討論逐字稿 New Economic Visions: Currency

This is the transcript of our discussion of New Economic Visions: Currency.

At the most basic level, currency functions as a means of exchange (I give you a dollar and you give me an ice cream cone), a unit of value (a dollar, pound, etc.) and a store of value (you can hold onto a dollar as it maintains its worth). It’s also a source of information about relative value, and about what is needed to keep trade flowing, for instance, by adjusting the supply of money or the exchange rate so that those in other markets can afford your goods.

Does this make sense as a definition to you?
Actually at the beginning, when currency wasn't created yet, people used their own things to barter, for instance I exchanged my cup with jennifer for some bread. But because it's hard to value these things, it's hard to measure the value of those things, and in order to have a fair value on this exchanging step, the currency was created.
But it's not really fair, there's a lot of problems.
Can you iterate?
I think compared to when people are exchanging things [bartering], [using currency] takes away from the relationship of those two people.
How so?
Like if i exchange something with you, then we would chat, we would bond, but if its just money then, it's just like business.
Some of the human interaction is lost.
Yes, and it's easier to exploit people because of it.
Actually, one of the people brought that up in an article, so now it's the second time i'm hearing it. Because, we've been talking about trust a lot lately, right?
And so when they started talking about trust in these articles it made me prick up my ears.
In some parts of the world, this kind of trading still exists.
Like markets in Africa, and people just gather around in villages, and if I just decided I can trade my things with your things, and both sides are happy with what they get, becase the agree to exchange that and they got what they wanted.
Business activity has to be based on trust, so its no matter what the intermediate stuff is that you utilize, first of all, if you have to carry your commodity for a long distance, it won't be convenient for you to exchange your stuff directly without currency.
That's why we've moved away from direct bartering.
Also the article you posted has demonstrated a way to preserve the benefit of currency. And in the meantime, without spoiling the trust between people. On the contrary it increases the interaction and trust between people.
How so?
They created another kind of currency, people in that community, becase they trust each other.
Yes, they all accept this currency.
So the problem is we are using currency we didn't decide to use.
Someone else decided.
I read some article, that said to decentralize the control of currency, the idea is similar to what oliver said, it means, currency can be created by a certain group of people, and these people, they trust each other. Is it the same idea?

Conventional currency excels at serving as a store of value—so much so that use of money for actual trade slows down, leaving some local economies stuck. Coin and paper currencies do not lose value like the products one buys with them can, which makes hoarding and speculation attractive, particularly with the enticement of interest. Argentine economist Silvio Gesell described this phenomenon in 1913 and said that money also should lose value: that it should “rust” or go moldy like other commodities, and suggested a penalty, or demurrage fee, for holding onto it.

What's demurrage?
Okay, google says it's a ship taking up space at a port for longer than they agreed to. They're getting in the way of other boats, and wasting people's time and money. So the demurrage fee is for holding on to or using something too long, and inconveniencing other people. So demurrage is about holding on to currency too long, storing value for too long.
But on the contrary, we encourage people to hold on to money by giving them interest for deposting in the bank. But why we encourage this, it's becaue the bank can earn profits by gaining our currency. So the whole banking system encourages people to store currency, but not to use the currency. And in the end, bcause the trading activity slows dow, so the economy doesn't grow.
Reducing taxes on the rich doesn't grow the economy for the same reason. Rich people take tax breaks and don't necessarily use it to create jobs or real investment, they might just save the money instead.
Yeah, in the US, they're saying the rich are job creators, so they deserve lower taxes, but the truth is, the last thing you want to do as a business owner is hire more people, becuase it increases your costs, so creating jobs are only something done as a last resort. So rich people are only job creators when they have no choice.
But why does the government reduce the taxes on the rich?
I really don't know.
Because they're the ones who pay their campaign fees!
Is that the only reason?
Well theyre rich themselves usually, you have to be rich to get into national politics, so they're giving their relatives and friends a tax break.
But, because they are more rich, so they should pay more money!
[general agreement]

This is how it works: Each quarter, every Chiemgauer bill loses 2 percent of its value.
In the beginning, Gelleri got complaints. Then people figured out how to make the model work for them. For instance, one cinema owner said that business went way up at the end of the quarter when people wanted to shed their currency. Increased cash flow at quarter’s end was helpful for accounting, he said. The 2 percent loss, he added, was insignificant compared to the advertising he’d have to buy to secure the same level of customer loyalty he has from accepting the Chiemgauer.

