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Looking to the Future – Financial

The next article in our series ‘Looking to the Future‘ is Financial.

Almost from the off we will have issues with bartering. After all someone with a chicken can barter an egg, feathers or the chicken itself for some wheat but what about some meat from a cow? After all you can’t sell a bit and keep the rest alive, you have to sell it all at once, either to one or a dozen or more people. What will the person who makes the horseshoes barter for some eggs or meat if you do not have a horse? It is certain that very soon we will require some form of currency.

Now I’m not suggesting we all go back to banknotes but it needs to be something that is tangible and cannot be easily replicated. I would like to think it was based on gold or silver but suspect that we will be unable to set that up as most of us do not have gold or silver except what we have in jewellery and although we could acquire some it is not really of much practical use, although silver in particular, is of some use to us.

I’m looking at avoiding bankers because they contribute nothing and take a cut of everything that passes through their hands but I cannot see how to do that. It was one of the reasons I was so interested in Bitcoin. It was a transactional system that had no central bank but allowed people to trade easily. It is unsuitable for a medieval currency as it is computer based and can only be manually replicated in a local area which creates a role as banker for someone.

So, I’m back to the bartering system. The one where I buy an egg for a pound of wheat. That goes smoothly but what about a cow, that is worth 1000 eggs but I don’t have that many so I promise to pay those eggs at the rate of four eggs a day for 250 days. But what happens when the person I owe the eggs to wants bacon, he wants to sell my eggs on as he has nothing else but I won’t be paying that for a while so the bacon is not forthcoming. That won’t work too well.

What we need is an item, or series of items, which can represent our new local currency. Survival Pennies. To keep things simple we would stick to the same scheme we have now when 100 survival pennies are a survival pound and so on. That should make it easier. We would then simply price our items and get paid in survival pennies. However, that still leaves a few big problems. Who will create these pennies? and how will they be distributed initially? are two questions that jump immediately to mind. Once it is up and running it should go smoothly provided the currency is not devalued, as it is now by politicians, and we can equate 1 survival penny with an ounce of rice and an egg is 5 survival pennies or whatever.

So what happened in the past? Someone had a nice shiny shell and swapped it for some food, shiny shells became currency and things progressed from there. Next came gold and precious metals but we don’t really have much now nor are we likely to. Originally the gold was stored and replaced with notes for easy of use they were then manipulated and became backed by worthless political promises and not the gold itself. Now of course our money is just token and only worth something if others are willing to accept the promises.

As you can see I’m struggling with this one. I have been looking at alternatives and thinking about this currency since I finished the last series and have no real solution. You can see now why I did not make a career in economics.

The only thing I can think of is if we created our new currency with something robust like metal disks. We could swap the new currency for promissory notes. Such as I could promise some tangibles like land (preferably), gold, or even intangibles like future eggs, a day’s labour or something else acceptable and be given in return an agreed amount of survival pennies. The promissory notes would be held centrally, (Ooops, just created a bank). The collateral would have to be decided by the local community and agreed. Once issued the pennies could be swapped for goods external to the bank by people going about their business. Eventually, the promissory notes could be bought back while the remaining pennies would remain in circulation.

Now, again, I can see problems with this. What happens when someone runs out of currency and has no collateral? What happens if everyone buys back their promissory notes? There will be no currency. I actually see people dying and the currency will be all they have, a promissory note for a weeks labour, being all that is collateral. That will keep currency in circulation without promissory notes, of course that means the currency is devalued by a little amount every time as someone would not be paid and hold currency not backed by a promissory note. Eventually the currency would be worthless in itself, not backed by promissory notes but still used for transactions. For this to happen we need plenty of currency in the economy before it is devalued, certainly enough to allow expansion and trade as the community grows.

What happens when someone from another community wants to trade? At first you can’t use money but goods. Eventually community two’s pennies would be worth X of community one’s pennies and trading could begin.

The whole thing is full of holes but I cannot think of a neater solution for this requirement despite the fact they were doing it centuries ago. Any ideas? Let’s hear them so we can discuss them. This is one area I am out of my depth.

