8 Aug 2015

Bristol Propects - another scheme for reforming money

My last post talked about how the Bristol Pound is remarkably close to providing a true alternative to conventional bank created money. Bristol City Council can pay their staff with them, and anybody in Bristol can pay their taxes with them. Unfortunately, they have to purchased with conventional sterling - money created almost exclusively by the commercial banks when they make loans.

But last Monday, Steve Clarke (Bristol Pounds director) and Ciaran Mundy told me about another interesting scheme they are setting up. The scheme is called  Bristol Prospects and aims to  help small and medium sized companies in the region who either have excess capacity and want to make new sales, or need the provision of easily accessible and low cost credit. These two groups of businesses will be bought together in the Bristol Prospects network and will offer each other ‘mutual credit’. It sounds quite close to the WIR Bank system that has been running very successfully in Switzerland since its creation in 1934.

In the Bristol Prospects system, there are two ways that  businesses can obtain credits. If a business is capable of running at a profit, but is short of cash, it can obtain Prospects directly following a centralised vetting process. Alternatively, businesses supplying the Bristol City Council can have invoices paid with Prospects. In both cases, the Prospects are provided for a limited period of 120 days, with the idea that they can be used to stimulate trade between different partners. The Credits can be spent with any other business on goods or services in the network at the same value as sterling.

When Steve and Ciaran were telling me about the Prospects idea, I was intrigued to compare the idea with my own OWEM proposal. With OWEM, anyone can extend  credit to anyone else, whether an individual or a business by accepting an IOU. One interesting feature of the system is that whatever happens, the net amount of "money" in the system is always zero. If I send you an IOU for £20, my account is as -£20 and your account is at +£20, but the overall system is still at zero. This means that the amount of credit in the system can increase almost without limit. As long as people are prepared to accept IOUs from other people for providing work or services, things can progress with no money at all.

We didn't have enough time to fully compare the relative advantages and disadvantages of the Bristol Prospect scheme and OWE'M, but I believe that both provide a way to inject interest-free credit into an economy. That has to be good news.

I also made the suggestion that an OWE'M style IOU system could be included in the Bristol Pound system as an alternative way to increase the amount of Bristol Pounds that are effectively in circulation. Again, we didn't really have enough time to fully explore this possibility, but I think it could be very interesting.

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