miércoles, 13 de enero de 2016

Notes around monetary sovereignty

Notes around monetary sovereignty

This article was originally published in Spanish at the Instituto de la Moneda Social, August 13, 2015, Apuntes para una soberanía monetaria. Amended with some corrections and some additional clarifications.

The Monetary Sovereignty is understood as the ability of citizens to directly issue the money necessary for the economy and the management of the Commons, and keep directly record of the transactions, without intermediaries.
Of course not enough, the monetary system must be well designed for the economy and well managed.
"....but money has become by convention a sort of representative of demand; and this is why it has the name 'money' (nomisma) - because it exists not by nature but by law (nomos) and it is in our power to change it and make it useless." Aristotle, Nicomachean Ethics [1133b 1]

The Vision, the Utopia, and the monetary context

The "Real Utopia" scenario context for these notes is the stage after something like a Great Transition to a sustainable economy and more socially just. This approach is valid if we think that the way to a post-capitalist society will not be alone, nor primarily, a conquest of political power of the Capitalist State and a top-down change from that power supported by mobilization. 
This will complement with the consolidation Islands of Social Economy, brewing thus a counter-power of social economy. B Plans that may be imposed to big capital at the political fights. B Plans out of the web of debt money, without the only alternative to a massive bankers blackmail being a regression to the most primitive methods of barter as happens now in Greece, and this counter-power, lived by millions as a possible reality, growing until it becomes dominant.
Erik Olin Wright, (2015) at "How to Be an Anticapitalist Today", Jacobin speaks about this duality:
"You need to participate both in political movements for taming capitalism through public policies and in socioeconomic projects of eroding capitalism through the expansion of emancipatory forms of economic activity. We must renew an energetic progressive social democracy that not only neutralizes the harms of capitalism but also facilitates initiatives to build real utopias with the potential to erode the dominance of capitalism."
Unfortunately, monetary systems have not a miraculous single currency solution (either "independent of central banks", either "with demurrage", either"mutual credit", whatever that is), in special not any virtual currency just hanging from the Web. The monetary system is closely linked to the government of a community, to the management of the economy and specially the management of Commons (the Common Good).
Therefore, using a full scene of speculative, Utopian vision of a post-capitalist society allows us to see aspects that are elliptical or not that evident in each of the emerging islands solidarity economy, which have different business models and lace different in the future society (some are embryonic social services, other cooperatives, etc.), and display especially aspects of their possible relationship with the community government and the possible transition process (Rob Hopkins,The transition Handbook: From Oil Dependency to Local Resilience).
The aim would be to provide each one of these islands a complete tool of a fully fledged monetary system, scalable to the final system. With that we would facilitate the agglutination into superior systems of initiatives that now seem divergent proposals, and facilitate their growth.
Perhaps the aspect with most impact of this socio-economic vision for the monetary system of the future, beyond the preeminence of the Common Good and cooperative work, is that the trend towards a global economy has become a trend to re-location , to "buy local". The key factor is sustainability and the high cost of transportation due to the high cost of energy, even though most of it would be renewable.
