Berkshares

August 3, 2009 5:56 AM

The Goat Who Took on the Fed: WSJ's Andy Jordan spends time in the Berkshires to see how locals make the case for "slow money" with their own local currency, "The Berkshare". (previously 1 2 3 4)

cf. George Dyson on Exchequer Tallies

As early as the twelfth century it was realized that money, like information but unlike material objects, can be made to exist in more than one place at a single time. An early embodiment of this principle, preceding the Bank of England by more than five hundred years, were Exchequer tallies — notched wooden sticks issued as receipts for money deposited with the Exchequer for the use of the king...

Until the Restoration tallies did not bear interest, but in 1660, on the accession of Charles II, interest-bearing tallies were introduced. They were accompanied by written orders of loan which, being made assignable by endorsement, became the first negotiable interest-bearing securities in the English-speaking world. Under pressure of spiraling government expenditures the order of loan was soon joined by an instrument called an order of the Exchequer, drawn not against actual holdings but against future revenue and sold at a discount to the private goldsmith bankers whose hard currency was needed to prop things up. In January 1672, unable to meet its obligations, Charles II declared a stop on the Exchequer. At the expense of the private bankers, this first experiment with derivative financial instruments came to an end.

Today's Exchequer, distributed across the global banking network, splits digital tallies by the millions in milliseconds: above human scale in magnitude and beyond human scale in time. High-speed trading programs not only have access to unlimited funding; by dividing time into ever-smaller increments they also, effectively, have access to unlimited time, and, in the words of Ampère, "must then be considered as a single opponent whose fortune is infinite." Can this be stopped?

Financial systems exhibit the Gödelian incompleteness characteristic of all sufficiently powerful formal systems: within the given system it is possible to construct statements (or financial instruments) whose value appears to be sound, but cannot be proved within the system itself. No financial system can ever be completely secure and closed. There is no limit to the level of concepts (including fraudulent ones) that an economy is able to comprehend. The system depends on trust.

[...]

Establishing a bank requires secure information storage to keep accounts, a license from the government (or an entity beyond government), a small amount of capital, and a large amount of trust... We should be less concerned with loss of money and more concerned with loss of trust. If we have to start over with more trust and less money, is this really so bad? ... Charles II had the right idea. He trusted (and endowed) the small group of oddballs who were forming the Royal Society, and put a stop on the Exchequer. If he had rescued the bankers, and ignored William Petty's band of Natural Philosophers, where would we be now?

BONUS

• Replacing Scarcity with Trust - Francis Ayley established over a dozen local currencies in the UK before moving to the U.S. He contrasts our standard, scarcity- and debt-based money system with local currencies in which "there's always as much as you need."[1]
• Money Monopoly - Marshall Auerback says California is challenging the federal monopoly on money creation: "In effect, what you have is a state of the union creating a sovereign currency right under the noses of Treasury, Fed."
• Wealth Inequality - Wolff provides a chart of the share of marketable wealth held by the top percentile in the UK, Sweden, and the US, from 1920 to 1992. The graph is striking: we are roughly back to where we were in 1920 when it comes to wealth inequalities in the United States.[2]
• Geithner vs Geithner - If Timothy Geithner is as bad at handling the economy as he is at picking bathroom tiles, he won't need to sell his house.
• Alain de Botton on Success and Failure - A kinder, gentler philosophy of success: He makes an eloquent, witty case to move beyond snobbery to find true pleasure in our work.[3]
• MoneyMonkey Herding Goats - A monkey in India has learned, without any training or supervision, to tend herds of goats, cooperating with a human farmer. Even more amazing: It's a formerly wild monkey who is free to return to the wild at any time.
• Pet cat catches the daily bus for four years - "Casper is quite quick for his age so he just hops on to the bus before the doors close. He catches the 10.55am service and likes to sit on the back seat." A spokeswoman for First Bus said the firm has put a notice up in the office asking them to look after the non-paying passenger.[4]

