domingo, 24 de enero de 2016

In search of a plan B

In search of a plan B
Rogelio Segovia is member of the Instituto de la Moneda Social

This article was originally published the 6th January 2016, in Spanish, at VIENTO SUR, “A la búsqueda del plan B

[In this article the need to launch already now and grow a monetary plan B that we will need when we need to look into the eyes the Eurogroup. For when that time comes this plan should already operating, covering a significant percentage of the economy, so that it can expand rapidly in front of a situation of suffocation as the Greek, allowing at least the internal economy work, giving a precious letup, of months, before planting the new state monetary system on the world monetary table. It is a plan B that grows from the bottom up. It is a plan B that is post-capitalist at the roots, which does not pay interest to the Banks. But above all, it is a plan B that can be helping in the meantime, in a practical way, the most desperate population]

Since the definitive establishment of the Federal Reserve (Fed), the US Central Bank, after a long process with two earlier attempts, what we have is the enthronement of the financial power over the rest of the capital (and I dare even classify it as a new superclass); the apostolic model of the State of the four powers is obsolete, the "democratic theater" State has grown a protuberance, a fifth power, the banking power, with their own bodies intermediation, with Central Banks in the lead as private cartels of the banks, with the rest of civil society excluded from these bodies.
The Federal Reserve System US was established on December 23, 1913 by the Law of the Fed (Federal Reserve Act). It is the result of the reaction of the big banks to the panic of 1907: in 1910, executives of the banks JPMorgan, Rockefeller and Kuhn, Loeb & Co. Banks, etc., held for ten days a meeting in Jekyll Island, Georgia, secretly, in pure conspiratorial style, but full of patriotic fervor according their autobiographies, concocted the plan, presented to Congress by the Republican Party and supported by the American Bankers' Association. The Federal Reserve controls the size of the money supply with almost absolute power, out of almost any democratic control, and thus took over all the controls of the economic control room, and now the crisis or booms can be generated at will. It is called "Money Cartel". The European Central Bank (ECB) and most Central Banks in th world are designed in its image and likeness.

There is no way to "conquer it from within." Either it is abolished or amended by law from the classical democratic State bodies, as proposed now Bernie Sanders, and it seems that Varoufakis follows now with the DiEM25 intitiative, and we wish them all the best of all lucks. Bernie does not seem to be very aware that he is calling by her name no other than the mother of Aliens nest, the beast herself. They call it Plan B, but it is a Plan A. As Siriza had a Plan A. For me, it is more than problematic any progress without creating an alternative power to put in place monetary areas of sufficient size out of their system, as it is uncertain modify labor legislation without a healthy dose of workers' struggle. What I miss is a Plan B.

The reality of the monetary movement

There is a huge explosion of literature about monetary reform without a clear ideological compass in a pot of thought where all more or less agree on the diagnosis of the crisis of the current monetary and financial system, but the result is a vortex of approaches ranging from anarcho-capitalist, followers of the Austrian school, till the preachers of the Common Good through a change of consciousness and ethical behavior.

Within this turmoil on the currency reform, a current is emerging without explicit Marxist roots, but clearly post-capitalist, united in some way (although not formally) around a vision of the future with the resistance to climate change, the economic sustainability or de-growth and the fight against poverty as major axes. One of their centers of thought is undoubtedly the National Economics Foundation (NEF), and variants of the "Great Transition". Key authors are for example, Bernard Lietaer, Paul Grignon, Thomas H. Greco, Ellen Brown. We have a solid historical research by authors like Stephen Zarlenga (The Lost Science of Money. The Mythology of Money–The Story of Power (2005, American Monetary Institute). We must especially mention an author with a privileged position at the crossroads between the theory of law, economics and cryptography, Nick Szabo, bridge author with the movement of crypto-currencies.

The STRO, the Social Trade Orgnaization, has played a key role in spreading the ideas into initiatives. Another think tank to mention is the P2P Foundation. Cyclos, Digipay4Growth, Community Currency, Community Exchange System, Community Currencies in Action are all resource centers for complementary currencies, providing from knowledge to software. In Spain a small think tank around the Instituto de la Moneda Social is taking form.

