Community Currency

         The question came up elsewhere recently: if you started your own settlement or commune of sorts – to try and distance yourself from today’s horrid government; what trading system would you employ, and what currency would you use? It is more engaging a question than you might first guess, and an important one.

The correct answer to this is, fortunately, not difficult to comprehend or put into action. It is also legal, even though it is quite easy to skirt taxation thereby. That is: one should use the metals as currency. Gold, Silver, and Copper.

(I will address ‘why not the crypto-currencies?’ at the end.)

If you are not familiar with past attempts by communities to form their own money, you might ask ‘why do this at all?’ In more naive scenarios, it is often born out of a community’s hope that it will encourage buying from local shops – even though the shops themselves are stocked with Chinese goods. These misplaced hopes eventually end in failure – because mortgages cannot be paid in funny money.

Sometimes local currency is implemented more skillfully, with the intent to kick-start an otherwise cash-strapped and economically depressed town. The smartest and most promising examples of this had municipal governments spending freshly minted local-bucks that were deemed acceptable for property taxes – ensuring there was an actual benefit to being paid in what was otherwise fantasy paper. But these were always quickly and jealously shut down by state and federal governments – themselves eager not to lose tax revenues. It is also why currency creation is so very illegal and treated as tantamount to secession.

So alas, the remaining reason to deploy your own currency – or in this case, commodity, since only the latter will spare you from jail – is the same as always in times like these: people are losing faith in the current money (and therefore, faith in the current system,) and want something more clearly valuable to trade with instead.

         Briefly, there are two kinds of currency: Intrinsic and Extrinsic. One is valuable in and of itself, the other has its value enforced by threat of violence. Unless you are a local warlord, the local money used between your neighbours and friends must be of the intrinsic type – acceptable because useful in some other way. In prison, it’s cigarettes. Out here, it’s bullion.

Intrinsic money is in contrast to the pax of a government or empire, which prefers extrinsic currency, as fiat money is easier to circulate and tax. There is also a sociological dimension to fiat money: the more people are willing to use yours, the more acknowledgement and credibility you get as a country. Since the money itself is relying on abstract faith backed by real machine guns, it speaks volumes that people feel confident in not only using the money – but holding it as the benchmark of value against everything else.

That social and political factor is why leaders stamp their image onto coins and notes; when a denarius circulates all the way up to the Saxons and down to the Bedouin, you see the face of an empire that has spread its influence precisely that far – and you should be impressed both by the empire and its emperor.

If you find this topic remotely interesting, you have likely heard the phrase that ‘any nation that employed fiat money eventually debased it entirely,’ and might regard fiat money as a kind of pure evil. It is true they all end in ruin – but the same thing happened in antiquity with stamped coins. That is where the term ‘debasing the currency’ comes from: the removal of base metals (copper, nickel etc.) from the coinage and its replacement with inferior and more common metals – while insisting it carried the same value.

Removing the base/basis of the currency in this way reflects the looming inferiority and banality – rather than nobility – of the authority issuing the coins. It is why monetary inflation is so intimately linked with the decline of a nation – along with the other telltales of dilution, such as importing cheap foreign blood to suppress the rising cost of goods.

When inflation is merely high, it reflects that people no longer care so much for your offerings or feel particularly threatened by your power. When inflation is extreme, it is caused by the ruling power losing faith in itself – printing and spending madly to make everyone dependent on its wages, rather than grateful for its presence. The adage that all fiat money ends in ruin is really just the reflection that no empire lasts forever.

         Anyway, to hit home the complications of extrinsic currency if deployed by small groups, here are just a few of the bureaucratic and security nightmares it conjures in the community:

  • Who mints the currency?
  • How do you control for counterfeits?
  • How much money should be issued?
  • How is its printing/production tracked?
  • What if the guy in charge of the money system subverts the guy in charge of the community?
  • Why accept the internal money, when one still needs government money to pay the taxes?
  • What happens when the government eventually declares you are evading taxes by using this money for trade?