So a local currency is like giving out tickets for people to use for certain places.
Yeah, and you know what? It turns out we have a local currency in Taiwan, it's printed by the President Corp. You can only use it to buy things at President stores. We got it from Chunghua Telecom, they gave us a rebate on our internet service, but not in NTD, but in these President vouchers. They're printed like money, there's no expiry date, so technically they'd be good 20 years from now. It's really a local currency.
Actually, there's more, then. Like points systems in department stores.
Air miles!
Would a yoyo card be a currency?
Yes, i think so!
7-11 cash
Credit card points
Online games all have currencies.
Oh, and you can exchange them to buy real things with real money.
There is even a company to provie a platform to exchange a lot of diffrent kind of game points, to let people exchange.
So they're a currency converter for online game points, holy cow.
If you have extra points you can convert it to another game you're playing
This is why i love talking with you guys, i would never have thought of any of this.
Not only games, including any service, credit cards, department store vouchers, gift certificates.
You're changing currencies.
And it's not limited, just point to point exchange, or point to gift certificate exchange.
So that you can change the point you don't want to other things you need.
Oh, it's convenient and useful.
It's a Taiwanese company, right?
We have a gambling spirit.
And our governemnt allows this currency to be used.
That's the other point!
And they have taken the time to research how to manage these kinds of currency systems.
But the businesses need to work with these games in order to be able to exchange these gift certificates.
Yeah, how does that work?
That's their job! [to figure this out]

So, wait. Those currencies are designed to create consumer loyalty to certain businesses, but they're not designed to create community trust. It's not that alternative currencies are automatically good. It's how they're designed and used.
I have a question, based on the Cheimgauer thinking, he thinks that devaluing the currency can solve the problem.
Solve what problem?
People wanting to store the currency.
But when we discussed the banking system and inflation last week, we mentioned that when there is inflation, the value of currency decreases. What's the difference between this situation and the Cheimgauer one? And now, the greek currency, the value is dropping, but people in Greece do not increase their consuming.
This is a valuable question, but I want to talk about the next quote before we try to answer it.
I don't get the question.
Okay, last week we talked about that...
During the process of inflation, the value of currency goes down.
Which means, before you could use 5 dollars to buy a cup of coffee, but during the period of inflation, you need 10 dollars for the coffee. That means the value of the currency goes down.
But that's its relative value
Relative to what?
To other commodities.
You need to explain more.
I 'd like to talk about the German case first, since currency is a kind of substitute for commodities, so this is kind of straigtforward for me, that currencies should have the same qualities as commodities, including like, rusting.

“From the beginning we had two objectives—to promote the region and promote local charities,” says Christian Gelleri. In 2003, Gelleri and a group of his students at a Waldorf School developed the Chiemgauer currency in the Lake Chiemsee region of Bavaria, Germany. Since then, some 3 million Chiemgauer notes (equivalent in value to the euro) have been placed in circulation. The currency, accepted by 600 businesses in the region, typically is spent and spent again 18 times a year—three times more than the Euro. This means that the currency is encouraging trade and cooperation in the region, which keeps the shops and restaurants and artisans active. Think of this faster rate of use (what economists term “velocity”) as a kind of reinvestment in the community.

