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

Sinead.Quinn@volunteernow.co.uk 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