Welsh Pound

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The Context

bulletIn the footprints of Abraham Lincoln, US Congressman Congressman Ray LaHood (R-IL) has introduced the "Sovereignty Bill" as HR1452, the STATE AND LOCAL GOVERNMENT ECONOMIC EMPOWERMENT ACT
 
bulletIn England, 'Early Day Motion' is the term used to describe notices of motions given by Members that are not generally expected to be debated. Effectively, the tabling of an EDM is a device to draw attention to the issue, and to elicit support for it by the means of inviting other Members to add their signatures to the motion. Early Day Motion 314 was submitted by Dafydd Wigley MP and provides a unique opportunity for creating a Welsh Pound

 

DISCUSSION PAPER

06 February 2000

A WELSH POUND?

Considerations and Recommendations for Implementation

Professor Bernard Lietaer as the designer of the European Currency Unit is one of the experts on complementary currencies. He suggests that unemployment, destruction of the environment currency crises and social problems can best be addressed by currencies that have fundamental differences to national currencies as current legal tender.

Objective of the Creation of the Welsh Pound

The concept of a Welsh Pound is designed to solve the following problems:

        provide matched funding for the amount offered by the EC

        reward voluntary community work for which there are no public funds

        enable the payment of unemployed people

        provide additional purchasing power to buy local produce

        act as a model currency and stable medium of exchange.

Executive Summary

The paper describes the tension between politics and economics as it has been created by the mechanism of National Debts and interest on national currencies. Paragraph 33 of Local Agenda 21 asks for creative financial mechanisms. Given the commitment of the Welsh Assembly to Sustainable Development, it is recommended that the Welsh Pound be introduced as soon as possible and with the maximum support of significant institutions, such as banks, Job Centres and supermarkets.

Questions that need to be Discussed on the level of Welsh Politics:

1.      Does the Welsh Pound serve as an exchange medium only like a Green Dollar in a LET System or should the functions of lending and saving also be incorporated?

2.      If the second is true, then how is this legal tender money put into circulation? By public works projects through central or local government agencies? Through giving private interest free loans?

3.      What are the conditions in terms of administrative fees? Insurance for the loan? Payback time? Demurrage fee?

4.      Is the Welsh Pound accepted by the government for payment of taxes?

5.      Does the money have any backing in the form of government real estate e.g. historic buildings which would create the need for the demurrage fee to cover maintenance costs?

Introduction

The balance between political democracy through voting and economic democracy through monetary transactions has not been on the agenda of politicians or the media so far. However, the opportunity for matched funding from Europe shows not only the financial deprivation of Wales but also the weakness of the management of Sterling by the UK Government.

The Forum for Stable Currencies has access to a wide network of experts who have studied the political and economic implications of currency issued as a National Debt. With a view to EURO perpetuating that devastating mechanism, it is recommended that the Welsh Assembly adopts the Welsh Pound as a currency that is complementary to the Pound or EURO.

The purpose is to demonstrate in a small scale how a currency can be made stable rather than inflationary and fulfil its main function, to act as a medium of exchange between traders. Instead, it has become a commodity of brokers and financial institutions as well as the mechanism for passive income for shareholders.

If proven successful, the Welsh Pound can act as pilot project for the Commonwealth of 54 Nations.

In this context, it may be important to note that the Dubai Department of Ports and Customs relaunched the traditional Golden Dinar and Silver Dirham as complementary legal tender on March 23, 1999. For the current way of dealing with national currencies undermines the value of domestic trading.

The Islamic example shows that the value of the currency lies in the preciousness of the metal used. Although all spiritual traditions forbid the lending money at interest, also called usury, as the means for social erosion, Islam considers it the highest sin against God and people.

Local Exchange Trade Systems, in short LETS, and commercial Barter companies show how the recording of the value of a transaction between people and companies becomes a ‘Trade Pound’ – only among the registered members of an organisation though.

The history of former East Germany has shown how a currency could be introduced and withdrawn. Its stability was created partly through low interest rates which were the same for borrowing and for saving. Consequently, it achieved very high economic security: virtually zero unemployment and hardly any violence.

In Wales, suicides of farmers and unemployed young men are the desperate cry for help and change that can not possibly be overheard.

For the Welsh Pound to become effective, two levels need to be considered: its creation through the Welsh Assembly and its distribution through banks and companies to individuals.

Creation or Recording

The creation or issuing of currency has been the monopoly of Central Banks. As a debt, charged with 8% interest, the founder of the Bank of England gave 1.2 million to the King in 1694 to fight France so that soldiers could be paid. This model has been copied world-wide with the consequence that today the whole world is in debt, continuously paying interest – a modern form of slavery. For the real assets such as land, food and buildings end up being controlled by the recipients of interest payments. In 1944 Norman Smith MP said that there is always enough money for war, but never enough for education and health. This pattern continues to be true today.