Therefore, the economy will have the principle of subsidiarity as one of its most crucial bases. In political terms, the subsidiarity principle is widely accepted that it is better to decide and execute everything as close to the people affected. In economic terms, this means that you have reversed the economies of scale to make the local economy more efficient in most areas concerning the proper size for industries, optimum flexibility to changes ("resilience") and its permeability to innovation (a lower level of investment required). The principle of reuse and recycle reinforces this trend.
For global production what remains only is what it is more efficient overall, considering the whole life cycle. For example, some industrial products (chips, electronic instrumentation, semiconductors, pharmaceuticals, modules transport systems, as driven wheels of the electric vehicle) will remain global or continental production, while its assembly can be local or even micro-level "do it yourself" in small workshops of highly robotized neighborhood with 3D printing machines, etc. repositories using open engineering design under Creative Commons. Other examples of global production are the backbone of the Internet or knowledge (as Wikipedia).
The rest, about anything that involves heavy weight (food) or implies transport of persons (services), will be production for markets nation-wide, regional or local. The garment, furniture, household utensils, and even the assembly of electric vehicles can be local. In food, there will be a spectacular growth of urban agriculture, occupying a place in the cycle of the water and waste in each city. Social services of health, education, elderly, dependent, will be managed more locally, linked to local citizens taxes and fees.
Thus the circuits of production, distribution and services are restructured at various scales.
To this corresponds an ecosystem of currencies to all those scales. An ecosystem with virtually a currency to each well, including fiat currencies for the managementof the Commons at each community government level (national, regional, local, micro).
Currencies backed by production or products: A geographically broader levels, in no man's land, there will probably be a predominance of currencies oriented to "barter" or B2B and B2P and currencies (currencies promises of goods, products and services) currencies. These are currencies that are a bond or garment for an existing product or service, in storage, or future.
The fiat legal tender: At more local levels, and given that social services (education, health, security, local transportation, and in future also the generation of energy as a common good) are managed locally, there will be a predominance of currencies in which taxes are levied, that is legal tender currencies, which are the currencies in which public services are financed.
With regards usability, a complex ecosystem of currencies imposes an intermediate barrier to the solution of the double coincidence of wants that historically monetary systems must solve: exchanges. That is why there is a tendency to single currencies. This barrier is a highly damped in a system based on crypto-currencies, with agile exchange markets and multi-currency electronic wallets. This dampens the need for currency monopoly over large geographic regions. It seems reasonable to assume that each person can comfortably handle a handful of different currencies in everyday life, without involving greater complexity as now handlingvarious bank accounts. You need that a currency exchange can be made from the same wallet. The balance is probably each user in a given area has to managebetween 5-10 popular currencies. Nothing more complicated than your supermarket card, the public transport card, your bank payment card and your credit card.
It is in the context of this ecosystem that we have outlined in broad strokes how we intend to discuss monetary sovereignty.