Next up is Government.

34 comments to Looking to the Future – Financial

  • moosedog

    You might be interested in the many projects going on in Totnes, especially the T£ which the link is to. They’ve had problems with an alternative currency but the article indicates things have stabilised a bit. They are also very keen on bartering. I’m not sure how it is working as I’m no longer in the area but their ideas are based on sustainable living. There is also mention of an electronic currency in Bristol.

    http://www.transitiontowntotnes.org/content/ramping-activity-totnes-pound-2011-and-beyond

  • Skean Dhude

    Moosedog,

    There has been a few local currencies like this a famous one is on the link. However, creating a new currency is easy atm, you make something and back it with real money so like Bitcoin it is linked to GBP, USD, EUR, etc. It seems to be taking off but one of the main reasons is you can convert to a standard currency if you want so people feel there is less risk.

    So I could do this. I will set up a currency SurvivalUKPounds. You give me a shiny new £1GBP and I’ll give you a shiny new 1 SurvivalUKPound so each one is worth £1 GBP. If local shops accept them then you buy £1 worth of goods and all is OK. An alternative local currency. It could even fluctuate on the exchange rate as time goes on and the GBP declines as it will.

    What I am stuck on it creating a currency from scratch. That is different and where I am stuck.

    I’ll have a look at that electronic currency in Bristol. Bitcoin can be set up on its own as a local currency and it could be that.

  • moosedog

    The initial idea in Totnes was to have a completely independent currency for locals to use. They would sell, say, 6 eggs for a “token” £1T which could then be spent in the local shops for something else. A bartering system with goods priced up. If the national or world economy crashed the Totnes residents would continue as they were. Of course it doesn’t work fully with a functioning national economy running alongside but that’s life in the real world. I have no idea how they set it up or how you could set up an alternative currency but just know it can be done, as it has in Totnes. They seem to have a lot of other good ideas as well and if I was still in the area I would definitely investigate further.

  • Skean Dhude

    Oh. Forgot to say. The biggest barrier to any new currency is getting it accepted by people. This takes;
    Making them difficult to forge.
    Linking it to something allows people to ‘cash in’ their currency and not lose anything.
    Getting it accepted in shops for everyday items.
    Making a reasonable exchange rate.

    Disney have done it for years the easy way with a local economy, a direct 1:1 exchange link either way.

    Local currencies seem to flourish when people lose faith in their countries currency which is probably why this is taking off all over the world.

  • Skean Dhude

    Moosedog,

    Sorry missed the last comment. Treat this as an add on to my last comment.

    It is easy to do that and running with national currencies does create issues but we run alongside other currencies already, suppliers sell in GBP, EUR, USD, etc. all the time. It works fine. Totnes can do the same. For example I could walk into my local butcher and pay with USD. If he wanted to accept them and he would if he felt he could get more than his money after the money was converted to GBP. Many people would have concerns and mainly about them being worse off. Who can blame them with bank charges the way they are, another advantage of BitCoin. Multiple currencies are just not an issue. Getting them accepted in the local shops is.

  • Steven K

    In a teotwawki situation, I’ve always thought that a currency backed by a scarce but essential resource would make the most sense. Depending what happens it could be potable water, 1l to 1 currency unit or a food staple. It would still require a central bank to work which is the problem.

    This idea is shamelessly stolen from the fallout games btw.

  • Skean Dhude

    Steven,

    That was on the list. Only thing is that it would mean that people could set up water farms or grow more food and create more currency. Maybe that is not a bad thing but it would devalue the currency out there. Although I would have a slight issue collecting on a stored egg or something perishable. The central bank doesn’t have to be an individual or a company. It could be a position, such as leader or a part time role.

    Maybe I’m over thinking it. I do like to have all the ends neatly tied away in general.

  • Hi Skean,

    Ive a small amount of gold and silver coins but my main focus is storage,barter, gardening and fishing.

    I think in a TEOTWAWKI situation currencies will develop locally, more affluent areas using PM`s, others barter and the poor eating each other and stealing before dieing or being killed, such is life……and death!