Some small towns interested in developing their own currencies realize the bureaucracy alone would bankrupt or exhaust their efforts. These people might turn instead upon the adage ‘time is money,’ and float the idea of promissory notes.

  • ‘Peter did three hours shoveling shit for Paul.’
  • Both sign a paper attesting so.
  • It gets deposited with some central registrar, or perhaps into each others’ own little ledgers.
  • Peter, being such an industrious fellow, has accumulated some hundred hours to his name in this way.
  • Paul, ever loathing to shovel his own shit, has a hundred hour deficit.

Technically, Paul should go around offering to do stuff for people to work off his deficit and get back into good standing, but I trust the reader is smart enough to guess what would really happen. Something like this only works on scales so small as to make any accounting of it pointless. Normal human beings call it ‘helping out’ and ‘returning the favour.’ The degree of trust required is such that tacking an accounting system on top of it is both pointless and antithetical to community.

Even where time-accounting does work, it is clear that an informal system is better than the formal one. For example, I recall a kind of thrift store – I think it did actually exist and wasn’t merely proposed – that had a substantial repair department, an open house workshop. People would donate appliances, volunteers would log time repairing them, and those same volunteers would then bank enough time to ‘purchase’ an appliance without money actually changing hands.

In the absence of money to pay with – either for the appliance or for the man’s wages – I can see how this idea cropped up and might be sustainable. But really, this is just a formalized way of saying ‘Dave puts in a lot of hours here, let him take that stove home.’ It may not be discarded altogether – a village of 1,000 could probably benefit from it – but its application is narrow.

I trust I’ve said enough to establish the futility of using something extrinsic or abstract when there isn’t serious power backing it up. Most examples you find in the wild are just formal systems grafted onto existing relations; the kind of quid pro quo people quietly track anyway. It amounts to a feel-good exercise; useful for distracting otherwise troublesome activists – but otherwise of no merit. I’ve only bothered to address it briefly here to clear out the usual misunderstandings people have when they first start pondering or scheming an economy for an in-group. So, let’s move on to the viable choice: intrinsic commodity-currency.

         A lump of copper, no matter what is happening in the world, always has some value – since at bare minimum you can pound that lump with a rock until it’s the shape of a bowl. Even if your town is awash with copper, the fact that you can add value to yours or make use of it in some way remains.

Metals have served as currency for a long time for two simple reasons: they can be proven to be what they are with little scrutiny, and they are valuable to everyone for serving universal needs.

Silver, for example, is an anti-microbial – that is why silverware was once in such demand. Silver vessels (or even just silver coins in ceramic pots) prevent water contamination and milk spoilage without imparting taste. It can be applied to wounds to reverse infection, or fashioned into a suture superior to silk. It also possesses some extremely interesting health properties if a charge is applied to it – but that’s beyond the current discussion.

Copper can be used as an anti-fouling sheath on boats, as superior roofing material, for water piping, and for cookware, along with a litany of other uses. It is also likewise anti-microbial.

Gold needs no introduction of course. Though I suspect there is more practical value to having some gold around the house than is acknowledged today (beyond its use in dental fillings;) it is so tightly associated with eternity and immortality – and was so seriously pursued by alchemists, emperors, and holy men – that one should believe we have lost some knowledge of gold’s utility in that respect.

There is a running theme of health, food, and preservation associated with these three metals, but with the exception of copper alloys, they also exclude association with tools of violence. There is some poetry – and a deeper metaphysics – to these rarer materials being life preserving, while more common metals like iron and lead are so much more useful for killing. Copper – soft on its own – is weaponized when alloyed with common tin or zinc. There is also something to the fact that we usually find these life-preserving metals paired in ores with life-corrupting substances like mercury, arsenic, cadmium and lead.*

Metaphysics aside, it is this human desire to keep pathogen and decay away from us that gives the metals their broader appeal amid alternatives like ceramic and timber. A golden ring, silver vessel, and copper pot are preserving your health alongside your wealth (for who can enjoy wealth without health?) and for this reason, they exert that universal desirability that befits money.

