little big cookie shake

[keturn]

I've been spending a lot of my attention on alternative currencies lately, driven by an interest in the Portland Timebank community and partners. I've been in some discussions lately about different directions the timebank might develop in, and some of these conversations have succeeded in challenging enough of my assumptions about economies that

Comments

Limits on a mutual credit system

[ext_40242]

A mutual credit system is not without limits. Like some people mentioned. Right now you don't need money to get started trading with US$. You get a credit card. Nothing stops people from shopping till they drop, except maxing out their credit cards and the credit card companies making a decision that the person no longer has the ability to pay off their obligations.

In a mutual credit system, replace the credit card company with your neighbors and trading partners. Either the currency system imposes fixed commitment limits, or (as I hope is possible) the trading partners themselves can be encouraged to make good decisions. They can decide when to not accept money from someone with a balance so committed (negative), their ability to fulfill the commitment in reasonable amount of time is questionable.

Another option for limiting the amount of credit a person has, is for there to be a common rule, but instead of a flat limit (say $-300) it's based on a number of things, possibly including the cost of living. The community might say, we

Re: Limits on a mutual credit system

[keturn]

Some have that goal and nothing more, and they deserve to be awakened.

Oh, so, my economy will only work with awakened people? Because one unenlightened broker can resell goods to an army of deadbeats, and easily keep _his_ balance in the black to, at first glance, seem like a productive member of society. So I either need a gatekeeper to only let in enlightened people, or my do-business-with metric needs to look a lot deeper in the graph than just one step.

If we can automate the answer to that question, we can overcome a lot of friction in alternative currency transactions.

Yes. Because "am I going to be able to spend this money" is really not a question I want to have to ask every time I sell a six-pack and a bag of chips at my convenience store. So I think it's got to be very low-friction to work in any wide-scale sort of way.

Re: Limits on a mutual credit system

[freyley]

heart.

[pmb]

This is exactly like how real money works. Your confusion in one case directly applies to the other. The main difference is that we have decided that credit card companies and banks should be the arbiter of who will be able to make good on their claims, and complementary currencies seem to leave it up to the individual.

[keturn]

Okay. That's a pretty valuable service. I think I'm quite happy to delegate that (the "who will make good on their claims") to specialists. And I'm not really sure I trust laypeople to do it in general.

Which suggests to me that I am either:

1. having my "specialists" be an open-source algorithm baked in to the accounting machinery, or
   
2. probably not interested in a complementary currency with an unrestricted membership

Larger, possibly unrelated question

[flamingweasel]

If this is just an alternate currency with a group of appointed experts to handle the economy, why not just use US$?

Re: Larger, possibly unrelated question

[freyley]

we have to get them from somewhere. people know their worth relative to the outside world, so they will demand their worth, and that's a lot of startup capital to make the group be able to function. this is a way that people with free time can create currency.

[radiotelescope]

I like the idea of an asymptotic limit. Say once you get more than a certain amount in the hole -- 10 hours of favors owed -- your value decreases 10%. So if you ask someone for another favor, she helps you for an hour, but she only gets 0.9 credits. Ramp that up and you'll hit a point where you can't get any farther in debt. But in practice, you won't get that far, because there will be a rising disincentive for other people to put you off until you rebalance yourself.

[radiotelescope]

Er, incentive. Or disincentive. You know which I mean.

[keturn]

So, it's not that services become more expensive when you're in debt, but people providing services to debtors receive less for their time. Interesting! That does certainly provide the seller with a disincentive.

I can think of ways that might go weird -- would sellers take disproportional affront to being paid at 90% and not do business with debtors at all? Would debtors deliberately surf that line to get cheap labor? That might be harder to exploit for service exchange (as is the primary focus of a timebank), but if you were exchanging goods, it could get exploited pretty quickly.

[pmb]

This is exactly what credit cards and loans do/are. Better credit risks get better rates, worse ones get worse rates.