The complementary currency WIR Bank in Switzerland, in existence since 1934, formerly the Swiss Economic Circle (GER: Wirtschaftsring-Genossenschaft) has an annual turnover of 4,6 billion Swiss francs, serving 45 000 SMEs with 15 000 employees. The business plan of SoNantes, France, has a goal to take over 10% of GDP in Nantes. Partly thanks to the activity of STRO, there are nearly 4 000 complementary currencies in the world. 
The telco giants are entering in plunder mode to dispute the role of banks as primary intermediaris of money. M-Pesa in Kenya, mobile money, has a base of 10 million users. Launched in 2007 by Vodafone for Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania. It has since expanded to Afghanistan, South Africa, India and in 2014 to Eastern Europe.
The Tunisian government has introduced the eDinar digital currency in conjunction with Tunisian Telecom and Monetas, 600,000 people had for the first tie access to some form of financial services in recent months.
The Banco Central de Ecuador launches in 2015 its “dinero electrónico”.
In all cases, it is now new money. It is about payment systems, as covered by the EU Directive on Payment Services (PSD), in which the source and final destination is always legal tender money as issued by Banks. 
But Bangla-Pesa, the currency of the slums in Mombasa, with a social orientation, a Credit Clearing System (Barter Exchange), thus not banking money, is also performing very well: launched in 2013, covers 16% of retail sales in their community.

In Spain, and mostly around initiatives of REAS (Red de Redes de Economía Alternativa y Solidaria - Network of Networks for Alternative and Solidarity Economy), VIVIR SIN EMPLEO lists an inventory of tens of complementary or alternative currencies (not to be confused with social banking, such as FIARE, which are a remake of the old Cajas de Ahorro, finally running with the same monetary instrument). To highlight, currencies at municipal level, to be treated further down.

We all know about Bitcoin and the boom of crypto-currencies (1 million downloads of the main android wallet, about 7 billion US $ in capitalization, 200,000 transactions per day), with an ideology behind which is nourished, if by any, by the neocon school and their Golden Calf of the "digital" gold standard.
But it is not the only type of cryptocurrency. Others also use block-chains, but try to implement models much closer to the STRO traditional models. To highlight the open source movement around ethereum. Ethereum enables the design, contrary to a cryptocurrency emulating "gold", scarce, limited, as Bitcoin, abundant crypto-money, allowing for credit money, truly sovereign. In this case, technology is not neutral, it is a key political choice.


The monetary battle is old and historically it formed part of the struggle for power. It goes back to the Punic Wars and the Roman aes, an evolution of the original nomisma of Rome (King Numa, 716-612 BC), designed following the example of Sparta. It was minted in copper and bronze, and not in precious metals, with a nominal value higher than the price of the content in metal on the market (even dipped in vinegar to further degrade the metal). It was used to pay the labor value of the Roman army, the welded, and was legal tender for their taxes. An amount linked to census was emitted, and therefore fixed the exchange value of money in Rome around the value of the soldiers salary, not gold. It was key to destroy the invader equipment and refreshment logistics of Hannibal, who's money was based on precious metals, not accepted in Rome. Until the Punic Wars, the last benchmark for prices in Rome was the pay of the legions. It was the subsequent robbery of the Roman generals who flooded Rome with gold, had as consequence the displacement of the peasants and ended up ruining the Empire.

The warlords had already discovered in prehistory that much more productive than devastate, plunder and abduct slaves in successive raids the weaker territories, it was to maintain armies threatening enough and dictate a tribute to the vassal territories to allow them sufficient prosperity optimize revenues (Laffer curve, … one implication of the Laffer curve is that increasing tax rates beyond a certain point will be counter-productive for raising further tax revenue ...), finance the warlords luxuries and pay the weld of the winning army. To avoid misunderstandings, in times prior to the writing, the warlords left, for example, a copy of a necklace with shells (or other objects) as a reminder of the amount of grain, goats or work to be paid as taxes. Throughout the year, defeated tribes traded between them with these shells, because what mattered was the balance at year end, giving rise to money to solve the "double coincidence of wills" in the market between tribes. The main disadvantage of barter is that it requires the double coincidence of interests, that is, that everyone wants what another is offering in the same place at the same time; money as a medium of exchange, solves it. Then the warlords discovered that religious domination, assumed obedience, can save many army mouths and established tributes on precious metals to the temples, but also other more perishable products but costly to obtain, such as feathers, which destination was not spending, but ornamental (Szabo, Nick 2005, An Explanation of the Kula Ring, en Nick Szabo’s Papers and Concise Tutorials).

