>Re: TURMEL: Why not print funny money?...
>From: Jim Blair <jeblair@facstaff.wisc.edu>
>Organization: University of Wisconsin, Madison
>Date: Wed, 03 Dec 1997 14:10:08 -0800
JCT: Looking through my messages-to-be-answered directory, I ran
across this post which well shows why it's so hard for LETS to make
inroads in economic theory though I wonder if the LETS over the last
couple of years may have made any empirical difference.
>Hi, John Turmel wrote:
>My what a long post. I printed it out (25 pages) and won't
>comment extensively. But I do have a few question for you.
>I see two different issues here. "Real money", and LETS or what I
>will call "funny money".
JCT: Socreds have been used to having their monetary theory
called "funny money" for decades and it can be opined that it has
certainly helped people not take monetary reform seriously to their
detriment. I always find it funny that when a banker comes to town,
creates new money and loansharks it out based on the collateral
pledged, economics call it "real money" but when the citizens of that
town create their own local currency based on the same collateral
pledged, they call it "funny money" or "unorthodox finance." If a
community's local currency is to be called "funny," then it might
be said that banker created loansharked money should better be called
"sad money" rather than any more real. After all, both monies are
based on the same collateral and the only difference is that the funny
money doesn't inflate since it's backed up one-to-one with collateral
while the tearful money does lose its value over time because of its
usury which is truly "not funny."
>On the "real money", if there were no interest (interest = usury)
>and it is illegal, there would be no banks.
JCT: Economists have this funny habit of jumping to silly
conclusions. Take this statement that since the LETS bank doesn't
charge any interest on its currency but only a service charge, that
there would be no LETS banks. You have to agree that it's pretty silly
to argue that when a bank runs on a service charge, "there would be no
banks." What's sad is that when economists make statements like this,
they don't even realize how silly those statements are. I think this
is just another good example of the kind of brain damage inflicted by
the study of Economics. Just read Professor Flaherty's contradictions
in Essence of Money #9 at http://turmelpress.com/lp.htm
where he says first that the bank expenses pipe in Fig 3 is connected
to the reservoir, then connected to the tap, then the reservoir, then
the tap again to fully appreciate the damage he has suffered as he
"teaches us" about Economics.
>So only the government would make loans.
JCT: So because LETS banks make local currency loans without any
interest, those LETS wouldn't be making the loans, only the government
would make loans. Another silly conclusion.
>Is this what you have in mind? And they (a government agency like
>the Treasury Dept) would make interest-free loans.
JCT: Not necessarily. There are many good examples of government
Treasuries running sound interest-free currency systems: Sparta, Rome,
England, American colonies, Lincoln Greenbacks. But private banks
creating currencies locally for local purposes present no problem
either. As long as neither the government bank nor the private bank
charge interest, I have no problem with who creates the money to
liquify my collateral, only how they charge for their services.
Service charge I'll pay, usury I'll fight.
>So just about everyone would want to borrow a lot of money.
JCT: I'm your read the Consequence of interest-free money #2 at
http://www.onelist.com/viewarchive.cgi?listname=lets&archive=50.gz
you'll see that I've explained how there is a natural limit to the lot
of money that people would want to borrow.
>Just how to you propose to ration the loan money? Who would decide
>who actually gets to take out a loan?
JCT: Again, how this natural limit to the amount people wish to
borrow when the loan is interest-free arises is explained using Hours
of currency in that archive.
>On the LETS, I hope to put together a post on this, working title
>"LETS print Funny Money". In my web page version (after the peer
>review process of posting it and getting some feedback) "LETS"
>will link to the URL http://www.transaction.net/money/lets/
>and the "Funny Money" will link to my text file, yet to be written.
JCT: I know that that URL has lots of useful information about
LETS and I just hope that it cleared up some of Jim's questions.
>Some people in Madison, over in the Williamson (Willy) St. area
>decided that the problem is that there is not enough money in the
>area for the people there to buy all that they want. So they started
>printing their own local "money". The idea is that the stores there
>will pay the workers with it, and will accept it in exchange for good
>and meals, etc. I hear that this idea is happening in many places.
