Choosing Mechanisms: Issuing Procedures
General Purpose
General purpose currencies are designed to fulfill all three classical functions of
money (standard of value, medium of exchange and store of value). Historically,
many traditional currencies used locally would fall into this category. 1 Today,
conventional national currency is by far the most important general currency.
However, there exists an implicit contradiction between the function of store of
value and medium of exchange: notionally when someone accumulates money he
or she also deprives others from using it as a medium of exchange.2 This is why
some currencies are actually designed purposely to separate those functions.
In general, complementary currencies are typically designed with a narrow and
specific purpose in mind. Although a successful complementary currency system
tends to gradually expand its applicability over time, today no complementary
currency has reached the point where it can truly be considered a “general
purpose” local or regional currency, although this could happen in the future.
1 The Department of Economic History of Bocconi University in Milan, Italy, has undertaken a
systematic study of such historical complementary currencies. They have discovered many such
currencies widely used locally in Europe from the 8th Century to the 18th. Such currencies were
circulating in parallel with centrally issued currency, some were even issued by central authorities, but
they were not accepted for payment in taxes by the central government (royal or imperial). See
Fantacci, Luca “Storia della moneta immaginaria”, (Venice: Marsilio Editore, 2004). See also
Labrot, Jacques “Une histoire economique et populaire du Moyen-Age: les jetons et les méreaux”
(Paris: Editions Errance, 1989).
2 The banking system resolves partially that problem by relending funds that people deposit with
them. But, particularly from a regional viewpoint, there is no guarantee that the money will become
available within the same community or area where it originated, thereby reducing the helpfulness of
the recycling of funds via the banking system.
Issuing Procedures
This is perhaps the least familiar of all four dimensions of this classification
system, but is nevertheless also one of the most important. Errors in designing
the issuing process are the most common reason for dramatic failures of
complementary currency systems (consider the fate of the Argentinian creditos1
for instance). There are seven major ways of issuing a currency:
Backed Currencies: The strongest currencies are typically those that are fully
“backed” by a good or service, and are directly and legally redeemable for them.
Historically, many currencies were inventory receipts, i.e. with 100% backing
secured by a physical inventory of a good (e.g. the wheat currency in Dynastic
Egypt). Some contemporary complementary currencies are using conventional
money as backing, others some specific goods or services.
Borrowing with legal collateral: This is the way the bulk of the conventional
currency is created: through bank loan backed by collateral such as a mortgage
on a house, or inventories for businesses. It can be considered as a form of a
“backed” currency, but their redemption requires a legal action (seizure of the
collateral) and is normally an exception rather than the rule. Some
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