---
[1] Building a Better (Secular) 'Religion'
[2] The Coming Collapse of the Middle Class
[3] Help a Fellow Out
[4] your leisure is my pleasure

posted by kliuless (14 comments total)

There's a well known UK one in Lewes, near Brighton (where they also burn effigies of the Pope but y'know in a fun way) called the Lewes Pound.
posted by rhymer at 6:23 AM on August 3, 2009

I wonder if people will ever learn the difference between money and currency.
posted by Pastabagel at 6:26 AM on August 3, 2009

splits digital tallies by the millions in milliseconds: above human scale in magnitude and beyond human scale in time. High-speed trading programs not only have access to unlimited funding; by dividing time into ever-smaller increments they also, effectively, have access to unlimited time,

If one wants instead of the 2 minute hate but wants 60 minutes of hate for the banks and credit cards one can listen to James Martinez.

The shows with "Bob Neveritt" go into the very idea of "unlimited money", along with more esoteric things about the different kinds of bodies and even more out there claim - he's gonna break the banks via releasing some kind of cold fusion device.

In other currency news - The Liberty Dollar just closed.

And if one wants to spend a whole lot of time looking into "money" - Complementary Currency Resource Center.

(and at the middle of the month "we" are starting up a timebank for our county. A magical word seems to be UNILETS with this google search dragging you down rabbit holes.)
posted by rough ashlar at 6:46 AM on August 3, 2009

I was reading something a while back, which I unfortunately cannot find for citation, which said that the invention of paper currency in China actually increased the usage of local currencies. The explanation was that money becoming more liquid made it easier for wealth to be taken out of a community and using a local currency prevented that to some degree. The local currencies were also less vulnerable to inflation, which was a major problem in China because they didn't understand yet that the government can't simply print money to pay its debts. Many of the local currencies were tokens or coins made out of clay or non-precious metals like lead or tin.

While fruitlessly searching for a cite on that I did find this interesting article:

Discover Magazine: The Cradle of Cash
posted by XMLicious at 7:34 AM on August 3, 2009

Yeh great post, lots of good reading there. And very interesting market conditions we've got right now.

Strong manufacturing numbers really kicked the market this AM, so equities are moving nicely up while US Govvies are getting whacked.

Also of interest, we're seeing the US Dollar hitting 2009 lows, something that's got the technical analysis guys all excited even as gold starts to break to the upside and oil runs past $70.

So yes, longer term while it seems like we're already awash in new treasury offerings lots more US Government debt will be coming to market, and already some investors are starting to ask where the economic growth will come from to support current interest rates? Watch China; while they are still purchasing US Treasuries, they are moving demonstratively to the short end something that's rattled some folks.

Coming up - a steeping of the yield curve, definitely higher long term nominal rates and it seems like some participants are pricing in inflation of about 6% pa, achievable over the next eighteen months or so. Thats on the low end of where I see it but I like 6% inflation much better than I do any deflation.

Needless to say, this is a really, really good time to be loading up on gold & silver, and pretty much any commodity. You want to buy stuff when nobody else wants it. Far too many people are still looking out for deflation and I think that was yesterdays problem.

As I've mentioned before, this does indeed seem like a rerun of the 70's, and once we start to see GDP strength, unemployment being to wane commodities will really start to boom as demand picks up.

Oh yeh. Inflation as well.
posted by Mutant at 7:45 AM on August 3, 2009 [3 favorites]

given the kind of homey but pricey stores that thrive in the berkshires, i have a feeling berkshares are like gift certificates you can use at various stores. i can see that concept spreading if they mean a discount for the consumer. so, regular price is $10; gift-certificate price is $9. because once you have those gift certificates, you have to use them at those stores. it's like a contract to buy from them at some point in the likely near future.
posted by noway at 7:52 AM on August 3, 2009

because once you have those gift certificates, you have to use them at those stores. it's like a contract to buy from them at some point in the likely near future.

