*Date: Sun Sep 28 15:46:12 1997
*From: dillonph@northcoast.com ("Paul
H. Dillon")
*Subject: Local government revenues and
local currency systems
*To: econ-lets@mailbase.ac.uk
*Hi.
*Once again I query the econ-lets collective
experience/wisdom.
*A city council member with whom I was
speaking about our efforts to
*organize a local currency system asked
me what the effect would be on
*local city taxes. She told me that the
new city manager had issued a
*memorandum pointing out that city revenues
from sales taxes had
*declined 40% during the preceding year.
The memo continued to state
*that given the decrease in local revenues,
council members should
*not be so quick to jump on the local
currency bandwagon since that
*would only decrease the already shrinking
city revenue base.
JCT: That depends
on how much of the Green the city takes in it
manages to spend. Evidently, every time
it pays for something with
local rather than interest-bearing money,
there is a saving.
*My immediate reaction was that the city
could begin to use the local
*currency itself but I don't have any
experience in this issue and
*I've really never heard anyone address
it.
JCT: Your immediate
gut reaction is absolutely correct though
they could start with just a percent of
transactions to test it out.
*So I throw it out to anyone out there
who has had similar issues
*arise. What was done? Have local currency
systems been used by
*local governments?
JCT: The most
recent large-scale use of a LETS 1/s currencies was
by 6 Argentinian provinces. Back in Sep
1982, fifteen years ago,
Toronto police removed from the site of
the IMF and World Bank meeting
for having passed out my flyers to the
world's bankers titled: THE
CHRISTIAN CREDIT PROGRAMS. I hope the
front page stories about a 2-man
picket got their attention on the primary
program which was "the
Abolition of interest rates:"
"Consider how governments presently finance
their activities: If the
city has expended the money allocated
for snow removal and is hit with
a major snowstorm, Council authorizes
the issuance of $1,000,000 in
municipal bonds. The mayor prints them
up and exchanges the $1,000,000
in bonds with a banker for $1,000,000
in bills bearing 20% interest
which happen to weigh 100 pounds in all.
Council pays for the $1,000,000 job of
snow removal with the 100
pounds of bills ($1,000,000). The merchants
and their employees accept
the 100 pounds ($1,000,000) of bills in
exchange for their goods and
services but at the end of the year, because
the banker demands the
repayment of 100 pounds ($1,000,000) in
principal and 20 pounds
($200,000) in interest at 20%, Council
must levy 120 pounds of bills
($1,200,000) in taxes from the citizens
who only received the original
100 pounds ($1,000,000).
A Christian Credit government would also
authorize the printing of the
$1,000,000 in municipal bonds to get the
snow cleared except that the
mayor would bypass the banker by printing
up $1,000,000 in dollar
bonds bearing no interest which happen
to weigh 100 pounds. Council
will pay for the $1,000,000 job of snow
removal with the 100 pounds of
small-denomination interest-free bonds
instead of 100 pounds of small-
denomination interest-bearing bills.
Because the bonds retain the value of
the original services performed,
inflation will cease to exist. The merchants
and their employees can
accept the 100 pounds in bonds from the
civil servants in exchange for
the same goods and services that they
would have delivered for the 100
pounds in bills when they realize that
the end of the year, because
the banker-middleman has been cut out,
Council will only have to
demand the 100 pounds ($1,000,000) of
bonds in taxes to pay for the
principal saving them all the 20 pounds
($200,000) in taxes to pay for
the interest.
Having demonstrated that small denomination
interest-free bonds
cleared the snow as well as small denomination
interest-bearing bills,
Council will print up enough bonds to
hire all the able-bodied people
on welfare and the unemployed to build
themselves some affordable
houses that can be bought interest-free
because they were financed
with our new interest-free paper. With
less people on welfare and
unemployment, our taxes must be reduced.
With more people paying their
share, our taxes must again be reduced.
The abolition of interest must
benefit even the rich man..."
