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A Liquidity Network would be legal in Ireland

Liquidity Networks would be legal. Just before Christmas, the group obtained a written opinion to that effect from Anthony Collins, S.C. The opinion looked at two issues.

The first was whether quid were currency or money in the eyes of the law and whether, if so, this might make the way we intend to issue them, and other aspects of our proposal, potentially unlawful.

The Opinion was that “Since [the quid] is neither prescribed by the law of Ireland nor is it intended to serve as the generally accepted measure of value and medium of exchange in the State, it is difficult to see how it satisfies the definition of “money” or “currency” for legal purposes. What is proposed …. appears to be a means of exchange that is treated as “money” purely in consequence of local custom and/or the consent of the parties. As such it does not represent or reflect an exercise of monetary sovereignty by the State and thus falls outside the legal definition of “money”. The answer to the first question is thus that Katz is not currency or money in the eyes of the law. As such its introduction is not subject to any prohibition implied by law.”

There’s only one minor problem with this – if my interpretation of the Opinion is correct, the State would not be able to accept quid in payment of its taxes without the quid legally becoming money and this would be in breach of the EU Directive making the euro the single currency. Making the quid money might also affect the basis on which electronic purses could be used by networks. In the past, the EU has insisted that they may only contain euros, or units with a value expressed in euros, whereas we want the quid to be able to float in value relative to the euro. However, these are very much problems for another day, some years in the future.

This should not affect a council accepting quid because a council is not the state itself and would not need to pass a law to enable it to handle quid. I think problems would only arise if central government accepted quid in payment of income tax and VAT as this would require legislation. Such legislation would give the quid “the formal and mandatory backing of the domestic legal system in the State or area in which it circulates” to quote Collins’ authority. This would make the quid money. Whereas “anything which is treated as “money” purely in consequence of local custom or the consent of the parties does not represent or reflect an exercise of monetary sovereignty by the State concerned, and thus cannot be considered as “money” in a legal sense.” would apply to the arrangements made with the local council. So the issue is not the state accepting quid at par (or any other value) with the euro but accepting quid at all if legislation is required for it to do so.

The second question was whether quid were “governed by Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions, such that the system must comply with the requirements set out therein.” After some analysis, the answer was no, in part because the unit was not money. Obtaining this opinion is a relief because had the answer been otherwise, the compliance costs would have been high.

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Liquidity Network at Transition Towns Tralee

Tralee Transition Towns held an evening on local currencies on 25th November and Phoebe Bright made a brief contribution on the Liquidity Network. There were a steam of good questions from this large and active group. We hope to return to Tralee soon!

Other presentations included an overview of money systems from Steve Allin (hemp guru), local Credit Union, whose loans are down but whose savings rate has doubled in the last 6 months. A happy customer of the Triodos bank, based in the UK but with a few Irish customers. The local LETS group who are restarting after a gap for the Celtic Tiger

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Brochure and FAQs for the Liquidity Network now available

We now have a simple 1 page brochure to give a brief overview of what the Liquidity Network is, how it works and the potential benefits to a local economy.

The Brochure can be downloaded in .pdf format here:

Please share widely!

We have also been working on a set of questions to follow on from the brochure.  If you can’t find the answer to your questions, do add questions at the end of the list and we will get you an answer as soon as we can.  See FAQs on this website.

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Work with Kilkenny proceeding

A group from the theliquiditynetwork.org team is currently making concrete proposals for the implementation of such a system with the Kilkenny local council in Ireland. The presentation already offer concise insights on the procedures. The ideas evolve around simple yet powerful and secure electronic means of payments, building on a lean system to get quickly started and which would be expanded over time.