Already in the capitalist stage, the film The Secret of Oz, William Still's documentary, explains how several US presidents, including Lincoln himself, have been killed in this monetary battle within the capitalist class, until finally imposing the FED model. They were battles within the elite, without major role of the popular movement, but representing more or less democratic political power options. They were battles for supremacy within the bourgeois class, to consolidate the position of the financial sector over the rest of the capital, and especially about the owner peasants, but class struggle in the end.
Actually, they retook a long history of the battle of gold money, scarce money, linked to power, against abundant money, popular money, represented by silver, an already fought battle in the Middle Ages.

In the panic of 1893, shortly after the death of Marx, came the first really popular currency movement, the Free Silver Movement. The long march of the unemployed in the Coxey's Army, in 1894, called for public works policies, that we would today call Keynesian, linked to expansionary monetary policies based on paper or silver.

Closer, our Spanish civil war is a historic reef of the use of alternative currencies as combat ammunition (Corporales Leal, Carolina 2011, Moneda y guerra civil española, Ab Initio, Núm. Extr. 1, 2011). As a result of the evolution of the war, the metal became scarce and the government of the Republic ordered the hoarding of coins of copper, bronze and nickel, metals needed for the war industry. Collecting pieces of gold and silver in general was also ordered because these precious metals were used to buy weapons to the USSR. During the war, some provinces were cut off from the rest of Republican territory, and had to issue their own currency as an emergency measure. Minting local coins on the Republican side occurred mainly in Catalonia and Valencia. In addition, in areas where the anarchist CNT and the extreme left had more power, collectives and cooperatives emerged. It was economic and social institutions that formed in enterprises and large agricultural farms locally, especially in the regions of Arragon and Catalonia. Many of these communities and cooperatives came to mint their own currency, the outlaw, with revolutionary intentions which aimed to overthrow the economic system of the Republican state. Its monetary model was the currency promise of the good to be produced (''will deliver the bearer" be it potatoes, grapes, clothing, machinery, etc.). There are examples of money based on bread or flour of the miller. It is a self-credit. It came to exist money of the republican army battalions.

The battle against neo-liberal policies, first in Latin America and now in Europe, have definitely converted the currency movement in a movement associated with grassroots movements, the breeding ground where thousands have borne fruit STRO like proposals.


I do not find many wires to pull at Marxist literature to analyze what is discussed in the vast literature of the movement of the monetary reform.

We celebrated text of Ernest Mandel Marx's Theory of Money (2004, Internet Archive). We have the compendium of Fred Moseley Marx's Theory of Money Modern Appraisals (2005, Palgrave MacMillan) and we find 200 pages of authors diving in classic texts to say "This is based on what was already said or not said by Marx", but few proposals on how to generate intellectual tools or artifacts with which to arm current grassroots movements. The debate is being fought mainly in the area of consistency of ideas, essentially with the idea abstract labour value. This is certainly a powerful scientific methodology by which physicists have discovered, for example, never observed planets. But it is a methodology that requires the essential complement of accumulation and richness of details provided by the empirical evidence. The largest source almost contemporary of Marx, based on a systematic investigation of historical, anthropological and archaeological sources, is the enormous work of Alexander del Mar (Por ejemplo del Mar, Alexander, (1867). History of money and civilization, (repr. NY: Burt Franklin, 1969), work to which, apparently, Marx had no access. Since then, as Stephen Zarlenga points, any monetary history research has been the area of academic research in political economy more censored, with the exception of the Austrian School, heavily sponsored and promoted in all schools in the world economy, especially in USA.

