Credit Commons

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= synonym for Mutual Credit Clearing System, i.e. cashless trading circles

Summary Citation

Thomas Greco:

"The credit commons has been the most overlooked aspect of the commons, yet it is the most crucial, because credit is the very foundation and substance of modern money, and money is the essential medium for exchanging goods and services. Whoever control money controls virtually everything in the material real. The privatization of the credit commons has not only enabled the few to exploit the many, it has also driven economic expansion beyond any reasonable limits and fueled conflict over the control of resources around the world." (draft for Commons bk in preparation)



Thomas Greco:

"The real power lies in our ability to employ a basis of issue that does not require us to first get cash (political debt-money). That basis is the transfer of goods or services from one party to another. This is what I mean by "monetizing the value of our own goods and services." We need to claim this power instead of letting the banks monopolize it.

In a credit clearing circle, the resulting debit (obligation) incurred by the buyer supports the credit obtained by the seller. That credit is essentially a supply of money that is created separately without involvement of the banking system.

However, if that credit is simply a personal i.o.u. of the buyer, the risk of default is great and any such loss would be borne by the seller alone. (The seller gave up value and was not able to later get value from the buyer).

In a credit clearing circle, however, that credit is supported by all the members, not just the buyer who created it. So if the buyer defaults, the other members are still obliged under the agreement to honor the credit that is held by the seller. So the members collectively bear the loss when one of them defaults.

The essential elements then are

(1) the agreement under which the members of the credit clearing association operate,

(2) the process and formula by which the credit creation power is allocated amongst the members, and

(3) the central database of transactions (debits and credits) and account balances.

When payment for goods or services is rendered in such a system, credits are transferred from one account to another.


Another explanation by Thomas Greco at

"Cash is scarce. Credit is abundant.

Cash comes from banks. Credit is something we can give each other.

Why ask for payment in the form of something we DON’T control when we can pay each other using something we DO control.

Actually, goods and services pay for other goods and services in the process of reciprocal exchange. Money is just an intermediary device we use to overcome the “barter limitation.” Money bridges a gap in time and space so that reciprocity can be achieved in the normal course of commerce.

Is there another way to bridge the gap?

Everyone is both a consumer and a producer, both a buyer and a seller.

Mutual credit provides the “space” within which wants and offers can find each other. It addresses the question, When, and from whom, can the desired item be found? This space is what I call “the credit commons.”

All it takes is organization -- a way to “clear” debits arising from purchases against credits arising from sales.

How can goods and services pay for other goods and services without using money? Not with primitive barter, but through an evolved process called credit clearing.

This is the service that both commercial “barter” companies and grassroots LETS systems provide.

Just as the present networking of personal computers on the internet provides unprecedented power for peer-to-peer communications and access to information, the outlook for the future is for networks of credit clearing services that provide easy and efficient non-cash payment possibilities for all kinds of purchases and sales." ( )



Thomas Greco:

"Perhaps the best example of a credit clearing exchange that has operated successfully over a long period of time is the WIR Economic Circle Cooperative. Founded in Switzerland in the midst of the Great Depression as a self-help organization, WIR provided a means for its member businesses to continue to buy and sell with one another despite a shortage of Swiss francs in circulation. Over the past three quarters of a century, in good times and bad, WIR (now known as the WIR Bank) has continued to thrive. Its more than 60,000 members throughout Switzerland trade about $2 billion worth of goods and services each year, paying each other, not in official money, but in their own accounting units called WIR credits." (commons bk draft)

The Credit Commons Protocol

  • The CREDIT COMMONS is a proposed accounting system to allow users of any local currency to exchange with any other.


"A protocol for recursive mutual credit accounting

The Credit Commons Protocol supports independent entities to keep track of their exchange on a ledger which they control. Ledgers can be recursively nested, allowing trading blocs of all scales to exchange with each other without using money.

When trading partners record trade imbalances using any unit of account they please it is called mutual credit. This accounting is used commercially by business barter systems, and socially by LETS and time banks. Nested mutual credit allows exchange between independent groups, and groups of groups, being indefinitely scalable."


See also our entry on LETS


The Problem of Scaling

Thomas Greco:

"What will it take to make mutual credit clearing networks go viral the way social networks have? That is the key question, the answer to which has heretofore remained elusive. While the WIR has been an obvious success, it seems to have been intentionally constrained and prevented from spreading beyond Swiss borders, and while commercial “barter” has been significant and growing steadily for over forty years, it’s volume is still tiny in relation to the totality of economic activity.

As they are operated today, commercial trade exchanges are self-limiting and typically impose significant burdens upon their members. These include onerous fees for participation, exclusive memberships, limited scale and range of available goods and services within each exchange, the use of proprietary software, and insufficient standardization of operations which limits the ability of members of one trade exchange to trade with members of other exchanges.

