In 1934, two Swiss businessmen, Werner Zimmermann and Paul Enz, founded Wirtschaftsring Genossenschaft. This was an alternative banking system meant to circumvent the credit shortage of 1929. It was mainly aimed at small to medium enterprises. Now it is called the WIR Bank. The WIR-system has about 60,000 participants, which amounts to 20% of all Swiss small and medium enterprises. About 1.6 billion Swiss Francs are turned over, and spread over millions of small transactions. In 2008, the total balance was SFR 3.4 billion. How does WIR work? An entrepreneur is accepted into the system after a simple screening, based on reputation and solvability. He sells his products or services, partly for money, and partly for a WIR check from the purchaser. This check balance is booked into a central register after 1% is deducted for administrative fees. The entrepreneur can use this balance to purchase products or services from other WIR participants.
Notice that this is principally about small amounts, up to a few thousand Francs per transaction. In this manner, a lot of value goes around for relatively little money. Many products and services can even be purchased with just WIR checks. The 1% administration fees are invoiced periodically, and can only be paid for with real money. If you want to purchase something and you do not have sufficient WIR credits, you can borrow credits, as long as certain securities are put in place. Like, for example, a mortgage that can be paid off in ten years. A modest interest rate is calculated over the amount borrowed in WIR-credits: about 1%. Approximately SFR 2 billion in mortgages have been issued. All in all, WIR has strong points like low risks, low costs, quick transactions, and a lot of turnover within the own circle. The system has expanded into a self-basting, commercial-social network that organizes fairs, workshops, training, and network gatherings. The checks have been partly replaced by an internet-based payment- and transaction system. Your Swiss satellite navigation system can direct you to a restaurant, hotel, or retailer that accepts WIR-credits.
The Calgary Dollar from the Arusha Center in Calgary, Canada is described as:
“The grassroots currency system that brings together local talents and resources to strengthen our local economy and build community. A community’s true wealth lies in the skills, talents, and capabilities of its members. We believe that every person has something of value to offer to his or her neighbors. By encouraging local production and consumption, we are committed to creating a healthy economy that is rooted in a healthy society and a healthy ecosystem.”
The Canadian Government itself in the meantime, started a currency initiative called the MintChip.
In the United States, ITEX is the marketplace for bartering, or transactions without money. The annual turnover is over $100 million, and over 25,000 companies are members. Similar, private local exchange and trade systems (LETS for short) have been in existence since 1983. You will find them all over Europe, including in The Netherlands. In Amsterdam, there is Noppes. The membership fee is €20 annually, plus 3 Noppes per month. Flarden can be found in the city of Vlaardingen. One Flard is equivalent to half a Euro; the minimum hourly rate is 15 Flarden, and the subscription fees are 12 Euros a year. There are no transaction costs. The local social services grant welfare recipients a turnover of 250 Flarden a month, before his benefit is cut. Now that’s a great initiative! Most of these types of systems – about a hundred are active in The Netherlands – have a bit of a woolly image. The systems work in an old-fashioned manner, with books of coupons or paper checks. But they work.
The Dutch Social Trade Organization is mainly active in South America, and has an open source software package at its disposal. It is called Cyclos, and others can use it free of charge. This kind of trade by barter could grow to a large extent, and then the “L” of local could be exchanged for the “C” of community. From LETS to Community Exchange Systems, or CES. New Internet software makes trading by barter possible on a global scale.
Japan has the successful homecare system Fureai Kippu. If a Japanese person cannot care for his or her mother regularly, someone can do it for him. The other way around, he can return the favor for somebody else. In the USA, you have time banks, where people can perform a service in exchange for time dollars, units of time. It is proven that these systems improve the social cohesion in an area or in local communities. The social digital solidarity of people could make a “local” neighborhood into a very large neighborhood. After all, the Internet has no boundaries.
The new kid on the block is called Bitcoin, a crypto currency, wherein the creation and transfer of Bitcoins is based on an open-source cryptographic protocol that is independent of any central authority. More and more companies from all over the world are accepting this currency, which is completely based on trust. There is no central bank watching, or any other central, regulatory organization. However, there is a central Bitcoin website.
Bitcoins can be “mined.” You need a mini-supercomputer and the software. I am always interested in innovations from a couple of smart guys, and I invested in four computers for €5,000, and “mined,” using computational-intensive software, a number of Bitcoins. However, mining becomes more difficult, as there are more miners every day, and a dwindling supply of Bitcoins to mine… Enthusiasts, like me, believe that Bitcoin’s peer-to-peer architecture and low barriers to entry will allow the creation of a new generation of innovative financial services, in much the same way that the Internet’s open architecture led to innovative, new online services.
The bitcoin protocol makes money programmable, making numerous innovations possible, from fraud-proof voting systems, to branded currencies or digital rights management systems. So it not only virtual money!
The successor of the Bitcoin could be Ripple or the Nxtcoin.
The government, itself, does not necessarily need to mine Bitcoins or to go to a bank; they can become a new financial player by creating money themselves. After the World War II, the Dutch government created promissory notes in the form of “mint notes.” So, why not do it again? Why do only banks have the right of money creation? In 2009, the State of California did something similar. Under the leadership of governor Arnold Schwarzenegger, the state issued IOUs due to lack of funds, and in doing so, they bypassed the banks.