JCT: Local currency systems have arisen in thousands of places
around the world as well as being officially endorsed by the
Australian Parliament, New Zealand and England Governments, as a
valuable anti-poverty employment creation program.
>Money issued in exchange for work or goods, and backed by the
>full full faith and credit of ... well of a bunch of aging 60's
>hippies. I mean, who could ask for anything more?
JCT: Make fun of it all you want but it's working for those
people whose only other alternative was to not trade employemnt
locally and have these things remain unperformed. And I doubt it it's
just aging 60s hippies who have seen the light.
>Now this local money idea looks to me a bit like the "company
>script" issued in the last century. Remember that? Instead of paying
>their workers in US currency, some companies paid in script that
>could be exchanged for goods at the company store.
JCT: This are private company LETS which are based on the goods
in the store rather than the goods available from the population of
aging 60s hippies. Such store scrip systems were responsible for
saving many a town during the great Depression in Europe and North
America. There are many examples of such useful local currencies and
because everyone always got their value for that piece of paper, there
have never been any complaints even after the last scrip was cashed in
and the system finally abandoned once currency had returned to town.
>But I don't mean to be overly negative. I see a bright side to this
>movement. It is really just a way to avoid taxes and minimum wage
>laws, and these are both worthy goals.
JCT: You'd figure that someone who can't see the real value of
the system would see what is not of value. Avoiding taxes and minimum
wage laws is a crime and LETS is not a tax avoidance system. People
can avoid tax just as easily by not reporting cash transactions as by
not reporting local currency transactions. People who would cheat
witih cash would cheat with local but the fact fact they use local
does not promote cheating any more than using federal.
And as for minimum wage laws, most Timedollar and Hour systems in
the US pay a minimum wage of $10 an hour which is rather more than the
official minimum wage. So paying people a $10 Hour is certainly not
avoiding minimum wage laws and I have to wonder where Jim would ever
dream up such an angle.
>I mean if a store or restaurant wants to hire a worker or waiter, but
>does not take in enough money to pay minimum wage, and the applicant
>is willing to accept payment in little pieces of paper with a picture
>of a duck, hey why not?
JCT: As long as the paper with the picture of the duck can pay
for someone's meal, why shouldn't a worker accept some food IOUs
rather than remain unemployed. But considering you're an economist, I
guess you'd rather remain unemployed than accept paper that you could
trade to people who want a meal.
>And nobody has to pay taxes when they get or spend them.
JCT: And of course, still fixated on the red herring of
committing criminal acts. I supposed the fact people might be robbed
of their local currency might be considered a drawback too.
>What do you think? (oops, this did not take when I tried to reply to
>your long post, so I will use this one)
> ,,,,,,,
>_______________ooo___( O O )___ooo_______________
> (_)
>jim blair (jeblair@facstaff.wisc.edu) For a good time call
JCT: I think that you were very confused at the time. Do you
still hold the same opinions about local currencies?
Interestingly, the same questions are still be asked:
>Article #104348 (104364 is last):
>From: wfhummel@mediaone.net (William F. Hummel)
>Subject: Re: DEFLATION
>Date: Thu Mar 4 20:29:49 1999
>Borrowing at zero interest rate is just as much of a legal obligation
>as borrowing at a positive interest rate. You gotta pay it back on
>the agreed date or go to jail without passing GO. William F. Hummel
JCT: I've made the point that the fact they have to pay it back
acts as a limit on borrowing but the idea that people would all borrow
a couple of suitcases of money independent of their needs still
persists:
>Article #104367 (104395 is last):
>From: jim blair <jeblair@facstaff.wisc.edu>
>Date: Fri Mar 5 11:34:56 1999
>But if the interest rate is "really zero" wouldn't everyone borrow a
>lot? They would never actually have to pay it back, just keep
>borrowing more?
JCT: And of course, the post cited previously which uses Hours
currency best explains the natural limit on borrowings.
-------------------------------
Why not print funny money? #2
>Article #104806
>From: Jim Blair <jeblair@facstaff.wisc.edu>
>Newsgroups: sci.econ,can.politics,sci.engr,ncf.ca.lets,
>alt.politics.greens,alt.fan.john-turmel,alt.conspiracy
>Date: Tue Mar 16 18:52:15 1999
>But I do have a few question for you. I see two different issues
>here. "Real money", and LETS or what I will call "funny money".
