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Alternative Economies:
Community Currencies and Trading Schemes
13 June 2014
twitter: @NICVACEE
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From Bank Debt to Mutual Credit
or
Money as a social technology
Leander Bindewald
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NICVA, Belfast, 13st June 2014
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This presentation has been produced by the New Economics Foundation as part of the Community Currencies in Action (CCIA) collaboration project. CCIA is a transnational partnership working to develop and deliver community currency demonstrations in several member states across the North West of Europe. CCIA will lead the way in sharing knowledge and best practice to enable communities throughout Europe to grow stronger in their ability to achieve vibrant and prosperous networks that are efficient in delivering social, economic and environmental outcomes.
CCIA will design, develop and implement community currencies across NW Europe; providing a rigorously tested package of support structures to facilitate the development of CCs across NWE and promote CCs as a credible (policy) vehicle for achieving positive outcomes. CCIA is part funded through the INTERREG IVB North West Europe (NWE) Programme, which is a financial instrument of the European Union’s Cohesion Policy - Investing in Opportunities. Find out more about CCIA on our website: www.communitycurrenciesinaction.eu
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From Bank Debt to Mutual Credit
1. What is money?
2. What is the role of Banks
3. Where does money come from
4. Problems with bank-debt money
5. What are Community Currencies?
6. What are the different concepts
7. What are the advantages
8. Typical examples
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1. What is money?
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2. What do banks do?
Where did this money come from?
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2. What do banks do?
This is where money is created!
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Loan Agreement
I agree to repay the sum of
£ 10,000
with interest at 10%
Signed: A. Customer
Customer’s
Bank Statement
Personal loan 10,000
Balance 10,000
DR CR
3. Bank credit is money
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Simplified bank balance sheet
Assets Liabilities
Central bank reserves
Bonds & other liquid assets
Derivatives
Customer loans
Government bonds
Equity capital
Bonds in issue
Derivatives
Interbank borrowing
Deposits
Interbank lending
This is money
…and this is money
Cash
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Government bonds
The act of creating new money
Assets Liabilities
Bonds & other liquid assets
Derivatives
Customer loans
Equity capital
Bonds in issue
Derivatives
Interbank borrowing
Deposits
Interbank lending
STEP 1a: You sign a loan agreement with the bank. The bank now has a new asset.
STEP 1b: The bank credits your account, creating a new deposit, ie new money.
Central bank reserves
Cash
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The act of creating new money
Assets Liabilities
Bonds & other liquid assets
Derivatives
Customer loans
Equity capital
Bonds in issue
Derivatives
Interbank borrowing
Deposits
Interbank lending
STEP 2a: You spend the money (on whatever you borrowed it for)
STEP 2b: When you transfer your deposit, your bank transfers CB reserves to settle your payment with the other bank.
Central bank reserves
Cash
Government bonds
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The act of creating new money
Assets Liabilities
Bonds & other liquid assets
Derivatives
Customer loans
Equity capital
Bonds in issue
Derivatives
Interbank borrowing
Deposits
Interbank lending
STEP 3b: by borrowing on the interbank market
STEP 3a: At the end of the day the bank replenishes its reserves
Central bank reserves
Cash
Government bonds
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Inter-Bank Clearing
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Bank failure: solvency
Assets Liabilities
Bonds & other liquid assets
Derivatives
Customer loans
Equity capital
Bonds in issue
Derivatives
Interbank borrowing
Deposits
Interbank lending
If a bank makes too many losses on its assets (because the debtor defaults)…
It will wipe out its own capital, and become bankrupt.
Central bank reserves
Cash
Government bonds
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Bank failure: liquidity
Assets Liabilities
Bonds & other liquid assets
Derivatives
Customer loans
Equity capital
Bonds in issue
Derivatives
Interbank borrowing
Deposits
Interbank lending
If customers try to cash in their claims too quickly – ‘a run on the bank’
It will run out of reserves and will be broke
Central bank reserves
Cash
Government bonds
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Where does money come from?
“When banks make loans they create additional
deposits for those that have borrowed”
Bank of England (2007)
“In the Eurosystem, money is primarily created
through the extension of bank credit… The
commercial banks can create money themselves.”
Bundesbank (2009)
“When banks extend loans to their customers,
they create money by crediting their customers’
accounts.”
