Community Currencies

Pattern number within this pattern set: 
ernie yacub
Michael Linton

Money is just information and we can create our own.

Defining money-as-we-know-it

Conventional, normal, central bank money, is all the same. It is created in limited supply by central authority so it can stand as something of value in itself. Hence, normal money can go anywhere, which is an asset in some functions and a liability in others.

Problem : conventional money is dysfunctional

It's a matter of design, but not deliberate design. "Money" became a commodity itself, and therefore limited in supply. This evolutionary process has left us using a money that is better as a store of value than as a means of exchange.

The origins of this problem lie in fear and greed - nobody parts with anything of value without confidence that they're getting value in return. So money has generally had to be a thing of value in itself to be acceptable in trade.

The need for a universal medium with assured value necessitated the limited issue by authority who "stood" behind the money, or backed it with gold or something similar. But this function of money as a store of value, and therefore scarce, entirely compromises its function as a means of exchange.

So when there is work to be done such as building homes or looking after children, all too often the money (the measure) is missing. People with the necessary skills to build homes and care for children remain unemployed. The money's just not there when it's needed.

Therefore, conventional money fails to service the economy effectively - it leaves pockets and sectors of deprivation. This is an inevitable consequence of a money that exists in limited quantity. Its distribution will pattern the Pareto effect - a few will have a lot and many will have little.

Our dependance on normal money generates patterns of competition, exploitation, hoarding and crime, as we are reduced to competition for survival in a truly plentiful world. And for the physical ecology on which we are totally dependent, normal money is a disastrous problem - forests are strip mined; air, water and food are poisoned; estuaries are paved; and climate is changed globally - just to make a buck.

It all comes down to money in the end. The problems of the world come from our actions, and our actions, both as a society and as individuals, are largely determined by the way money works. Many trivial and even damaging things are being done simply because some people have the money and the will to do them. In contrast, other things of real value, many essential to the survival of the planet, are not happening simply because those who have the will, don't have the money. People are working in ways detrimental to their personal health, to that of the environment, both locally and globally, and to the well-being of their community because they need the money.

For most of the planet, the money comes first - what we do to get it comes second. And this is so because money is our means of exchange - we need to earn it to keep in the game. This is a problem, since money is scarce and essentially difficult to come by.

Consider the extent to which the economy of your own community is distorted at present by its need to import money through the export of real resources, often at unrealistic prices. Communities will squander resources, pander to tourists, entice heavy industry, and accept questionable benefits from government programs simply to keep the wages rolling. And consider how your community exports money to bring in goods and services at the most "economical" prices, rendering local producers idle, at an incalculable cost to the infrastructure of the community.

Most regions are communities in name rather than reality. An effective community is a process, an ongoing collection of social patterns and continuing relationships. It used to be that towns, villages, and regions were much more self reliant than now. When transportation was slow and expensive, when much had to be produced locally as it was too perishable to travel, when moving money was itself a risky business, most of the productive work in a community was addressed to meeting its own needs with what was available locally. With the advent of "cheap" energy and transportation, technologies of preservation, and the present ease of global monetary transactions, communities everywhere have been progressively drawn into patterns of cash crop specialization and the inevitable dependency relationship.

The flight of money from a community can leave it devoid of the means to trade within itself, even when resources are available. People are unemployed, not because they lack skills or they are unwilling to work, but simply because the money to employ them has drained away from the part of the world where they live.


Context - money is information

Money isn't really real - it's a social artifact, a ticketing system we use to manage who gets what and how much of it. So it's absurd that there are economies inactive merely for lack of tickets, when tickets can be created as required.

It's been a long time since the country's money was anything of "real" value - gold, silver or something else precious in itself. Nowadays, money is just a ticket system - cheap metal coins, paper bills and cheques, or just records in some bank computer. Money has become a form of social information, something of absolutely no value in itself that we use to measure how we value other things, including our time.


It's understandable that there should be shortages of real things, like bricks, fuel, skilled labour, or food, but why should we ever be short of measurements, short of gallons, degrees or pounds? Why should the economy fall into recession and people be unemployed, merely from a lack of money, when money is nothing but tickets and measures? That would be like having everything needed to build a house - but not building because we ran out of inches. "We have plenty of wood, but sorry, we have no inches today." Obviously, this is nonsense.

Money is just information and we can create our own.

Defining mutual credit money - aka community (complementary) currencies (cc)

Accounts in a mutual credit system (community currency) start at 0 and fluctuate between debits and credits. The community currency (cc) is originally created by the buyer making a payment to the seller - the buyer's account goes negative and the seller's account positive. These are reputation based currencies - for your money to be accepted in payment in due course you have to reciprocate by earning them. Your money is your word - how good is your money?

These moneys, created as needed, circulate in the communities they serve. They are convivial in form and function - what goes around comes around.


Patterns of distribution

The typical patterns of distribution emerging in a money simulation game - LETSplay ( - show the difference between a commodity money (every player starts with $200) and a community currency where all start at zero and the money in circulation is not fixed. The y-axis tracks total trading and the x-axis shows balance (positive to the left, negative to the right).

The patterns of distribution displayed here are not a consequence of how people play the game, but of how the two different forms of money distribute.

In the limited supply money, players soon diverge from their starting holding of $200, but while no-one can diverge down by more than $200 to zero, there isn't an upper limit and every player with high holdings means several with less than $200, and often with little or nothing.

In the mutual credit money(cc), players hoarding the money have no effect on others, nor do they gain any advantage or power over others. Similarly, although it may seem to defy common sense, excessive spenders have little impact on the viability of the system, and indeed are far more rare than generally supposed - the "free-rider" problem is discovered to be more imaginary than real.

In the real world, the difference between these distribution patterns and the power relations they create - power over / power with - can generate significantly different behaviours in users. Typically, people (and business) are more generous in their dealings with cc than they are with hard money. This is a micro-economic effect, working at the level of the individual user acting in their own perceived best interests.

Patterns of connection

There are very important macro-economic consequences to the use of closed loop money, that are best understood from the recognition that the patterns possible for the movement of the money itself determine the patterns of goods and services exchanged. We are familiar with the idea that money makes the world go round, but less aware how this happens.

In those sectors of the economy where transactions are monetised, there are two components to the event. A gives B something "real" - goods or services; B gives A something "unreal" - money. Since no money means no deal, the patterns in which a money can or cannot move determine the patterns of exchange of goods and services the money can or cannot support. The patterns of money and the goods it moves are identical in form and the inverse of each other.

Conventional money can move anywhere, and so it does - moving in and out of any community in response to the sum of market forces, and thus making the community dependent on imports and exports.

In contrast, community currencies circulate within the community. They can only move from user to user, thereby applying internal resources to internal needs.

Consider the multiplier effect of a money that continues to circulate - creating real common wealth.



The way conventional money works is a problem for many people and their communities all over the world. Community currencies are a solution to the problem.

Money is simply information, so we can create new complementary money patterns that provide a better means of acknowledging the real things that happen, the gifts that are given.

These community currencies, that are created by us to circulate in our own communities, are convivial by nature - what goes around comes around. Cooperative and collaborative patterns will naturally evolve as a consequence of using money that is always available and likely to come back.

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