Grok

= proposal for local and regional multipurpose currency

Description

"Design criteria for a successful multipurpose local currency

1. The currency must be trustworthy and misuse of the barter community precluded. The barter system as a whole must not be able to be cheated of value by individuals.

2. The currencys purchasing power per unit should remain more or less constant over time.

3. It is a means of payment, and must therefore flow rather than be hoarded – it cannot be used to store value.

4. Since the requirement for well-founded trust automatically leads to a cautious approach to credit, a diversity of possibilities must ensure that sufficient liquidity is available.

5. The currency construction must be legal according to national law and, if possible, not subject to scrutiny by the authorities which supervise banking activities and other financial services.

6. The currency is designed to keep operating costs of the barter community as low as possible.

How the Groks design meets these criteria

1. Well-founded trust

To preclude misuse either something of equivalent value must be given in exchange for Groks, or securities must be deposited for a Grok credit facility, which will be drawn on if the account owner defaults on their debt. The difference between the two is that an exchange of something for Groks cannot be reversed, whereas something can be taken out of deposit provided the account is not in debt.

Items exchanged directly for Groks must either be stakes in local businesses / projects oriented to sustainability, or be convertible into or leading to such assets, e.g. national money or work performed for the ReeComm.

2. Long-term stable value

No interest is charged or granted, nor allowed to be charged or granted, on Groks. Since inflation is for the main part caused by compound interest, thus no inflation is to be expected for Groks. The value of the Grok is completely independent of state money (and any other currency). Its current value can nevertheless always be expressed in pounds or dollars via the relationship of both to the financing options offered to citizens by the ReeComm.

3. Flowing rather than hoarding

The REC concept provides for storage of value independently of the Grok – as shares or financing certificates of the ReeComm. Thus there is no need to hoard Groks – people who wish to store value just buy shares or certificates rather than Groks. Beyond this basic design, a small but "nagging" incentive is employed:

To ensure that the Groks keep flowing for the purpose of bartering and are not left unused, they are subject to a regular circulation safeguard fee (demurrage). This fee does not disappear from the system, it is used according to the stipulations of the ReeComms general meeting. Due to the demurrage the Grok intentionally loses its advantage over goods and services. Like these, it is subject to an ageing process and loses value when stored. Unlike the rate of inflation, the amount of the demurrage is known right from the start.

4. Providing sufficient liquidity

There are only two conceptual ways for Groks to come into circulation: either entitlements, material possessions or services must be given to the ReeComm in exchange for Groks (or a credit facility); or securities must be deposited for a Grok credit facility – either way, you can't get more out than you put in.

These provisions, while ensuring the value and reputation of the Grok, do put clear and nontrivial requirements on each member of the barter community. To avoid a liquidity problem – a lack of Groks to remunerate the goods and services which could and should be exchanged – a number of ways have been provided for a member to exchange something for Groks or get a credit facility, so that each prospective member should be able to find a way which suits their personal situation. They are described in an extra section below.

5. Conforming to national law

Outlined here is a basic conceptual design of the Grok barter currency. It conforms to German national law, where it is also exempt from supervision by the financial services authority. For other countries the relevant local authorities and fiscal experts must be consulted, and a set of rules for "your" Grok hammered out which are legal by your national laws.

6. Keeping costs low

Keeping overheads low has always been an economically sound idea, and remains so here. To avoid the considerable work and cost involved with paper vouchers, the Grok accounts and marketplace should (at least initially) be a purely internet-based implementation. Payment in shops can be made possible via Smartphone- or WAP-Access to Grok accounts. If vouchers are still required, then a cooperation with a local trade system or regional currency can be sought.

Providing sufficient Grok liquidity

As stated above, Groks must either be purchased or securities deposited for a credit facility. In the latter case, Groks even then only come into circulation when such a person performs a purchase. But since anyone in the region can open a Grok account (co-op membership is not required), and offer goods and services on the Grok marketplace, there may not be sufficient liquidity to facilitate transactions. For example: Alice would cut Bobs hair, Bob would repair Cindys bike, and Cindy would sell Alice her used stereo - but none of this happens if none of them have purchased Groks or acquired a credit facility.

To ensure that trade is not stifled by lack of currency, a number of options have been conceived, none of which compromise the currencys trustworthiness:

1. Providing a credit facility for deposited ReeComm shares or financing certificates.

2. Allowing direct purchase of Groks for national currency (whereby the purchaser must know that this is a "one way street"). The amount sold must be limited to the capability of the ReeComm to invest the influx of national currency.

3. Like (2), but the Groks would not be credited to the purchasers account, rather she/he would get a credit facility of the corresponding amount. This would avoid demurrage until the account holder uses her/his credit facility (and may thus be a more attractive option).

4. Providing a credit facility for contribution in kind, e.g. when an entrepreneur makes over part or all of her/his business to the ReeComm.

5. Providing a credit facility as remuneration of work performed for the ReeComm (but in total not more than the difference between assets held and deposited finance certificates).

6. Allowing the optional formation of small groups within the barter community, whose members mutually guarantee each others credit, e.g. with 50 Groks per person. For a group of 9 members each would then get a credit facility of (9-1) x 50 = 400 Groks. If a group member defaults then the debt would be apportioned equally to the other members accounts.

This extends the asset-underpinning by a "promise of goods and services" component.

Can Groks be converted to national currency?

Not directly – this provision serves to ensure that money, goods and serves used to purchase Groks or deposited as securities for a Grok credit facility remain available to the ReeComm for long-term investment in local assets. It may also have the desirable side-effect that the Grok is not subject to oversight by any national financial authority.

However desirable Groks may be, and their long-term use be encouraged, personal circumstances will sometimes dictate financial requirements in national currency. Currently we see two ways for an individual to get her or his value owned in Groks out of the system: (a) by purchasing financing certificates from another Grok account owner for Groks and then selling them on the fiat-money market; and (b) by buying units of a fiat-par regional currency for which the fiat money has been invested by the ReeComm, as noted above. In each case, the "exit strategy" involves buying something with Groks, which thus still remain in the Grok system (and require that another Grok account holder is selling said items). The only way to reduce the maximum possible amount of Groks is to take securities out of deposit.

So Groks are pretty much a one-way street, certainly as they start up – by design. A certain amount of trust is required for people to move into Groks: They must trust that the Grok barter community as a whole will work for them, allowing them a balanced give and take. Yet they need not trust in the value of the Grok itself, due to its various design provisions to this end."

Is the Grok a mutual credit system?

Yes an No. Yes, except that in contrast to many conventional mutual credit systems, every single Grok in circulation is either prepurchased or covered by deposited securities, to make them really absolutely trustworthy. Many other mutual credit systems allow people to start off by getting goods or services out of the system before they put anything in. This has to-date often proved difficult in practice since the general awareness and responsible attitude required of the participants regarding the common good is only sufficient in small communities, where people know each other. When the community is large enough to be impersonal then some people cheat the system, bringing it into disrepute.

Note that while the Groks strategy is appropriate to the current situation, with the pre-existing national currencies and ownerships, it could not be used to kick-start a system without pre-existing items of value (which could be exchanged or deposited for Groks). In this sense, a mutual credit system without securities would be the right answer under other circumstances." (http://regional-economic-communities.info/downloads/hidden/Money_So-where-do-we-go-from-here_2011-09-03.pdf)

More Information

• The Grok is part of a proposal for Regional_Economic_Communities