LETS plus local community currency's and bitcoin?

[ShireSilver]

If the price is allowed to float

yes, but does the price of the one universal commodity currency currently float in a way that is beneficial to the requirements of a local community at a given time and place?

Why would there be one universal currency? That just sounds like a really bad idea. Eggs and baskets and all that.

We can see in Europe what happens when you try to have just one currency.

As amazing as bitcoin seems to be, I don't believe it can be all things to everyone. There are reasons to have other currencies. A free market in currencies is IMHO the way to go. Let each currency float against all the others, and the market will figure out the right price - and change the prices as needed.

[herzmeister]

then why are we discussing    

this thread is about local currencies and bitcoin after all

but ok, lots of parameters to fine-tune there. *How* local? Which rules? I'd like to see an empirical approach one day, i.e. many communities trying out different things, all sharing their findings through the internet.

(oh ok, and you said local commodity money, but a commodity for me is inherently universal)

[lonelyminer (Peter Šurda)]

Why would there be one universal currency? That just sounds like a really bad idea. Eggs and baskets and all that.

Money is subject to the network effect. On a free market, I would expect a small number of dominant currencies (maybe even only one), however there could be small local currencies. Think browsers or operating systems.

We can see in Europe what happens when you try to have just one currency.

The Euro is a political project, not a market one. The reason why it failed (or will soon) is a variant of the tragedy of commons (see Philip Bagus: The Tragedy of The Euro).

But in the past, there were times where gold and silver were dominant due to market forces. The various names for money, e.g. dollar, pound, mark, were merely different weight units (of gold/silver).

[herzmeister]

to be nitpicky, Dollar comes from Thaler comes from the name of a location, Joachimsthal in Bohemia.

[matthewh3]

to be nitpicky, Dollar comes from Thaler comes from the name of a location, Joachimsthal in Bohemia.

A dollar is the same weight as a British Crown (coin) isn't it (a quarter of a sovereign with a sovereign or a £ used to be equal to a Troy pound of sterling silver) ?  Also the British colony's in India also used a dollar too I think.

[matthewh3]

to be nitpicky, Dollar comes from Thaler comes from the name of a location, Joachimsthal in Bohemia.

A dollar is the same weight as a British Crown (coin) isn't it (a quarter of a sovereign with a sovereign or a £ used to be equal to a Troy pound of sterling silver) ?  Also the British colony's in India also used a dollar too I think.

As under the pre 1918 gold standard about $4=£1

[matthewh3]

to be nitpicky, Dollar comes from Thaler comes from the name of a location, Joachimsthal in Bohemia.

A dollar is the same weight as a British Crown (coin) isn't it (a quarter of a sovereign with a sovereign or a £ used to be equal to a Troy pound of sterling silver) ?  Also the British colony's in India also used a dollar too I think.

As under the pre 1918 gold standard about $4=£1

It wasn't actually equal too $4=£1 as the $ was .900 silver and the Crown .925 Stirling.

[herzmeister]

I was referring to lonelyminer's statement about "The various names for money", i.e. merely the etymology.

[Haplo]

There is no such thing as a "generic unskilled labor hour",

Yes, is a work that you don't need preparation nor any special abilities to complete. It's a very simple definition. Usually it's said "it is more or less equivalent to 10$" as an orientation. The intention of using hours is avoiding USD inflation.
Anyway, if you don't like that unit, you can use USD, silver oz, liters of milk or whatever you prefer. Whatever the group agrees will work better for them.

I repeat, there is no such thing as a generic "unskilled labor hour". Herding geese, painting houses, moving boxes, and digging holes are all "unskilled labor", but they certainly are not all worth the same amount of money. Nor is the quality of work the same between laborers or companies for all of those jobs. Also, your "they're trying to avoid inflation" argument is 100% invalid as virtually every community currency operating in the US is backed by USD. A few "have plans" to back their currency with stupid things like firewood, but I haven't seen it happen yet and I can already tell you how that will work out. How many tons of firewood does it take to exchange the same value as one ounce of gold? Which is more expensive to store? Which will rot and become more or less useless if it gets wet?

and I don't have to prove that Keynes was wrong in order to say that Gessel's depreciating money is crap when Gessel himself was full of crap.