If anything I'll take the recommendation of the editor of the above Marx's Theory of Money Modern Appraisals in his introduction :

“In terms of future research, I would suggest that the most urgent task is to develop further a theory of pure credit money (without commodity back- ing), based on Marx’s theory, in a way that is consistent with Marx’s labour theory of value and surplus labour theory of surplus-value. Promising beginnings concerning this important task have been made by several of the authors in this book and by others ...”. 

If what we are talking about is the basic concept of credit money, the problem is solved in the literature of monetary reform sufficiently to operate in practice: credit money represents the labor-value of the products to be produced, they will be sold in the future and with the sale the credit will be canceled. This does not contradict any Marxist principle. On the contrary, it strengthens. Now it is true that this concept would lack deeper treat (I will not go into details, see, for example, Matslats (2105), "Wave/particle money", Segovia, Rogelio (2015), "Credit is the time dimension of money", and a mathematical framework that treats the probabilistic universe of possible future transactions. Nothing missing to be clear about the basic choices of the monetary reform.

The power machine

Money is not just a concept. It is primarily an instrument of power whose mechanisms must be understood.

The modern version of this instrument of power was initially created by the Amsterdamsche Wisselbank, the Sveriges Riksbank and the Bank of England, a model well established already in 1700 and remains in force to this day, commonly known as "fractional reserve banking" or fractional reserve banking. Fractional reserve banking is a system in which banks they are only required to keep as reserve a fraction of the amount of customer deposits, although they have the obligation to return the deposits on demand. The system is based on the fact that depositors tend not to claim all their deposits at once, not all debtors are paying the same time.

The banks twist this concept even further.

This includes deposits generated by granting a credit (the deposit that appears in your account when we sign a mortgage). The deposit in the account of the debtor actually has only a small reserve behind at the bank (the ECB requires only 1%). In this way the multiplication “ex-nihilo” of the money is generated. Several central banks have pages where they shamelessly explain the mechanics [McLeay, Michael et al. of the Bank’s Monetary Analysis Directorate, 2014, Money creation in the modern economy, Bank of England Quarterly Bulletin 2014, Q1]

This fraudulent practice was opened by the ancient goldsmiths with their gold deposit notes. They acted as intermediaries to lend at interest the deposited gold. Soon they began to issue more notes than they had gold reserves. When the State began issuing its own notes, banks replaced the goldsmiths and notes had to be in legal tender notes, ultimately backed by the State gold. Give, as credit, more money than the deposited was forbidden by law as counterfeiting, but the law was talking only about money printed by the Mint. Nothing says the law about electronic money at the bank data bases representing minted money. So the banks repeated the trick of the goldsmiths. It consists of two sources of money, complementary to each other, and a supplementary mechanism to give it a value:

1. Mechanism of imposition of legal tender money and its value

As the legal tender is the required currency in taxes, and the money by which state expenditures are paid, especially government employees, the legal tender money is the one that establishes and anchors the value (the trend of the value) of the money used in all other monetary transactions within State Legal framework. And it sets the value the most Marxist way possible, because it makes it by 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. Is the same monetary policy for value setting used by the Romans and the Athenians. Aristotle money whose value is by law.

The labor value of gold as an intermediate measure of value is not needed. It is a necessary accessory reference value as a bridge only to consider a Country economy in the global economy, a fraction of each economy to this day, which is mainly national (European in our case).

So that the value of a legal tender currency in a State is actually fixed in the spreadsheet of the State Budget, that establishes chapters of expenses and income, and more specifically, establishes an arbitrary figure measured at its currency metrics, which is the global amount for the salary of its civil servants.
Divide it by the number of public employees, compare it with the goods an average civil servant is supposed to buy, and you have the value of this legal tender.
  • A Country may have a State Budget of 1 000 000 COINS to pay 1 000 public employees with an average salary of 1 000 COINS. 1 000 COINS = 1 salary. The value of the money by law.
  • Another Country has a State Budget of 1 000 BUCKS. It pays 1 000 public employees with a salary of 1 BUCK.
  • In the exchange market, the tendency will be 1 BUCK = 1 000 COINS
Sure, we can complicate the example by saying that the standards of living are different, but in the end, all conversions made, the principle will hold.
The Holy Grail of the last reference value of legal tender money, who's market value is fixed by a commodity, translated into value of labour is a much more familiar ground to the left than where it appears that the Marxist scholars seek it, who seek it where the neoliberals do, looking at gold.