Sovereignty over the amount of money in circulation, to issue currency.

Give me control of a nation’s money supply, and I care not who makes its laws”
Amschel Rothchild
Sovereignty means controlling the money supply in circulation and sovereignty to issue currency.
In the current system, the money supply is controlled by the credit tap. The need for credit is a direct function of the temperature of the economy in the amount and intensity of necessary transactions. The invention of fractional reserve banking by which you can generate money from nothing, as long as it is returned, it is a brilliant invention to follow these changes in temperature, essential to the modern economy.
This ability to create money out of nothing is now in the hands of the banks, which monopolize the issue of money in the form of credit to businesses and issuing legal tender to the governments. Central banks only very indirectly control the money supply through the public issue of the reserves that banks operate.
Note that this is possible by the merger, electronic bank records of the quantities of legal tender issued by the Central Bank and deposit money. Bank money at the beginning of fractional reserve banking, originally consisted of bank notes and legal tender consisted of notes and coins issued by the Mint, and was itself a promissory note in gold reserves. Now both are fused in the same record quantified in the name of legal tender, no longer promise anything. It is pure fiat money. And it is used for both the needs of the free market to the needs of public services.
By this mechanism, banks control the economy.
  1.  Banks have done with this power lead from the (electronic) recording transactions worldwide, and earn a reputation, deserved, taking them scrupulously. Today it is only a fraction of the money transactions "cash".
  2.  The second power, to create money out of nothing, it was possible to earn a reputation, too, to analyze the solvency of the creditor, and to ensure that the loan is repaid, so that the money supply balance again. A bright financial innovation. No moral objection to make, if it works.
  3.  The benefit of this is distilled interest, which was originally established as a share of the benefits but also the risks, and then stripped of any risk to create money out of nothing. Interest has played a role in the expansion of the economy in the early centuries of fractional reserve banking. A money (to pay the debt plus interest) that comes out of nowhere, products can be brought "out of nothing" (for English, "from nothing" is "overseas").
The system, invented in the seventeenth century, has been corrupted and has reached its end of cycle.
  1. The "blockchain" allows keeping records of transactions more reliably and safely, without intermediaries, directly P2P.
  2.  Banks have defrauded analyze its role to give credit solvency and have used their magic to create money for speculative bubbles and building purposes. The entire range is now in the financial capital, while the margins of productive capital is reduced to zero, and without any link to the real economy becoming fallacy all the talk about the role of competition. It is time to radically democratize this ability to analyze creditworthiness. Keeping records in the "blockchain" is the condition.
  3.  Now, the interest generated by a compulsive need to GDP growth (the volume of goods traded with money) that leads to the destruction of the planet. The sustainability of the planet involves financial capitalism ending debt with interest (This Changes Everything, Naomi Klein).
Although it not mentioned, in what follows is understood that credit should not have interest. Another thing is investment, which can lead to a share in profits, but implies also sharing the risk..

