The Community Reserve Exchange: a Community Exchange: Based Upon Modern Monetary Economics Tadit Anderson
The CRX model is a Local Exchange Trading System and is an advancement over the common model applied as a LETS system. The most common LETS model is a debt based exchange system, and thereby reproduces the private and debt based monetary process at a community level. The CRX reflects the current best proposal for the reforms analyzed as necessary to reform the current default of a privatized monetary system. It thereby complies with the principles that are crucial to the American Monetary Institute proposal for national monetary reform. The details of the AMI proposal can be found at their website.
The CRX also applies the principles of modern monetary theory, as detailed by post Keynesian economists such as L. Randal Wray and others. It also includes many of the principles of functional fiscal policies as advocated by Abba Lerner, Hyman Minsky, and others. It defines the value of basic labor upon the principle of a "living wage." It also applies limitations to prevent usury, organizes to share risk, and supports the development of community. The CRX is intended as a practical process to facilitate exchanges, retain community wealth, and serve as an educational tool to advance economic literacy and the advocacy of economic reform.
The simple Community Reserve Exchange will use the Community Reserve Note, "CRN." It will have a directory and a classified section including offers and wanteds. In its full version the CRX will have a dual currency system available for member equity transfers. The CRX is a system of community equity expressed as a currency system. The CRNs will be a complementary alternative to the US Federal Reserve Notes, "FRNs," also known as U. S. Dollars. This dual currency system will require that the balances for each member for their CRNs and FRNs be accounted for separately. The CRNs will be a unit of accounting sovereign to the CRX and cooperating organizations, and for equity transfers within the exchange cooperative by consent. The CRNs will originate based on labor volunteered by members serving either the operating needs of the CRX or of designated sponsored non-profit or not-for-profit associations.
The development of the CRX can be treated as a growth and management process. It will begin from a set of core functions and will add features as the capacity of the managing board of members matures and the number of members increases. A simplified starting point will begin from using the CRNs only, and then adding to the accounting utility the capacity to also account for FRN exchanges. Other capacities can be added as the association grows. One example is the required level of retained member capital. Other choices will include the appropriate level for the annual subscription fee, to tax hoarded or idle units, and another will be to hold CRNs and FRNs in reserve as the basis of an internal revolving loan fund.
Individual Memberships will be based upon an active membership agreement defined by an annual subscription fee and acceptance of user service fees upon requirement. Negative account balances should not occur ever. This means that there will be a 100% reserve process. The annual subscription must be paid in either CRNs or in FRNs. Because the CRX will have operating expenses payable outside of the CRX context some charges for services will be required in both CRNs and FRNs. CRX members are permitted as member/owners to transfer equity within the exchange cooperative as they wish and according to the current membership agreement. Labor will be priced in CRNs or FRNs in a time and materials transfer. Labor in practice will be valued or priced however the member producing the labor values it in a flat rate or even exchange.
The CRNs are a Fiat and Sovereign Currency:
CRNs are initially put into circulation by members doing volunteer labor as equity toward the work of the CRX or toward designated CRX co-sponsored projects. This is another way that we can build community. The validation of the volunteered work will be made by the receiving project or organization. When the validation is received by the CRX the member will be credited with the related CRN credits.
Co-sponsorship by the CRX will be based on a monthly budgeted allocation of CRNs by the CRX. This process would be treated within the program utility by the co-sponsored projects being "group" memberships with an allocation of CRNs. The budgeted amount of CRNs per month could be allocated to those accounts with a entry into its CRX account. This group would also have an entry in the CRX classifieds asking for volunteers of various skill levels to do certain work for that co-sponsored group.
Persons who do not have the ready FRNs or CRNs for their initial member subscription and member capital can join as a provisional member waiting to pay the membership subscription in their third month. They can then establish their member equity by doing an exchange with a current member on the basis of the credit established by the provisional member's performed labor or upon labor volunteered to support the services and projects of co-sponsored non-profit or not for profit community associations.
