Conference review: making money in diverse economies

Academics, government officials and top players and practitioners in the field of alternative currencies gathered at the 2nd International Conference on Complementary Currency Systems in The Hague on 19-23 June to exchange views and best practices on monetary innovations.


Interview with Bernard Lietaer – Economist, author and professor

What is a complementary currency?

A complementary currency is defined as an agreement between people to use another instrument than conventional money as a medium of exchange. This agreement can take on different forms and vary substantially in kind. People can agree to use an hour of time as a unit of account to exchange services ranging from piano lessons to babysitting. In a local exchange trading network (LETS) users agree on a unit of account related to but not exchangeable with conventional currencies and turn excess capacity such as unused chairs in a restaurant into productive assets. Another type of agreement allows users to actually exchange euros for RES, a fictitious name for a unit of account, which can be used to trade electronically within the RES network. Yet another model uses nothing that is exchanged but functions as a recording system of sales and purchases. In the case of the Cyclos system, conventional money is conditioned to reach the desired effects. In this case a long-term savings account can also be considered as a kind of complementary currency.

To bring some order into this chaos it is helpful to look closely at the basic mechanics behind the idea of a complementary currency, which is based on a mutual credit clearing system and zero sum accounting. Zero sum accounting is a method whereby the positive and negative balances of trading partners always amount to zero. Peter trades a TV-set for 300 units with Anna. Anna has a credit of 300 on her account and Peter a 300 debit on his. The total sum of debit and credit amounts to zero. A mutual credit clearing system is an arrangement by which a group of traders agree to allocate one another sufficient credit to facilitate transactions between each other. In such a system, the total amount of credit outstanding at any point in time can be thought of as the money supply within the system. In such a system goods and services pay for other goods and services and the money supply always matches the goods and services traded within the system.


Thomas Greco Jr. – Writer, consultant and networker

Conventional money and complementary currencies

For those of you to whom this sounds too esoteric think a moment about the way conventional money is created. Conventional money is created today by the process of banks making loans. When Peter applies for a mortgage to buy a house the bank makes two entries in its books. The mortgage note is entered as an asset and it is matched by an equal entry on the liability side. On the liability side the bank creates a deposit in Peter’s account out of nothing (fiat lux) as it were. Now Peter can buy a house but owes the money to the bank. Interest on the loan ensures that Peter owes more money than the bank created in the first place. The situation is the same for every bank loan ever made. As long as banks can continue to make additional loans to create additional money Peter can service his loan. But there will never be enough money in circulation for everybody to pay for what they owe. Because of the interest rate charged in the money creation process economic growth is inevitable.

The initial skepticism about complementary currencies is quickly overcome when we look at the scope of existing complementary currency initiatives and the motivations of their founders. Among the larger initiatives is the community exchange system (CES) which has been in operation for nine years, running 730 currency groups in 37 countries. Another one is RES, which exists since 1995 in Belgium, and is used by 5,000 businesses and more than 100,000 customers. The integrated payment system allows members to use their debit card to make transactions in the RES network or at a store (Point of Sale). The WIR in Switzerland was used by 60,000 businesses (about 16 percent of Swiss businesses) in 2010 with a total turnover of 1,627 billion Swiss franc (One WIR franc = One Swiss franc). There are around 5,000 to 10,000 mostly smaller community currency initiatives (such as De Makkie in Amsterdam) worldwide and 700 to 1,400 are business currencies which are favoured by members who want to make a profit. Their number is growing exponentially supported by open source software and online services allowing anyone to setup a complementary currency system in a short period of time.


Tim Jenkin, founder of the Community Exchange System

Favourable timing

The debates at the conference were well informed and pragmatic. There was a general consensus among participants to adhere to the opinion of Tim Jenkin, founder of CES, who said that “that the global economy is about to fall over and we feel like it is really time to do something now”. With the socioeconomic and political implications of the current financial crisis, the rise in ageing populations in the world’s most advanced countries, jobless growth and global warming representing some of the bigger challenges tackled by innovators and academics, practitioners and grass-root activists are using complementary currencies primarily as a tool to build communities and generate a second income stream to foster local production and consumption. In their eyes, money is not a neutral instrument that facilitates exchange but an active arbiter of societal and mental outlook capable of shaping human behaviour as much as any educational programme.

The timing could not be more favourable. With Europe’s economies submerging and confidence in politics and national identity on record low, more and more people are searching for new ways to make a living. High speed mobile internet and open source software make it ever more feasible to convert skills and goods into virtual currencies and exchange them without any intervention from banks or national governments.

Bitcoin, created by the economist Peter Surda who was also present at the conference, is only one of many such grass-root projects that has recently gained media attention. Whatever the outcome, there was no doubt among the participants that the time is ripe to give complementary currencies a shot.

Edgar Kampers conveyed the general understanding of the future of complementary currency when he said: “I expect we will have a whole age of experimentation and innovation in the next to five to 10 years”.


Interviews with Edgar kampers, Henk van Arkel, Bernard Lietaer, Arjo Klamer, Thomas H. Greco Jr, Tim Jenkin, Dussart Julien, Stephanie Rearick, Raines Cohen, Peter Surda at the 2nd International Conference on Complementary Currency Systems (CSS)

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