The Cheimgauer is used 18 times, and a euro is used 6 times, so the Cheimgauer economy is more active than the euro economy.
Hm? I'm not sure that's true.
I'm so curious, that they trust that it has the same value as the euro.
What would devalue it?
I mean, in the current system, we trust that this paper is worth 100 dollars, that's because the govt or the central bank says that it is worth 100.
Yeah, but in real life, do you really think about that?
We actually just take it at face value.
It represents an investment in the locality, and a trust in the community.
And a trust in those students [who developed the currency]. For instance, if there's a stranger, and this person printed a lot of notes and encouraged us to use those notes as currency?
You don't know him, there's no trust there.
For instance, because we trust President company, so we accept those coupons as worth 100NT.
Wow, so we're getting to the heart of the issue.
We trust the government, becaue we use their currency.
But we have no choice but to use it.
No, that's not true. In Vietnam, people use dollars as well as dong, and sometimes buying things in dollars is cheaper. If Taiwan people really didn't trust the NT, there would be a dollar economy as well. Like in France. They're angry with the Euro, and lots of places are starting to use the old french francs again. We don't have no choice.
And in the Czech Republic, you can't use the Euro, people don't trust it, you have to buy Crowns. And if you do use a euro, it costs more.

So let's go back to Fanny's question:
What's the difference between the devaluing that happens because of inflation and currency manipulation, and the 2% inflation that happens in the Cheimgauer?
People will be more likely to consume, as people treat currency as a normal commodity such as Vegetables. If you are a farmer, you want to trade your vegetables as soon as possible. On the other hand, if you feel like you don't have as much diposable income as before, you may try to confine your spending. So that's why the different result, when the value of currency goes down, people react differently, based on their feelings.
Do you know what I mean?
It means, if I have 100 dollars in my bank account today, and when I realize that this one hundred will devalue...
Will rust!
...will rust tomorrow, I will--
Try to shed it.
You'll spend it. You'll rush to use up the vegetables in your fridge.
So maybe our government should tell everyone that the NTD will devalue.
It's easy, as long as they turn interest rates from positive to negative.
You'll be punished if you deposit.
What is going on? I don't understand?
No one will want to store money in a bank.
Since you save money in the bank, you have to pay money to the bank, so people will get their money out of the bank and spend it.
But why does the government do like this?
Acutually we discussed this when I was in college, and you reminded me of this today. But why do no governments use this? It's a good way to...
If they do so, they won't be able to control the public. The power will be distributed among the people.
What do you mean?
The currency will be distributed among the public, instead of staying in the bank.
And making money for the bank.
So the bank won't be able to earn money, and so the currency won't concentate on the bank anymore.
And the government can't control the amout of currency that's circulating.
If you imagine currency as a kind of power, and it's distributed among the people instead of at the bank--
That's democracy! That's currency democracy!!!

What about insurance companies? I feel like they are like banks, you put your money in there, and they will give it back when you almost died.
I think they're more like casinos.
Yes, my mother says that, you can't beat the insureance companies
You can't beat the house! [=casino]. The house always wins! Statistically. Otherwise why would anyone run a casino? The whole point is to earn a ton of cash.

Reliance on national currency means being at the mercy of the national credit situation. As we’ve recently seen, credit constriction can paralyze local economies. Despite the availability of goods and the need for business, when there’s no money, consumers don’t buy. Stores don’t sell. Start-ups can’t get a toe-hold. An alternative currency gives people another way to buy, sell, lend, and borrow. If the community creates its own currency, local business can go on even if the supply of national currency dries up.

It's what you're using the currency for, and what it means to the people using it. People use the Cheimgauer because it represents an investment in the poeple that they care about.
People use the NT dollar because it's convenent and it works.
In taiwan
Only in Taiwan.
Yeah but it's not only taiwan that has a limited national currency. Lots of countries have currencies that only work in their own country. It's really only the US that has like a global currency. Even the Euro isn't really used outside of Europe.