JCT: I'd prefer if you called it "interest-bearing" and
"interest-free" money because local currency is just as valuable as
federal currency. I think calling local scrip "funny" is a false
denigration.
>And for readers who want some background on this, see "LETS
>Print Funny Money" on my web page at:
>http://www.geocities.com/capitolhill/4834/cpi.htm
JCT: I've decided to pick up this article and post it here:
>>Start of article>>
Funny Money
This from the net.
>Yes, It's legal for a community to print their own money.
>Over 30 places have done it in the U.S.
>See this URL for details: http://www.transaction.net/money/lets/
Someone wrote:
I'm not sure where this "answer" comes from, but I like it... Local
currency is a way for local economies to help keep money earned and
spent in the local area in the local area. Ithaca is a great example.
Many smaller communities are doing it and I love the idea.
Strength in local communities in all areas (economy, social,
political, networks) is important.
"Money has mobility. It knows no geographic loyalty and thus has a
centrifugal force on family, neighborhood, community, and
increasingly, our entire national identity."
-Edhar Cahn from "Money That Builds Connections" as printed in
YES! magazine Spring 1997
"Paul Glover organized Ithaca Hours to keep local money circulating
locally, to encourage local farmers and businesses and to provide an
income for these people.
And it seems to be working. Hours are accepted in 300 local
businesses and have the enthusiastic backing of the chamber of
commerce and the mayor, who accepts them for meals in his town center
restaurant. One local bank Pays staff partly in Hours, and you can
pay your bank charges with them, too.
'We wouldn't eat out if it weren't for Ithaca Hours,' said the
divorced mother of two. 'It feels terribly good. You see the money's
value coming around again and again.'
Glover calls this the 'community magic act': they print their own
currency and somehow it makes everybody better off...."
-David Boyle as printed in same reference as above.
The Spring 1997 issue of _YES! A Journal of Positive Futures_ was
entitled "Money: Print Your Own."
Hi,
Some people in Madison, over in the Williamson (Willy) St. area
decided that the problem is that there is not enough money in the
area for the people there to buy all that they want. So they started
printing their own local "money". The idea is that the stores there
will pay the workers with it, and will accept it in exchange for good
and meals, etc. They are called Madison Hours and you can find a
reference to them in that LETS (Local Exchange Trading Systems) web
page under "Project LETS list" and "USA".
I hear that this idea is happening in many places.
Money issued in exchange for work or goods, and backed by the full
faith and credit of... well of some ageing 60's hippies. I mean, who
could ask for anything more?
Now this local money idea looks to me a bit like the "company script"
issued in the last century. Remember that? Instead of paying their
workers in US currency, some companies paid in script that could be
exchanged for goods at the company store.
But I don't mean to be overly negative. I see a bright side to this
movement. It is really just a way to avoid taxes and minimum wage
laws, and avoiding both of these are worthy goals. I mean if a store
or restaurant wants to hire a worker or waiter, but does not take in
enough money to pay minimum wage, and the applicant is willing to
accept payment in little pieces of paper with a picture of a duck,
hey why not? And nobody has to pay taxes when they get or spend them.
REPLIES:
Date: Tue, 16 Dec 1997 02:57:20 -0600
From: Kevin Bertsch <kbertsch@istar.ca>
Are you aware that there are many 'barter' clubs set up in Canada to
avoid the combined (in Ontario) 15% tax bite (higher in most other
provinces)? They use systems such as your LETS to allow the easy
exchange of house cleaning services for, say, income tax return
preparation. Of course, this is giving Revenue Canada fits, and they
are trying to find ways to either tax or close down the clubs.
Subject: Re: LETS Print Funny Money!
Date: Mon, 15 Dec 1997 11:17:28 -0500
From: Enrique Diaz-Alvarez <enrique@ee.cornell.edu>
Organization: Cornell University
jim blair wrote:
>Money issued in exchange for work or goods, and backed by the full
>faith and credit of... well of some ageing 60's hippies.