Monetary sovereignty of producers, companies, cooperatives and workers.

The first sovereignty is that any person or business that offers goods and services for sale on the market is able to issue currency. E.C. Riegel puts it this way "Flight from Inflation": "An aspiring money issuer must, in exchange for goods or services purchased on the market (with money), put their own products or services on the market. This simple rule of equity is the essence of money”. This coin is a self-credit of the producers to finance their inputs, and redeemed at the end of the production cycle of the product on delivery. Since no one is obliged to accept that currency, their acceptance will depend on the credibility of the producer. It is the currency of the baker in the medieval market. It is the currency of a time bank. It may be the currency of the agro-food industry.
Essentially, a currency should be a credit instrument that is spent into circulation by a trusted issuer on the basis of his commitment to accept it back in payment for desired goods and services that he is ready, willing and able to deliver.”
This ability is now almost entirely in the hands of banks by issuing money in the form of credit. It is the banks that grant loans to companies, especially SMEs, they need to manage their production cycle and the uncertainty in sales, purchasing, pricing, payments, uncertainty than large enterprises, managing large numbers, suffer to a lesser extent. It is the banks that grant loans to small investment in goods and production tools when there is no capital contribution.
Large companies already use this system with its bonds and vouchers. The system can be generalized to different branches of production, distribution and services, with trade assotiation currencies. For example, there may be a currency freelance professional services, issued by their associations, the "PROFESSIONAL TIME" and every professional sets the price of his actual time.
These currencies are legally a issuer contract with the carrier, a promise, of a product or a service.
However, it should be noted that, except for very large companies that issue their own currency, the collective management of these currencies by trade associations is not without its complications. We must agree on the overall production and the share of each company sharing the currency, put mechanisms against fraud or failure, etc. You have to define the range of products to which it refers, and its period of validity (eg. a range of fresh vegetables, then which prices will go each)
This type of money is expected to cover only part of the market, where this is easy to do, probably in uncompetitive sectors and stable "market share" products and a limited range of prices.
So presumably elsewhere the industry will use the fiat currency as a mediating instrument.
The conclusion is that the fiat money supply of currency, though greatly diminished, will always be greater than the money supply provided by money backed by products.
In any case, commodity backed money erases with a stroke the need for a huge amount of credit, particularly credit based on collateral, such as mortgages. With these currencies, mortgages and purchases of capital goods are replaced by another mechanism. It is the producers of durable goods who issue self-credit (eg the construction industry issues currency for the value of their buildings, and thus finances the work) and sells, in installments, the durable goods in their currency.
The credit (debt money) hardly makes sense in these currencies, because they are already a form of auto-loan backed by future production of promised merchandise (including Time Banks).
Technologically, its implementation in the form of crypto-currency shall include the meta-data of that contract (which has a timetable and contents), a contract with Ricardian format digitally signed (see examples), so it is a legal document that can be required under the law. The main driver of these currencies Paul Grignon, andDigital Coin (see an example implementation).
Apple has released a standard, Apple Passbook, which is used to deliver discount vouchers, tickets and others like travel vouchers. There are wallet type "apps" for Android (eg Pass2U) and iOS that allow transactions and pay with these digital vouchers. However, they do not allow splitting or "monetary" changes. Pay fractions of these currencies would be like giving "shares of lottery", which must bear the reference of the original ticket, and this is not implemented in any of these wallets.
We will have to wait for the block-chain technology for more manageable solutions. The block-chain system must include a content service to include the meta-data of the products (pictures, logo, etc.). In that sense, the SWARM planned ethereum 2.0 tool, a kind of BitTorrent for digital assets, is very promising.