         In addition to the metals’ direct utility to the possessor these three: Au, Ag, and Cu, also have the advantage of convertibility. That is: it is not hard to obtain them from the market, nor is it hard to sell them back for fiat dollars when needed. That means, (unlike the more fanciful systems communities dream up,) that the participants are not taking some great leap of faith or locking themselves into a potential failure by participating in the system they’ve cooked up.

It is true the spot price – the market price – of these metals move around significantly, enough to make some toes curl. But that is true of all investments, and of the dollar itself. You are not, remember, sinking every last cent you have into these metals. You are resorting to them in the first place because they’ve become more trustworthy than the dollar – and thus worth bearing some volatility.

There is also the ‘indestructibility’ and high recyclability of the metals mentioned. They are not going to spoil, be consumed from use, burned up in a house fire, or otherwise lost easily. They could be stolen of course, but only in the old-fashioned way, and that is true of everything you possess. A little torture and blackmail is all it will take to get your crypto password, right? At least gold is heavy and can be hidden under the floorboards.

I should also remark: that one cannot flood your little internal economy simply by dumping metal into it. If some new member arrives with a dump-truck of solid gold, the dollar value of gold – as far as the rest of the world is concerned – has not changed. It is not quite the same with coffee beans or moonshine, which are harder to find ready buyers for.

         Finally, I promised that I would address the crypto-currencies. Are they suitable for in-group, localized economies? They are an odd hybrid. If we set aside their novelty – which has bounced and jolted their price around as people try to peg their worth and speculate their gains from day-to-day, a few things stand out.

They are primarily extrinsic – but it is not the barrel of a gun enforcing the value. Rather it is the fact that one can dodge a bullet in using them. It is a kind of popular revolt, a People’s Fiat if you will.** This was in fact the original reason purported for Bitcoin. It was a way to take money power away from any central authority – though it has not played out as such.

Yet crypto is also a little intrinsic. Ethereum, for example, doubles as a record of ownership for all sorts of assets traded on its network – and every single user has the means to verify that ownership, which has important legal ramifications. Monero on the other hand, lets people hide their transactions altogether – which is value of another kind – while still enabling instant and global transaction.

The difficulty in policing crypto is what allowed it to flourish and become entrenched. Though like early radio, television, and internet – it will presumably be consolidated and monopolized over time by savvy and clever men.

There is a technocratic layer involved with crypto that Joe Sixpack can’t or won’t take the time to decipher – anymore than he bothers to understand the US Dollar or the Federal Reserve. Some flaw or exploit may lie in wait to deprive him of everything and it will escape his notice. We have seen it many times already – crypto-exchanges become popular and then vanish after looting their users. Or rumours circulate that a coin backstopped by real assets is no more than a shell game – but is construed in such a way that only a programmer with a Bachelors in Finance can possibly distinguish the fact from fiction.

I do not dissuade anyone from trying crypto, but it is, at heart, fiat money. It exists by decree and therefore can be destroyed by decree; which means – unlike guns, houses or butter – it can be taken from you without a fight. And, ultimately, the only reason we’re entertaining these thoughts now is because we are entering a fight.

*Note that I am focusing here on unalloyed metals of immediate use to a person – even if that person is absent any skill in metalworking and inept with regards to electricity. Hence Tin, Zinc, Lead etc. – while all adding much in their own right – I am passing by. A nascent community, using metal for trade, will probably not be thinking of how to forge and alloy brass or even pewter in its beginnings. Alloys, at any rate, make evaluating what one has in his hands more difficult, and so less suitable as a currency.

**Fiat means ‘by decree.’ It is dad’s ‘because I said so’ on a grander scale.