Yeah, and with the Ithaca hours you can buy necessities such as Tarot
sessions, acupuncture massages, overpriced organic food and incense
sticks. As long as you pay 80-90% of the cost in evil greenbacks, of
course. The only thing you can't buy with them are luxuries such as
gasoline, utility bills, rent, etc.
>Now this local money idea looks to me a bit like the "company
>script" issued in the last century. Remember that? Instead of paying
>their workers in US currency, some companies paid in script that
>could be exchanged for goods at the company store.
They look to me more like glorified discount coupons for high-margin,
non-essential items.
>It is really just a way to avoid taxes and minimum wage laws,
Actually, the Ithaca Hours newsletter reminds hours users that the
scheme is legal only as long as taxes are paid on each and every
Ithaca Hour earned, at a cash equivalent of $10/hour. No data on
compliance is provided, heheh.
>Enrique Diaz-Alvarez Office # (607) 255 5034
>Electrical Engineering Home # (607) 758 8962
>112 Phillips Hall Fax # (607) 255 4565
>Cornell University mailto:enrique@ee.cornell.edu
>Ithaca, NY 14853 http://peta.ee.cornell.edu/~enrique
<<end of article<<
JCT: Interestingly, the Subject: Re: LETS Print Funny Money! is
one that I posted several years ago and I'm happy to note that it
generated some action.
I'm amazed that over 300 businesses including the bank could only
provide Tarot sessions, acupuncture massages, overpriced organic food
and incense sticks. Actually, I consider this a cheap shot coming from
someone who doesn't appreciate the value the real services offered by
all those stores and members might represent to the poorer citizens
who can pay with their own labor rather than scarce cash. I wonder if
the lady who wrote: 'We wouldn't eat out if it weren't for Ithaca
Hours,' would agree?
>LETS is a link to the Local Exchange Trading Systems at:
>http://www.transaction.net/money/lets/
JCT: I also prefer to use the engineering definition of LETS, a
System for Trading Employment Locally, the Local Employmemnt-Trading
System.
>>After all, both monies are based on the same collateral and the only
>>difference is that the funny money doesn't inflate since it's backed
>>up one-to-one with collateral while the tearful money does lose its
>>value over time because of its usury which is truly "not funny."
>Do you agree that money is worth exactly what you can buy with it? A
>US Federal Reserve note is of value to me because others will
>exchange goods and services for it. Same for a gold coin. And "local
>LETS" are worth what I can exchange them for. More on this later.
JCT: I do not like defining money as worth what you can buy with
it. That may change. I believe sound money is worth what has been
pledged to the cashier when it was issued into circulation. That stays
fixed. The old definition of what it can buy is for the old money
which can change over time. The new engineer's definition for the new
money is what has been pledged which cannot change over time. I know
it's hard for economists to grasp an inflation-free medium from the
start but casino cashiers manage every day of the year. LETS cashiers
too.
>On Zero Interest Loans:
>>Service charge I'll pay, usury I'll fight. The qualitative
>>difference between a service charge and an interest charge is
>>demonstrated in my Service Charge Island and Interest Island at the
>>end of my mathematical analysis at
>>http://turmelpress.com/bankmath.htm.
>But this link was dead.
JCT: The link is not dead. You just didn't type it right.
>So explain to me the difference between charging me a $100 service
>fee for a $1000 loan, and charging me $100 in interest. And why I
>should prefer one to the other.
JCT: That bankmath has been on the net for years. Go to the
Crucial Information section at my web site or Search the net for
"Interest Island" where it explains the advantages of living on
"Service charge Island." After all, I have produced two models which
you can test with your friends. Then you repeat to me the perceived
advantage and then we can continue on an agreed understanding of the
difference between the two models.
>>Again, how this natural limit to the amount people wish to borrow
>>when the loan is interest-free arises is explained using Hours of
>>currency in that archive. read the Consequence of interest-free
>>money #2 at
>>http://www.onelist.com/viewarchive.cgi?listname=lets&archive=50.gz
>>you'll see that I've explained how there is a natural limit to the
>>lot of money that people would want to borrow. I've made the point
>>that the fact they have to pay it back acts as a limit on borrowing
>I read it, but still don't know the answer to this: if I can get
>interest free loans, based on only the collateral of my future labor,
>why don't I borrow $X and when it is due, just borrow another $X to
>pay THAT loan back. etc. And thus never repay the loan, in that I am
>always $X ahead.