JCT: I was pleased
to find in Tom Greco's book of LETS resources:
New Money for Healthy Communities ISBN
0-9625208-2-9" page 73, an
article that showed that my efforts may
have paid off as small
denomination government bonds were being
tried and had shown startling
results:
Thursday November 28, 1985,
The Charlotte Observer,
CASH-STARVED ARGENTINE PROVINCES TURNING
OUT THEIR OWN MONEY
By Andres Oppenheimer, Knight-Ridder News.
MIAMI -- Two remote Argentine provinces,
short of cash to pay
public employees, have come up with an
easy solution.
They're printing up their own money, to
the chagrin of the
national and international banking authorities.
"We are paying all our public employees
with provincial bonds,"
Roberto Romero, governor of the northern
Argentina province of Salta,
said in a telephone interview. He said
Salta started printing its own
IOUs because it wasn't getting sufficient
federal currency fast
enough.
"People can change these bonds for money
at any bank," Romero
said. "They can use them to shop at supermarkets
and to buy cars or
any other products."
The Argentine government is not smiling,
and world bankers are
worried that other cash-starved states
will copy Salta's financial
extravaganza and jeopardize Latin efforts
to curb inflation and pay
huge foreign debts.
The International Monetary Fund (IMF),
the world's main financial
inspector for debt-ridden countries, was
concerned enough to bring up
the issue in recent talks with the Argentine
government, said sources
in Argentina and Washington. The IMF does
not comment on negotiations
with individual countries.
After Salta started quietly issuing its
own IOUs in September
last year, the nearby province of La Rioja
started printing its own
bonds too. Four other Argentine provinces
have either begun adopting
similar programs or are preparing to do
so.
In all cases, the bonds are good only
within the province where
they're issued.
But the government of President Raul Alfonsin
says the provincial
bonds are expanding the country's money
supply and are undermining
efforts to remove Argentina from the list
of world inflation leaders.
Earlier this year, Argentina had a 1,000%
annual inflation rate.
Alfonsin made headlines worldwide in June
when he launched an
austerity program built around a commitment
to stop his government
from printing money. Since then, inflation
has dropped to 3% a month,
a record low in recent history.
The bonds printed in Salta come in denominations
of 10, 100, and
1,000 australes, the same as ordinary
Argentine currency bills. They
pay no interest and can be either exchanged
for Argentine currency or
used to buy goods.
Romero, of the opposition Peronist Party,
and officials of other
provinces claim their bonds are not really
new currencies because they
are no good outside their provinces.
JCT: They might
say their bonds are no good outside of the
country but I'd take them for my Canadian
products as I'm sure
everyone in those Argentinian provinces
will honor them too. Note once
again that not only did inflation not
go up with the injection of more
local money but, contrary to orthodox
economic laws, inflation went
down from 1,000% to about 36% a year.
This should be repeated as LETS breaks
sacred economic laws.
"The Argentinian Provincial Government
LETS 1/s local bond
currency being added to circulation made
inflation of the federal
money go down. To understand how reducing
foreclosures makes inflation
go down, you have to grasp the difference
between inflationary Shift A
and Shift B detailed in my LETS Engineering
Mathematics Analysis.
*Are sales taxes (where applicable) levied
on exchanges conducted in
*local currencies? If so, have they been
paid using local currency or
*are the taxes paid in federal currencies
on the value of the local
*currency exchanges?
JCT: So far,
taxes which would be incurred using the federal
medium of exchange are owed if incurred
using the local medium of
exchange though governments using and
accepting their own Green
currency seems the inevitable next step.
It is the logical thing to
expect that once government itself needs
it to pay off its own bond at
the Treasury LETS, it will accept them
itself. But even if LETS isn't
yet acceptable for payment of taxes, having
public transit accept it
could deliver the same benefit to the
city.
*Thanks to anyone who can help. For us,
this might be the pivot issue
*for generating a very strong base of
support for developing our local
*currency system. Paul H. Dillon
JCT: And well
it should. Once you can pay your taxes or ride your
buses with any local currency, then everyone
in your neighborhood
becomes your trading partner. So, from
my poem on LETS, here is how a
city council should use a LETS:
A mayor faced with rising costs and shrinking
revenues,
To study any proposition, he would not
refuse.
