More on Open Money

Extraits d'un entretien avec Michael Linton, mars 2005

Framework and definition

What money DOES, IS, FROM
The three characteristics of conventional money:

• Does => It Moves anywhere, independent of the person. What I buy doesn’t affect the money supply.
• Is => Scarce, limited supply.
• From => authority, central bank.

Money comes from the activity of the community. Then it moves within the community then eventually it goes out to bring services and products that are not produced in the community. Then comes the competitive advantage of communities. It uses its advantage to draw in money, then uses it to buy products.

The problem is if the supply comes down, the community becomes “drug addict”, needs the mean of exchange to bring in the goods and services. Short-termism. Tourism brings even more trouble. A depletion of means of exchange creates unethical behaviours. People export whatever they can, cut down trees, mine further, overkill (like an ecosystem where there is a shortage of oxygen). Time frame of a person = 20 years; of a company = 3 years.

Michael’s experience

Michael’s community went through a big crisis in 1981 (40 000 people, interest rates 20%). Then he created a community database to exchange services. Needs at least 100 000 people to work, requires lots of negotiation. They created a money for their network, which cannot leave the community. It is based on Alan Watts (1950) who showed that the big depression in 1929 was due to a shortage of money.
This is absurd: it is as if if centimetres were limited when we build houses. Money is just a measure. The real shortage can be wood or bricks, or food...The only value of money is to facilitate exchanges.
Michael had nothing scarce so they created a money without any promise, an imaginary money. How much to create? How to make it?

LETS system

• Does: it enables transactions between individuals. People make their transactions and create their deficits / credits on a 1 to 1 basis
• Is: it is not scarce. When you make a transaction, you create the money (+x / -x) and inject it in the system. The money is the breathing of the community.
• From: it comes from Us not from Them.

Money is just information, not valuable by itself. The primary function of money is to Connect my consumption with the products available.
Money is arbitrary, conventional and social. Information is free, need not be limited. Cannot be controlled, it is a P2P process (goes beyond Napster). It is based on trust, reputation, and experience. The conventional money is based on distrust, it is supposed to be valuable and that’s why it goes everywhere.

• Condensation laws => Water, money follow the same pattern
• Free money: no central authority decides how much to inject in the system. Inversion of the problem, the money is created by the community, P2P. There is no king or a person who is wiser. The structure and the game creates winners and losers.

Patterns

Once a community wants to go for it:

• Define a unit => hour, currency, kilowatt…? Any grouping can be chosen, SCC (Singular Community Currency). The loyalty programs, affinity cards…are SC but with limits (created by the producer not the user). It has to be a facility for users so that they can create their own CC
• 5000 cases in the world, mostly in Brazil and Argentina. 1000 in Europe, hundreds in US and Australia. Argentina had cases with paper
  • France has SEL (mutual credit system, with a log book = limited in size, few products, gadget or perceived like a system for the poor only)
  • Argentina took off because of a big crisis, money was worth nothing in a few days. Then people start barters on a 1 to 1 basis; created their money in their own neighbourhood, in a centralized way. Four million people used it until a major confidence crisis led to a collapse. Because there is central money, there is distrust hence possibility to cheat.
  • Variety of monies is the key. Variety => each has its simple accounting => smartcard which can have 20 million monies and communities. We can create any groups on the net (e-mail list), effective to the extent that others see it as valuable. The facility is available for millions of applications. Michael wants to create a network of servers that can connect as many communities as we want. Open ecology of utility and opportunity, like the Yahoo groups.

How to speed the process?

Show pilot cases:

• Commercial barter. 200 little networks existed in the US B2B for 2 billion $/year in 1983 (standard brokerage). The controller takes 10-15% fees in cash. Grown up to 20 billion now. International Reciprocal Trade Association.com
• Ireland. In 1973-1974, the clearing bank was on strike. Then people created their own money by writing checks and passing them around in smaller notes. It worked because people knew each other before accepting the check, went on for a whole year.

It can grow very fast, like the P2P, Skype or Internet.

Other

Money that comes back is better than money that goes away. SCC will stay in the community= good argument to Corporates, municipalities…My behaviour reflects the community I am part of. If I get +100, they get -100. Hence I spend in my neighbourhood, then in my locality, then in my region (small is beautiful). Variety goes the other way, hence people can have 5 to 10 currencies, with at least 5000 people in it.

The pattern of money is the pattern of things. The reduction of entropy is the creation of life and patterns. Collective intelligence is not the sum of individuals. Individuals supporting each others create money (information, protocols). Invisible hand of Adam Smith is about greed, competition.

Finansol : Patrick Viveret, Célina Whitaker, EU financing for a feasibility phase, with Trichet, Chèque Déjeuner, regions (Nord Pas de Calais, Bretagne and Ile de France) => reports.