Monetary sovereignty to fund the Commons

The second issue is the sovereignty (or control over the issuance) of the legal currency that is used for the financing of the Commons in a given community. That is, controlling the money supply of the currency used by the governing body of a community to pay for common services and to collect contributions or taxes. By Community we can understand a state, a republic, but also a regional government, a municipality or any charity organization.

Weaknesses of the sovereign currency proposal requiring 100% reserve for the credits

The monetary movement of “positive money” (International Movement for Monetary Reform, with the lead at positivemoney.org) proposes to snatch the capacity to issue money to private banks and delegates the decision of the issue (or destruction) of currency in circulation to Parliament, in accordance with the needs of the State Budget (in the case of a State). In a balanced State Budget you can use the money collected in taxes last year (which is equal to spent) and do not touch the money supply. In expansive State Budget, "sovereign" currency is issued, without asking anyone credit, issuing out of nowhere the money. In a contracting State Budget, part of the money collected prior year is destroyed.
The “positive money” current for banks proposes the strict role of intermediary for banks, ie, credits can only be made with previously saved and deposited money. It proposes to generalize to the global economy system the way loans are made between friends: "Take it out of my pocket" ..
In short, the current “positive money” proposes to regulate the money supply by the tap of the State Budget.
This solution is not convincing.
Credit scarcity: It links the total money supply, which should reflect the needs of the economy, to the rigidities of the economy of the Commons, the State Budget, which sometimes can be contradictory trends, and this seems a unnecessary rigidity. The additional variable needs of the economy in general cannot be met only with self-credit currencies type "bond for a commodity" or other complementary currencies. A large part of the economy will solve the problem of the double coincidence of wants with the more generic and more desired currency, which is the currency used for taxes. Therefore, credit must use the legal tender.
You cannot say that today a 97% money is debt money, and then minimize the scale of the need for credit. Total debt in Spain is around 3 billion euros. Mortgage debt, to be replaced in the future by paying in commodity currencies of long cycle, round 1 billion. The State Budget is around 0.5 billion. That is, it remains a need for additional debt of 1.5 billion. The total household savings is about 2 billion, but is mostly investment. The remaining available deposits for loans do not reach 0.5 billion. There is a shortage of about 1 billion to cover.
In the future, the increasingly significant role of peer-to-peer finance in debt markets is likely to further reduce the importance of bank lending to business”
That is, the system of "sovereign money" (the one issued for the State Budget) with 100% reserve credit holds only if, in addition, there is credit by “some other miracle” at the complemntary currencies.
The brilliant solution of fractional reserve banking is that the total money supply will be determined by the amount of credit needed, that credit is made in the denomination of the currency used for taxes, - the legal tender - and what remains to do is to democratize radically the credit authorization, ie they are the same citizens who authorize the issuance, out of nowhere, of the sovereign money needed for the credit.
It is monopolistic: to solve the double coincidence of wants, that is, that every debtor has to find some lenders who have at this very time deposits, availability, and willingness to make the loan, you need some institutions (banks) as intermediaries that have vast amounts of deposits for credit. In one of the most detailed proposals positivemoney.org, Bank of England (Creation of Currency) Bill 2011, users have two accounts of their deposits, a checking account and a savings account, freely available to the bank for credit. In exchange for a rent !!! This brings us back:
  •  the monopoly of banks in the recording of transactions
  • the monopoly of banks to authorize loans
  • and back to interest !!!! there is no reason for someone freezing its assets without obtaining a return
Such power in the hands of banks (or whoever), and the rigidity of the system, soon would bring back the need to approve again the monster of the debt without reserve in the hands of a few.
Some crypto-currencies designing solutions for credit. In the crypto-currencies of the first generation the monetary mas has to be mined, ie you can not make money out of nothing, they are issued currencies. Therefore, the solution for credit is a second currency, interchangeable with the first, which is the "credit money". By that we solve that the recording of transactions is distributed in the block-chain. We also solve that there is also interest. But again we need a monopolistic entity that mines and sells all the "credit money".
At “Issued Currencies vs Metric Currencies”, 22 Dec 2015, Community Exchange System , Tim Jenkin says:
... So if there is a creator who controls the quantity of what is created, that creator has enormous powers over what is created....
... It is true in a certain sense that most currencies today do not exist in a physical sense. They are mostly digital – numbers on computers. However, what distinguishes issued currencies from metric currencies is that the former ‘exist’. ...
... This applies to all issued currencies, including fiat currencies, metal-backed currencies, specie, national-currency backed complementary currencies and Bitcoin-type currencies. As issued currencies, there has to be a controlled quantity of them giving the creator/issuer an advantage over the users. ...
... Metric currencies do not have the property of quantity. They simply measure, in the same way that litres and kilometres measure. There is no quantity of litres or kilometres. ...
The solution for credit with a sovereign currency will only be acheved with the crypto-currencies of the second generation, as ethereum, where we only mine the fuel of the financial infrastructure (the ether), but where the money supply of any currency using the ethereum financial infrastructure can be generated “ex-nihilo”, with a line of code, by anybody the rules of that currency say. Any member of a community could, if so agreed, endorse a credit to another member and issue out of the nothing the money required.