Do you know what I'm trying to answer in terms of Fanny's question?
Which one?
The question I'm trying to answer is that, why the devaluation of currency results in different situations, when people spend their money. The devaluation of Cheimgauer encourages people to consume, but when it comes to inflation, people tend not to spend.
Yes, that's my original question.
So the point you are not catching is what?
Let me think.
Okay. Why doesn't inflation have the same effect as built-in rust?
Wait, it's about the contract! It's about the being built in! It's about the agreement! When I accepted the Cheimgauer, I agreed it would devalue, I signed up for that at the beginning. But our normal currencies, nobody says when they will change, or how much, and they change it without even asking people, we didn't agree for it to change around like that! So it breaks our trust!
Yes! The face value agreed to pay us 100, but the inflation breaks the contract.
But the devalutation is part of the contract with the Chiemgauer.
We were all asking the question from a slightly different angle.
So that's the beauty of diversity, so we should have a lot of currencies.
When I was a college student, why couldn't my teachers teach us like this? We never thought about how the system worked, or why it workd.
We learned things parrot-fashion
What do you mean?
Just like in cram school, we accept everything.
What is parrot fashion?
You know, like a parrot will learn to say "Awk! Polly-want-a-cracker!" but it doesn't know that it's a sentence with a name, a verb and an object, it just knows that if you make this sound you get a delicious cracker.
how didi it learn the sentence?
Operant conditioning. Someone goes, does Polly want a cracker, and then they get a cracker, and so they learn to imitate the sound to get a cracker.
So the teacher said, "Bank is good, bank is good bank is good"
So you guys said, "Awk! Bank-is-good!"
So when we first discused this topic it was hard to say bank is evil.

I'm sorry, I'm still behind.
You're performing a valubale service, you know. When someone isn't clear it makes everyone else clarify their thoughts in order to explain, you give everyone an opportunity to understand what we're saying better.
Why is the Chiemgauer valued?
Because the people in that area all accept this.
No, why does it devalue?
It's just like a rule that's set. When you agree to use this currency, you know it will devalue in 3 months.
In one quarter.
So you agree to this.
Are you asking why it needs to devalue?
Or you just don't get how it operates.
And why when it devalues it increases consuming.
It's like if I have a stack of RO dollars, say. Let's say these RO Studio business cards are RO dollars. Tomorrow is the end of the quarter, so 2% of these bills will disappear, I can't use them anymore. So if I want to get the value out of them, I have to quick spend them, so I can get the same value out of them.
So, why is the rule set like that?
They only have to agree.
The rule says that, this bunch of ro dollars will devalue tomorrow. This will just disappear.
That's a part of the contract,
If you use this currency you agree to this fact.
Okay, but why would you want to do that?
Okay, it's like this, let's just set up an economy with just one RO dollar. With this one RO dollar we can actually make 5 different transactions happen. Maybe I'll buy some financial advice from Fanny for one RO dollar, and then Fanny will buy, say, housecleaning from you, and then you'll buy tutoring for your kid from Oliver, and then Oliver buys, oh, I don't know anymore, my brain is tired, but something from Stacy, and so this one piece of currency created 5 transactions, an economy is created. The currency just allows the exchanges to be made.
Oh! Just like Time Banking, you can exchange one hour and one hour and one hour.
Holy cow, I just realized, using hours for a currency system, why that's so fair, because noone can change the value or duration of an hour, it's the most stable currency you could possibly use!
So Time Banking is using time as currency
And it's very fair, because its a fixed value, that no one can change.
There's a movie about that
Yes, the years of your life are used as the currency.
"His crime wasn't taking time, it was giving it away."
This is significant, it means, the government doesn't want money to be distributed, it wants it concentrated in banks!
In the movie, you have to pay money to get from area to area, so poor people can never get to the rch area.
There's another movie like this, called Upside down
So poor people...
Live on the ground.
...probably cannot become rich people, but rich people can pay money to become poor people?
Or lose their money
Or just visit the poor people.
It's just like the caste system in India

We can approach problems by different routes. So no matter alternative currency or alternative cooperation, globalization, it needs to change. And last friday, jennifer told me about her career to become a social entrepreneur, just like on wednesday we talked about bunker roy in india, he's also a social entrepreneur, and I also mentioned the book named the blue sweater written by Jacqueline, she did things similar to Roy in India.
I think of the RO studio as a social enterprise.
How do you define it?
Instead of focus on making a profit, you focus on making benefit for people.
You want to pay your expenses, but profit is not your main goal.
But it's not the same as a non-profit.
You dont focus on making your own profit, you make profit for other people.
Or for sustaining purposes.
But non-profit also doesn't focus on making their own profit.
For social entrepreneurs, making profit is their means not thier goal.
So they could be non profit, just that they aren't necessariily.
So Jaqueline is like barefoot college

Final Statments
Economics just bores me.
It's okay! I remember that one week we talked about GMO foods and cancer, I had the same feeling.
When was that? Did we talk about gmo foods?
High fructose corn syrup, and the effect on people's bodies
I just want to say, that it's okay if you're not that interested in a given discussion.
Okay, because, from my opinion, the Chiemgauer, it's a small currency, compared to the euro, which is used in most of europe. So, you have no control over something so big. And I think, for the Chiemgauer, we feel that we can do something with the currency, we can invest in the shops here, we can help the local businessmen here, um, but the euro is controlled by the government, the UN, and it was forced on the people, a lot of people don't like the currency.