  • Skean Dhude

    Nick,

    I know Gold and Silver are big in the US but my concern for those in the UK are it does sound like a good investment for when the financial systems settle down but if they don’t, you can’t eat it nor, like Totnes Pounds, will it be accepted for some goods. For example I have no idea how much an egg is worth in gold or silver.

    I think you are probably right about the different currencies. Whatever works. I’d imagine that drugs, booze and cigarettes will be the basis for many of them.

    I’m ready for any, poor or otherwise, intruders. A cookbook for humans. Yummy.

  • Skvez

    A currency needs to be:
    1] Non perishable (eggs aren’t good)
    2] Have intrinsic value (such as gold)
    3] Be of limited and stable supply; to avoid mass inflation. (Water is a bad idea as when it rains the prices of items would need to skyrocket)
    4] Be difficult to forge

    Money used to be backed on precious (and not so precious) metals (Gold, Silver, Copper and even Iron). That worked until the population grew faster than gold and silver was being mined.
    As soon as anyone can ‘print their own’ money you immediately run the risk of over supply and mass inflation.
    In real terms a ‘good days manual labour’ has not changed in terms of the amount of silver it is worth

    Banks serve a number of useful purposes
    1] They keep money safe, rather than every person hiding it or trying to own their own vault a bank can keep money safe for people
    2] They can lend money to people who need it. If I had to save up the cost of my house before I could buy one I’d be living with my parents into my forties. Banks allow me to move out earlier than that.
    3] By charging interest in what they lend, they can actually offer a smaller rate of interest in the money they ‘keep safe’ for people rather than having to charge a ‘keeping your money safe’ fee.

    Problems come when banks get greedy and over lend, or lend to investments that go bad and can never pay back.

    • Skvez

      I should add:
      5] Small, Relatively light and easily portable. Obsidian Bowling balls meet the first 4 criteria but wouldn’t make a good replacement for coins!

  • Skean Dhude

    Skvez,

    Can’t argue with your list of currency requirements.

    I’m not so sure about your list of useful purposes.
    1) Not any longer. Plod can go rifling through your safety deposit boxes and most peoples money are just bits anyway.
    2) The word need is incorrect. They do lend money but on a business basis only.
    3) I wouldn’t pay a keeping your money safe fee. I wouldn’t pay that. I would invest it is businesses. No interest = no savings = no loans.

    I’m with you there. That is why I am wary of banks. I need them as an independent storage area only and at this stage they could be managed by the leader. There are alternatives to central banks and after recent history we should consider that.

    Have you any thoughts on what it should be?

  • Ronnie

    If you want to keep money safe buy a safe. someone could break into one of my gun cabinets, but I don’t suppose a post event bank will be much safer.

    I listened to radio 4 programe: Aparantly, old testiment says Jews had to lend to their ‘country men’ in need without interest, but could charge interest to outsiders. I think we’d be borrowing from neighbours.

    Skvez:
    I’ve seen folk in my neighbourhood build houses quickly. A gang of men will put up a pole barn that’ll stand for >20 years in a weekend. House prices today are inflated beyond belief. Post event we’ll look at the true cost of things. A house won’t be worth 30-40 years of a man’s working life because a modest dwelling could be built and payed for within a few years. I recon we’ll borrow from friends and family.

    I have no idea what the currancy will be. Gold and silver maybe, but they cannot actually keep you alive, so it would only take a poor harvest for the currancy to loose its value?

    Does anyone thing we’d use out current money? Its so handy and familiar. Maybe we’d just go back to using it, even if its not backed, but so long as I can have my horse shoed for £3, why not accept £1.80 for that cheese i’m selling?

  • Skean Dhude

    Ronnie,

    Buy a safe and hide it somewhere good. Not behind a picture or in the bedroom.

    I think that communities will band together once the individuals are in a position to. I’m not sure everyone would feel they ‘had to’ lend to some people. People will where they want to.

    You are right about houses. A modern house costs a fraction of the cost of an existing house to build. It is the land and the hoops you have to jump through to get planning permission that puts up the costs. I think it is ridiculous that you can have 100 acres of land but can’t get permission to build a house. Many people just build and take a chance that they can hide it for four years others put a young mother in them for a few years. I say good luck to them and screw the councils.

