Business-friendly means of exchange


This article was first published in the Wairarapa News in July 2012


Times are changing. Communities are welcoming moves toward local resilience. Money’s interest component has progressively dug us into a huge debt hole and will continue to handicap local business for as long as we use conventional money. Getting out of the debt hole – becoming a viable economy – will not be possible until we adopt business-friendly means of exchange.


Because money always comes with an interest cost, using money amounts to buying from outsiders our own right to trade. A trade-friendly currency enables us to trade freely among ourselves. Time Banks, for example, promote the free exchange of services, Savings Pools the free exchange of funding and Food Pools the free exchange of garden and farm produce and information.


Free exchange – trade in which no third party profits by simply supplying the currency – saves costs just as effectively for commercial firms trading goods as well as services. If local businesses take up trade-friendly currencies, it will prove such a boost to the region that we will be asking ourselves how bank credit could ever have been the norm.


The cost of bank credit is quite unnecessary within an intertrading community.


When we buy local goods with money – the same money that buys imported goods – the interest cost slashes our spending power. And as long as we demand payment for local products in money, we face more competition for them than we need to and earn less for them than we might.


We acknowledge a local customer with a friendly greeting or nod of recognition. A shrewd business community would acknowledge local goods and services in a similar way. Local products represent a chance to make big savings, because every transaction between local traders could be an interest-free exchange.


A pool of traders would establish accounts for mutual trade. Whenever A sells B goods or services, the price would be deducted from B’s account and added to A’s. Although traders would enter pool transactions as cash transactions in their books (for GST and income tax purposes), no actual money would ever change hands within the pool. Instead, each account would fluctuate from month to month around a zero balance.


The pool would welcome whoever has value to offer the local community. As membership grows, the advantages of membership would add up too.


Traders typically feel isolated, each competing for a customer’s dollar. Pool traders would start to feel connected and able to support others, including by finding a variety of ways to change direct and destructive competition into mutually beneficial accommodation.


Business would pick up, even when cash is in short supply. Members’ incentive to buy within the pool would create a buffer against outside competition. The increasing demand on local product and traders’ ability to draw on surplus capacity would translate into higher and more dependable turnover and profits.


Cash outgoings would drop as pool transactions comprise an increasing proportion of traders’ total turnover. Rent, for example, would become a free exchange when the landlord joins the pool, a portion of rates a free exchange when the council joins. Debt would be paid off faster as the dwindling number of outside (non-pool) suppliers leaves more cash income available.


As such pools spring up around town and in neighbouring towns, people would see the bleeding of hundreds of thousands of dollars of interest from the region slow to a trickle and a new dynamism characterise regional trading:


·         marketplaces – never short of buyers or sellers but only of money – flourishing;

·         local businesses working to full capacity;

·         new businesses emerging to meet the demand for local goods and services;

·         customers able to order sooner and pay more promptly;

·         costs falling and prices stabilising;

·         wages rising and unemployment falling;

·         young people finding local work as soon as they leave school;

·         household and business debt levels plunging;

·         a new sense of pride, confidence and hope permeating the region;

·         the region’s ‘pool factor’ drawing visitors in to see the effects for themselves.