And it is a key concept because it gives us clues about how to approach the monetary model to the periphery of the State, such as town councils, but also to the governance structures of any popular, solidarity or alternative movement, any base, solidarity and resistance structure. Whenever we have a Commons or Public work with a circuit on collective contributions, we have a sound monetary base.

2. The amount issued by the Central Bank as a reserve for banks

The first is the so called "money printing press" of the Central Banks. Surprisingly, the state can not issue money and can not use the money issued by the Central Bank. In Europe, according to the Maastricht Treaty, the physical money is issued by the mints under authorization from the ECB, and electronic money is issued by typing, by divine act, at the terminals of the ECB.

The ECB is above the law or any democratic body (“neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body”).

It is is prohibited for the ECB and the National Central Banks the lending in favor of such institutions, the Member States, or any other national public body as well as the direct purchase of "debt instruments", much less to pay their expenses. The ECB money can only be used for lending to private banking the reserves they need to provide credits.

The state is there as troupe to move the machinery, impose the currency by law and give value (could we say "wash"?) to the money generated by and for the cartel of private banking. That's why is called fiat money (fiat), since it is based on faith and trust of the community, that is, not backed on precious metals or anything other than a promise of payment from the issuer. A promise to pay you for a bank note by another banknote. The bank does not need a reserve of gold to backup the value of your money. It is the State machinery which says, in the Banks name, how much is the value of an euro, in proportion to a reference wage.

This article focuses on principles, but its a great opportunity to comment how a currency like the euro, relying on the setting of its value in 24 State Budgets, with 24 wage levels, has not the same purchasing power in all countries.
That's the sign of the Bank which is the Central Bank's mission is to keep inflation under control. It does so by regulating reserves and interest Banking, trying to control the intensity so that this credit be granted, and thus the total money supply. The intention of this mission is none other than, without inflation, debts on loans issued by the cartel members and their interests are paid, mercilessly, at an actual nominal value equal to that contracted.

3. The instrument of credit money

It is the money created “ex nihilo” (out of nothing), as explained above in the fractional reserve banking, multiplying by far the reserves, and a money that when it comes into circulation increases the money supply issued by the Central Bank to meet the amounts needed by quantitative theory of money, and where it fits perfectly Marx considerations on the volume and velocity of money, so far until is returned, when it is wiped out again, and the cycle is repeated with new money created through credit.

In our economies this money is about 97% of the circulating money (mostly electronic deposits). As it is issued with interest, we must return more money than money was created and, therefore, this banking elite stands at a podium above the rest seeing all the other capitalists in the arena competing to death to repay loans, go break the stragglers and, in any case, growing exponentially the GDP to create a market for the growing volume of money to be returned and burning the planet until exhaustion.

We should not launch an anathema too hasty about this kind of money, as the positive money current within the monetary reform current does. In the slums where Bangla-PESA operates, the daily fluctuation of incomes of small businesses is around 400%. The need for money trough credit for SMEs to save the bumps is structural. It is simply the result of the randomness of the small size of their market. Free money available for credit backed 100% by savings is only a small fraction of what is needed, for example, by SME's. Most of the savings, in special family savings, go as investment in capital goods and is not available for lending. Therefore, if you can not create “ex nihilo” money, there will be missing money for credit. You have to keep the magic of pure credit money (without the backing of any commodities), but radically democratizing its generation, taking away that power form the banks by putting this power under popular sovereignty. And especially escape the spiral of growth, abolishing interest.

Proposals of “Fair Banking” or “Ethical Banking”, as far as it works with interest, whatever well intended mission statements, is not even close to what it is needed. In the end they are webbed with the rest of the banking system. The proposal of a Public Bank giving interest-free loans, comes closer, but it takes something much more distributed and more near the democratic sovereignty bodies than a centralized State Public Bank.

