Credit Clearing

= "Credit clearing means that payments between businesses can be ‘cleared’ if loops can be found, in the same way that if I owe you £10 and you owe me £10, then we can just clear it and neither of us has to find £10". [1]

Description

Thomas Greco:

"Credit clearing is the highest stage in the evolution of reciprocal exchange, which, in effect, makes money as we’ve known it obsolete. The fact is that goods and services pay for other goods and services, whether we use money as an intermediate payment medium or not. Direct credit clearing makes the use any third party credit instrument (money) unnecessary.

A credit clearing system is an arrangement in which a group of traders, each of whom is both a buyer and a seller, agree to allocate to one another sufficient credit to facilitate their transactions among one another. The rest is merely bookkeeping.

In such a system, the total amount of credit outstanding at any point in time can be thought of as the money supply within the system. That will be the sum of either the positive balances or the sum of the negative balances. These two sums of course must always be equal to one another. Note how the money supply fluctuates up and down as credit balances are spent and debit (negative) balances are reduced when sales are made by those who had a debit balance."

(http://beyondmoney.net/2007/08/06/credit-clearing-pure-and-simple/)

Status

Tomaž Fleischman:

"Slovenia has been the most successful, but it’s not the only one. There is something similar (but with different algorithms and techniques) in Romania, and there are things happening in Bosnia-Herzegovina. I don’t know of any other national-scale projects. But there are a lot of local projects, for example in Italy, Spain and the Netherlands. Portugal introduced legislation in 2019. Their ideas was not to run this as a govt. agency, but to seek a public-private partnership. The legislation helps in setting up these schemes. But as yet, they haven’t been able to find partners to run this at the national scale."

Source: From a conversation of Tom Woodroof of Lowimpact and Mutual Credit Services with Tomaž Fleischman of Informal Systems about Credit Clearing.

History

• Interview with a specialist on the history of credit clearing, https://www.lowimpact.org/posts/a-brief-history-of-credit-clearing-with-hans-florian-hoyer

Examples

• the National-Scale Credit Clearing Scheme in Slovenia

• Local Loop Lancaster & Morecambe – credit clearing project, https://www.localloop.network/

More information

• Introduction to the topic of credit clearing, https://www.lowimpact.org/categories/credit-clearing

• credit clearing as a ‘gateway’ to Mutual Credit: https://www.lowimpact.org/categories/mutual-credit