Peer-to-Peer Credit without reserve

Probably the main intellectual barrier to figure out how credit must operate in a sovereign monetary system is the "horror vacui" and the moral heresy before the concept that money can be generated from nothing.
Those educated in the principles of modern physics are used to the concept that a particle appears out of nowhere or where there is not supposed to be. Whenever just for a while, within the quantum uncertainty margin.
Until we understand and admit the brightness of the invention of the fractional reserve banking and its role in the modern economy, we can not advance a definition of a new generation, sovereign, “fractional reserve banking 2.0".
The fact is that many systems of complementary currencies, mutual credit, do creation of money “ex-nihilo”. The credit given by default to all members of a mutual credit system (CES, Community Exchange System) increases, out of nowhere, the money supply in an amount per member. Eurocat and SoNantes, to take two examples, allow for authorizing credit lines, also from nothing.
Credit (with no mortgage, with no collateral, based just on the guarantee of future income) resolves, like coins, the "double coincidence of wants", but in the time dimension. Someone needs money now for an opportunity or business need that is now and not later, but will only have the money in due future when he makes another sales transaction that can not be advanced in time (renting an apartment on the beach in summer). The money will come in a future day, but the chain, the sequence, of transactions, visible to all and relatively safe (that's what it means “solvency”), has not brought it yet to that account.
We all use credit card. We buy products now with the card because almost for sure we will get the salary paid at the end of the month. The card company has analyzed our solvency to set the limit of what we can safely spend. The company analyzes the statistics of defaults, fixed cancellation and complaint procedures, and averages the costs.
For SMEs, it is about solving the problems of cash flow.
The peer-to-peer (P2P) credit we need must be variable, as big as needed (depending on solvency), having a clear sequence of returns with clear deadlines, and protocols for an unpaid credit well specified, so that failures are not avoided 100% but remain a small manageable cost to the community.
The P2P credit is not to transfer of deposits of one or more peer creditors to the debtor's account. That would be crowd-funding. The role of crowd-funding is another, it is a quasi-investment when there is a direct or indirect interest, if not in the financial benefits, in business results. In crowd-funding the monetary mass remains the same.
At P2P credit, what is P2P is the analysis of solvency of the debtor. One or more peers, with enough reputation given by the Community to exercise this role, have the power to issue its judgment on the solvency of the credit applicant and authorize it or not. This reputation allocation can be done by a human denomination following some selection procedure of the Community, or can be obtained and increased by an algorithm looking at your past performance as “money lender”, or a combination of both. It works the same way that the expert of the office of your local bank authorizes your credit by delegation of the Bank, but not out of his pocket. If the opinion is positive, the Community creates from nothing, as in the fractional reserve banking, the money for the credit.
Once returned, the money disappears, so that the money supply balances again.
Any commoner of a given Community may initially have a reputation of an order of magnitude of the credit automatically given as is usual practice in mutual credit systems. At authorizing a credit, the lender (guarantor, agent) is deducted by the amount of corresponding reputation, which is returned at the payment of credit. A system with two currencies, money that can be transferred, and a quasi-currency, reputation, that you can not transfer, but varies according the credits you authorize and the credits that are successfully returned. Nothing very different to a bank agent bonus system.
If the debtor returns the money on time, the reputation of "lender" is increased (at an adjustable formula), so that in the future he may allow larger loans. Otherwise, the reputation of "lender" is penalized (also adjustable according to a formula), and possibly both the lender and the debtor can be fined with money. Thus fraud tends to zero easily.
That is, in a P2P Community, the role of solvency analysis is radically democratized, but not automated. Lenders can use some indicators as banks do now, but nothing can replace the human analysis of the certainty of the transactions borrower provides as evidence of his solvency.
In a way, all future possible transactions of the borrower are a kind of probability space that expand in the future like a wave. See Wave/particle money, by Matslats. It is not worth automating this analysis, and the results probably no better than the good eye of an experienced agent.
Ex ante, we have only chances.
However, the reward or the punishment of the reputation of the lender can be automated with formulas (and recorded in stone in the block-chain currency contract) so that nobody can do fraud. If the credit was returned or not, when and how much, is totally factual and can be recorded with no ambiguity.
Ex post, we have facts.
A Community may want to be able to assign some of its members a special reputation, for example to some specialized experts of the team managing the currency. The Eurocat project includes the appointment of such specialists.
"A body of technicians in Sustainable Production Feasibility be created. These technicians are professionals with specific training required to be able to approve credit lines ... the access to such posts will be through a series of tests, the maintenance of which depends on the ratio of success or failure of the credits approved by them. "
As said already above, you may combine the delegation of reputation by the Community by a selection process, like in eurocat, probably for bigger loans, with a minimum automatic stating P2P lending capacity to any commoner, like in any mutual credit system, to stimulate small credits. From there, the reputation of both cases will vary with the "ratio of success or failure of the credits approved by them".
The solvency counseling service's could be paid. Its not an interest, but a payment of the time spend on it. Its price can be set the market, so it does not have to be a programmed functionality of the currency. Some people may find it attractive as a way of life, and spontaneously accumulate enough reputation to earn a living, thus becoming something like Community freelance banks. There is no better proof than that demonstrated in practice.