This diabolical theater of Chinese shadow puppets, where nothing is what it seems, is like a Matrix world, which only holds because we believe it all, is staged by a small elite and by these shadows they dominate nations, make wars, ruin millions and lead the planet to the abyss. On the left we remain trapped in this illusion, in these concepts and in that language. Perhaps improperly we speak about anti-capitalism, when the capitalists, defined as owners of the means of production, and are a subordinate class of this top predator class. Just look at Piketty (Piketty, Thomas, (2013), “Capital in the Twenty-First Century”, Harvard University Press) and the rates of return of each. When this elite nor has what is traditionally understood as capital because it has not the money it claims to have, but the power to say that it has it, and then money "is". How we call them? Gods?

For this reason, it is necessary, of course, a growing civil tide flooding the institutions of the "canonical" State, but also other tide settling in territories outside the Matrix world, beyond the bondage of interest payments to the outgrowth of the fifth power, in a new monetary world of the Commons, if only to point to show the way to what and who remains inside the Matrix world, and facilitate a massive migration when the Eurogroup ever happens to come again with a blackmail to the people (in an event that one would dream as viral and uncontrollable a second version of the fall of the wall). The leitmotif is the same: sovereignty. Democratic sovereignty, food sovereignty, energy sovereignty ... and monetary sovereignty.

The social acceptance of social currencies that pay not interest to bank credit money to make it grow to significant economic areas is laborious because as payment service they do not have radically superior benefits, and frequently are operated with very amateurish means or platforms, and they generate a lot of mistrust. However, in a shocking situation like the Greek, previous use at small percentages (5%?) of the economy can be enough to make it viral. In the Argentine “corralito”, in the Greek and Cypriot crisis, the growth was explosive for crypto-currencies. A fruit vendor without customers, surely will accept the complementary currency before throwing the rotten fruit.

As a side note, banking has reached this oligopoly by one and only position of strength. It is the only industrial sector that enjoys the almost absolute confidence of everybody to safely carry the books of the transactions between any other third parties. Formerly paper books, now giant databases. And this the Achilles heel on which we have an historic opportunity. Cryptography allows us to design decentralized databases, P2P ledgers, bockchains, safer and more reliable than have ever been the monster computer at the bank vaults. This will remove the carpet under their feet and lowers the entry barrier to the main means of production of their business to within the reach of a Neighborhood Association.

Conceptual and action guidelines

On June 28, 2015, the troika banged his fist on the table and thwarted all Syriza negotiations with a simple action, showing who actually exercises sovereignty. The ECB cut the tap for reserves to Greek banks and that suffocated at a stroke the Greek economy, putting to knees Syriza and thus the Greek people, highlighting the null value of democracy. The monopoly of the money machinery is the monopoly of power. 
Vaguely Varoufakis was speaking of a mysterious "monetary plan B", never matured or explicited. And we all wonder what that plan B was, what the Grexit would consist. The boldest minds talk of a EuroDracma (crypto-currency?), But in the end, bank debt money. Meanwhile, civil society, through its grassroots, is covering the State gaps as it can and is finding alternative ways of economic functioning. It seems that the plan B of Varoufakis has no connection with these movements to provide them with alternative monetary instruments.

In our country (Spain) what we need to do, as Jaime Pastor says in these pages (VIENTO SUR), is to convert the electoral machinery of PODEMOS in a machinery for empowering social movements from existing grassroots and 15M platforms. Otherwise, between now and the next election the millions in poverty and precariat, tired of the limited efficiency of the activity of the 69 MEPs of PODEMOS in Parliament, have resulted in his despair into a Greek New Democracy or French National Front in our country.

It is necessary to launch and grow now the monetary plan B that we will need when we need to look into the eyes the Eurogroup. Juan Carlos Monedero says again and again that the volume of our economy will be enough as a deterrent. I doubt it. Higher towers have fallen. In extreme cases - and the financial crisis of the derivatives bubble can bring extreme cases - their hands have not trembled to make a clean sweep of larger economies like Russia, after the fall of the wall.
When that moment comes, we must have already an operational B plan covering a significant percentage of the economy, so that it can expand rapidly at a situation of suffocation like the Greek, allowing at least the internal economy work, giving a precious breath, may be months, before planting any new monetary system on the world monetary system board. It is a plan B that grows from the bottom up. It is a plan B that has post-capitalist roots, which does not pay interest to the Banking World Web. But above all, it is a plan B that can be helping in the meantime, and in practice, the most desperate population by helping them to run their alternative economic solutions.

