COUR-THIMANN: And thank you so much for bringing us
here together to rethink money. And if you heard, all
about the discussion this morning was how to
get to democratize money. One way is really through
complementary currencies, and you can judge from
the titles of the books that we’ve brought
with us, if you want to have a look at Occupy
Money by Margrit Kennedy, which is Creating an Economy
Where Everybody Wins, or People Money,
which she co-authored, with The Promise of Regional
or Complementary Currencies. And in fact, as
Christine puts it, money is a method of
representing and moving resources within a group. And this within is
then how the resources are moved within the group. Margrit Kennedy [? would tell ?]
the monetary system that we have now continually
redistributes wealth from the large majority
to a small minority. And from that
[INAUDIBLE],, she thinks there is a need
to reoccupy money through complementary
currencies. So I’m happy to welcome
everybody here two lawyers, two economists,
and two historians. We are only four, but they are
so skilled that they really have [? a ?] [? trend ?]
[? over ?] [? bit. ?] So Helmut is a living example,
a concrete example, of the fact that you need
history and law to understand economics and especially
the nature of money. Helmut is both a jurist
and an economist. He’s a professor in Frankfurt. And he shapes the minds
of the young generations, but also the constitutional
law themselves and especially in
central banking. Helmut has many titles. So he’s a professor,
doctor, doctor, [INAUDIBLE] and honorary
[INAUDIBLE] and so on. We are very happy
to have you with us, and especially you
have brought something very precious, which is a
whole collection of bank notes of different kinds
which will show you how, in fact, complementary
currencies and multiple currencies was the rule and
not the exception in the past. Then we have Farley Grubb. So Farley is an
economic historian also. Also Farley Grubb is a professor
in the Delaware University. He has been looking
into the era of America before the revolution and after
and looking at the changes first through international
trade, including slavery and labor economy
supply through history. And from trade, you naturally
moved to money, which is the living blood of trade. And then we have Isabel. Isabel Feichtner is also
a professor [? of law. ?] She is in Wurzburg,
and she worked before in a law firm in New York. Isabel can tell you about
mining asteroids, can tell you about mining in the deep oceans. But today, she will be
down to Earth with us. And she is looking now at
the complementary currencies and especially the
German experiment with them, which is very
successful with the Chiemgauer. We also brought a few pieces of
those complementary currencies. And we’re happy to have with us
the founder of a local currency in Massachusetts, Susan
Witt, for the BerkShares together with Alice
Maggio who has been managing the
BerkShares that are used in the Berkshire country. Helmut, the floor is yours. HELMUT SIEKMANN: Thank
you very much, Philippine, for your kind introduction and
the kind words about my work. And thank you, Chris, very much
for organizing this conference and for inviting me
here to come to Harvard. Now I have to find
my presentation. So I’m only used to
the Windows world. And it’s always a challenge to
get used to an Apple computer. So complementary currencies
is not actually my– how come this is always on top? OK, now it does appear. In preparing this talk, I
looked a little bit closer in complementary currencies. Because we have learned
during my studies of economics that there is something
like [INAUDIBLE] but didn’t trade it further. And I’ve heard also about
Chiemgauer, about which Isabel will give you more details. And there was a paper a
few years ago published by the Deutsche
Bundesbank and that also traded those local currencies. And we didn’t use the term even
complementary currencies, just local currencies. And they kind of dismissed
it as quantitatively not really significant. But the interest is
now growing, mainly because of the crisis and
the aftermath of the crisis. And at the moment, the interest
in those local currencies is growing. And when I tried to
get into contact, I looked in on the internet. And there was a local
municipal savings bank, which allegedly
would provide notes of the Chiemgauer. I called there, and then
they asked and said, stay on the line, and
we will try to clear it. But after a long,
long time, they said no, no, we are not
going to send it to you. And so that’s
already demonstrated one of the problems
of getting hold of a local currency
when you are not really living in the region. And then I looked
at the home page, and I saw the manager of the
association was, by the way, a French person living there. And they had only
altogether four opening hours during the week, and
I had other things to do. So it was not so easy
to get into contact. But when the [INAUDIBLE]
[? manager ?] and he was very, very polite and very helpful. So I joined the association. I’m a member of the
Association of the Chiemgauer. And a few days ago,
I got them here. They are [? real. ?] So if
you want to look at them, I have already scanned them in. That’s how they look
like, and that’s always something very good
for a complementary currency. There is something you
can hold in your hand. But it also shows he was
very eager, voluntary work, and tried to convince me that
this whole philosophy is really kind of the saving
of many problems. And so that’s [? also ?]
[? the ?] third information I got from that, that
you need probably this kind of a
conviction to keep something like that running. Now, let’s come to the
more academic details. First, a few words
on terminology, not the usual
academic definitions but just a few remarks– you all know this probably from
the functional view of money. I don’t want to go into it,
and I don’t have the time to. What is money and
how to define it? That is probably
better done by– FARLEY GRUBB: Farley. HELMUT SIEKMANN:
Farley, I’m sorry. And what I also
wanted to mention is also in contrast to what
was discussed this morning. From the beginning
on and especially the research of
[INAUDIBLE] showed us that there has always been
not only this functional view that private persons get
together and see, oh, it’s more efficient to have
money instead of barter economy, that there
has been probably from the beginning on
some collectivist view and that the intrinsic
value, even of coins, was rarely equivalent
to the nominal value. So there was always
something additional to it and some kind of society
or government of an early type that was behind it to
give it some credibility or whatever, maybe even
for religious reasons. Now, what is currency? I thought, are complementary
currencies really currencies? Because currency,
in our language, quite often is something also
regulated by the sovereign, instituted by the sovereign. And whatever I could see at
those complementary currencies, it was purely private
organizations. So somehow, that contradicts
to the term currency. But the currency term
has become quite wide. As you can see here,
there is expansions. And so one may go ahead and call
complementary currencies really currencies, even though
that somehow contradicts to the notion of a currency. Now, that’s very
important for me to show. After looking in
a lot of different of those products of
the monetary systems, those notes from
the beginning on– and we talk about banknotes,
not about coins anymore. Banknotes, that’s
my main interest. They have been always, in
the beginning, a complement to real money, to [INAUDIBLE],,
to the coins, silver or gold, or even the copper coins. And so this also is being
watered down somewhat that there is a move to
narrow down the concept. Not all parallel
currencies are called complementary currencies. It more has become a technical
term within those circuits, only these currencies on
a local or regional level, and often demurrage. I hope I pronounce it correctly. That means they lose value
unless you keep adding some kind of stamps to it. Here you see my main source. And it was already mentioned,
this book by Margrit Kennedy and Bernard Lietaer
and John Rogers. And so that’s pretty
comprehensive on many of those currencies. They come to the result. Legal
tender, they don’t replace it, just parallel. And that’s where it
came from, my research from parallel currencies. And there was more of
the present day problems. Introducing a parallel currency
in a more or less failing state, like Greece introduced
a [INAUDIBLE] parallel to the euro that would help
them to solve the problem, I have my doubts. And then you have the book
money created by banks. More than 90% of all
money in a wide sense and the functional
sense of the word is created by financial
institutions, basically banks. And then they say, no,
we have a third category, complementary
money, people money. And that’s supposedly
democratic. And now, a short remark on
democratic representation and control, it was
a distinct decision after World War II in Germany