These are the main criteria for the system:

  • Low barriers to entry for B2B, B2C and C2C
  • Cater for range of technical comfort levels
  • At least as secure as chip and pin credit card
  • Quick to develop trial
  • Extensible and open
  • Use standard, easily available components
  • Plenty of marketing oportunity
  • Innovative and news-worthy
  • Low risk system
  • Focus on user experience and trust

The system components have been so far identified as the following:

  • A lightweight, scalable server to run the LQN accounts
  • A simple web based client that can run on anything from a
    mobile phone, through an iPod touch to a laptop.
  • Scalable security / ease of use trade-off depending on
    levels of trust
  • Extensions for vouchers and cheques as ‘delayed electronic
    transactions’
  • A system that is as anonymous and secure as a credit card
  • As easy as using a phone

Usage of the system is proposed on the following assumptions:

  • We sign up users by giving them a card containing their
    account number and verification number (optionally
    increase security using photo)
  • We forward a PIN to them in a secure manner (not email)
  • We could ask some users (high volume such as retailers) to
    upload photographic evidence (buildings or faces)
  • Users and customers use simple web interfaces where they
    must input some of account numbers, PINs and
    amounts. All these are digits to enable simple mobile
    phones.
  • Retailers choose their input device – we will recommend
    touch-screen smart-phones / PDAs but they can use what
    they like. For QR codes we would recommend 3 types of
    smartphone.

We also plan to introduce self-printed vouchers as physical currency:

  • Use once
  • Change credited automatically to printer’s account
  • Scanning takes trader to
    https://lqn.ie/katz/voucher?id=4829NSLF92
  • Could be printed for users at Kilkenny Katz help-desk

This summarizes the proposals presented to Kilkenny people, both from the public and the council. Discussions are going on to decide on further steps.

Feel free to contact us for more information.

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Paper and electronic quids

There is a highly interesting discussion unfolding at the feasta.org website. It deals with the discussion about paper currency and virtual tokens.

Initially, the LQN had been proposed as an electronic system only. Such a system allows different tweaking, as there is the chance to adjust the currency supply to the economic activity level.

After the auspicious meetings with both the Kilkenny Council and the Kilkenny public, the wish for the introduction of a paper version of the quids has been postulated. The main driver for this being an increased identification and acceptance through tangible units, as well as broader integration of potential members with no interest or reluctance to adopt electronic devices.

The project team has taken up this new proposal very seriously, as it recognizes the validity of its advantages. Several issues need to be addressed, like the costs of production, introduction and distribution/removal, forgery, as well as coexistence issues with the electronic version of the quids.

There is an interesting discussion thread at the feasta website which deals with this subject. You can follow it here.

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Simulation starts to…simulate

Simulation implementation has made substantial progress. By using SimPy and python, we have been able to reach initial goals in integrating different elements into the simulation.

First we started an effort in getting some variables defined, how many members and businesses we want to have at start, how many quids they should get initially credited, etc.

The design is built on a core objects package, which we plan to be able to re-use for the production application, and a simulation package. We work with the concept of a policy, which implements the tweaking parameters of the quids management, and of a scenario, which is meant to provide an abstraction of the economic environment in which the LQN is running.

The simulation is now executable. We have a simple policy and a simple scenario for now (which are not that simple neither, but are meant as stepping stones for iterative development). However, for meaningful results, the simulation needs to get more details, essentially more feedbacks and behavioural modeling of members and businesses.

We would still be very happy to welcome python developers, as the code base expands and complexity increases. Knowledge of SimPy would be also most welcomed. All code is open source, and we host the master branch on github.com. This is the clone URL.

Posted in Development, Simulation.

Kilkenny and the Quid: Fertile grounds

This week, very promising meetings between The Liquidity Network initiators and local authorities as well as the public in Kilkenny, Ireland, took place.

The situation in Ireland due to the financial crisis is worsening. Local councils are forced to cut back expenses, and might be pushed to more cuts in the next months.

Out of these conditions, local authorities develop an interest in being able to still pay wages to their employees. Scenarios, in which they pay them wages partly in Euro and partly in alternative currencies, are being discussed. Continued…

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The usual story of a debt-free national currency

I am reposting this article from the P2Pfoundation.net, published 7. July 2009

****************************************************
This article by Louis Even was published in the January-February, 2004 issue of “Michael”.

It is illustrative of how a local community could create “sufficient” and non-inflationary money streams to revive the economy.