FRN/CRN Exchange Rates and related details:
The relative exchange rate between CRNs and FRNs in the dual version will be based upon the current definition of a “Living Wage” per hour for low skilled labor, as defined by the US Department of Health and Human Services. In effect the CRNs are "pegged" to the US Dept. HHS definition of a "Living Wage," and will be periodically adjusted. The value of more highly skilled and equipped labor can be established between the exchanging CRX members. The CRNs can then be used to pay for other services and commodities being offered. Currently the Living Wage exchange rate is $10.00 FRN equals 1.00 CRN.
Withdrawals of the CRNs in US FRNs from the dual currency version of the CRX is not possible directly, because the CRN's are a "sovereign" currency. Members can exchange their CRNs with another member for FRNs. The CRX is not intended to be used as a process to only extract U.S. Dollars (FRNs). On an annual basis the FRN currency withdrawals from the CRX will be reported to the members and to the US IRS as miscellaneous taxable income on a form 1099. Accounts will be considered to be abandoned when the account has had no transfer activity for a calendar year.
The CRX is organized as a Limited Liability Corporation. This allows the CRX to convert CRNs to FRNs only when it operates with in dual currency version. In the single currency version the exchanges are sovereign to the association. This complies with the limitations placed upon most community currencies by the US I.R.S. that all exchanges be convertible to an equivalence in US Dollars. The LLC corporate form allows earnings and equity within an LLC to be only taxed when it is withdrawn from the corporation, rather than being taxed every time it is re-distributed within the LLC.
Internal Accounting and Fees for Services:
Account balances and recent transfers can be viewed by the password protected member accounting utility on line for free, or on request as a paper copy by US mail for an additional fee. Payments will be made by members to complete a member equity requirement (the details of this policy will need to adjustable) during the first year of their membership. Having zero member equity is assumed to be a temporary status lasting no more than 14 days.
The CRX Is Also A Cooperative:
As an exchange cooperative, we intend to fully follow the established principles of cooperation, as they relate to the community exchange process. This includes open membership, democratic member control, membership equity, that the organization will perform in a autonomous and independent manner, that we will support cooperation with other cooperatives, and we will support other organizations with similar concerns for economic democracy and sustainability within our community. The traditional principle of consumer cooperation of limited returns on member patronage will be expressed by low interest on member equity held in reserve.
The CRX is also a creative way to reward members in volunteering for work benefiting their cooperative. The participating cooperative would be an affiliated community organization and thereby eligible for monthly allocations of CRNS. This relationship will make volunteered member labor to be more affordable, and exempts the cooperative as an affiliated community organization from the application of US Labor laws and the application of IRS taxation on earned income. The participation of individuals in the CRX would make them independent participants.
Terms of Trading:
All goods are traded on an "as is" basis. Services and labor traded by members is self insured. On commodity or service even trades there will be a flat rate transfer fee. The recording of agreements will require a service fee, and if arbitration is requested there will be an additional service charge. There will be a carrying fee applied to credits that remain out of circulation for 60 days, or these credits can be put into reserve to the CRX for a specific time for the purpose of supporting the establishment of micro-enterprise start-ups by members upon application.
Terms of equity transfers can be on a minimum rate for an even exchange or on a time and materials basis. In even exchanges the service fee will on a flat rate basis subject to review. It is assumed that skilled and professional labor would have higher rates to be negotiated. At some point the CRN's may be accepted within other local exchange cooperatives by way of reciprocity. The CRNs can be used in exchange for goods as well as services.
Fraud Prevention and related services:
There are several methods for preventing fraud of different types. password protection of accounts, the recording of transfer agreements and of the completion of the agreements, spot auditing on equity transfers which have a related member complaint, an annual independent audit of the system; a mutual rating system could prevent certain types of abuse; no negative balances; the service to record the exchange documents and offering an arbitration service should prevent illegitimate claims.