Mutual credit for production

[bhaugen]

This is part of thinking about a mutual credit economy. Can't have an economy without making things.

Some excerpts from an email conversation between me, Matthew Slater, and Stephanie Rearick about this topic:

Bob Haugen:

I thought this would be an advantage of mutual credit vs coin-of-the-realm. Sensorica needs to use value equations to distribute income to contributors, and the contributors need to wait for the income to be distributed. We've seen the same pattern in food networks. But if they used mutual credit, the workers could get their credits immediately, no equations or income distributions required.

Matthew Slater:

When sensorica talks about income, it means money, which is paid on delivery of the goods. The ovn software, as I understand it, helps to decide how to distribute the money as the value is created. In a sense if OVN is distributing tokens, the tokens are promises of money, conditional on the contract being completed. Once the money is delivered I suppose the tokens are somehow invalidated, burned, extinguished? Mutual credit is a just a way of presenting/recording the accounts that emphasises the balance between credit and debit, and says that all money is merely the balance of account between credit and debit. So while you can't pay people money which hasn't been received yet, in both OVN and mutual credit, you can issue tokens or credit at any time in anticipation of that, and the very promise of money is a very good source of liquidity within the network itself.

Stephanie Rearick:

I don’t know that Matthew is opposed to the projects paying out the credits, but has told me he considers it then to be ‘fiat’ currency since the project can have a big negative balance. i say that’s still mutual credit because the negative balance exists, and the accounts all add up to zero.

Matthew Slater:

Right, you can use mutual credit accounting which shows a bit negative balance in the house account, and I argue that if there is no intention to restore balance to that account, then the principles of exchange no longer apply and the money system needs to be governed and monitored under different standards and metrics.

Stephanie Rearick:

To me the difference here seems as simple and basic as viewing the currency or credit as a means to an end as opposed to an end in itself. And that's a fundamental, really important distinction IMO

Bob Haugen:

I think I agree with Steph on principle here, but am also still thinking about mutual credit and how it fits into a more complete cooperative economy.

The situation in GoPacifia might end up being different than the MAN. They are talking about mutual credit for work on production processes that will create goods that will often end up being exchanged for mutual credit within the network. So the balances of the accounts for the production organizations may be restored.

@matslats feel free to correct anything I said wrong here.

In that same thread, not related to production, but still interesting:

Matthew Slater:

I just spent at least 3 hours editing the wikipedia page. https://en.wikipedia.org/wiki/Mutual_credit I've been wanting to get that off my chest for a long time. Hopefully it will survive quality control...

[gcassel]

This conversation makes sense to me. I consider all fiat currencies to be, essentially, types of credit (or trust) which people extend-- often implicitly or obliviously-- to communities and their governments, including government-approved currency-issuing bodies. Such currency-issuing bodies may in some cases be considered "independent" group Agents, but also may be considered provisionally-accepted delegates of higher executive authorities which they ultimately serve.

I don't think there's anything inherently wrong with a community being perpetually in debt to its participants. As with all credit/debit relationships, it depends on how big the total debt of each agent is, compared to those agents' productive capacity and demonstrable responsibility (or lack thereof).

[gcassel]

I should add too, one idea which excites me as an almost-anarchist is the idea that lean and responsible governing bodies could fund their nondiscretionary expenses entirely by issuing new community currency units in proportion to predicted economic growth. Thus, totally avoiding issues like income tax (or membership fee) accounting, collection and enforcement.

[Added note: I do not mean economic growth in the traditional sense of increased physical processes and consumption, although that can be a component. I mean growth in whatever is economically valued, including creative work and stewardship of community resources.]

This relates closely to some anti-tax MMT philosophies, although I believe that some targeted taxes (such as a carbon tax) would be rational and desirable in anything remotely resembling today's world.

[almereyda]

We have moved the ValueFlows organization from GitHub to https://lab.allmende.io/valueflows.

This issue has been closed here, and all further discussion on this issue can be done at

https://lab.allmende.io/valueflows/forum-valueflo-ws/-/issues/98.

If you have not done so, you are very welcome to register at https://lab.allmende.io and join the ValueFlows organization there.