Mervyn King (2012)
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Bank debt money
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4. Problems with Bank-Debt money
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Monopoly Bank Money
• One size does not fit all economic regions
• Interest and exchange rates favour the strongest
• Vital import/export balancing and competition effects are lost
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Professor, why did nobody notice?
“At every stage, someone was relying on someone else; and everyone thought they were doing the right thing” Professor of Economics Luis Garicano, London School of Economics in response to the Queen, November 2008
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Inequality through embedded interest
www.monneta.org
nef (the new economics foundation) www.egs.mmu.ac.uk
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www.PositiveMoney.org
Monetary Reform
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Who can create money?
Banks
created as interest-
bearing debt by
private banks
“The Ecology of Money” by Richard Douthwaite
People
based on “resources”
and mutual agreement
Government
spent into
circulation by state
and collected as
tax
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5. What are Complementary Currencies?
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“An agreement within a community to use something as a medium of exchange”
Bernard Lietaer
“Currency is any unit system,
that facilitates collaboration
in a community”
Currency = Social Technology
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Local exchange – backed by fiat currencies
Social exchange – time credits/hours
Economic exchange – Business Barter, Loyalty points
Environmental exchange – Reward Points, Carbon quotas
Community Currencies concepts
Learning/Awareness, “participate and feel empowered”
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Examples: Local Currencies
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Local Solution: Plugging the leaks
from: www.pluggingtheleaks.org
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Social Inclusion
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SME Credit Currencies
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Ecological Reward Points
www.e-portemonnee.be
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What is Bitcoin? – An Analogy
1922: “I heard it on the Radio”
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2012: “I paid for it with Bitcoin”
What does Bitcoin facilitate?
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CCIA: Implementation Framework
Overall aims
Project Plan
Stakeho
lde
rs
Project specific objectives
Partne
rs
End
users
Currency Model
www.CCIA.eu
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www.CCIA.eu/ToC-Toolkit
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Want to know more?
http://www.neweconomics.org/issues/entry/community-currencies
www.community-currency.info
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“Money is not metal; it is trust inscribed” Niall Ferguson
Money - a Social Relationship
WHAT IS TIMEBANKING?
www.volunteernow.co.uk
History of Timebanking
What is a Timebank? • Share skills with others and be
rewarded for it
• For every hour you give providing
help to another member you receive
one time credit
How it Works
• One hour = One time credit;
• Principle of ‘giving’ and ‘receiving’- 2 way
exchange;
• Time Broker / Co-ordinator / Organiser (can
be more than 1 person);
• System to record;
Core Values
• Recognising People as Assets
• Valuing Work Differently
• Promoting Reciprocity
• Building Social Networks
• Respect
Timebanking in Northern
Ireland
Redburn Loughview Community
Forum
Redburn Loughview
Community Forum
• Timebank Established in 2012
• 178 members
• 2,842 hours exchanged
Exchanges at Redburn
Loughview • Drill banner at front of building
• Moving/Lifting
• Organising Social Events
• Painting
• Painting / Decorating
• Reading Lessons
• Reiki
• Security/ House checking
• Sewing/ Embroidery
• Shopping
• Simple DIY
• Timebroker Services
• Typing/word processing
• Wildlife / Nature
• Woodwork
• power wash front garden
• remove rubbish from garden
• Training programmes
• Visiting
• Window cleaning
• Babysitting
• Beauty treatments
• Building work
• Computer Skills
• Cooking
• Craft Work
• CV writing
• Doing Errands
• Driving
• Errands
• Gardening
• Giving lifts
• Hairdressing
• Help to fill out forms
• Help with form filling
• Home repairs
• Housework
• Leafleting
• Lifts by Car
Benefits identified by Housing
Executive from RLCF Pilot • Operates outside financial systems – real
benefit to those on low incomes
• Encourage residents to learn new skills,
assist in the labour market
• Way to engage with socially excluded who
may not otherwise become involved
• Energises communities – recognises people
as assets rather than imposing top down area
based solutions
Benefits identified by Housing
Executive from RLCF Pilot • Fosters a sense of community, creates a sense of
belonging and promotes respect, tolerance and
diversity
• Reduces ASB by providing a mechanism through
which young people become more integrated through
the reciprocal nature
• Build social networks
• Encourage greater participation from a greater
number, and broader cross section of tenants than
some traditional models of engagement.
