I have been away some time but I have worked on something interesting. It is the Natural Money Bomb. Here it is:
The Natural Money Bomb is weaponised superior efficiency that will wreak havoc and create chaos in the financial system. It will bring down the banks and Wall Street when it is used. The core ingredient and explosive material is scrip money, which is money with a holding tax or fee. It will destroy the usury financial system because of Gresham's Law:
Bad money drives out good money. So bad money is a superior currency. A tax or fee on holding money is very bad in the eyes of the usurers.
Most people are not stupid. They are afraid for change and they have good reasons for that. They want a better alternative and see it work before they will accept it. This idea has been tried before in Wörgl and Lignières-en-Berry with great success:
- for more information about Wörgl, see: http://www.newciv.org/nl/newslog.php/_v105/__show_article/_a000105-000002.htm
- for more information about Lignières-en-Berry, see: http://www.barataria.org/i/5/i.5.4.htm
- for an explanation why this money is more efficient, see: http://www.naturalmoney.org/introduction.html
The Wörgl experiment became explosive because many towns and villages wanted to copy it. For this reason the central bank of Austria banned it. The Lignières-en-Berry experiment was explosive because it would have replaced regular usury money within a few years. For this reason the government of France banned it. If the experiments had not been banned then everybody would use scrip money now.
The secret formula
Currently there are a number of similar currencies and LETS systems but they did not achieve the success of Wörgl and Lignières-en-Berry. In order to make the money a spectacular success the following conditions must be met:
- the currency must be exchangeable in regular usury money but exchanging it must be less attractive than keeping it;
- at least initially the currency has to be backed with regular usury money;
- there must be an incentive to use the money in the form of a holding tax;
- the money must be attractive.
There are two methods to produce an explosive experiment that will spread like wildfire:
- a public currency: the currency is issued by a government like in Wörgl and the government accepts the currency for taxes;
- a private currency: the currency is issued by a community, a group of people like in Lignières-en-Berry or a corporation.
The scheme of Lignières-en-Berry is the most easy to implement because it needs only a small amount of capital and it does not need a large organisation or support of a government.
In Lignières-en-Berry a clever scheme was devised to make the money attractive. It was the following:
- people could buy the money at 95 cents to the Dollar/Euro;
- they could spend it as 1 Dollar/Euro because businesses accepted the money at that value;
- after four months they could exchange the money at 98 cents to the Dollar/Euro;
- they could also buy a stamp of 1 cent to make the money valid for another month so they could spend it as 1 Dollar/Euro again.
The situation in Lignières-en-Berry soon became explosive because:
- people bought the money because they could spend it at a 5% profit or exchange it at a 3% profit after four months;
- the money circulated fast because there was a holding fee of 1% per month;
- businesses accepted the money because it generated extra business and it could cost them no more than 2%, but if they did spend the money then there was no loss at all;
- many people chose to buy the stamp even though they could get back 98 cents because by buying the stamp they could spend the currency unit as 1 Dollar/Euro.
If no currency is returned then the profit is the 1% holding fee per month excluding costs. If there are no costs and the profit is used to issue additional currency then 33% additional currency can be created each month. At the same time the money is sound because it is backed by regular usury money.
This money spreads fast and the experiment in Lignières-en-Berry became explosive. It may have taken only a few years until the money had replaced usury money in France and the rest of the world. For this reason the government of France banned it.
Capital and profit
To set up a Lignières-en-Berry currency you do not need much capital. If you intend to issue 10,000 Dollar/Euro of currency units you only need 300 Dollar/Euro. People will buy the currency at 95 cents so they bring in 9,500 Dollar/Euro while you need 9,800 Dollar/Euro to pay them back.
It is possible that the operation will run at a profit because people have to pay a holding fee to keep the money valid. The profit can be used to the following ends:
- to issue additional currency. In this way the scrip money will spread fast. If the market becomes saturated, more people will return the money for 98 cents so the profit will disappear and the situation will stabilise.
- for the benefit of the community, for example poverty relief.
- it can be added to the value of the currency so the value of the currency will rise. This will make the money attractive for investors to invest in, for example by loaning out money at 0% interest.
- a dividend for shareholders. Many people will not prefer this solution but in a free market this type of money can exist alongside public and community currencies.
The fast circulation of the scrip money generates extra employment. It can produce even more employment if employers and employees could agree on using it for salary payments. This happened in Lignières-en-Berry and this was crucial in making the currency a such a success that it threatened the usury financial system. Some possible schemes are the following:
- the employer pays a regular salary including taxes but the employee agrees to return a part of his or her salary to the employer in exchange for scrip money.
- the employer pays a minimum wage including taxes and an additional amount in scrip money. This scheme could cause trouble as it results in reduced tax income for the government.
- governments may choose to accept scrip money for taxes so it will be possible to pay salaries in scrip money. The public may force the governments to do so.
Possible adaptions in the scheme
It is possible to make some adaptions in the scheme like the following:
- the money can be sold at a price of 97 cents and returned at a price of 98 cents after two months;
- the buy and sell price can be made one cent lower so it will be more attractive to buy the stamp.
A successful example of a similar scheme is the Chiemgauer in Germany, see: http://en.wikipedia.org/wiki/Chiemgauer
The Chiemgauer can become explosive as soon as the scheme is not used to promote charities but to make the money attractive. If businesses are able to pay salaries (partially) in Chiemgauer or when a local government accepts the money for taxes then it can turn into an unstoppable force that will replace usury money.
There are some risks that should be addressed:
- legal issues: the government has a monopoly on issuing money so the currency should be named "gift certificates";
- trust: the organisation behind the gift certificates must be trustworthy and transparent. This may require independent oversight and auditing;
- participation: before the experiment starts a significant number of businesses must be willing to accept the gift certificates;
- over issuance: if too many currency units are issued, the chance increases that gift certificates are returned at the end of the month, creating a loss of three cents per unit returned;
- traders: people that sell gift certificates at 98 cents should not be able to buy new gift certificates at 95 cents. This problem can be mitigated by limiting the issuance per person or issuing new gift certificates only once every two months. Preventing over issuance will also help to alleviate this problem;
- return loss: interest rates are lower now than they were in France in 1956, so a lower return profit of 2 cents in four months (6% annually) will still be attractive. This will reduce the risk of loss on the scheme.
There may come a clash between banks and governments versus money reformers. Banks and governments cannot stop the spread of knowledge and the functioning of markets so their resistance will be futile. In a democratic society people should control the government and therefore the superior efficiency of this money can be a power tool to enforce democratic reforms. The most important one is a referendum law that will give citizens full control over their government. This will end the rule of the elite.