We are on the verge of a great transformation. The COVID-19 pandemic is transforming the world at a pace faster than that of globalization itself. We are living in perhaps the worst financial crisis since the Great Depression in the 1930s, and its consequences are only just beginning. The temporality of the present moment will change the world in ways that we can only begin to imagine. Within weeks and months, money will become even more scarce for people who rely on wages in order to live. Already affecting the poorest and the precariat, it is only a matter of time before moneylessness becomes widespread in society everywhere. We are approaching a tipping point where drastic change is no longer merely an option.
Historically, moments of economic crisis and loss of trust in the powers that be have seen the emergence of bottom-up community currencies which encourage trade within and between towns, cities and rural areas. The idea of local currencies or mutual credit systems is not new; they are as old as civilization itself and come to the fore in times when people lack a general purpose money to exchange; when state and bank money become scarce. Community credit can be issued free of interest by any group or political community anywhere with people willing to accept it.
During the Great Depression of the 1930s, President Roosevelt called the many experiments happening all over the U.S. “emergency currencies” (see the work of Irving Fisher for a detailed history of such currencies). There are many systems in existence today: Time Banks, Mutual Credit systems, Local Exchange Trading Systems (or LETS for short). Some living examples are the WIR in Switzerland, Sardex in Italy and Sarafu in Kenya, to name a few, each with its own story of creating community credit in times of crisis and insecurity.
What Are the Benefits of Community Credit Systems like Circles?
Systems like Circles provide credit in times where there is no trust in the general economy; it facilitates trust, transforming under-utilized resources into extra liquidity for people and local businesses. With Circles, businesses and cooperatives can acquire new customers, increase their turnover and save liquidity.
Traditional mutual credit systems are local-only in scope, with a central administrator who manages the system, allowing people in the community to go in and out of debt with each other. The Circles credit system takes the principles of mutual credit and decentralises the power to issue money to each individual person who joins. In Circles, mutual obligations between members ripple in a network of trust beyond hyper-local communities, reflecting the real interdependence of any economy. Persons will be able to pull their personal credits together and create group wallets or group accounts, so that different collective entities such as cooperatives, restaurants, supermarkets, farms, houses and so on can distribute their circles credits and exchange with each other at ease.
With Circles, there is trade wherever there is trust. Circles allows local economies to be more resilient. One of the purposes of Circles is to reconnect the region’s businesses, cooperatives and local farms and provide them with high value added promotional services and a means of payment. Circles aims to be an alternative to traditional money, one that is more ecological and rooted in the region. The Circles system is a perfect tool for frameworks like the Doughnut, outlined in detail in Kate Raworth’s work, but it goes beyond it a few meaningful ways.
Weaving Credit Circles
Circles allows for wealth to stay in the community that produced it for longer, relocalizing supply chains in novel ways. Systems like Circles facilitate the creation of cyclical circuits of exchange between different merchants — so-called business to business networks or business credit networks — which workers and communities at large can also partake in and expand. By connecting local needs to existing available resources, trade can become more regional and complementary between different producers, workers, retailers, wholesalers and so on.
Community credit systems like Circles can be a lifeline in times of economic collapse. When people claim the power to issue money, local merchants and people in general can diversify their income streams, which means more stability than only relying on state and bank money. Circles allows merchants, workers and communities to give each other a basic income by transforming their untapped productive capacity into additional liquidity. One of the main goals is to build a strong network of vendors, where they can pay with Circles for the things that they need, thereby increasing their revenues via more sales and lowering their costs in the national currency.
As a vendor, it is important that you know how much you can commit in terms of capacity and to define your Circles credit limit. An ideal start with Circles might be paying for advertisement in local newspapers and magazines, giving discounts or offering your services in your off peak business hours, or by putting to use your idle inventory or surplus. If you trade with Circles what would otherwise rot, you are being less wasteful. The point is to encourage spending in ways that benefit your own supply needs. By encouraging spending within the community, credit systems like Circles make the local economy more resilient against shocks of future financial crises, providing a palpable alternative to today’s financial system.
Weaving Credit Circles offer small and medium sized businesses with an effective tool for trade, especially when their cash flows in the national currency are low. It is a powerful way of building trust in the local economy. By connecting local businesses in the network to each other, they can complement their supply needs with the resources of the others in more self-sustaining ways.
If Circles succeeds politically and economically in becoming the main means of payment in your local area, the extent to which you use your national currency should decrease over time, while UBI becomes a reality for all. By accepting Circles you are contributing to a functioning, non-state, community basic income system and to a more stable and democratic society. Join Circles!
PS: Meanwhile we are out of our budget and need 2,000 regular donors. Your donation helps the IT development, the European and Asian pilots, the tests, the research, the community building, the mentoring for the pilot community, and so on. Please donate now: https://joincircles.net/donate
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