From: John CROFT <[email-masked]>
Date: Mon, 16 Sep 1996 14:50:29 +0800

Re: interLETS exchange
On Sun, 15 Sep 1996 Rob Squires wrote:

>>2)Create a new unit of currency which is neither equivalent to the
>> pound, USdollar, AUS dollar or any other.  I am not sure how such a
>> currency could be arrived at.
>>
>>Any input ?
>>
>>Rob.

To which larens imanyuel wrote

> A practical way to create a new unit of account is to specify
>an exchange rate on a particular day and the rules by which prices
> or exchange rates will change after that day.
>
> For Alta California Ecological Money Units (emus)
> the exchange rate was set at 1 emu = 1 troy oz. silver (= $4.80 U.S.)
> on 1 January, 1995.  This made a connection to the historical
> common law precious metal unit (troy oz. silver), corresponded
> roughly to the minimum payment for one hour of labor in the
> industrialized areas of the world on that day, and serendipitously
> had a conveniently round number for the initial exchange rate
> with the U.S. dollar. [8 cents U.S. = 1 minute labor (minimum payment)]

There is a problem here and that is that we are again anchoring the
measure of value (i.e. money) against a specific commodity (i.e. silver). 
The amount of silver available, and the price it gets on the market, will
determine the value of that money.

But silver is a "non-renewable resource" and to tie ecologically
renewable resources (eg. human labour) to the value of a
non-renewable resource is ecologically questionable.

> The rules of change are (roughly) that the average earnings of labor
> (seasonally adjusted) in industrialized areas should remain constant
> when specified in emus.  This labor-based evaluation means that
> the long-term prices of tangible commodities will constantly decrease 
> because of technological advances (including gold and silver).

"Technological advances" to date have only shown a decrease because
the value of fossil fuels (another non-renewable resource) is
consistently undervalued.  When we use "energy units/per quantity of
material extracted" many of the values that seem a technological
advance, in fact seem to be energetically a move in the wrong direction 
(eg. To extract 1 barrel of oil used to take on average the energy
consumption of 0.2 barrel to extract.  Now in many places it takes more
than 0.8 barrel, and will get worse as depletion of fields gets closer).

> Labor-basing allows the practical use of antiusury principles
> specifying zero interest within strongly bound communities.

Perhaps, but not always (debt slavery systems historically were
sometimes based on labour basing systems, in which "interest"
payments resulted in debtors selling themselves or their families into
bonded labour.)

> Because the most readily available figures are for labor costs to
> corporations rather than payments to laborers, making calculations
> a little difficult, and inflation has been relatively low recently,
> the practical exchange rate against the U.S. dollar has tended
> to stick at 1 emu = $5 U.S.
>
> To have a really rapidly adjusting unit would require creating
> a banking institution that would have the resources to do
> the statistical analysis frequently and to adjust a set of prices
> of standard commodities for which the emus could immediately
> be exchanged.  If 10% of the value of the units were backed
> by warehouse receipts for these tangible commodities and 
> the other 90% by a lawful obligation to pay from future production,
> these units would be more secure than the common international
> fiat currencies.

Warehouse receipts may work, but what about production trends that
are shifting off conventional systems to "just-in-time" production
processes not needing large warehouse inventories?  And what about
the decline in world food stocks reported by Worldwatch Institute?

Obligation to pay from future production assumes future production value
is going to be equal to or greater than the value of present production. 
While this has been historically true, it may not be true for the medium to
long-term future.  If we are to move to a steady state economy, then we
will come to a stage where expansion is impossible.  If it is true, as
Donella Meadows et al suggest in "Beyond the Limits", that in significant
resources we have crossed the threshold from living on our
bioshpherical income (what is infinitely renewable), and have started
consuming our biospherical capital, then an obligation to pay from future
production will be a recipe for long-term slavery.  Already it has been
estimated that human beings are consuming living resources at a rate of
40% the full photosynthetic potential of the planet.  With population
increasing 100 million yearly, and a revolution in rising living standards
underway in South and East Asia, any bets on how soon we hit 100%? 
What then?

What we need, I feel, to help us guide our way out of the morass that
this suggests, is the creation of grass-roots, local environmentally
responsive currencies, as we find with LETSystems.  International
trading can then grow from the "bottom up" as it should, rather than be
imposed by fiat from the top down.  Lord Maynard Keynes suggested
something similar at Bretton Woods, but his proposal was ignored
because US was the overall economic winner of World War II and Foster
Dulles (and others) were keen to see the US$ emerge as a de-facto
international currency.

Hope this helps the discussion

John Croft