not to have democratic control because– and the majority of economists
would probably agree– that politicians will
destroy the monetary system. And there are a
lot of instances, in especially the
central European history, where it has been done. A lot of research
still is waiting. Because if you look into
archives, not all of that is true. But often, it’s now contended,
an independent central bank– that means not under the
control of politicians, no democratic control– is better for the stability of
a currency and helps by that way the poor people. They need more than the rich
people a stable currency. And that’s why we had, from the
founding days of the Bundesbank on, an independent institution. And our Federal
Constitutional Court, comparable to the
Supreme Court in the US, said this is compatible with
the principle of democracy. Well, that’s a long,
long discussion that has been going on, still going on. Now it’s in the primary
law of the European Union. OK, now we go on,
and I’ll give you just a few examples about
the heterogeneous origins of paper money. There are different routes. One is purely private. It was just receipts
for depositing coins or precious metal and
therefore became tradable. And an important role
played [? the ?] [INAUDIBLE] exchange, not really
money, but they substituted coins
for quite some time, and very important for growth. And then, of course,
we had always rulers who printed and started printing
money notes either immediately or by a bank they founded. And that was basically to
get interest, to get credit without paying interest. So it would be not
historically and legally correct to say there’s
just one strain of thought. There’s just one source. It’s just several
that get together. It’s complex, much more complex. And here, you see one example. That was allegedly the
first bank note in Europe issued by the Stockholm Bank. The next one was
issued not by the bank, but it was issued by the city
of Vienna under great distress during the Napoleonic Wars. And that often happened. Here, the first
bank note allegedly from France with the Banque
Generale, Banque Royale later on. It was renamed. You please correct
me if I’m wrong. And that was disastrous because,
as always, it’s the temptation. They printed too much of
it, and a lot of people lost their savings. And the same happened
about half a century later with the [INAUDIBLE] of
the French Revolution. And that is very interesting
from the legal point of view because those papers
had some value in so far as they were letters of
hypotheque, of mortgages on the nationalized
wealth of the Church and of the nobility
possibly too. That one worked
in the beginning. People trusted it. And then they printed
and printed and printed. And of course, it was wartime. And then later on,
it was worthless. Then they introduced [FRENCH],,
and that became worthless too. And what do rulers
do when people don’t accept paper money anymore? Then they give order to do
that and draconian fines not to use this piece of paper. And that happened in France. And that’s one of the
reasons why banks in France don’t carry the
name bank anymore. Here’s a German example. And there was also,
at a time when we had already a central
bank, Reischbank, it issued bank notes. But there were no legal tender. And they didn’t
have the monopoly. And that was issued directly
by the debt administration. And that was used like
small paper money, a small species of paper money. Reischbank was not allowed
to issue small denominations. Now we come to my attempt to get
a little bit of order into it. And some of those, what I show
is here an American example because the US, except
the two attempts, first the National Bank and
the second during the colonial war, which was already
shown here this morning, didn’t have one
until 1913, allegedly also to finance the
First World War. Here is an example from Germany. Wurttemberg, that’s part
of the German Empire. And they had kept the
right to issue bank notes. They were not private,
and they were parallel to the Reischmark. The denominations were
the same, parallel to the bank notes issued
by the Reischbank. Interesting to go in details,
but we don’t have the time. I have to see that
I can continue. Now I come to [INAUDIBLE]. He’s kind of the grandfather
of all the models of the now modern regional currencies. And what did he do to enforce
that money should circulate, should not be hoarded? So he imposed, in his concept– it never became an official
currency, of course– a fine for hoarding the money. You had to tear off one of
those small denominations, [? fennecs, ?] and then paste
them on this free money. That’s what he
called free money. And that’s from his
own publication. So in a way, that’s genuine. That’s original. I just scanned it from his book. I own it. And here, later on, I already
showed it to somebody. That’s later. And I don’t know
how genuine that is, but I found it in an old book
that I bought in a bookstore. And that’s the same principle. That’s his portrait on
front and the backside. Again, you had to paste a
little stamp every month to keep it valid. That’s the principle,
which we all see also in the modern times. And then in times of need,
you have parallel currencies, or complementary currencies. And need means like the
hyperinflation in Germany in 1923. They couldn’t even
print enough money. So they imprinted a 1,000 mark
bill and imprinted one billion. So that was not even the top. It went even until a trillion. So what did the authorities
do to help themselves? They issued complementary money. Here’s one from the
city of Cologne. Sometimes these are cities. But that’s legally. It’s written on it Gutschein. Whoever knows German,
that’s a voucher. They don’t call it money,
but it’s circulated. And I thought it’s
interesting because it carries the signature of our
later Chancellor Adenauer. He was, at that time,
mayor of Cologne. Here’s another one issued
by a private corporation, parallel currency. And here’s one
because I like that. That’s from my hometown. That’s where I was
born in Velbert. And this is legally different,
because it’s not a voucher. How come? It is a check, legally a
check, not a bill of exchange. It’s a check
because it’s legally drawn on the municipal
savings bank, which is owned by the city. And that’s a public law
institution, but it’s a bank. So therefore, it’s possible
to use this as a check. And all that was tolerated
by the Reischbank, by the central bank, because
it was not able to provide the necessary species. Now how did we come
to better times? Also a parallel
currency, which is really interesting for
Germany, because in 1923, they founded a new institution. And that issued a new currency
and also a new denomination. And this was also
legally structured like the [INAUDIBLE]. It was more or less a
letter on a mortgage on the national wealth. So it was correct what
was said this morning that always the wealth of the
population, of the people, is behind such a fiat
currency and its credibility. And this was parallel. And it was no legal
tender, but that helped. Instead of a billion, all of a
sudden, you had one Reischmark. And then the Reischbank
continued to exist and issued new legal tender
in a new currency, Reischmark. The older currency was mark. And that was parallel. So you had products of
this [INAUDIBLE] bank parallel to the central bank. And it was accepted and
circulated until the end. Here’s a later issuance. And you’ll see from the
date that that was already during the time
of the Nazi rule. Now, one of the prominent trait
of the complementary currencies today is that you try to achieve
another aim, another goal beyond simply using these
banknotes as a mean of payment. You want to foster something. There’s a regional economy. You want to make unused
resources into use to make the local economy grow. And there are
examples from the US. Instrumental use of the monetary
system I would call that. That’s kind of a
common trait of all the complementary currencies. Here, you may have a look on it. Somebody wants customers
to come to his business. And we have many
varieties of that type, like also saving stamps. You put them in a book
when you buy somewhere. And then it’s also
used like cash, because you can trade it
in– could, at the time, when I was a boy,
and got cash for it in the official currency. Here’s another one,
an earlier BerkShare. I hope it’s correct. I got that from the internet. I don’t have a real
specie of that time. Here it is. And here are the
modern examples. You brought some, and
I saw them already. And here’s another
interesting example. That’s from Jersey,
the states of Jersey. Jersey is part of the
English Crown system. I don’t even know if it’s
part of the United Kingdom. And they issue their own money. And there, it is
not instrumental, as far as I could find out. It’s more to finance
the local government. It extends the credit. It’s interest-free credit
for the local government. So that’s also an
interesting example for a parallel currency, not
only a private imagination. And here’s the Chiemgauer. And I look at the watch. So I have [? two. ?]