    I think the currency cannot exist now. After all if it was based on GBP then someone coming ac4ross a bank full of it would destroy that currency. Alternatively how do you print more when your society grows. It is a difficult one. I think I need a lot more thinking time here.

  • Skvez

    @Ronnie
    Continuing to use our current money is an interesting idea, after all money only has whatever value it’s commonly perceived to have. The notes only have a limited service life though, they need replaced every few years. Coins last a lot longer.

    In a bad harvest it’s not so much that the money looses value but that food gains value (due to scarcity). The cost of a saw blade in grams of silver is unlikely to change depending on a good vs bad harvest.

  • Skean Dhude

    Skvez,

    I think using our existing currency would be an issue in the long run. What if other communities do the same and the chances they will value things the same is unlikely. Plus as you said replacements. Ironically we would be much better using Euros or something that are not so common but I spit on Euros so will not endorse that. I still think we need our own and they need to be coin like.

    The saw blade will increase in value as saw blades are damaged or destroyed. That is not a bad thing as it forces people to take care of them as they become scarcer. The value of anything is not fixed. It is what people are prepared to pay.

  • Ronnie

    I see I was wrong about the food being more valuable rather than currancy devaluing.
    Agree that own currancy wouldn’t work. How about adulterating today’s coins in some way? – Give them a unique mark somehow; can they be stamped/melted into them, some complicated signet ring/mark on one side and how about individually numbering each coin on the other? So there are only maybe 300 £1, 500 50p and 500 1p coins (or whatever) in the village (I’m thinking maybe 10-30 households, not 2000). The signet ring and numbering device goes into several people’s separate safe keeping.
    Let 1 hens egg be around 2p, a day’s labour 30p (ish) and a cow’d be worth around £40, obviously depending on actual market value, but just approximate and it’d work itself out.
    If anyone gets worried, or even once every few months, everyone could be gathered together to show their money and demonstrate that there are no duplicates in circulation.
    Just an idea, not thought it through!

  • Skean Dhude

    Ronnie,

    That is a good idea. Something that fits all the requirements, can be expanded and will still be unique (in a way). UK coinage with a community mark.

    Th3e market will decide how much an egg is and a cow. That is one of the problems with GBP we have values in our heads for what 10p will buy and 5 eggs is not it. However, we could get round that.

    I’m not sure about once a month showing money. People wouldn’t bring their duplicates or they would make sure they spent them before the date. The people caught out that way are not the ones who introduce the coins sadly.

  • Ronnie

    Perhaps record all the £1 coin numbers numbers and their ownership on a public board in the market? If someone came to buy a large purchase you could check first to see if “Smith” actually ‘had’ those coins, then you’d cross off “Smith” and write “Jones” next to them instead.

    I dislike the idea of this as people shouldn’t have to air their finances, its long winded, slow, and fairly BigBrother. However, if it would give confidence to a very local curancy it might be worth it? If its by the public for the public, and no middle man, perhaps not so big brothery? If you don’t want to write up your coins thats fine, but Jones probably won’t accept your coins if he can’t see where they came from. …?

  • Skean Dhude

    Ronnie,

    What are the coins for then? You could just record the transactions as they occur on the public board.

    Arnold Schwarzenegger wouldn’t get very far with his renaming. Coins change hands a lot especially the smaller denominations and they would be covered in names and scratches. Writing names would be impractical.

    If Jones didn’t accept my coins I wouldn’t accept his and that would start a chain reaction leading to the end of the coins. They are there to represent a value. If you need to verify the history what is the point?

  • Ronnie

    Yes, I wasn’t happy with the idea.

    Only way is if their design/manufacture is complicated enough to not be easily forged.

  • Skean Dhude

    Ronnie,

    Bouncing ideas around is the way we will end up with a viable solution. I’m not happy with my idea but can’t think of anything else.

    Making them difficult then becomes a job with costs and processes. You can’t win.