Carrickfergus Community
Currency
Small Grants Programme
Organisation Timebank
What makes it different to
‘traditional’ volunteering Reaches out to people who wouldn’t normally volunteer
Time of Our Lives, Dr Gill Seyfang, University of East Anglia (2002)
‘No society has the money to buy, at
market prices, what it takes to raise
children, make a neighbourhood safe,
care for the elderly, make democracy
work or address systemic injustices.
The only way the world is going to
address social problems is by enlisting
the very people now classified as
‘clients’ and ‘consumers’ and converting
them into coworkers, partners and
rebuilders of the core economy.’
For news, resources and
information
www.volunteernow.co.uk
[email protected] facebook.com/TimebankingVolunteerNow
Upcoming Events 19th June – Moving the Coproduction Conversation
Forward (in partnership with the New Economics
Foundation)
2nd October – Setting up a Timebank (Free)
Energy Brokering
SETTING UP AN OIL BUYING CLUB
NI Fuel Poverty & Oil Dependence
• Oil dependence is one of the key reasons why NI has the highest incidence of Fuel Poverty in NI
• ~63% households use oil as the main source of fuel
• Costs of heating an average 3 bedroom house with oil approx 30% more than with natural gas
• (£1573 - non condensing oil boiler or £1093 – condensing gas boiler)*
• A typical 3 bedroom semi-detached house will take around 2,000 - 2,700 litres of oil a year to heat the house adequately (depending on oil boiler) *
• Many households under use fuel because they cannot afford it
* Sutherland Heat Cost Tables October 2013
How An Oil Club Works
• An order is made for the total amount of oil.
• Payment for oil does not go through the oil club – people continue to pay their supplier as before and can pay using oil savings stamps if they wish.
• The club gives members collective bargaining power to negotiate with the oil delivery suppliers for the cheapest price based on the total oil order.
• Oil suppliers benefit from fewer goods vehicle movements - a full tanker can get as little as 8 miles per gallon. If deliveries are organised so that a tanker delivers to several customers in the same area, the tanker’s fuel consumption is reduced.
How An Oil Club Works
• Oil Clubs work best when it has members who can afford to place larger orders (e.g. 900 litres) as well as those members who can only afford smaller orders (e.g. 300 litres).
• Everyone gets the oil at the same price per litre regardless of the size of their order.
• Usually oil clubs will place an order once a month and will set a deadline for members to get their orders to the co-ordinator.
• Since the establishment of East Belfast/Cregagh Oil Club in September 2013, over 200 members have joined: 7 bulk orders have been placed for 156 households: Group savings of £2,411.21; Average savings of £15.46 per order.
How To Start up An Oil Club • Arrange a public meeting about the advantages of setting up an oil
buying club
• Agree membership Terms & Conditions
• Elect Chairperson, Treasurer and Secretary & Volunteers
• Create memberships forms and promote club
• Set the buy date – usually at the end of every month
• Set a deadline for members to get their orders to the co-ordinator.
• Collate the total amount of orders
• Research oil prices prior to the bulk buy
• Negotiate the cheapest price possible for the bulk order
How To Start up An Oil Club • Confirm to all those members who ordered, the name of the
successful oil supplier and the price per litre that was negotiated
• Email the order list spreadsheet to the successful oil supplier
• Oil supplier will contact the members on the spreadsheet to arrange payment and deliveries
• Inform the members / local paper of the total oil club buy and the money that was saved – to help promote the club
• Keep accurate records of all monthly oil club buys etc on a spreadsheet and keep a back up copy as a safety measure.
• Alert the members to the number of days to the next big oil buy then repeat process
Statistics
• 1st Oil buy was on Friday the 20th September 2013
• 134 community oil club buying members joined (165 East Belfast + 49 North Belfast)
• 111,775 litres of oil ordered through the club (20,300 in North Belfast + 91,475 in East Belfast)
91,475
20,300
111,775 litres of Oil Ordered
East Belfast
North Belfast
Statistics
• 226 Households got cheaper oil prices through 8 oil club bulk buys (27 in North Belfast + 199 in East Belfast)
199
27
226 Households
East Belfast
North Belfast
Statistics
• 40 Households got cheaper oil prices through individual brokering (9 in North Belfast + 31 in East Belfast)
• Members savings to date: £3,962.56 (Average - £14.90)
• Average savings to date: 4.57p per litre
£3,435.41
£527.15
£3, 962.56 Savings
East Belfast
NorthBelfast