Here’s the real currency, and you may touch
it if you want. And it’s more to say,
especially if you’re trying to analyze
problems and benefits from those local currencies,
but I have used my time already, over-used, I think. So I would like to give
a hand over to Isabel. And as we talked about the
division of labor, so to say, and she is– PHILIPPINE COUR-THIMANN:
You’re on next. HELMUT SIEKMANN: Oh,
you are the next, OK. But Isabel is talking
more on the Chiemgauer, basically on their
specific legal problems. I could say them from the
European Union law perspective, but I stop here in order to
not over-use my time too much. Thank you very much. [APPLAUSE] PHILIPPINE COUR-THIMANN: Farley. FARLEY GRUBB: OK, I’m
going to talk from here. I don’t have a slideshow. It’s a theoretical paper, so
you don’t want to see that. I’m going to tell
you what I’m about and what we’re going to do here. Basically, I’m narrowly
focused on trying to understand British
Colonial American colonies and their creation of
what I call inside moneys, or mediums of exchange that
aren’t gold and silver coins. And they faced a problem. They constantly complained about
a scarcity of gold and silver coins, a scarcity of
outside money, if you will, in order to engage
in local trade. And I’m going to
try to explain that. Before I do that, let me
say I’m a big bad economist. I’m a Chicago
economist, Chicago PhD. So I’m very much wedded to
that monetary tradition. Most of you may know this
through Milton Friedman. I’m actually a
Robert Lucas student of rational expectations fame. And so I’m kind of hemmed
in by economic models. But let me repeat here. An economic model
is not reality. It’s a model. The whole point of
an economic model is to strip away
a lot of the noise and a lot of the
particulars of circumstance in order to see
core forces at work that you have to deal with. But it’s not reality. Now, unfortunately, a lot
of my economist friends fall in love with
their models and start to think of them as reality. And whenever they see reality
not matching their model, they deny reality. No, my model’s true. That can’t be right. And that’s not how
it should work. That produces ideology. The way it works is
you’ve got a model. You’ve got these forces. You can’t deny them. But the point is, is you look
at your particular historical circumstances and
you say, OK, now I got to add back into this
model what I need in order to see what’s happening
on the ground, and that’s what I’m
trying to do here. So I’m trying to take some very
basic economic models that we can’t deny but also look at
them critically and add back in some features
that will end up getting us local
currencies, inside moneys, things like that. So let me start with
British Colonial America. And this really applies
to any polity that has some constraints on it. So I think of colonies around
the world through time, but it might also apply
to smaller economies that are really being dominated
by larger economies, so economies that really
don’t produce their own what I would call outside money. In this world, it’s
the money that’s traded with between countries. And that’s gold
and silver coins. So British North
American colonies didn’t possess gold and silver. They didn’t mine it. They could only bring
it in through imports. And so they weren’t allowed. And they also weren’t
allowed by the British Crown to mint coins, so
they really couldn’t produce their own
money that was used to trade with internationally. So they’re constrained by that. And they’re also
constrained by not being able to create
something that they can really hold in a
fixed exchange rate without outside money. So one of the
conditions is that, whatever they do,
there’s no fixed exchange rate with specie
coins on the outside, because they don’t have
any ability to defend that. The other thing is they’re
not allowed to really engage in capital trade
controls in order to control the inflow and
outflow of specie money into their economies,
either the parent company or country, Great Britain. Blame everything
on Great Britain. They did everything wrong. Anyway, wouldn’t allow them to
do this, or for other reasons, they don’t engage in
these kind of controls. In that sense, we want
to ask the question, how then can this country maintain
enough of this outside money, in this case, gold and
silver coins imported, to do local transactions as
opposed to it flows back out, and they’re left with nothing? Now, the problem
I run into when I read the colonial history
is the colonists always talk about chronic
specie scarcity. They don’t have enough
gold and silver coins to execute local transactions. When you read through this, it
is ubiquitous and overwhelming. I went through a
lot of literature. And it is just overwhelming
how often they’re saying, we just don’t have
this, and we have to revert to some kind of
other media of exchange or direct barter of some type. There are some others who
claim, no, that’s a myth. That just doesn’t happen. These people are crazy. They don’t know what
they’re talking about. Most of those are
economists who say that who don’t like the reality
of what they’re reading. But there are some
colonials that say this. So let me explain where
the controversy comes from. We want to explain how is it
possible to have chronic specie scarcity in a world
where you don’t have any trade
controls, where there’s open arbitrage of value? In that kind of world and
a simple economic model, specie should flow in. Prices are going to
adjust, and you’re going to have enough
specie to trade with. There should never be
chronic specie scarcity. Now, this basically comes from
a very simple quantity theory of money story and quantity
theory of money specie flow mechanism for an
outside economy that really produces a world
where chronic specie scarcity is impossible. You can never be
scarce on money. The way that works
is the quantity theory of money, very simply,
in a closed economy, what you end up with is that
the growth rate of money matches the growth rate
of prices pretty closely. And that’s because output
and velocity are severely constrained by real factors. In a nutshell, that’s the
quantity theory of money. It’s hard to deny that. In a specie flow mechanism when
you’re looking at the outside– so you’ve got a quantity
theory of money, but you also import
and export money. So if you have a local
money like a banknote money that you hold in
a fixed exchange rate to that outside
money, the gold and silver, the quantity theory
of money still works. As long as it’s held in a fixed
exchange rate, it still works. As you have more money, as the
growth rate of money goes up, prices are going to go up. And that’s going to
reduce the inflow of money and bring it back
to an equilibrium. So if you just take
that at face value, you can’t have chronic
specie scarcity. And in fact, you can’t have
monetary scarcity at all. You can have trade disruptions. You can have shocks. But at the end of the
day, there are tides. There are storms. But sea level is sea
level everywhere. That’s what the quantity
theory of money gets you. Now, the problem is that if we
take the colonists seriously and there’s chronic specie
scarcity, we’ve got a problem. The theory isn’t telling us
everything we need to know. We need to do something to it
to match the reality as opposed to deny the reality and to
say we believe in the quantity theory of money. So what I do in
this paper is I say, OK, let’s look closer at the
quantity theory of money. There are two
important assumptions that I think we have
to get rid of in order to understand why we get local
scarcity of an outside money. The first one is the
quantity theory of money assumes that all
transactions are monetized. So once you get rid
of that, once you say, there are some
transactions that take place that don’t use money,