When creating a currency, it needs to be backed by a credible authority to ensure its purchasing power and value as legal tender.

Unfortunately, the authority of Governments has been undermined substantially – on one hand by the power of capital, on the other hand by the legalised practice of banks as the principal mechanism for creating money via bank accounts.

However, Governments do have the power to create notes and coins, also called M0. In practice, the amount of money in circulation as cash has gone down from 21% to 3% since 1960.

When recording the value of transactions, simple mechanisms need to be in place:

        cheque books as they are used by LETS groups

        credit card slips as they are used by Barter companies

        mutual credit carnets in use by LETS groups in former East Germany or

        smart cards as an extension of the MONDEX trial for an ‘electronic purse’ or the EC card in Belgium.

The mechanism of recording is either anonymous or arranged by a central agency or agreed between trading partners. Given the high degree of alienation that has been achieved by our current monetary system, it is desirable to boost Welsh morale and prosperity by facilitating transactions as much as possible. Facilitation requires the gathering of information for the purpose of passing it on to the right recipients.

Bartercard is the most successful barter company established in seven countries. Their experience shows that good facilitation requires a ‘broker’ who ensure that companies get what they need in terms of skills from unemployed people, or products and services from other companies.

In the same manner, co-ordinators are required for 80 - 100 unemployed people in Job Centres where CV, skills and profiles could also be published on websites. This could become part of a Training Course in basic Internet skills – paid in Welsh Pounds!

For Wales to become economically independent of London and Brussels while combining the advantages of information technology with a rural environment, it is vital that the Welsh Pound becomes additional ‘oil’ in the machinery. Likewise, it is vital that Internet literacy is as high as possible, given the ‘competitiveness’ that current currency management requires.

Distribution and Carriers

With a view to establishing the Welsh Pound as a stable and model currency, the following means of distribution that are currently in use for Sterling need to be matched in their ease of use:

        notes and coins

        bank accounts and cheque books

        credit and debit cards.

In the end, money is a set of numbers as information that needs to be carried by metal, paper or plastic. Plastic is used by credit cards with a magnetic strip and in casinos as chips.

        Cash and chips are the easiest up to a certain amount.

        Cheques solve that problem but require labour extensive recording and administration.

        Credit cards require matching readers.

Given the development of information technology, it would seem advisable to make best possible use of future oriented mechanisms.

The Internet as an add-on to computer technology is the most promising vehicle. At the same time, the experience of LETS as well as Bartercard shows that it is paramount to facilitate transactions between people for the purpose of recording their value.

1.      Plastic Money in Credit Card Size

The A4 page has set a standard for textual information. The credit card has set a standard for financial information and business cards. For maximising ease of handling and durability, it therefore seems convenient to match notes and coins with plastic cards in the size of credit cards. For security reasons, they could be numbered just as credit cards.

Consortium of Banks

With the Welsh Dragon, printed by the Bank of Wales with the approval of the Welsh Assembly, plastic cards could provide the start-up mechanism for distribution.

Just as Scottish banks printed their individual logo on their legal tender, so a consortium of banks could be created who would support the Welsh Pound as stable currency in addition to Sterling. Their logo on a plastic card would add credence and the support necessary to the Welsh Dragon.

2.      Mutual Credit Carnet

This simple mechanism removes the centralised administration of cheques from banks and enables people to do their own accounting. By keeping track of the value of every transaction and countersigning by the trading partner, the carnet contains headings such as these:

Date

Transaction

Member No.

+

-

Balance

Signature

 

 

 

 

 

 

 

 

This Carnet could be issued by Job Centres and thus enable unemployed people to do occasional or part time work that may lead to full time employment – for Welsh Pounds.

The Carnet should also be obtainable from Banks and Post Offices or Newsagents. Public Internet facilities would be another pick up point. The emphasis in on self-help and self-organisation. An East German model is available upon request.

3.      Smart Cards with Dual Currencies

Assuming that at least one bank or credit card company backs the idea of a stable Welsh Pound as complementary and interest-free currency, the technology of their card should be extended to include the Welsh Pound as a second currency.

The MONDEX example carried out by five banks in Swindon allows for five currencies – none of them were interest-free and thus stable though.

However, to agree on the kind of card and all the logos is a minor technical detail. It is much more important for politicians to acknowledge that

        neither Sterling nor EURO can continue business as usual if Sustainable Development has any meaning whatsoever

        the devastating gap between country and city has been created by money in its current management

        the Welsh Pound as outlined above would provide a solution on a significant number levels.

06 February 2000     Sabine Kurjo McNeill