Informal Systems
Status
Tomaž Fleischman:
"We’re also working on other local monetary instruments, like vouchers and mutual credit. I’m not the top expert on this – I’m working with people like Paolo Dini and Guiseppe Littera, who used to work at Sardex, which I think is the second biggest mutual credit network that exists – I think that only the WIR Bank is Switzerland is bigger. What we’re working towards is marrying MOS / credit clearing (liquidity-saving) with what we call liquidity sources. This can be a lot of things. The simplest liquidity source would be a trust line between you and me. So, I trust you to return £100 to me within a set time, so I can provide liquidity to you. This new liquidity does its magic via the multiplier effect of the network. It’s the risk management of the liquidity provision that is usually costly. But in the case of this trust line, the risk is contained between the two members who decide to do this. It can’t spread further (this is the opposite of what happens with the banking system, where risk is socialised. What that means is that profit is privatised, and losses are socialised).
To then take it a step further, if there is a group of businesses that work / trade closely with each other, and they decide that they want to provide liquidity to the system by trusting each other, they can create a mutual credit club. It can be small (3-20 members) – you don’t need thousands of members to provide liquidity. In this case, the risk actually is socialised, but it’s contained within this small group. All the members of the group have agreed to be in it, and the overall MOS network provides a risk-reduction mechanism for all members, including liquidity providers."