that are some kind of trade, then you kind of open the hole. You break the equation
of exchange identity, and you have an opening for
some kind of, if you want, local alternative. The way I phrase this
is all money mediates exchange, but not everything
that mediates an exchange is money. You can have real goods
mediating exchange. You can have book
store credit mediate. You have lots of things
mediating exchange that doesn’t look
like the, quote, “real money” which people refer
to as gold and silver coins here. So once you do that,
you open the door. The second thing
I think I need is you need a condition of
poor import substitution. So you need an
underdeveloped local economy that really can’t
produce something that has a high elasticity of
substitution with what they can import from the outside. The way to put this is, there’s
some goods on the outside I really want, and there’s nothing
local that will take its place. I want to drink Madeira
wine, god dammit, and the beer we’re
producing here is crap. So I’m going to
import Madeira wine. How do I do that? I need real money. I need that outside money. And that’s what I’m going to do. And the minute I buy
that Madeira wine, the outside money
leaves the economy. And it’s not in the local
economy to further trade for other transactions. So I need these two conditions. Not all trade is monetized, and
there’s underdeveloped or poor import substitution. Once I do that, even under the
assumption that outside money, gold, and silver
coins, in this case, have a lower transactions cost
in trade than any alternative, any alternative barter or book
credit or inside promissory notes or anything like that,
even if I maintain that assumption, I can
produce an outcome where, as long as there’s some
efficiency in what I call barter transactions– this
might be like book credit transactions at a local
store where you can have cross-clearing of accounts– as long as I can produce
something like that, I can produce a condition where,
in that local economy, if I have gold and silver
coins, it’s to my advantage to buy the import good and
ship it out of the economy. And I’ll resort to that
local order transaction to do my local exchange. Thus we get chronic
specie scarcity. We don’t have that
specie to trade locally, because I’m always buying
import goods for it. And then I show that under
that kind of condition, this is suboptimal in terms
of welfare optimality. The reason for
that is the gain I get by being able to
buy that import good, I’m looking at that
gain for myself. I don’t consider the
loss everyone else in the economy has by having a
less efficient way of trading by not having that
gold and silver coin anymore, that they have to
go resort to book credit or something like that. So that produces
a condition where we’re going to have
chronic specie scarcity. The outside money is not
going to be around to use, and we have a sub-optimal
outcome because we’re all relying on some kind of
endogenized media of exchange of some type– promissory notes,
book credit, things like that. The last thing I do is
I go through, and I say, OK, suppose we can make
whatever, this barter transaction method, inside money
method, as efficient as we can. It’s still not as good as
having the outside money, but we can make it
pretty efficient. And in the colonial
economy, I kind of term this as when
colonial legislatures start printing bills of credit
that circulate more generally within the whole
colony rather than just around a specific store
or around a specific group of promissory individuals. So there’s a little
more efficiency or lower transactions
cost to using them. If that lowers the
transactions costs enough, even if it’s still
above the outside money, if it lowers it below
the transactions cost of the outside money
and the opportunity cost loss of using that outside
money to buy imports, then we can produce an optimal
social welfare outcome. It becomes optimal to ship
that outside money out and buy those imports and use
this inside local money, in this case, colonial
bills of credit, to do your local transactions. And that becomes welfare
superior to the alternative. So it’s kind of an evolutionary
scheme where you end up saying, we start developing– we keep economizing on our
transactions cost of trade so that I’m not
walking door to door with a pig under one arm
looking for someone with a box of candles to trade with. That’s very costly. We find more efficient
ways to do this by having, again, centralized
trade at our local stores or promise. We find some efficiency. Once we start doing
that, it becomes beneficial to not use our
outside money for local trade but to buy those
imported goods with it. Adam Smith recognized
this a long time ago when he was
talking about, gee, if we could only use
that outside money to buy our imports rather than
locking it up in local trade, wouldn’t that be
welfare enhancing? And we could use something
else for local trade. So I’m looking at that
hierarchy as they kind of move down and find more and
better ways of economizing on those transactions costs. And they finally
get to a point where they’ll have an inside local
money that will basically serve as their method of trade. The key to all this
modeling is really the gap between how
efficient whatever this inside barter,
local inside money, trading mechanism is
and the opportunity cost loss of not using the
outside money to buy imports. It’s that gap that draws this. You can eliminate chronic
specie scarcity then primarily by developing the
economy so that you have better import substitutes. In fact, if you get to the point
where you have perfect import substitutes, the
opportunity cost of using specie to buy
local goods goes to zero. And so you never need to export. You can buy local goods. You don’t have to buy imports. Two minutes– and so it
really comes down to the fact that we’ve got
economies that are underdeveloped in their ability
to produce the goods that they really want to buy that can
only come from the outside. Now, at least in
the American case, one of my
interpretations of this of what the US does once
they get rid of the British– once we get rid of the British,
we do all sorts of things. One is to have our own tariffs. So the Hamiltonian
tariff, everyone interprets that in certain ways. My interpretation
is what they’re doing is they’re trying to lower
the opportunity cost of using specie to buy local goods. And thus, they can maintain an
internal specie money supply, because they need to do
that, because they’re going to have a banknote system. If they want to hold banknotes
in a fixed exchange rate to specie, they can’t
have specie flowing out. So they need to eliminate
that opportunity cost gap. And you do that by, in this
case, raising tariff prices, making those foreign
goods a lot more expensive than local goods. One minute? PHILIPPINE
COUR-THIMANN: So Isabel is going to discuss the
paper of Farley Grubb and then tell us
about the Chiemgauer currencies and
some legal aspects to having complementary
We’ll have time for questions after the presentations,
unless you have questions just for clarity that
you wish to ask now. Is there any question to Farley? Yes? AUDIENCE: [INAUDIBLE]
of clarity, but it’s a question
of [INAUDIBLE].. AUDIENCE: Can you speak louder? [INAUDIBLE] understood. AUDIENCE: So my question
is really about [? this ?] exchange rate or not. So [INAUDIBLE] [INTERPOSING VOICES] AUDIENCE: –exchange
rate, that was important to the way the
currency worked because they could actually build a
local exchange [INAUDIBLE] without being tied to a specie. And therefore– [INTERPOSING VOICES] AUDIENCE: So I’m wondering why– I admit this is going
[? further– ?] but since there [? isn’t, ?] why would
we, in our modeling [? where we’re ?] [? thinking ?]