"So many think the job of being mayor
is such a snap,
But the decisions that I'm faced with
are an ugly trap.
With tools, materials and trades that
cover total range,
Yet one ingredient is lacking, money to
exchange.
If snowstorm hits the city and there are
no funds to pay,
What does my council have to do to clear
the snow away?
We pledge a million dollar bond to banks
to get the cash,
With which we pay the skillful men who
clear snow in a flash.
The merchants gladly take the funds for
soon they have to pay,
The taxes for the snow removal that was
done that day.
But though a million principle was spent,
we must request,
That citizens be taxed for principle and
interest.
To budget who gets scarce resources isn't
ever fun,
But interest on city's debt is always
number one.
Whatever rate the bankers set is due amount
I pay,
Unhappily, which projects live or die's
my only say.
But if it's true Greendollars serve as
well as Locals tell:
Why shouldn't government be one to try
it out as well?
When another snowstorm hits without the
funds to pay,
We'll test to see if LETS Greendollars
are a better way.
This time we pledge the million bond to
Treasury instead,
And see if use of Green will get us very
much ahead.
The merchant should accept Greendollars
as another way,
His taxes needed for the snow removal,
he can pay.
Again we'll spend a million but the tax
to be assessed,
Including only principle without the interest.
Before the budget allocations are completely
spent,
Could LETS Greendollars help reverse project
abandonment?
If council members for their tax took
part of pay in Green,
We'd have some cash left over which is
something rarely seen.
If civil service took some Green at least
for taxes due,
The extra cash would guarantee that extra
jobs ensue.
We'd offer Green to fix a pothole to a
company,
Wishing to pay their tax with unemployed
capacity.
With Green we'd pay for road repairs and
all would gladly take,
Greendollars from the working men so payment
all could make;
And we could build our hospitals and all
would take as pay,
Greendollars to buy medicine and service
they purvey.
Today, in our society, where money clearly
lacks,
Who could refuse some paper anyone may
use for tax?
Greendollar paychecks could be earned
by all desiring work,
The opportunity to pull their weight so
few would shirk.
With Green the unemployed around the world
will save the day,
Without it they will idly sit and die
their lives away.
And best of all we'd have the Green to
save environment,
A way to pay to save our lives and make
us affluent.
The only question left is how the tax
should be assessed,
For goods and services? A simple formula
to test.
For services, we'd levy tax at end of
every year.
For assets, tax to pay depreciation. It's
so clear.
The government that spent the most and
had the highest tax,
Would be the government providing citizens
the max.
The most successful Royal LETS was in the
British Isle,
Where "Tallies," sticks of money, left
King Henry I with smile.
Accountants in the Treasury would split
the stick in two,
One half would be the money and the other
half its due.
A Tally worth a pound of gold to pay the
King's expense,
The other half amounted to taxation that
makes sense.
The tax collectors through the land all
had an easy way,
Since people had their tallies and enough
the tax to pay.
The tallies funded projects and could
pay for everything,
With tallies matching tax, a hero, Henry
I, their King.
I'll pay Your tax for army and police
to handle strife;
I'll pay Your tax for doctors, nurses
who protect my life;
I'll pay Your tax for all engaged repairing
road and sewer;
I'll pay Your tax for social servants
helping out the poor;
I'll even pay Your tax for bureaucrats
with no regret;
But I'll resist Your tax for any interest
on debt.
Politicians and bureaucrats will have to
be real sure of the tax
end of it before they will consent. The
prime question is:
*The only question left is how the tax
should be assessed,
*For goods and services? A simple formula
to test.
The prime response is:
*For services, we'd levy tax at end of
every year.
*For assets, tax to pay depreciation.
It's so clear.
Just like King Henry The First's Treasury
tallies, if he spent a
million tallies to rebuild roads he did
not expect to have to rebuild
for 10 years, he'd add one hundred thousand
tallies to each year's tax
levy always matching the remaining tallies
in circulation to the
remaining value of the roads.
If he spent a million tallies providing
health care and public
services, he'd add the whole million tallies
to that year's Dec. 31
tax levy.
