chaos, etc. But resolving trade deals, gold was the best means of not losing value—taking a haircut—when making deals with distant parties.

Note how these Dutch banking geniuses artlessly point out the flaws in their scheme! They think inflation is OK! HA. And they imagine their ZIRP system will work…if no one saves money! That is, these budding Weimar bankers know deep in their little hearts that no one dares hold these Gelre. These Dutch guys get downright nasty:

 Gelre returns - Saving money is always a bad idea anyway, because it withholds money from circulation, but that is another story. The point is, that if you have a reasonable entity issuing the money, its supply will be stable and cheap. The Gelre will also prove that gold is as big a hoax as is interest bearing debt. 

Tadit: there is an effect known as hoarding and identified by Gesell as a way of creating currency scarcity which can greatly impact a community, it seems that the appropriate way to deal with this is to reward savers with an interest rate that works with loaning process. Whether or not fractional reserve or other forms of leverage are used in the loaning out process becomes important. This would probably be one way of identifying a banking operation from an exchange association. Tadit

E. S. - HA. Like all guys wishing to raid the Cave of Wealth and Death using paper with lots of zeroes on it, these guys hate virtues. Saving money is a virtue, not a vice. Gamblers do not save money. The criminal classes don’t save money. Modern bankers hate having to pay interest on saving money! This is the ZIRP system in action: the ideal world for bankers is to pay no interest to savers while forcing people to take a 5% haircut on money circulation!

DUH! When people get loans that are based on capital, the bankers have to give some money to savers who have capital. These people, in turn, allow the bankers to ‘grow’ their money via lending it. The bankers must share the profits from lending with savers who take their own money out of the system and hand it over to the bankers to make it grow in value for both the savers and the bankers.

But if the bankers decide they need to have a capital base for lending and make money for free, they no longer pay savers for their capital. So savers have to depart from the system! Any banking system that decides it doesn’t need anyone paying off loans or saving money ends up like Zimbabwe. The Japanese and now G7 ZIRP system seems as if it is working…but only if there is a depression!

But all parties are most anxious to end the depression so everyone is printing money like mad. So….are there any savers in this ZIRP system?

The answer is immensely important: China is the mega-saver in this system. That is China, and also Japan in the case of US dollars—is saving the money so it doesn’t lose value rapidly. But if China were to disgorge all this paper money suddenly, the value of the paper money will plummet.

This is why paying China very low interest rates on our loans is going to increasingly irritate the Chinese. If they refuse to buy the loans or hold the dollars, the value of both will collapse and the need to get someone, anyone to buy our debts or hold our dollars will shoot upwards rapidly.

Also, people with dollars will want to get rid of them as fast as possible. So money will circulate much faster which is inflation. Right now, people are saving money as fast as they can due to having few places to deposit it safely so they are saving it by buying gold and other valuable things. So we have tremendous inflation showing up in the oldest international trade resolution devices in history: gold.

It doesn’t take brains to recreate the wheel. There is no perpetual energy machine that will give us something for nothing. The limits of natural systems applies to money creation. The concept of limits is very important to all money or financial systems. The energies of many people involved in making wealth via making money have to be devoted to limiting money creation, not being Santa Claus. This emphatically includes all governments. They have to encourage and enable savers who are the ones who prevent floods of free money from overwhelming systems.

Savers are the saviors of all monetary systems. The money creators who print the money are the demonic destroyers who have to be controlled and limited severely. Or all will be lost. The fact that the Dutch Gelre trio hate savers tells us exactly who they are: destroyers, not creators. They want to use the magic of money to make a profit! For themselves!

  And therefore,these Gelre guys are not good guys, but are bad guys. But then, the temptation to create money out of nothing is very severe. And is the chief lure to get people to go into the Cave of Wealth and Death and be utterly destroyed there.

 

End of posting