that exchange rate is important, well, why
[? would ?] [? someone in ?] the [INAUDIBLE] currency models
people pose fixed exchange rates in complementary
currencies? PHILIPPINE COUR-THIMANN: Right. I think one thing
is you wish to get the confidence of the
people within the currency. So you back them by the
legal tender currency. And this is, in that
sense, that they are complementary
to the legal tender currencies and not parallel. So you can introduce
parallel currencies in what Farley described
for the US colonies or at the time in Germany
as Helmut was describing. But if you want to kickstart
a new currency locally, now with the legal
framework we have, we need to back them by actual
dollars or actual euros. And then the easiest is
to back them one-to-one and have a one-to-one
exchange rate. And so you get the
confidence through that, and you get into the
legal framework as well. FARLEY GRUBB: One second– I think part of it is
the colonies just didn’t have the capability to do that. So that’s one
reason they didn’t. I don’t think it
was a designed plan. It’s just they couldn’t. AUDIENCE: [? The ?]
[? reason ?] I was asking about the [? design plan, ?] because
thinking back on one-to-one, I don’t see how it
could actually stimulate the local economy [INAUDIBLE]. PHILIPPINE
COUR-THIMANN: Well, yes. That will– indeed. The whole point is you make it
circulate within the community. That’s where it’s accepted. So your local currency
we can estimate will have a velocity
which is sometimes eight times higher than the
velocity of the actual dollars or euros. So you increase velocity by
increasing the transactions, and this is why you have
demurrage, for instance. So you want the currency. You make it [? extra ?] to lose
its value as in [INAUDIBLE].. So people are incentivized
to use it and do not save it. So it’s nothing
for a store value or for speculation
or for savings. It’s really coming back to
the first function of money, of using it as a
means of payment. And by making it
circulate in the economy, you multiply the transactions. And you incentivize the one who
receives your currency to also use it locally because it
cannot go outside with it. And in that way, you increase
the potential of the community. Isabel. ISABEL FEICHTNER: Yeah,
thank you very much. I should maybe first
say that I just started a research project on
the democratization of money and credit. And part of that
research project is also looking at
and conceptualizing complementary currencies. So I don’t have any research
findings to show for yet, so that’s why I agreed to
comment on Farley’s paper and then give a broad
overview on the objectives and design of complementary
or community currencies, as they also called, and
then maybe just very briefly touch on some legal problems. So I won’t spend much time
on the Chiemgauer, sorry. So I’ll start with my comment. So Farley Grubb’s paper
begins with a critique of economists’
conception of money as a particular
medium of exchange. Their definition of money,
Farley says, is too broad, their definition of
barter too narrow. Moreover, he
criticizes economists for conflating money
and medium of exchange. What is money then, for Farley? Money, according
to the paper, is a thing that has a
particular utility for executing transactions. We might call this utility, I
believe, liquidity, or as he does, the transaction premium. Farley says we may
or should separate the money part of the thing
from the non-money part of the thing. We may identify the money part
counterfactually by asking, if this thing is not used as
money, what would its value or barter price be
in a pure [INAUDIBLE] general equilibrium? If the counterfactual barter
price was the same as the price we observe, then there is no
money component in the good. According to Farley,
moneyness is thus determined by the willingness to pay for
the liquidity it provides– in Farley’s terms, for its
transaction cost premium. This raises the question how
we may objectively determined the value of the thing. If valuation depends on
the existence of money, as some argue, if money is
the form that value takes in economics, then moneyness
cannot be determined by some value external to money. Where does the unit of account
come from, we might also ask, in which we can express
our “willingness” to pay if not from money? So let’s return to the
paper’s concept of money. Farley proposes how things
that mediate exchange begin to take on moneyness value
beyond their pure barter goods value becomes the interesting
question to study. So they might take
on moneyness value until, ultimately, we end up
with pure fiat monies, namely things that are “all moneyness
value with no real barter goods value to them.” So that’s a quote
from the paper. So much for the
abstract description of money in the paper. Concretely, there
appear to exist two real moneys he mentions. So the just-mentioned fiat paper
money is one of the real moneys as well as specie money. Specie money, for Farley, are
all silver and gold coins, be they gold Spanish pistoles
or gold English crown. What he calls inside money
is for him are rather barter arrangements
with different degrees of efficiency, but
not real money. Several questions arise
for me with respect to this inside money. If government-issued
tradable debt instruments that were used as
a means of payment are not money but only
have a money part, what is the non-money
part of these instruments? And what, by contrast, turns
specie money into real money? What is the reason for the
transaction premium of specie that is always higher,
according to Farley, than that of inside money? So you might
remember Farley just explained to us
that the transaction cost of using specie is always
lower to the transaction cost we incur when
using inside money. According to Farley,
the use of specie always involves less
transaction costs than the use of inside money. This is the premise in which
his whole model is built. But why should this
premise be accepted? Farley’s explanation
once more turns on value. I quote, “outside
moneys are moneys that lose little value on
crossing polity borders either because they have some universal
commodity value at their core or because a defended and
believable fixed exchange rate exists between that
money and other outside or other
polity-specific moneys.” So the value they don’t
lose when crossing borders is their transaction
premium, their liquidity. But why is this
value now defined in terms of commodity value
when earlier in the paper the term commodity money was
critiqued as an oxymoron? We were asked to distinguish
between the commodity part of money of the
thing on the one hand and the money part of
the thing on the other. Later in the paper,
Farley explains why also the cost of using
specie, the real money, in transactions is not zero. Costs inter alia arise from
identifying counterfeit coins, from determining what
specie coins have been debased, clipped, or
otherwise reduced in value. Costs arise from determining
the value of a Spanish pistole compared to an English crown. I wonder then, given all these
potentially very significant costs, why the transaction
cost of using specie should always be lower
than the transaction cost of using inside money. I also wonder is not
the moneyness of specie is better explained by reference
to some kind of agreement or legal arrangement
which transcends the borders of the colony? The fact that
inside money loses– and I again quote–
“loses substantial value when crossing polity borders,”
quote end, as Farley writes, would also plausibly be
explained with reference to a collective agreement or
to some legal arrangement, in this case, one that
only encompasses the polity or the community that has
created the inside money. So this brings me
to my last question. How does the legal design
of inside money matter? It’s very clear from Farley’s
description of inside moneys that these are creatures
of law, that they are products of collective design. Yet how does this design matter? Even though the design is
described of efficient barter and enhanced efficient barter,
I cannot really see how it matters to Farley
apart from affecting the elasticity of the money
supply, the quantity of money. So my final question, thus,
is whether the paper leaves us with but a slightly
modified quantity theory of money or one that
takes account of limits to tradability as well as of