    I’ve trawled a few economic sites and nobody seems to be looking at this. Probably because most people don’t see it happening.

  • Skvez

    If you make an ounce_of_silver coin and are using it and I come along and also start to make ounce_of_silver coins they can be accepted as equal to your coins because they are. You’re no reason to be threatened by me making silver coins. It’s unlikely that someone will flood the local economy with enough ‘new circulation’ silver to significantly impact the value of the silver coins.

    I know one individual in the US created and sold his own silver coins and the US government went after him claiming he was trying to collapse the dollar and was producing illegal money because it looked a bit like ‘real’ dollars.
    I’d like to see small affordable silver coins readily available without having to pay VAT on them (no VAT on Gold but VAT on Silver).
    The 1oz British Silver Britannia is selling for about £33 today. Too much value for small transactions like a few eggs.
    We need someone to mint copper coins again. A one_ounce copper coin would be worth about £0.17 in copper value (would cost more to make) but even if it was £0.25 in coin form that’s a reasonable amount of value for barter transactions.
    If we had coins that were linked to their value in metal rather than claiming to represent some fiat money then we could all accept them and they wouldn’t be subject to inflation (other than changes in the spot price for their metal).
    Skean, fancy looking into what it would take (and cost) to mint some “survival UK coins”? Lets avoid words like pound or dollar. A one ounce (or 25g if we decide on a nice round metric amount) coin can simply be “an ounce of copper” or “25g of silver”.

  • Ronnie

    Skvez,
    It sounds like that should be fine but I’m not sure. I should stop complaining though as I’m going to be RICH when I melt down everything from my mum’s antique jewellery shop (keep telling her its well overstocked, maybe I’m wrong)! Unless thugs break in and take it all in the crash?

    I guess in the beginning I imagine money almost one up from an “I OWE YOU” note such that it deals with the problems of fresh produce going bad before it can be sold, return for labour, etc. I don’t think people will be happy turning their 15 hour gruelling work days into metal coins, knowing that some bloke (or me with my new bags of coins (thanks mum!)) can waltz in and happily spend the equivalent of a weeks’ labour on one chicken dinner. Although we are in the habit of this now. You’d never sell anything to neighbours again, when this guy can give you x20 the current market value.

  • Skean Dhude

    Skvez,

    There are places that mint coins for you. They sell all different types made of different materials. Out of interest I will have a look and see if I can find the address and inquire.

    I don’t believe the option about using gold or silver will work for one main reason. Nobody has that much silver or gold in the UK nor are they likely to get any in sufficient quantities. It needs to be something else, something available yet has a value. Plus if the coins are worth something then they have to be injected into the system somehow. That is my main sticking point. I accept we need something; Tokens by any other name. But how do we get them started and them still be worth something?

    Ronnie,

    No matter how well stocked she is I bet you don’t have enough to create a community wide currency.

    I think you are right about the IOUs which would mutate into cash eventually backed by IOSs in a bank, this is what I was suggesting purely because I can’t think of anything else.

  • Kenneth Eames

    It would be possible to cast aluminium into various sizes for various values. Aluminium drinks cans could be cast in homemade moulds. Various designs could be impressed upon them. Look at some of the ancient coins for ideas. The first banks in Britain were opened by the Quakers and were run fairly. Perhaps this would be the way to go. The Quaker “Friends House” in Euston should have some old banking documents in their Library.

  • Skean Dhude

    Kenneth,

    That sounds promising and providing the designs were intricate it would be difficult to forge. Aluminium is not the most robust of materials though.

    I’ve just been looking through the Quaker banks history. The had strong moral codes and sound business practice.

    “To implant in (young) minds a sense of piety and virtue, and to train them up in the best things. This would prove more advantageous to children than getting a great deal of riches for them.”

    It would certain be a different society if more people, businessmen and particularly politicians thought this way.