Glad that you get they're different. Out of curiosity...What would you say is the worst crap from Gesell?
Not talking about solutions, what misconception?

There are two major fallacies in Gessel's work. The first is the idea that interest is an unfair charge against workers (and business owners, who Gessel would rather see eliminated) for capital. The second is the idea that workers should receive "all of the fruits of their labor". He specifically mentions salespeople as being more or less superfluous middlemen that steal potential "fruits" from the "laborers".

The stated purpose of LETS and every other ponzi scheme like it is "to provide an alternative (or adjunct) to state money, and to create jobs in the community". In every case, people get some sort of discount; either in the form of a markdown on goods or else (extremely) cheap labor. I remember an article about it once, noting some old lady getting her house painted for less than half of what it would cost her in dollars.

LETS aren't designed as ponzi schemes. You don't need more and more users to make it work. In fact, it's trust requirements make growing the user base very difficult or even impossible from certain point.
What makes you think they're ponzi schemes?
I haven't heard of any discount not in stuff prices nor in wages. Where have you heard that?
I read some articles about bitcoin being a ponzi scheme too. Could your article be biased too?
Could the old lady be saving the hidden costs of conventional money?

Unless those community currencies are saving the hidden costs of minimum wage, which would be illegal AFAIK, then no. Bitcoin started at zero value, whereas LETS and similar schemes start bankrupt. The berkshares site even specifically says "merchants give a ~2% discount as an incentive to use berkshares". Also, the article I read was pushing LETS as a great socialist panacea, it was my own conclusion that they are ponzi schemes, based on the fact that they begin bankrupt and run on debt.

The system overall is basically the same stuff the NGOs shove down poor developing countries' throats: shame based credit money. They claim by offering either zero interest or artificially low interest you can stimulate business, but all real business runs on capital, the holders of which demand interest and for good reason. The incentive of interest ensures that money is spent on the most efficient businesses rather than socialist bridges to nowhere. By taking away interest and economic responsibility through their arbitrary credit materialization, they invert economic control from consumers to producers and eliminate any chance of getting capital influx or developing any real business.

This is not to borrow money for investing. This is just realizing the internal trades within a community and replacing conventional money with their own accounting in the degree that is possible. Nothing to do with micro-credits which, by the way aren't at zero interest.
But you can also borrow to invest at low or no interest with others systems like Wir or JAK.
Still they aren't ponzi schemes nor destroy the economy. Read about them, also interesting.

If you want to be a "good person" and paint some old lady's house for free, then volunteer and do it for free. Don't use some retarded socialist ponzi brainwashing scam. LETS, Berkshares, and all their crony companions are pure blooded communists, and the results of communism are always the same no matter what shade of red you paint it.

Amazing how fast dogmatic people bring up words like brainwashing. I'm far far away from communism. You haven't read Gesell (specially critic with Marx) nor Riegel (who inspired LETS). Both libertarians.
Start with their wikipedia pages because it seems that you haven't gone that far in your research:

http://en.wikipedia.org/wiki/E.C._Riegel
http://en.wikipedia.org/wiki/Silvio_Gesell

Then reading directly what they said from them won't hurt you:

http://www.newapproachtofreedom.info/
http://www.community-exchange.org/docs/Gesell/en/neo/

I have read Gessel's work, in his (translated) words for myself. I always do so in regards to any subject that interests me even slightly, and that I might argue about. I'm quite familiar with Gessel, and when I first read his work I even thought it was a good idea.