the moneyness of inside moneys. So in the end, it
seems that you suggest that while economists have a
too broad definition of money, the quantity theory of money
has a too narrow view of money. I also ask myself whether
Farley proposes to us a concept of money that like the
[INAUDIBLE] model regards value as an inherent property
of commodities, thus a concept that
does not subscribe to an institutionalist
conception of money as proposed, for example, by
[INAUDIBLE],, which understands money as the form that value
takes as making valuation and thus market
exchange possible. So after these
comments, I now turn to contemporary complementary
currencies, their design and objectives. And I focus on the so-called
community currencies. These community
currency initiatives demonstrate very
clearly that money is a product of collective
design and that design matters. Through the design of its
complementary currency, the collective may effect,
for example, who is included and who is excluded as
an economic actor, how the economic product
is distributed, what kind of economic
development is being promoted. So I am looking at the
following objectives of complementary
currencies, which go beyond facilitating payment– economic development and
sustainability, democratization of money and credit,
changing valuation, and transforming political
economy more generally. So economic development
and sustainability is an objective pursued by a
number of regional moneys, one example being the Chiemgauer. The Chiemgauer, being
a regional money issued by a non-profit
organization, it can be purchased with
euros at an exchange rate of one-to-one. And Chiemgauer are accepted
by regional businesses that are members of the organization,
and these businesses can convert Chiemgauer back
into euro but at a loss of 5%. And 3% of these 5%
are then donated to social projects
designated by participants in the Chiemgauer initiative. The Chiemgauer, as Professor
Siekmann just mentioned, loses value if not spent
or revalued through stamps that can be purchased. So its so-called scrip money. And through the Chiemgauer
then, local production and consumption
shall be promoted, because your
Chiemgauers, you can only spend at regional businesses
which accept the Chiemgauer and to which if they don’t
want to exchange them back into euro at a loss
have then to also spend these Chiemgauers regionally. Income, which the Chiemgauer
organization makes, is used to support
local, social, and environmental projects. And there is also a
small credit function. This credit function is
larger or more extensive as concerns the eusko. That’s a regional money
in the Basque Country. There, the euros,
which are spent purchasing and
guaranteeing the euskos are deposited with a
financial co-operative, [? NUF, ?] that then
extends social finance. So the initiative seeks to
produce the additional benefit of providing social credit to
some quite extensive amount, or extend social credit
on a much larger scale than the Chiemgauer
organization can. So my third example
then is the Sardex. That’s a business-to-business
electronic complementary currency, so merely
electronic while euskos and Chiemgauer issue notes. That is merely a
mutual credit system, so that corresponds to
what in Farley’s paper was the efficient barter system
of mutual credit arrangements. And that initiative
seeks to enhance access to credit for regional Sardinian
small and medium enterprises. I come now to the second
objective, democratization of or through money and credit. So a number of complementary
currency initiatives also aim at democratizing
money or to employ money to democratize society
and the economy. And I would like to distinguish
between three dimensions. So the first is the
collective participatory design of the currency. So for example, the
Chiemgauer, there has been a collective
design process regarding the
organization rules, and that process
is also ongoing. So the rules could be changed
by collective agreement. The second dimension is the
aim to reduce inequality as a threat to democracy and
to strengthen social cohesion. So here, again,
the Sardex could be referred to as an
example which seeks to reduce inequality and
strengthen social cohesion also across regions in Italy. And the third dimension, that
would be the aim of empowerment and inclusion of groups
otherwise excluded from economic and
political participation. Here we might
refer to the Makkie as an example, which is an
initiative in East Amsterdam. One Makkie corresponds to one
hour of community service. So here, you even
have your own unit of account, which you
don’t have with respect to euskos and Chiemgauers. And this Makkie can
then be redeemed for products, services, or
discounts at local stores. And also there, you have
the rules and design of the initiative are developed
in a participatory process involving municipality, local
businesses, and civil society. So then I turn to the objective
of changing valuation. So if money is the form that
value takes in economics, if money allows us to make
objective evaluations on not just our individual but
inter-subjectively recognizable valuations, for example,
through determining people’s willingness to pay, for
example, for the conservation of certain species
in the deep sea, then it becomes tempting to
try to transform valuation through a different
monetary design using a different unit of account. So one example of
complementary currencies attempting to do this are
time-based credit moneys. They are not linked to the
euro like the Chiemgauer or the eusko, but rather
the unit of account expresses real
labor time– so not the socially adequate labor
time but real labor time that went into production of the
good or provision of a service. Another example
are energy moneys that strive for money to
express energy production and consumption. So one representative
of such an energy money proposal or of such
proposals was Douthwaite. He argued that money
production should be linked to energy production. At the same time, he
envisaged energy production to be reformed so communities
should, for example, produce their own energy and
use this as a basis for issuing a local currency. So you can imagine a currency in
form of energy credits instead of tax credits that circulate
as means of payments and can be used to
redeem your energy bill. I want to conclude this part
by pointing more generally to the potential
of monetary design to transform political economy. Chris has impressively shown in
her work on the Bank of England but also with respect
to the transition from early American paper
money to what she calls modern money how
monetary design can transform political economy. So with respect to the
colonialist paper moneys, she writes, “colonial
legislatures decided when to issue
money and how to retire it. Local constituencies approved
and disapproved the results. Political authorities working
with an involved public appropriately
created the medium. As each holder accepted a
credit and every taxpayer cooperated in the practice
that retired bills, all could appropriately
claim benefits from that common fund.” The imagery used, as
described by Chris, was blood. And if we look at
today’s initiatives it’s interesting, I think, to
see this imagery recurring. So money like blood, many
of these initiatives claim, should reach all
parts of the organism, should be provided by the
collective for the benefit also of the weakest part of society. By contrast, modern money
could be conceptualized, and again, I quote, “as a
medium subsidized by the public and produced by investors. And money creation
which is based on profit expectations
with respect to individual enterprise,
the benefit for society being much more indirect
in that the profit accruing to individual investors, so to
part of society, maybe someday will trickle down to
the rest of society.” I conclude. Is there time? Otherwise I could just
leave out this part. PHILIPPINE COUR-THIMANN:
Yeah, yeah, one minute. ISABEL FEICHTNER: OK. So many, many legal
issues arise with respect to complementary currency. So I just really
focus on very few. So complementary currencies
have existed for a long time. In Germany, we can say that
it’s really a gray area. There so far have not been real
or successful legal challenges. But sometimes it’s discussed
whether, especially whether the issuance
of paper notes– these are vouchers in the