In the article Apuntes para una soberanía monetaria (Segovia, Rogelio, 2015, Instituto de la Moneda Social) [Notes around monetary sovereignty] I outline the principles of monetary sovereignty that should guide these efforts. I only pretend to open a first breach in the gap in the left literature in the field. Hopefully it bears fruit in a thousand ideas, but above all, in a thousand initiatives.
I would urge the movement to organize a wide debate with the few scholars, groups of alternative economy, as ATTAC and others, Ethical Banking people, Social Currencies, the agents of the social economy as REAS, party economic teams like 3E, to go first body developing a conceptual guides and solid action. The anti-austerity movement that proposes Varoufakis seems a suggestive framework to frame the debate. My first question is: Where is it written that an expansive policy of public works only have to finance with debt money, as the euro?

The plan B of a peoples empowerment machinery

We are position ourselves at a vision of the economy that has been named "the new feminist economics", a less efficient economy but a more resilient one, in a re-localized economy, less global, a "buy local", which takes into account the total cost of things including its recycling and environmental costs, where you must carefully manage renewable energy. To this what corresponds is a machinery of sovereign money consisting of a monetary systems ecology corresponding to the ecology of governance structures where democracy is exercised (Lietaer, Bernard, et. al. (2012), Money and Sustainability, The Missing Link, Triarchy Press).
The Public Banking of which we speak, is a banking at each level, at each and every economic niche and every community building an ecology of sovereign currencies. Communities are free to issue currency as they like and give or lend it to the government of the community to manage their Commons budgets without further condition than the community has participated in the preparation of the budgets and know and accept the effects in services, taxes and inflation. Some agencies or community agents, strictly evaluated and with powers according their records of successful, returned credits, will be delegated by the community to analyze the solvency of the credit requests, and can create all the needed credit money. Better if nobody selects them and it is all a P2P reputation building process.
The hottest level is the municipal level. SoNantes. Brixton Pound. Now in Barcelona. The program of Barcelona en Comu includes creating a local currency.
The municipal money has some very clear lines, which are not so evident in other grassroots intitiatives. These would be the guidelines:
  1. At least part of the wages of municipal officials must be paid with that money. It is what fixes the labor-value reference of the currency and is resistant to any external monetary maelstrom.
  2. At least part of municipal taxes (or municipal services) must be compulsorily charged in that currency, or optionally with an incentive, because this will encourage all other economic agents to obtain that currency if they want to pay taxes.
  3. You need a first base of local businesses to accept that currency as part of the payments, but mainly as a clearinghouse for businesses, as mutual suppliers, wich is the side that most presses the SMEs books of accounts. It is necessary to guarantee the convertibility to euro.
  4. It must be possible to authorize credit lines in that currency, “ex nihilo”, without interest, by delegated bodies and monitored by the community, ensuring sovereignty over the temporary surplus of credit money.
  5. If possible avoid using a data base resident on a server, centralized, vulnerable, and instead keep the records at a blockchain, decentralized, P2P shared collectively, almost unvulnerable against lightly taken executive decisions at local power shifts. If you close, not before a proper legal battle. The monetary legal building has many cracks, - it could be no other if the business ground is a fraud -, so if the records are saved at a foreclosure, then there is every chance of winning the legal battle.
The structures of solidarity or parallel economy, as now flourish in Greece, temporarily replacing the state or generating new cooperation structures should follow a similar model. In Spain, the Red de Solidaridad Popular seems the most mature candidate to test a state-wide movement monetary system. Is particularly sensitive the payment of the "public proto-employees" of these structures and their place in the labor law, but at a soup kitchen, volunteers must be paid in the currency of the network to which the soup kitchen belongs . All donations should be made in that currency, by changing euros if necessary, so that a stock of euros will be available to buy in the "external" market. If people who come to the dining room can pay whith what they have earned in a Time Bank with that social currency, have won something important, their dignity. And of course, you must give credit by creating new money, as a collective act.

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 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, 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