However, I have also read "Human Action" cover to cover, and after comparing Gessel's arguments to von Mises', I can only conclude that Gessel's arguments, and not Mises', are invalid. Do I also need to rub it in your face that Gessel served as the economic Tzar under a communist state (albeit for a short time)? Gessel says that he is an anarchist and supports freedom, but the sort of freedom he wants is the freedom to do whatever you want on anyone else's property. His "freeland" idea was nothing short of pan-communism, and his obsession with worker ownership was obviously pinko. Gessel's "Robinson Crusoe" argument was especially convincing, but when you take away the moral assertions and examine it from a pure economic standpoint, it completely fails to make sense anymore. An economy where you grow everything yourself and the only trade is barter in perishable goods, then it's true no interest is possible, however no economic specialization is possible either so it's a moot point- you can't have economics without a real economy.

Also, Switzerland is currently a bankrupt hole working on becoming a third world country. Wir hasn't worked any economic miracles for them, although it has produced a lot of superfluous low quality housing. It's merely a less extreme version of the colossal ghost towns built by the communist Chinese government.

[jtimon]

There is no such thing as a "generic unskilled labor hour",

Yes, is a work that you don't need preparation nor any special abilities to complete. It's a very simple definition. Usually it's said "it is more or less equivalent to 10$" as an orientation. The intention of using hours is avoiding USD inflation.
Anyway, if you don't like that unit, you can use USD, silver oz, liters of milk or whatever you prefer. Whatever the group agrees will work better for them.

I repeat, there is no such thing as a generic "unskilled labor hour". Herding geese, painting houses, moving boxes, and digging holes are all "unskilled labor", but they certainly are not all worth the same amount of money. Nor is the quality of work the same between laborers or companies for all of those jobs.

Good examples. Negotiating labor prices wasn't going to be that easy. I guess they end up using 1 h = 10 USD.
Then you don't like hours denominated LETS, ok. Then chose other unit. The unit is not the fundamental concept of mutual credit.

Also, your "they're trying to avoid inflation" argument is 100% invalid as virtually every community currency operating in the US is backed by USD.

Then those community currencies are not mutual credit. LETS aren't backed by anything. Well, you could say that "LETS are backed by the wares offered by the participants" or "LETS are backed with trust". But in the sense you mean, in the traditional one, LETS aren't backed.
You should know that given that you claim to know "virtually every community currency operating in the US".

LETS aren't designed as ponzi schemes. You don't need more and more users to make it work. In fact, it's trust requirements make growing the user base very difficult or even impossible from certain point.
What makes you think they're ponzi schemes?
I haven't heard of any discount not in stuff prices nor in wages. Where have you heard that?
I read some articles about bitcoin being a ponzi scheme too. Could your article be biased too?
Could the old lady be saving the hidden costs of conventional money?

Unless those community currencies are saving the hidden costs of minimum wage, which would be illegal AFAIK, then no. Bitcoin started at zero value, whereas LETS and similar schemes start bankrupt.

LETS don't start bankrupt. The positive balances always equal the negative ones. That's why they talk about "the power of zero".
That's the only reason why you think they're ponzi schemes?

The berkshares site even specifically says "merchants give a ~2% discount as an incentive to use berkshares".

Berkshares aren't mutual credit.

The system overall is basically the same stuff the NGOs shove down poor developing countries' throats: shame based credit money. They claim by offering either zero interest or artificially low interest you can stimulate business, but all real business runs on capital, the holders of which demand interest and for good reason. The incentive of interest ensures that money is spent on the most efficient businesses rather than socialist bridges to nowhere. By taking away interest and economic responsibility through their arbitrary credit materialization, they invert economic control from consumers to producers and eliminate any chance of getting capital influx or developing any real business.

This is not to borrow money for investing. This is just realizing the internal trades within a community and replacing conventional money with their own accounting in the degree that is possible. Nothing to do with micro-credits which, by the way aren't at zero interest.
But you can also borrow to invest at low or no interest with others systems like Wir or JAK.
Still they aren't ponzi schemes nor destroy the economy. Read about them, also interesting.

There are two major fallacies in Gessel's work. The first is the idea that interest is an unfair charge against workers (and business owners, who Gessel would rather see eliminated) for capital.

What?
He was not against profits or free floating interest rates, just against a hidden rent in the gold standard.

The second is the idea that workers should receive "all of the fruits of their labor". He specifically mentions salespeople as being more or less superfluous middlemen that steal potential "fruits" from the "laborers".