Sovereign issuance of new money and the Budget for the Commons

The circuit of legal tender, the tax cycle, begins with the collection by the government of a given Community of the taxes of the past year activity, continues with the discussion and approval of the State Budget of the Commons for the following year, the request for credit for a possible deficit and finally the budget spending on public services and past debt. A new cycle of collecting taxes begins.
After discussing the P2P credit, it becomes clear and how this mechanism should be, both in the future institutions of the Commons in the post-capitalist society, and the entities, NGO's, that now coordinate the islands of solidarity economy.
  1. The total economic activity will correspond roughly to the number of commoners. The total monetary mass required will be thus also proportional to the number of commoners. The standard creation of the main monetary mass is to mint a quantity per commoner. For example, any new member would be gifted with a fixed quantity, minted “ex-nihilo”, without obligation of return.
  2. At a no growth, sustainable, economy, the situation of an expansive economy will be rather seldom. Only in this case, a stronger volume and speed of transactions would require a bigger monetary mass. In this case, new money will be minted and given to the government as first spender. The government will spend it as extraordinary public works. If the economy shrinks, money has to be taken away of circulation.
  3. On a steady economy, in which the State Budget has a peak by one reason or another, but the economy in general stays stable, the number of commoners is stable, the deficit has to be covered by credit, P2P credit, the only existing.
Every citizen gives the government a peer-to-peer credit, their share, equal for all, of the budget deficit, a quantity democratically agreed at discussing the State Budget of the Commons.
The collection of taxes is a different circuit. Once collected, their destiny is to finance the stable part of the State Budget. However, taxes are a function of redistribution and therefore are not equal for the rich than for the poor.
Reaching the ignition point for the solidarity economy implies that the coordinating bodies, ONGs, charities, associations of the solidarity economy (REAS, Red de Cooperativas Integrales, Red de Solidaridad Popular) at all levels, but also municipalities and regional authorities:
  1.  Create their own legal tender currency with P2P credit functionality.
  2. Work with a Commons Budget to be spend into the social services, financed in case of need by P2P credits of all the commoners.
  3. Function with a tax system, for citizens, businesses, and transactions (demurrage) only payable in their legal currency. Donations should be counted as part of the collection of taxes.
  4. Additionally, any business producing a good, may issue its own self-credit currency as a promise of that good.
Municipality currencies follow a similar scheme, like for example the scheme for Barcelona en Comú.

The role of volunteering as osmotic pump to transfer value

Solidarity Economy represents a huge economic force, and its volume, currently invisible, is not a negligible volume. To start talking, lets talk about volunteering. Millions of people voluntarily donate in a philanthropic way part of their time in volunteering works or time banks. The European Volunteer Measurement Project of the EUROPEAN VOLUNTEER CENTER estimated 140 million people worldwide who volunteer and that amounts to 277 billion Euros in value. Equivalent to the 7th economy in Europe. The time represents 68% of all philanthropic donations, much more than what banks, companies and states donate in the form of monetary donations.
According to the report of the European Foundation for the Improvement of Living and Working Conditions - Second European Quality of Life Survey - Participation in volunteering and unpaid job - 2011 in Europe, on average, 20% of the adult population in Europe does voluntary work, dedicating between 6 and 7 hours a week, something between 24 and 30 hours a month.
The Manual on the Measurement of Volunteer Work ILO has very specific recommendations on how to estimate the value of that work.
It's time to put into circulation these economic value to move the mills of the monetary circuits of solidarity economy.
Volunteers working in organizations or cooperatives in the social economy should be paid in the sovereign currency of the Community (say a neighborhood association) or the self-credit currency of a production cooperative (say an urban farm). Volunteers working in jobs for the Commons, are proto- public employees of the new economy. They must be paid by the sovereign currency of the Community, and included in the budget of the Community and covered by the Community taxes and donations.
It would seem logical that time banks also use that Community currency. Volunteers “sell” their time to the Commons public works, time bankers “sell” their time to the open market. Both can be measured in time, hours.
The spending that volunteers would do in that currency in the local market is the piston that puts into circulation the new economy.
Donations in euros should be exchanged to sovereign Community currency to move the mill. Almost all social enterprises accept donations in kind or in legal tender money. The soup kitchens, for example, collect food. It should be paid in Community currency to the donors. Donations in euros, for example, must be exchanged and paid in Community currency to the donors.
That does not diminish the altruistic merit of the donor, on the contrary. Not doing so it's like donors coming by boat to an island of solidarity economy, deposit their gift, and then donors are expelled back to their country of origin of bank debt money. You have to invite them to the island and engage then in the Community social life!
The true charity would be they use their exchanged Community currency and become customers of the social enterprises of the Community, thus making the economy turn.
For old-fashioned minded donors, with a classic understanding of charity, they may always donate, this time without compensation, the received Community currency amount to the Commons wallet.

