VIRTUAL CURRENCIES, CASHLESS EXCHANGE SYSTEMS AND MONETARY CONTROL

VIRTUAL CURRENCIES, CASHLESS EXCHANGE SYSTEMS AND MONETARY CONTROL

2 July 2009

David Barboza reported in the NY Times of July 1 that China is putting new limits on virtual currencies. The buying and selling of these make-believe currencies has become so widespread that the Chinese authorities fear it will affect the real economy. Smaller gaming companies have even set up virtual sweatshops, cramped quarters where young people play online games to earn credits that the companies then sell at profit to overseas customers in the region or even the US.

Besides this somewhat shadow form of cashless exchanges, there are numerous alternative currency and trading systems such as time-dollars and other Local Exchange Trading Systems (LETS) that make a local economy monetarily self-reliant. It was during the difficult times in the 1930s that several towns developed their own currencies according to the Gesell’s method and that a coal company introduced its own scrip, called Wara. According to former Belgium central banker, Bernard Lietaer, “complementary currencies facilitate transactions that otherwise would not occur, linking otherwise unused resources to unmet needs, and encouraging diversity and interconnections that otherwise wouldn’t exist.” Wikipedia reports  that,  in the US, about half a million businesses are linked to about 700 barter exchanges which result in $8.5 billion in cashless trade. “It seems that this type of trade rips along at 15% a year, three times the speed of dollar commercial exchanges.”

How have these forms of cashless money to be evaluated? Thomas Greco shows the strengths and weaknesses of both these forms and the official currency that is used as legal tender with which you pay your taxes and other official bills and charges. In the process of that discussion he makes clear what money is and that the creation of money is not to be in the hands of privately owned banks, but is to be vested in the public sector. However, I want to evaluate these cash and cashless exchange systems in terms of Tierra monetary paradigm which is based not on gold, but on a carbon standard.

Given that the Tierra reserve/vehicle currency is an official currency that can be used internationally besides one’s own national currency it functions as a legal tender currency between nations and other international actors. The more people and businesses can engage in productive economic activities, either nationally or internationally, by using legal tender or reputable cashless exchange instruments, the better for them.

As regards monetary control of both cash and cashless exchanges on the national or international level I would favor an international clearing house, so that everyone is able to understand the amount and type of economic activities that are going on. If governments consider this information to be socially or ecologically relevant in making monetary and financial decisions, they are to subject their proposals to appropriate deliberative and consultative procedures.