Well, he was a merchant. It's kind of strange that he call himself a parasite, don't you think?
Remember what he said about Marx? Remember what he said about free trade?

I'm quite familiar with Gessell [...]

[...]An economy where you grow everything yourself and the only trade is barter in perishable goods, then it's true no interest is possible, however no economic specialization is possible either so it's a moot point- you can't have economics without a real economy.

It seems that you have forgotten the book you claim you've read then or mixed it up with something else in dreams. Where did he proposed such an economy?

[lonelyminer (Peter Šurda)]

I was referring to lonelyminer's statement about "The various names for money", i.e. merely the etymology.

You are correct that Dollar comes from Thalers, but that does not invalidate my argument. See wikipedia:

From these earliest 'thaler' developed the new Thaler – the coin that Europe had been looking for to create a standard for commerce. The original Joachimsthaler Guldengroschen was 1 ounce in weight (27.2 g). The Reichstaler (1566 to 1750) was defined to contain 25.984 g of Silver which was set as the coin of account of the Empire.

[Haplo]

Good examples. Negotiating labor prices wasn't going to be that easy. I guess they end up using 1 h = 10 USD.
Then you don't like hours denominated LETS, ok. Then chose other unit. The unit is not the fundamental concept of mutual credit.

Also, your "they're trying to avoid inflation" argument is 100% invalid as virtually every community currency operating in the US is backed by USD.

Then those community currencies are not mutual credit. LETS aren't backed by anything. Well, you could say that "LETS are backed by the wares offered by the participants" or "LETS are backed with trust". But in the sense you mean, in the traditional one, LETS aren't backed.
You should know that given that you claim to know "virtually every community currency operating in the US".

True, LETS isn't backed by anything. It's not really an advantage in that case, either.

LETS aren't designed as ponzi schemes. You don't need more and more users to make it work. In fact, it's trust requirements make growing the user base very difficult or even impossible from certain point.
What makes you think they're ponzi schemes?
I haven't heard of any discount not in stuff prices nor in wages. Where have you heard that?
I read some articles about bitcoin being a ponzi scheme too. Could your article be biased too?
Could the old lady be saving the hidden costs of conventional money?

Unless those community currencies are saving the hidden costs of minimum wage, which would be illegal AFAIK, then no. Bitcoin started at zero value, whereas LETS and similar schemes start bankrupt.

LETS don't start bankrupt. The positive balances always equal the negative ones. That's why they talk about "the power of zero".
That's the only reason why you think they're ponzi schemes?

Mutual credit = mutual inflation. There is no practical limit to the positive and negative balances that can be accrued under such a system. As a result, the fact that all balances "zero out" on paper is of no consequence.

There are two major fallacies in Gessel's work. The first is the idea that interest is an unfair charge against workers (and business owners, who Gessel would rather see eliminated) for capital.

What?
He was not against profits or free floating interest rates, just against a hidden rent in the gold standard.

The second is the idea that workers should receive "all of the fruits of their labor". He specifically mentions salespeople as being more or less superfluous middlemen that steal potential "fruits" from the "laborers".

Well, he was a merchant. It's kind of strange that he call himself a parasite, don't you think?
Remember what he said about Marx? Remember what he said about free trade?

I'm quite familiar with Gessell [...]

[...]An economy where you grow everything yourself and the only trade is barter in perishable goods, then it's true no interest is possible, however no economic specialization is possible either so it's a moot point- you can't have economics without a real economy.

It seems that you have forgotten the book you claim you've read then or mixed it up with something else in dreams. Where did he proposed such an economy?

So I have to dig through that garbage and point out all the glaringly obvious quotes I'm referring to, eh? Fine, but that will take time.

[Mageant]

I think Bitcoin and local currencies can complement each other very nicely.

You would use Bitcoin for purchases over Internet, interregional trade and large purchases (like a house or a car) when you want to deal with a really safe, highly valued currency.

On the other hand though use a local currency for regular purchases at a local store, because handing out some slips of paper at the cash register is just simply faster and less complicated.