JCT: Sure if you rolled over the debt year after year, you'd die
owing the original $X amount of the loan. But you missed the point
that it is never due so that when you die, exactly the same amount is
due except that we spent nothing on the process of chasing you for the
rollover. Since all your earnings go into the one account against all
your consumption, if you should happen to lead a losing unproductive
life, like my mentally-retarded cousin, then your debt will be shared
by a levy from the whole database. But should you lead a winning
productive life with credit for all the resources you need for such a
winning term in Eden, then your account will be positive no matter
what hypothetical debt you'd like to keep rolling over.
Read it again. The other subscribers to lets@onelist.com seem to
have caught on. Even I learned new facets of Eden's interest-free
world in that post.
>And PS; these are not "dollars" but "hours", right?
>Only some "hours" are worth more than others? And in Madison, an
>"hour" is just a picture of a duck.
JCT: That's a silly thing to say after hearing the poor lady's
comment. In Hounslow, UK, their piece of paper says "Six Cranes" worth
"One Hour" with a Crane worth a Pound. If you choose to believe that
the name of the local "receipt for collateral" invalidates its value,
I can't help you but you should try to explain to the Madison
residents who keep cashing them for the pledged value that to you,
they're only worth a pretty picture of a duck
>>>Money issued in exchange for work or goods, and backed by the full
>>>faith and credit of... well of a bunch of aging 60's hippies. I
>>>mean, who could ask for anything more?
JCT: In Ithaca New York, their Hour notes may not have a pretty
picture of a duck though they have a picture of a local waterfall but
nevertheless, these people accept these Hours as worth a $10US and are
accepted by several hundreds of area businesses including the local
bank for service fees. Of course, they cannot be used to retire
federal currency debts which were issued in federal currency but fees
and even they see that because they can be spent everywhere in town,
they are a valid currency they can use to pay their employees. It's
just sad that until they become useful to large numbers of citizens,
others can't see that they have held the same value no matter how many
businesses were participating.
>>Make fun of it all you want but it's working for those people whose
>>only other alternative was to not trade employment locally and have
>>these things remain unperformed. And I doubt it it's just aging 60s
>>hippies who have seen the light.
>In Madison now, anybody who wants a job can find one, and typically
>at $7 or $8 per hour at least. Paid in money that is good anywhere in
>the world (ie US dollars): Money that can be exchanged for any thing
>that is legal. Or that is not legal as well.
JCT: But the original user had to pay interest on it to get it,
had to charge greater prices for his goods and watch the federal
currency lose it's value over time while the hour is worth an hour now
and forever.
>>>Now this local money idea looks to me a bit like "company scrip"
>>There are many examples of such useful local currencies and because
>>everyone always got their value for that piece of paper, there have
>>never been any complaints even after the last scrip was cashed in and
>>the system finally abandoned once currency had returned to town.
>But why abandoned if they represent a "better way"??
JCT: It was abandoned because large amounts of federal cash had
come into circulation and there wasn't the dire need for an alternate
currency to take the slack. The fact that the recent recessions have
called local currencies into circulation once again makes the point.
And if the shortage of federal currency were alleviated, then I guess
people would soon once again abandon the smaller, though better, local
currency. I'm not claiming people are necessarily smart when they only
revert to doing locally only when the feds don't do it right.
>>People can avoid tax just as easily by not reporting cash
>>transactions as by not reporting local currency transactions.
>True. And they do. But I have never even heard of anyone paying taxes
>on LETS currency. I'll check with the Wisconsin Dept of Revenue. And
>how much income do you think is reported to the US IRS or its
>Canadian equivalent as "LETS income".