Louis Even:

“Guernsey is a small island located in the English Channel. An Anglo-Norman population. This island is located closer to the French coast than to the English one.

At the close of the Napoleonic wars, the island, like several countries, was in pitiful condition, both pydically and financially.

No money

Sea walls, roads, markets were needed.There was no manpower shortage. but there was no money to pay for these works.

The money used by the people on the island was the money from England, the pound sterling. But, like after any war, the financiers were calling back the money advanced to finance the slaughter, and the pounds sterling were very scarce everywhere.

The island had an autonomous government, “the States of Guernsey.” So it had the rights inherent in all sovereign government, among other rights, that of regulating the volume of money incirculation in the country. But, no more ethan any other country, the States of Guernsey had thought of exercising this sovereign prerogative.

An intelligent governor

The island was especially in need of a new market house, and a committee was set up to take care of it. The committee went to see the governor to explain the situation to him:

“We need a new market, but we have no money to build it.”

“With what material are you going to build a market?” asked the governor.

“With stone and wood.”

“Do you have it in the island?”

“Certainly, and in plenty.”

“Do you have workers?”

“Yes again. But it is money that is lacking.”

“Could not your parliament issue money?” asked the governor.

A new idea!

This idea had never occurred to the committeemen, who had never analysed the money question. They knew where to get money when there was some: but they never wondered where money begins or can begin.

The method of taxing when there was money was quite familiar. But the method of injecting the money that is lacking, and of taxing only after, was something new to our administrators.

Issues of national currency

An estimate of the cost was prepared and the States printed the money required, which was paid to those who either worked on the project or furnished materials for it.

As the new currency was paid out into circulation among the people, exchanges were being expedited. The wage-earners went to the shopkeepers, the shopkeepers went to the producers, the producers bought enough to increase their production.

The currency was accepted everywhere. The government took measures against inflation by decreeing that money would be withdrawn by taxes, so it does not accumulate. And, in fact, the money was retired on schedule by taxes. But, as the increasing activity required a corresponding volume of money, other issues were brought out by the government for other works.

On October 12, 1822, the new Market house was completed and opened. Not a penny of public debt on this public enterprise.

The bankers intervene

At the time of the original issue, there was no bank upon the island. This explain, without doubt, why there was no opposition to the issue of State money.

But ten years after the first issue, the island had become so prosperous, thanks to the activity allowed by a sufficient volume of money, that the banks of England had en eye on this island.

English bankers set up branches in the island and brought the population around to orthodox rules. “It was unsound,“ they said, “to let the government finance its enterprises without getting into debt.”

The bankers did everything to stop further issues to introduce the system of interest-bearing loans to the government and to withdraw from the island the State money that had been paid out into circulation.

There was some resistance, but the bankers won their point, with their usual methods, and on October 9, 1836, the States of Guernsey had abdicated their sovereign prerogative over the control of the volume of money. From then on, the amount of the national currency decreased gradually, and was replaced by money issued by private bankers in the form of loans getting the island into debt.

Nevertheless, there is still about 40,000 pounds sterling ($200,000) of national currency outstanding at this date in the island. (According to Gertrude M. Coogan in Money Creators, published in 1935.)”

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Simulation progressing

Thanks to Stephen Butler joining the project, the simulation work now is taking shape. We code in the Python programming language.

Stephen has done some work in investigating tools for the improvement of code quality. Thanks to these efforts, we are setting up virtual environments for the simulation; this makes it easy to replicate development on any machine, and reduces dependency complexity and management. We use the virtualenv tool for this.

Also, we are setting up testing infrastructure. In fact, we aim at a high coverage of tests for the functions the code is supposed to do. Of course, for anyone in software development, that means improvement of code stability and quality while facilitating integration, especially when multiple programmers work together (and, like here, not co-located). We think we’ll use nose as a python tool for continuous automated testing.

As a next step, we’ll implement some first core objects. As we favor agile development, we strive to include the user in shaping those core objects. For now, members of the non-technical stream of the project will take the role of the user.

We are quite excited as things now move on.