The value of a Community currency

For currencies issued as self-credit by producers, the value is the value of the commodity, product, good or service the currency promises.
The difficulty is to understand what is the value of a Community currency that produces social services by volunteering work.
Ernest Mandel, at Marx’s Theory of Money (2004), reminds that:
In the same way as his theory of rent, Marx’s theory of money is a straightforward application of the labour theory of value. As value is but the embodiment of socially necessary labour, commodities exchange with each other in proportion to the labour quanta they contain. This is true for the exchange of iron against wheat, as it is true for the exchange of iron against gold or silver. Marx’s theory of money is therefore in the first place a commodity theory of money. A given commodity can play the role of universal medium of exchange, as well as fulfill all the other functions of money, precisely because it is a commodity, i.e. because it is itself the product of socially necessary labour. This applies to the precious metals in the same way it applies to all the various commodities which, throughout history, have played the role of money.”
However, Marxist theory has not very solid elaborations about pure fiat money, not backed by a commodity. We have to dig into the works of other authors to get some hints.
Stephen Zarlenga, at “The Lost Science of Money” (2002), explains:
... For military and taxation purposes Servius Tullius (578-534 BC) organized Roman citizens into a more regimented society divided into six classes by wealth, to determine how much they paid in military dues. Members of the first class had assets valued at over 100,000 asses; members of the sixth class had less than 11,000 asses. Wealthier citizens had to contribute more, and the first two classes fielded over half the "Centurys" composing the Army.
 Perruzzi tells us that this money affected a large part of Italy and was "a legal tender” - not a doubt about it...
 Servius' monetary reform was in connection with his new census system … Servius divided the city and the countryside into regions and required everyone of the same district "to contribute a certain coin per head, men paying one kind, women another, and children yet another...and to know the number of those living, newly born and died and came of age, he prescribed which coin relatives were to contribute for each one - into the treasury of Juno Lucina for the newborn, into that of Libitina for the deceased, into that of Juventas for those arriving at manhood. From those coins he would know every year the total of the inhabitants and which of them were of military age.”
AES EQUESTRE, AES HORDEARIUM, and AES MILITARE, were the ancient terms for the pay of the Roman soldiers, before the regular stipendium was introduced. The aes equestre was the sum of money given for the purchase of the horse of an eques; the aes hordearium, the sum of money paid yearly for the upkeep of the horse of an eques, in other words the pay of an eques; and the aes militare, the pay of a foot soldier.
The mystery is uncovered: the value of a legal tender money collected by a State to the census as taxes and used mainly to pay the soldiers of its army, soldiers being the main proportion of the public employees of that state, is, as could be no other, is the labour quanta you can pay with a unit of that currency.
The pay of a foot soldier was 100 asses a month.
For fiat legal tender, as it is the required currency in taxes, and the currency at which the state expenditures are paid, especially government employees, it is the one that establishes and anchors the value (as a trend) of the money used in all other monetary transactions within a judicial framework and sets the value at the most Marxist way possible, because it makes using the commodity mother of all commodities and final measure of all other commodities, which is none other than the very Marxist labor value of its officials, in their currency units. It is the same monetary policy for setting value to the legal tender currency already used by the Romans and the Athenians. Aristotle money whose value is by law.
So the value of a currency is fixed by a state in the spreadsheet of the State Budget, at establishing chapters of expenses and incomes, and more specifically, at establishing a figure, a quantity denominated in that currency, to pay the salary of its civil servants.
And it is a key concept because it gives us clues about how to orient the monetary model for Community currencies.
We know that all the added value at solidarity Communities is given by the work provided by the volunteers. The value of the Community currency is also given by the the work provided by the volunteers. This is why volunteers should be paid and the pay included in the Community budget. Its because it sets the value of the currency. A very transparent choice of the name for a Community currency is community HOUR pay.

Sovereignty of peer-to-peer record keeping

It is generally accepted that the new monetary system should be based on the technology of the block-chain, so that the P2P sovereignty for record keeping is full, and not easily vulnerable.
As we will need to use metric currencies (“Issued Currencies vs Metric Currencies”, 22 Dec 2015, Community Exchange System , Tim Jenkin), able to manage P2P credit, that is, negative balances, we need to use second generation block-chain technologies, handling smart contracts.

Proof of concept

wiki with monetary principles of a sovereing currency with P2P credit https://github.com/segovro/Community-Currency/wiki

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