This way, we wouldn't need any government-backed money anymore at all.

[daybyter]

But what could bitcoin offer those lets? I think easy (cheap, fast) electronic payment is one the features.

BTW: if the EU actually takes the 1 and 2 cent coins out of the market, bitcoin payers could actually save some money? But mobile payment would be a requirement then. And instant payment, or course..

[jtimon]

But what could bitcoin offer those lets? I think easy (cheap, fast) electronic payment is one the features.

They already have electronic implementations of LETS. Cyclos, a Drupal module, etc. I think Mageant's description of what bitcoin can offer is better.

[fergalish]

I think Bitcoin and local currencies can complement each other very nicely.

You would use Bitcoin for purchases over Internet, interregional trade and large purchases (like a house or a car) when you want to deal with a really safe, highly valued currency.

On the other hand though use a local currency for regular purchases at a local store, because handing out some slips of paper at the cash register is just simply faster and less complicated.

This way, we wouldn't need any government-backed money anymore at all.

This is something I've always thought bitcoin could do.  I've always imagined a world where local, or even national, currencies are backed by bitcoins.  e.g. Your government can prove it has 100,000 bitcoins, and so issues $1 trillion (or whatever) at a fixed exchange rate which citizens use on a daily basis.  When you need to buy a house, you save up your $s, exchange for BTCs and buy the house.  International trade imbalances would be paid off with BTCs.  (aside: I realise that I've made an exchange rate of $1 million per btc, but bear in mind I'm just using the "$" as a symbol to indicate unit-of-currency, not as an indication of the existing US$. We could use, e.g. B$)

This could even work with LETS.  A wealthy bitcoin entrepreneur could set up a bank and issue a BTC-backed LETS currency which the local community would use.  Neighboring localities would have their own currency backed by whoever owns bitcoins there, and the exchange rate would fluctuate according to how hard the people worked, and how much produce they manage to export to the surrounding localities in order to bring more BTCs into their own locality.

Less-than-honest BTC owners might try to surreptitiously issue more currency, but inflation would always catch up with them.

In a way, this would also partly solve the scaling problems with bitcoin (or have they all been resolved?).  If everyone all over the world were to pay for their small transactions with bitcoins, the blockchain would grow by... how much?... 1 TB per day?  And if everyone had, say, 10 non-empty addresses, then you'd need a balance-block of... maybe 5 or 10TB. (these are just guesstimates).  So, like Mageant says, paper currency for day-to-day transactions.

[jtimon]

This could even work with LETS.  A wealthy bitcoin entrepreneur could set up a bank and issue a BTC-backed LETS currency...

Again, if it is backed by bitcoin then it is not LETS. He could issue a local currency backed by bitcoin, but not a BTC-backed LETS currency.
LETS is mutual credit, it's a different thing from backed currencies.
Although LETS are local currencies, not all local currencies are LETS.

[fergalish]

Again, if it is backed by bitcoin then it is not LETS. He could issue a local currency backed by bitcoin, but not a BTC-backed LETS currency.
LETS is mutual credit, it's a different thing from backed currencies.
Although LETS are local currencies, not all local currencies are LETS.

Yes, indeed.  What is the acronym for a Local Exchange Trading System which is *not* based on credit/debt but rather on value-by-scarcity of some commodity?  How about BitcoinBackedLocalEconomicTradingSystem,PaymentNetworkandCurrency.  BBLETS,PNaC. 

[jtimon]

Yes, indeed.  What is the acronym for a Local Exchange Trading System which is *not* based on credit/debt but rather on value-by-scarcity of some commodity?  How about BitcoinBackedLocalEconomicTradingSystem,PaymentNetworkandCurrency.  BBLETS,PNaC. 

How about just what is is? A Bitcoin backed local currency. Including LETS in the acronym would be misleading.
All I'm trying to do is to avoid that people get a wrong idea about what LETS is. Because there's a lot of confusion about the qualities of different alternative monetary systems. People tend to see all of them as if they were the same thing and they're not. Also many times different names mean almost the same thing.