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Uruguay to launch new liquidity system

Quoting from Tao of Money

INFORMATION EXTRACTED FROM ARTICLES PUBLISHED IN URUGUAY, APRIL 2009

The Executive Power prepares details for a new system of payment which will be adopted to stimulate micro and small businesses.

In two months, the government will release a new way of payment, a transaction network, which will allow micro and small business to interact among themselves, through a new alternative currency, and at the same time to face their obligations with the State.

This was announced recently by the Minister of Work, Eduardo Bonomi, during his participation in the talk “International Crisis and Uruguay 2009”, organized by Montevideo City Council.

Minister Bonomi said that the development of this new system is the result of working together with the Ministries of Work, Economy, Industry and Energy, and with other governmental organisms, as well as state banks and state insurances and city councils of Montevideo and Canelones. Moreover, state companies will take part in this new system as well.

“This new network of transactions will allow small and medium businesses access to credit through an alternative currency, but it will be exchangeable throughout the whole country, where they will be able to pay for petrol, taxes and it will be redeemable into money”, he confirmed. Nevertheless, he made it clear, that this project is about giving support to the production and it’s not a credit for consuming. “Next week I’ll have a talk with the Meyer of San Jose (neighbour city), so that he enters the whole metropolitan area to the system. The idea is that city council providers can also trade through this currency”, said Bonomi. In a first stage, this system would include just micro, small and medium businesses, but in the future it could also absorb privates to the network.

This initiative counts with the support of the ILO, IADB (Inter-American Development Bank) and the General Inter-American Secretary. This project aroused a lot of interest among the region countries such as Argentina, Bolivia, Ecuador and Venezuela, which means that in the future inter-regional transactions may be possible.

Mechanism

All over the world similar systems already exist. In this case, the different element is that the administrator will be the State. It works as a network of payments through electronic debits and credits. To join the system the companies must request approval of the State Bank. From there on, the company will be assigned an account in the system. This company will be able to order the payment from its account to be credited in favour of a state organism or a private member of the network. Accounts will be balanced periodically and participants advised of their trading position.

This amount will be redeemable into national currency or used to pay for petrol or taxes. Bonomi said that this idea was presented to the National Association of Micro and Small business and to the Uruguayan Confederation of Cooperative Entities and other cooperatives, arousing great interest among them.

Implementation

The development of the network doesn’t create any costs for the country, since it was originated in cooperation with the STRO Foundation from Holland, which supplies the network model, known as C3 (Consume and commerce circuit). The name for the virtual money circulating through this payment scheme is called “internal liquidity”, although the technicians working on its development adopted a more native denomination: “charrua” (name of the Indians, that inhibited Uruguay before the colonisation, and who were completely exterminated, therefore it is ironic that the Uruguayans are called like that even nowadays, and more that this name it’s used as a icon of local identity)*.
However, in Uruguay STRO chose a new approach, which might also work out well for other C3s. Small businesses cannot obtain the same payment guarantees that large businesses receive. C3 Uruguay is going to work with a guarantee fund that will assure small businesses of payment on delivery in internal C3 money. In such case these small businesses do not have to wait for months until they receive payment and are therefore able to maintain their stock level. In the capital Montevideo, where over a half of the Uruguayan population lives, the same method of payment on delivery in internal C3 units to small businesses will be followed.

For STRO this new C3 approach is a fascinating experiment, because large partners have joined in. We therefore hope to gain more insight in what a C3 business network can do with a complementary currency in a poor country.
Access to the credit
Operations would be 100% guaranteed and the system will allow access to low cost credit -around 10 to 12% to small business that aren’t currently covered by the traditional banking system. This will also improve competitiveness of this economic unit and its formalization will be stimulated, reducing administrative and transactions costs at the same time. This network won’t create inflation dilemmas, since the financing will be channelled towards production, which will broaden the supply of goods and services.
National System of Guaranties
A guaranty fund of 5 Million US$ is planned to be established as the initial capital to stimulate the credit for small businesses. (What backs this fund?)
Interesting information about Uruguay’s current financial situation

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