Virtually all commercial trade exchanges are small, local, and operated as for-profit businesses. Small scale, local control, and independent enterprise are all desirable characteristics, but when it comes to building a new exchange system, something more is required. What the world needs now is a means of payment that is locally controlled but globally useful. That means giving members of a local trade exchange the ability to trade with members of other exchanges easily and inexpensively, with little or no risk.

Here are the things that I believe are needed for cashless trading based on mutual credit clearing to go viral:

1.Members need to offer to the network, not only their slow moving merchandise and luxury services, but their full range of goods and services at their usual everyday prices. This will assure the value of the internal trade credits and make them truly useful.

2.Like any “common carrier,” trade exchanges should make membership open to all with little qualification.

3.Lines of credit however (the overdraft privilege), must be determined according to each member’s ability and willingness to reciprocate, measured for example, by her record of sales into the network.

4.Trade exchanges must be operated for and by the members in a way that is transparent, open, and responsive.

5.Members must exercise their duties to provide proper oversight and supervision of those assigned to manage the exchange.

6.There must be sufficient standardization in the operation of trade exchanges to assure that their internal credits maintain comparable value.

As trade exchanges master these dimensions of design and operation, they will become models for other exchanges to follow. Then the rapid growth phase will begin, leading eventually to an internet-like global trading network that will make money obsolete and enable a freer, more harmonious society to emerge." (commons bk draft)

See also the extented treatment of scaling here at

From Local Community Credit to Global Credit Commons

Jamie Brown-Hansen:

"Community credit, however, is currently a global landscape of local credit facilities. This is not yet a global credit facility. It is easy to offer community credit within a local network of trust. It is much harder to offer community credit for something you’d like to order from China. So the interconnection of these facilities is the next piece in the puzzle that can make this a viable alternative to bank credit as a global medium of exchange, and that’s what we’re focused on today.

Like the natural world itself, the community credit landscape is diverse and dynamic and will never be fixed in a single pattern. That said, it is possible to recognize three distinct cultures that have emerged among these systems so far. They areLETS (Local Exchange Trading Systems), Business-to-Business (B2B) trading systems, and TimeBanks. Each of these groups organizes somewhat differently and uses different systems, but they’re all premised on the same basic principle of mutual credit exchange. A community credit facility results any time a group of people or organizations comes together and agrees to directly issue credit to each other for their own goods and services. (Some groups have a different way of describing this, but the result is the same.) This is usually called mutual credit, and it’s the most democratic form of credit creation: we issue credit ourselves backed by our own promises to redeem it in the future. Organize these promises together, and you’ve got a bottom-up credit facility.

There are now thousands of these worldwide, but they are not yet interoperable with each other. The next great design challenge facing the system engineers in this space is to develop import/export software extensions and protocols that would be compatible with each of the major systems currently used by the three trading groups. Their goal is to leave the design elements of the local systems intact, meaning the extensions wouldn’t compromise the sovereignty of communities over their local design choices. What they would do is allow the systems to communicate with each other using another connecting system, most likely Ripple. The result will be to achieve a larger “credit commons” through the interconnection of local credit facilities as long envisioned by mutual credit advocate Tom Greco. The developers estimate that this could be technologically feasible within the next two years." (

As financial Permaculture

“The credit commons can be understood as a permaculture landscape of diverse local models interacting with each other, analogous to a natural ecosystem. A variety of locally attuned credit modules interacting in dynamic non-equilibrium is a more resilient structure than the metaphorical monoculture of today’s prevailing monetary system.”

— Jamie Brown-Hansen [1]

Katalin Hausel and Matthew Slater:

"The credit commons is proposed as a meta-level mutual credit system in which any type of currency could participate. All that is required of a candidate member is an account for import/export, and implicit trust from existing members that the candidate honour commitments while only deviating from zero within a previously defined limit. To use a metaphor from biology, this limit functions like a cell membrane protecting the organism while remaining permeable tovital exchange with its environment. Just as each cell has a unique way to balance its integration into its environment, the maximum extent of these limits for each member in the network can differ from each other according to the health of its economy. Each unit in a mutual credit system can monitor its economic health through immediate insight into its balance of trade. This allows a more flexible, more localised, adjustment of microeconomic needs and health, compared to the system of national currencies. Limits are set by local economy and by the higher order system, respecting the lowest limits, which gives local economies a level of protection against strong inflows or outflows of credit which would cause inflation/deflation and distort the value of their currency. Truly grassroot, and resilient due to their diversity, credit commons is consistent with many biological design patterns: it is bottom-up, locally attuned and adapted, diverse, decentralised, iterative, modular, and premised on quantitative stability over time."

— deleted google doc.

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