I don't think that's entirely true.

You can sell the Berkshares back to one of the banks that Berkshares can be purchased from. The price you sell them for is exactly the same price that they were purchased for.

The same generally cannot be said of gift certificates.
posted by Flunkie at 8:43 AM on August 3, 2009

i have a feeling berkshares are like gift certificates you can use at various stores

Well, not to be mean, but this is not a profound observation: they are both pieces of paper that represent money. There's a continuum here from coupons to gift certificates to scrip to local currency to fiat currency. I think obviously by design a local currency is more flexible than a gift certificate, but on the other hand, it will have significant limitations compared to the operant fiat currency. Those limitations are in theory offset by local benefits, primarily keeping the money from going elsewhere, but that's something whose efficacy is difficult to prove. People naturally spend some of their money locally no matter what.

But if you get your change in Berkshares, you'd have to go to a bank (and lose about 6% value in the process) to use it outside of the area. So it does have more than a psychological barrier.

You could also have something that's the flip side of a gift card/certificate strategy. With a card, you go to a store and buy up to the value of the card, and perhaps more. For the store, bonus! (Stores also have the option of writing off and cancelling the value of the card or certificate after a time of disuse, and coupons almost always have an expiration date.) But with something like Berkshares, you could almost be in the position of being encouraged -- after your Berkshares run out -- to get more. I'm not sure how often that effect would take place, but in private transactions anything is possible, especially if someone says "Pay me in Berkshares and it's 20% off."
posted by dhartung at 11:40 AM on August 3, 2009

I'd never thought about it before, but local currency can be a good way to introduce mutualism to people...

Also, I love when people support gold or silver standards, as if gold had any sort of inherent value (outside of wire manufacturing) that was more legitimate than paper, debt and fiat power.
posted by cthuljew at 12:42 PM on August 3, 2009 [1 favorite]

I live in the berkshires... haven't had a need for BerkShares yet. I kind of wish I did, but probably never will. I can get anything I want with good old cash.
posted by alfanut at 6:18 PM on August 3, 2009

Having lived in the Berkshires when BerkShares were first introduced and a couple years after, I suppose I have a few things to contribute.

Even if you love the concept and want to keep the money local, goddamn if it isn't hard in practice. BerkShares won't ever, nor are they meant to, replace federal money and still, many establishments do not accept them – so you have to carry double the money. They take up extra space in an era where people want to carry less and less cash in their wallet. That probably sounds like a trifling concern but, again, in practice...

I worked in a restaurant that didn't accept them. Waitstaff carried their own bank and we sure as heck weren't carrying change in BerkShares. The video mentioned it's helpful to have exact change in BerkShares. That's a pretty tall order for most people.

Plenty of the stingier store owners don't want to lose that 5% when they change it back to "real" money.

In all honesty, I'd say the people using them 3 years after their debut are the diehards. I still totally support the idea and wish them all the best. The ridiculous majority of money spent in the area is from out of town so it is really great to show your local support.

And the New Yorker interviewed at the grocery store a minute and a half into the video? Yeah, she's why I'm happy to no longer live there.
posted by bobobox at 6:25 PM on August 3, 2009

Ugh, liberal artsy type tried to read Gödel, Escher, Bach again.
posted by phrontist at 1:11 AM on August 4, 2009 [1 favorite]

George Dyson is apparently the son of Freeman (physicist) and sister of Esther (science journalist), but no relation to the vacuum cleaner guy -- which is surprising, since the quote above is pretty much entirely hot air. Godelian incompleteness? Come on.
posted by miyabo at 7:37 PM on August 4, 2009

i thought it was fine (depending on how you read 'exhibit'!)

re: interesting market conditions

satyajit das (pretty much) speaks for me, but, then, so does ram dass :P
posted by kliuless at 4:20 AM on August 5, 2009