Credit Commons

= 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)

Description

1.

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.

2.

Another explanation by Thomas Greco at http://beyondmoney.net/2006/09/22/point-and-counterpoint-on-economic-exchange/

"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." (http://beyondmoney.net/2006/09/22/point-and-counterpoint-on-economic-exchange/ )

Example

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)

See also our entry on LETS

More Information

• Towards a Credit Commons with Thomas H. Greco, Jr." , an interview for New Dimensions Radio (with Michael Toms).