case of the Chiemgauer– whether that would
violate Paragraph 35 of the central bank
law which penalizes the issuance of
unauthorized moneys that may be used
as means of payment instead of legally
authorized coins. And the objective of
this norm is to protect monetary sovereignty. It’s a legal gray area,
because yeah, there has been no such prosecution
which has been successful. And there probably
won’t be any as long as these currencies have
such limited regional reach and are economically
considered as insignificant. But it’s still
interesting to juxtapose the situation in Germany
with the one in France where, in 2014, a law on the
social and solidarity economy was passed which explicitly
recognizes local moneys when they conform to
certain conditions, like they must be issued by a
social and solidarity economy organization, which must
be entirely democratically governed. Many complementary
currency initiatives want the municipality
to get involved either by accepting
payments, for example, if you go to your
local swimming pool, that you could pay in
complementary currency, and also by making payments
in complementary currency. That has also raised
certain legal questions. So the Brixton Pound– that’s
a mistake on this slide. It should be the Brixton Pound. They very closely
worked together with the Lambeth Council of
South London very successfully. The municipality accepts
payments and also makes payments in the Brixton Pound. The Chiemgauer has
not been successful. Reference has been made to the
principle of budget discipline. It’s been said that if we have
a scrip money which loses value, that makes the
municipality maybe spend the money even though
they would not otherwise spend the money. That would violate the
principle of budget discipline. Yeah, there are some
maybe guidelines how you could bolster legality
if you wanted your community currency be accepted as means
of payment by the municipality. So it should be ideally– that’s the case with
the Brixton Pound– be convertible back
into pound or euro. Expenditures should be
made via small contract so you don’t come into conflict
with the public procurement law. And in the case of the
euskos, a legal dispute could be resolved by saying
that the municipality would pay euskos to an intermediary,
which would then disperse. So payments are made in euro,
and the intermediary then disperses the euskos to the
recipient of the payment. OK, thank you. [APPLAUSE] PHILIPPINE COUR-THIMANN:
Thank you so much. Farley, would you
want to answer? You have some comments. FARLEY GRUBB: A
couple of seconds– how do you determine the
moneyness of a money thing when it’s money? It’s a simple answer to that. In economics, value only
has meaning relative to something else. It’s all relative value. I can only measure the moneyness
of inside moneys because I have to use the outside
money as the benchmark, which means I cannot use this
model to measure the moneyness of an outside money. I need a benchmark. I need something to
compare it against. So I can only do it
for inside moneys, and that’s the
nature of economics. We need a relative benchmark. In terms of why isn’t
the transactions cost a specie greater than
efficient barter, it may well could
be at some point. I don’t model it
that way because it’s a modeling convention where
I don’t want people to point at me and say, oh, you
assumed your result. So if I modeled it such
that inside money was more transactions cost
efficient than outside money, people would say, oh, you
just assumed your result. So I need to show the
development of this even in relation to that difference. So it’s not saying
it isn’t possible. It’s just that I can’t do
it in order to do that. ISABEL FEICHTNER:
But if the moneyness is higher than the moneyness– FARLEY GRUBB: Well, anyway,
so two short answers. PHILIPPINE COUR-THIMANN:
We’ll discuss later. Just a few words on
whether we can really, with complementary currencies,
whether we can really strengthen regional
development, and I want to take examples of the US as well. We were speaking a lot about
the Eurozone and about history. We know the political upheavals
because of some regions feeling left behind, like the
Midwest, of course. Or in France, you see the people
putting on the yellow jacket to demonstrate in Paris
and say don’t leave us behind in the
provinces of France. Or you have the left behinds
during the [? Euro area ?] crisis of the
periphery countries. So it’s a whole question about
periphery versus the central often [? financial ?]
[? shoulder ?] metropolitan areas. And the story we see
in every people’s minds when looking at complementary
currencies, but very often, this is not shown with data. And I want to take a macro look
to show you how important that is and then before
coming to a more micro level of making a case
for complementary currencies. And here, if we look at the
payment flows within the US, we can register them. We don’t have
balance of payments as we have in Europe between
the various countries. But we have the Fed
wire payment system of the US Federal
Reserve, which shows net payment flows between the
12 districts of the 12 reserve banks. And what happens here is
that before the 2008 crisis, you had the flows were the net
terms are quite zero, right? There were quite neutral. But with the
financial crisis, you jumped to very high numbers
of net payment flows. What does it mean? If you take New York, which
is represented in red, you had, in net
terms, more money coming into the
New York district than it was leaving
the New York district. The reason why you see sharp
downturns on the left hand chart is because these net
payment flow imbalances are settled once a year in the
accounts of the Federal Reserve system. So they are offset by
some changes in the shares in the pool of assets
held in the [? summary ?] [? accounts. ?] But this is an accounting
offsetting, right? The reality we need to
recover from the data. And the reality is really money
going out of the Midwest, say, and the periphery
of the country, towards the financial center
in very large numbers. So this is what I do on the
right hand chart with the– AUDIENCE: Do you want this? PHILIPPINE COUR-THIMANN:
COUR-THIMANN: All right. AUDIENCE: [? It’s ?] [? dark. ?] PHILIPPINE
COUR-THIMANN: So if you look at the payment flows, which
were quite neutral before, then the red part here for New
York, assuming no settlement, is increasing and increasing
towards some 7% of the US GDP. Meaning at the
time– that’s 2014, after which the quantitative
easing was stopped– around a third of the liquidity
injection through the Federal Reserve went back to New York. Well, how was this quantity,
this liquidity injection made? That was to the whole
country, for instance, by purchasing
mortgage-backed securities. So you help, or you support
the weaker parts of the economy all over the country
by subsidizing, in a way, mortgages,
real estate everywhere. But in net terms, it came
back to the financial center. And we have very, very much
the same story in the Eurozone where all the money
was injected mainly through the periphery for the
Greek banks, the Italian banks, Spanish, and so on,
which had problems. But in net terms,
through the payment flows in the real economy,
the money was coming back to
Germany or Luxembourg, so to the financial centers. So we have a new striation
of what we’re telling you this morning about the
financialization going on and especially
with the central bank having a lot of
responsibility there. In trying to fight
the crisis, they saved the financial system. But they also really
put a lot of help to the financial system itself. So that’s for a
macro perspective. Now at the micro
level, we can look at how we should
help enhance welfare through a
complementary currency. Very, very simply,
like with Farley, we have to assume away– not assume away the problems
of neoclassical economics. So you should not look at
maximizing your own welfare. You always think, when you think
about complementary currencies and introducing them, you
think about the community. Like at the macro level, you
think about the periphery and not about the center itself. At the micro level, you
think about your welfare you were maximizing
if you maximize, say, your consumer surplus– or I’m told we are
rather citizens than consumers this morning– with a certain
share, 1 minus alpha. Plus you care for the community,