Yeah, we've kept discussing how to change our world, how to solve the problem of our banking system, our economy, and climate change. From my point of view, the key point may be to decentralize. For the problem of our economy and banking system, we can decentralize the currency, and create local currency for certain communities. The same when we discuss the story that indian woman build the solar panels, and we also mention decentralization.
In that case, decentralization of aid,
And decentralization of education system. I think that's the way we can keep on discussing and thinking and change our world.
Decentralization of education?
In that case, they are...
They create their own education system.
...and they teach other women how to build solar panels by women, not by engineers, and not by schools.
Talking about this, after we had the barefoot college topic, I have acquaintance with someone, a researcher at the Academia Sinica. And he has a fellow researcher that used to be in the field of astronomy, but now he's working on electricity production.
So he went from farther stars to a closer star.
So this friend sent me a powerpoint that he did, a speech he did. And his conclusions for the current problem of electricity was more efficient nuclear plants.
Oh, jesus. Let's build even more better polluting potential bombs and scatter them all over the place.
But a guy I know working in Taipower company said we always had extra elctricity in Taipower company
Does that mean we don't...
Oh, guys, you have to understand how power companies work, or you'll misunderstand that statement. Power is a weird utility. It can't be stored, not really. And when you're powering a whole country, you have to match exactly the amount of power produced with the amount of demand from second to second, or the whole system collapses and becomes a blackout.
This is why devloping countries have problem with power. Listen. A power company needs to know exactly how much power is going to be needed at a certain time, so they need to know exactly how many customers they have. When everyone's property is regiesterd and they can legally apply for utilities, and are legal customers, the power company knows how many customers they have and how much power they use. But in a developing country, it's difficult to impossible to regiseter your ownership of a house, but you still need power, so people hook up illegally to power lines. Then the company never knows how much power to supply and when the demand and supply get out of balance, bam, blackout. If you want to understand more about this, you have to read "The Mystery of Capital" by Hernando de Soto.
Okay, but so I didn't understand why they can make these solar power panels in India, but the Acadmia Sinica researcher can only come up with nuclear plants and biofuel.
So I emailed it to him
What did he say?
He said, the problem of solar power is batteries. They cannot really store power.
Batteries are like the Chiemgauer. They leak value.
Power has to be consumed as it's made. If its not being used, they power down the plants. You can't store power like water. If no-one's using you have to stop producing, if more people are using you have to produce more. Second by second.
So how can it be used at the barefoot college?
Batteries. They charge the batteries by day and use it by night. The power loss is there, but since they're charging everyday, the batteries are enough each night. Also, you gotta think about it. They're using a single LED light, and that's enough because they had NO light before. But just in this room we've got 6 flourescent bulbs, a projector, a computer, the AC, that's a lot of power! You'd need a lot of batteries to store that much power, just to use it for two hours! We've got to learn to scale down power use, or vastly increase the power of our alternative generating systems. Or both.

You know, I understand that people find economics boring, but really the point for me is that if we understand all these systems better, we better understand the opportunities to change it when we see it. We have to understand our economic system to figure out how to make it bettter.
But it's so complicated!
But the thing is, a system that's too complicated can't survive, so there has to be just a few underlying principles, if a system is durable. And so, we just have to find and identify these principles, and then we can understand the complicated things that happen in the system. And it's not like any one person can change it, but it's like this. If something is clearly understood by the community, then it's hard to get away with manipulating it. But if nobody understands it well, then the people who want to play tricks can do it easily. So for me, the solution to creating communities that work, where people trust each other, is to have people understand the sytems we live and participate in. So more people just have to understand economics.