Since the government has an infinite supply
of tally credit to
sit on, he didn't really have chase anyone
for tax money to spend. A
whole ugly tax-collector industry turned
into a benevolent fund-
raiser.
So, I don't know what city council you're
talking about but let's
give concrete examples for both the tax
for service expenditure and
tax for capital expenditure.
TAX LEVY FOR CAPITAL EXPENDITURES
Should the city need to purchase two new
$25,000 trucks for their
road maintenance crews expected to survive
5 years, I don't see how
many truck dealers wouldn't consider taking
city currency they'll
often need for tax anyway. If no one wants
to sell for city Green,
you're in the same predicament with nothing
lost. The benefit is when
a merchant decides he'll be able to make
full use of the G$50,000 in
city local currency that everyone will
need over the next year for
taxes. If this is the only LETS transaction
that takes place and their
next tax levy would have been 1 million
dollars payable in federal
currency, they add the G10,000 Green to
the bill and raise the levy to
$1,010,000 payable in Federal OR Green!
The city has now managed to pay with its
own interest-free LETS
account rather than its interest-bearing
cash account. Again, the city
has had to levy the tax for us to pay
for those vehicles as they
depreciate. Getting the Green back is
easy because they injected it
and getting the federal remains the same
problem it was before. Notice
that the advantage to only this one LETS
transaction is saving the
interest on the $50,000 the city would
have had to borrow to obtain
the trucks using the federal currency
system.
TAX LEVY FOR SERVICE EXPENDITURES
Though the city only benefited from the
one LETS capital
transaction on the trucks, let's say that
the city decided to spend
another half a million in Green to fund
a formerly volunteer
neighborhood watch program which had been
of great service.
At the end of the year, the tax the city
must levy is $1,510,000
payable in either cash or Green; the original
$1,000,000 in federal,
the whole G500,000 Green spent for neighborhood
services and only
G10,000 Green for the depreciation of
the trucks.
ULTIMATE GREEN EXPENDITURE:
Finally, what happens when the city is
so broke that though their
budget is for only $1 million, there are
really $3 million in programs
necessary and with staffing ready to go.
In this case, the city would print up
and fund the G3,000,000 so
that at the end of the year, the tax the
city must levy is $4,010,000
payable in either cash or Green; the original
$1,000,000 in federal,
the whole G3,000,000 in Green spent for
all programs and the G10,000
depreciation for the trucks.
My point is that though the local population
is now facing an
additional 3,010,000 in taxes added to
their regular $1,000,000 cash
tax bill, they have also received an additional
3,050,000 in Green
currency to pay it with.
The Green currency side of the equation
always balances. It can
expand to supplement every funding gap.
That's all you have to do. Buy
people's time and services and levy Green
taxes accordingly. And
welcome Green taxes because you get the
same value for your Green
payments and no interest as you would
have received for your federal
and interest payments.
Simply spend as many of your Green tallies
doing your municipal
jobs as best you can and then add that
figure to the original cash
levy but making the final overall levy
payable in either cash or
Green.
I think a nice touch might someday be
the use of notes honoring
the actual services performed by citizens.
Numismatists would love it.
Men and women building roads? Settings
in labs? In hospitals? In
schools? Why not have a series of municipal
currencies honoring the
actual people they are being paid to?
Unnecessary but easily done.
JCT: My final point is to do everything
you can to find any one
of the city's suppliers who will agree
to take the city's LETS Dollars
for some of their trade and expect an
explanation for why they are not
taking advantage of that offer. There
are so many Time Dollar
sponsored by dozens of American states
that having municipal
government simply join and accept the
Time Dollars like everyone else
would effect the same relief.
I see my safety when I and my government
both have accounts on
the same LETS without any bankers as middlemen.
Get your Governor on
your LETS with you and you'll find out
what I mean once he gets to
understand that you don't mind him spending
as much Green as needed as
long as he's getting full value for it
in goods and services and not
money's time, interest. Government becomes
a whole new ball game.
On that note, I wish you success in finding
a LETS connection to
your municipal government. Ridding yourself
of the banker middleman
should really set you free.