so the average surplus in the community for
a certain share alpha. So this is this alpha
times the average share in the community, which is
different from all the macro models. And you need that. You need this thinking
about the community and the welfare and the
community to motivate, at the micro level,
the introduction of complementary currencies. So you can call this
alpha simply altruism, or you can call it an
aversion to inequalities in your community, or you can
simply look at a recognition that your own well-being
depends on the well-being of your community. And I would go even further and
say you think about yourself even but through time. And so when you retire and
still want to go to the baker at the corner of
the street, so you’d better go and buy from him
or from the local bookstore rather than from Amazon
in the first place. So through time,
it’s also foresight. The degree of foresight
is given by this alpha. So now, we can, from that
basis, consider the chain of spending individuals. And in the first
step, if individual spends without caring
for where he spends, say just get books
on Amazon, he doesn’t make any effort to select the
local shops and local goods. Then the propensity rises
that the next individual in the chain will be off
the job market, right? He will lose his job, and
he lives off public aid. And however, if the first
person selects the local goods, then the next individual is
more likely to maintain his job and spending his
earnings as he likes, which we can simply illustrate
in this chain of decision tree. Should I spend locally? No, I don’t bother. Then I have what you
have in your model as– with the low transaction costs,
you have the highest surplus. You can buy all import
goods at low costs. But then the next person,
say, is off the job market and all the rest behind, right? In a way, that’s the Midwest. Or yes, I make the
effort to spend locally. And then the next
person, so myself, I have maybe a consumer
surplus in the first step, which is lower. But I allow the next person
to have the same choice. And he can choose to
consume locally as well, or he doesn’t, and all the
rest is off the job market. But if he consumes locally,
that’s on all the rest. So you want, with your
complementary currency, to be in that part of the tree. Since you maximize, you’ll
take the economies you want to maximize welfare, you
will have certain conditions, depending on your degree
of altruism alpha, depending on the relative shares
of consumer surplus between those living off public aid–
so if public aid is very high, then it’s not so
bad to have it– depending on what
you get, if you just import or buy on Amazon,
and depending on what you– the surplus you get from
going to the local shops. And what the local
currency does, the complementary
currency, is simply– so I will not go
through the math or so. But it is simply that
you lower the opportunity cost of making the effort
to find the local shops or think about who
should I give my money to so that I am incentivizing
to also spend on local goods? And so in that way,
you increase this area. So for those who’ve seen
Farley Grubb’s paper, you would also see these
charts inspired by him. You increase the surplus
relative to the surplus of not doing that. And that is in which
way the local currency helps in its trends in bringing
the economy to work regionally and strengthening it. Now, I wanted to close with
some misconceptions regarding complementary currencies. You have some usual
counter arguments to them. Are they legal? So we’ve heard, right? To make them legal,
sometimes you have to call them
[INAUDIBLE] in Germany. Or you have to have special
rules as we have in currency. Maybe you all in the
BerkShare had to do some legal [INAUDIBLE].. [? I don’t know ?]
if you can tell us about that. But there is always an issue. Are they legal? And from the central bank, where
[? I ?] [? work ?] [? now, ?] this is something we regard as– it’s a parallel thing. So we have [? a ?] legal tender. We have [? your ?] legal tender. We should not [? load it. ?]
We should just disregard them as something not important. Not important, [? it’s ?]
[? not so ?] [? true. ?] Bernard Lietaer, if I may,
who also co-authored this book was [? counting ?] the
complementary currencies to be something like, quite
a few, but just a few, in the 1980s. And then before the crisis,
the financial crisis, some 5,000 complementary
currencies around the world. And after the financial
crisis, about [? 10,000 ?] local currencies– that is, you start small. [INAUDIBLE] small. And then you may hope to
have something bigger. But how to make those bigger
might [? end ?] with [? take ?] appropriate framework. And then we are back to
having the lawyers here. We also need the
historians to tell us, hey, this was not the exception. It was the rule to
have several currencies at once, monetary diversity. So yes, it can be legal. [? You may ?] [? need ?]
[? further ?] [INAUDIBLE].. Some say the functions of
money [? trading ?] [? with ?] [? that, ?] because you want
[INAUDIBLE] this local currency certainly. So it’s a means of
payment only sometimes, although it serves
many objectives. But you indeed kill any
speculation possibilities. And all of the incentives
are [? honored. ?] But yes, [INAUDIBLE] of money
[? is ?] [? its ?] strength. But that’s exactly what we want. [? Saying ?] the purchasing
power [INAUDIBLE] I can not purchase
things everywhere. But exactly that’s what we want. [? Greece ?] [INAUDIBLE]
flow will tell you, [? the amount ?] [? of ?]
[? money ?] you circulate, and the good money
will be saved. It’s exactly what
we want as well. You want this money to
circulate and revive the economy with its multiplier
effect, pension multipliers, through higher velocity
of transactions. Some would say it’s a
protectionist currency. It’s suboptimal if you have the
Ricardian benefits of trade. But that’s forgetting
that Ricardo himself looked at the benefits
of trade on average. Comparative advantages are, on
average, good for the partners. But they are very bad in
terms of inequalities. And if you don’t have the
mechanisms to redistribute wealth afterwards, then these
trade benefits are not there. And we’ve come to the
limit of fiscal solutions to redistribute wealth. So there is another
way, which is to work on how the money is
created and how it circulates. That’s where you can really
re-look at redistribution if you’ve come to the limits
with your fiscal tools. Usual fears we discussed
are that they would compete with the legal tender. Indeed, they start small. Let’s see what they bring. Sometimes they are confused
with the cryptocurrencies. But again, it’s a
question of terminology. As Helmut was putting it,
cryptocurrencies are only crypto financial assets. They are not currencies,
and they have nothing to do with the real economy. These complementary
currencies are fully backed by the real economy. Some would tell they
prepare an exit from euro, from the currency
area in the euro. And this is why we
should not allow them. That was my case
with my employer at the European Central Bank. Or some would say it’s a
return to the free banking era. Well, so there are some good
things of that theory as well. And finally, since they
devalue the value of money, they may spark inflation. Well, no, again, if you look at
the quantity theory of money, the idea is not to increase the
prices, the change in prices, but really to increase velocity. And especially if you don’t
have any money creation, you don’t create
it, because you back it one-to-one with the
legal tender currency. So to conclude, we have this
large redistributive effects which are inherent to our
current monetary system. And we should address the
problem at the source, in the way money
circulates and is created. And we need to avoid that entire
regions are falling behind in large currency areas. So remember the Midwest. Remember the yellow
jackets movements. And money, to make it
a democratic medium, Christine, I think one
really good way to do it and very concrete is with
people like Susan Witt and Alice Maggio is to
support the development of complementary currencies. Thank you to all the
participants on the panel and to you all for coming. The audience shows that
it’s not a very hot topic, but it’s growing. AUDIENCE: [INAUDIBLE] thanks. FARLEY GRUBB: Quality
counts for something. [APPLAUSE]