JCT: That you haven't heard of it doesn't mean they don't. In
fact, they must. I'm surprised that you'd repeat this tax canard
considering how you were told that "the Ithaca Hours newsletter
reminds hours users that the scheme is legal only as long as taxes
are paid on each and every Ithaca Hour earned, at a cash equivalent
of $10/hour." Maybe repeating it will help it register. The fact that
LETS members aren't now in jail or being prosecuted for tax evasion on
their local currency earnings do what the law compels them to do. Pay
their taxes on local earnings with federal currency.
>Think anyone has ever sent LETS money to the IRS or to a state
>revenue department? Or would they sent in the "dollar equivalent"?
>But that is "negotiated". See below.
JCT: But the day they do is the day that the use of LETS will
explode. Besides, Rome, Sparta, Lincoln and many other nations have
not issued their own non-bank currency but have also accepted it for
taxes, which, by the way, gives the government currency its value.
You should read my Poem to the Queen at the Crucial info section where
a full explanation of how governments should spend and tax local.
>>So paying people a $10 Hour is not avoiding minimum wage laws
>But LETS are not dollars, they are "hours". As the web page says the
>exchange rate to dollars is "negotiated". They pay with pictures of
>ducks and if I want dollars I must negotiate. I will try to find the
>going rate of exchange in Madison, but would be very suprises if an
>"hour" can be exchanged for $10.
JCT: I'll bet you the value of one Duck that a Duck has a fixed
value. It's the number of ducks for each member's Hour of work that
varies. Just like real money. Not the value of the Duck. It can be
traded for $10 in Ithaca, New York and every other American LETS Hour
system I've ever heard of. It's the value of the service that varies,
not the hour. It is absolutely silly to think that people might
renegotiate the value day after day.
>>I guess you'd rather remain unemployed than accept paper that you
>>could trade to people who want a meal.
>Actually, I'm a chemist. But I'm with you on this: if everyone is
>happy with the exchange, I'm all for it. But I want MY pay in US
>dollars. I like George, Abe, Andy, and especially US Grant, better
>than some ducks and loons.
JCT: I know my One Hour Duck (worth $10) will buy me an hour's
worth of labor in 20 years while your $10 bill won't even get you a
hamburger. You can prefer to watch the value of our federal moneyh
inflate away, I'll prefer my non-inflating hour and we'll let history
decide which if us had the more rational preferences.
>Some more thoughts on the LETS tax situation. For people in the lower
>income quintiles, social security is the main federal tax. Now be
>honest: have you ever heard of anyone paying the social security tax
>(contribution if you insist) on LETS income?
JCT: No, they've always paid the the extra cash they didn't have
to use because they could use their LETS cash. But I'm betting it will
happen.
>No SS has the effect of boosting the relative value of a LETS hour
>by 15%.
JCT: How do you boost the value of a one hour debt by 15%? The
original rule was that people would value the paper as a standard hour
of labor unless the free market permits you to charge two or more for
yours.
>The overall federal tax burden is about 20%, and state & local add
>about another 10%. So "tax free" LETS have up to a 30% edge on "real
>money" federal reserve notes and the money economy. Nothing to
>sneeze at.
JCT: It's as if my explanation that LETS is an interest-evasion
system, not a tax-evasion system, went in one ear and out the other
right after Enrique's went in one ear and out the other. No LETSer who
sends in his tax payment in federal cash on local earnings will find
that there any such edge.
Yet, I would refer you to "Time Dollars" by Edgar Cahn,ISBN 0-
87857-985-0 which does explain how the benefits of Time Dollars has
been judged to be of such great value to the community that Time
Dollar earnings have been exempted from taxation by the IRS. I
would point out that Time Dollars value everyone's time the same but
yes, they certainly do benefit of the edge you have pointed out which
is one great advantage over Hour and LETS systems which permit market
valuations of different people's time.
I personally see no reason why they should be tax free but those
US states have found that the benefits to the poor have proven of such
substance that the call on government services have been reduced and
hence the tax exemption. If these governments have found that their
savings reduce their need to tax everyone else, then I can understand
why they'd want to help promote participation in these "tax-saving"
enterprises.
Finally, I'd point out that the Time Dollar book mentions that
the Time Dollar was credited with reducing child mortality in El Paso
Texas. Maybe those kids will some day hold a better opinion of the
system that saved their lives than you do.
-------------------------------
Send a comment to John Turmel
Home