  • Annie

    I haven’t read all of these posts. I read the initial post in it’s entirety and then skimmed through the rest (too many to read completely), and the gist I get is the idea of setting up a new currency system. Won’t that just eventually get us back to where we are now? I think we need a new paradigm completely. Am I incredibly naive or is the conept of people living together in a community and everyone contributing to everyone’s well-being an impossibility? I think the key is to form small, close-knit villages/communities so that everyone knows everyone and everyone works together for the good of the whole. It’s the anonymity and separation inherent in cites/huge populations that starts to foment lack of empathy, selfish use of resources, hostility to others, etc. Most people are good. Most people have some level of empathy for those they know personally and interact with. When people belong and feel part of the group, they are much less likely to harm that group. So I believe that in small-medium size groups money isn’t even necessary. I suppose the issue arises when one group needs something that another group has. I don’t know what the answer is, but I do believe we need to think outside the box and not replicate the system we have now. Here are some excellent resources about how money works in our current system:
    Link 1 – Video,
    Link 2 – The Moneymasters,
    Link 3 – Video (Part 1),
    Link 4 – Video (Part 2)

    The Money Masters video isn’t the best quality, but it’s very informative.

    Note : I’ve edited this comment only to fix the faulty link and label them. Links point to the same places and no other changes have been made. Skean Dhude

  • Skean Dhude

    Annie,

    You are not naive to think that is a good idea but imo you are naive to think it will work as history shows it never has worked no matter how many people die so why would it after an event? It is this thinking that has brought us to where we are now. People think it is all new it is not, ir has been tried and failed many times.

    As far as currency goes you need some form of exchange. I want to sell my chicken/beef/pork to anyone but what if they want to buy my beef but all they do is sell chickens. I don’t want any so what do they use?

    Despite what you read in the papers it is not currency that got us to where we are now but politicians. Currency is simply a tool for us. If you read the article you would see that I’m suggesting this money is backed by something. This makes it unlike the money you have in your pocket today which is backed only by promises. Politicians promises. Promises that are not kept every time money is printed and that lose value every day.

    I think you should read the articles in their entirety. They are suggesting an alternative to what we have now but it is far far away from what you are suggesting.

  • Lil

    Precious metals appealed as currency originally because they don’t corrode easily, are bright and shiny and desirable, special looking and rare. That won’t change, except now we might mine a bank, rather than the Welsh gold mines. We would not trade with it initially because there might not be enough locally to have low enough value for daily needs. But neither would we stay local and isolated for long. Humans explore and we would soon, having got over the initial shock and the need to think about the harvest, be travelling and trading again. I think gold and silver would therefore re emerge as a standard coin. Therefore acquiring some might be smart, but expertise in other rare but useful skills or commodities would be good to trade for it.

  • Lil

    Not meaning rob a bank of course! I meant that banks are today’s source. But you might take your metal detector onto the beach and find jewellry

  • Skean Dhude

    Lil,

    Welcome. It certainly looks like there are few alternatives for wide ranged commerce.

  • Kit

    I know this is an old thread but I’ve just stubbled across the site. Top work by the way, the site looks great.

    As far as I can see, there are problems with any system. Nothing is perfect.

    As per Annie’s suggestion, I do believe that in a small, close-knit group that was self-sufficient you wouldn’t need money of any sort. Increase the community size though and relationships diminish. It’s a fact that people don’t really care about or trust those they don’t know. And so as the group grows you need something to trade and probably some sort of standard currency to ensure people aren’t freeloading.

    Banks and financial institutions are necessary, you can’t get away from that. In their current form they’re no good but any system left to develop will have a need for someone to control the currency and create new tokens. There will also develop a need for investment, loans and such like. I wonder if an offline version of Zopa would be a good model for the loans and investment side? Similar to the building society model.

    Also any financial system will have to develop as the items that are traded change. I don’t think you can create a system that works at all levels. Early on we’ll be trading essential things – if I’m not sure of my survival I really don’t care how many shiny things you give me, I need this food! But as things become less hand-to-mouth things will change and some tokens will be needed. Then as essential needs are covered by increasingly efficient farming and such like things will change again…

  • Skean Dhude

    Kit, Welcome and thanks for the compliment.

    I can see that there is no simple solution to this. Like everything in life if it gets to it we will go full circle again.

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