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Economic Means to Freedom - Part V

Complementary Money System

by Frederick Mann, Revised 12/23/98

NOTE (01/21/02): This article has been overtaken by events. A number of successful alternative currency systems have been developed and implemented, foremost among them e-gold. This article has become largely irrelevant, because it's unlikely that the kind of system proposed here will be able to compete successfully with e-gold, etc. Nevertheless, the article may be of educational, theoretical, and historical interest.


[Note: This article was originally published on 11/4/97 as "Alternative Currency System." It was extensively revised on 10/2/98. It has now been further revised. I now propose a "free software," "open source," "multi-currency" system, as explained below.]

The Economic Means to Freedom is one among many strategies that any individual could follow to expand freedom. Nothing in this article should be regarded as a suggestion that other freedom strategies should be changed or abandoned. This is a proposal for a complementary money system to be developed, launched, and implemented as a matter of urgency.

One of the reasons for urgency is that the international monetary/financial system could be a house of cards. The banksters in control may be able to prop up the system to recover from the current "Asian crisis," but they may not be able to keep their system going indefinitely.

The urgency is exemplified by Economics professor Michel Chossudovsky's article "Financial Warfare" in which he says:

"Humanity is undergoing in the post-Cold War era an economic crisis of unprecedented scale leading to the rapid impoverishment of large sectors of the World population. The plunge of national currencies in virtually all major regions of the World has contributed to destabilising national economies while precipitating entire countries into abysmal poverty.

...[T]his Worldwide crisis marks the demise of central banking meaning the derogation of national economic sovereignty and the inability of the national State to control money creation on behalf of society.

...This ongoing pillage of central bank reserves, however, is by no means limited to developing countries..."

Click here for the complete article.

I propose the development of a "free software," "open source," "multi-currency" system. By "free software" I mean that the software is made available free of charge to anyone who wants to use it as they wish. By "open source" I mean that the source code is made available free of charge to anyone who wants it and they are free to change it as they see fit. This follows the Linux Development Model -- see the Freedom Technology Resource Directory - Linux, particularly 'What is Free Software?'; 'The benefits of "open source" software'; and 'The Cathedral and the Bazaar' by Eric S. Raymond.

Note: Such a system has been developed: lucre

By "multi-currency" I mean that the system can be used for a multitude of kinds of currencies or forms of money. If someone wants to use the system for a kind of currency or money the software doesn't cater for, it should be relatively easy to change the system or add modules to allow for the new currency or money.

The idea is that all over the world groups of people will set up and operate their own local currency and/or money systems, using the basic software provided by this project. They are free to adapt the software as they wish and use it any way they like.

Ideally, there will also be modules that enable members of any local system to transact with members of any other local system. The most practical way to achieve this might be to have one or more currency/money types common to all or most local systems, e.g., silver, gold, and maybe a few national currencies. Members of local systems would be able to exchange their local currency/money for silver, gold, etc., which could then be used to transact with members of other local systems. Such an arrangement would make it possible for people all over the world to transact with each other, without the need for any central organization or clearinghouse.

This is the fifth in a series of articles on the Economic Means to Freedom. The first four articles are available at this website. The emphasis of the Economic Means to Freedom is on: (a) Building freedom, rather than "fighting tyranny" or "fighting for freedom"; (b) Bringing about a massive shift of economic power into the hands of individuals.

1. Money
"The pinnacle of power today is the power to issue money." -- Thomas H. Greco Jr., author of New Money for Healthy Communities -- see Appendix 2.

One of the kinds of money the new system caters for could be called the "Riegel." Each member in the Riegel system has the power to issue Riegels. Riegel called this the "individual money power" -- see Appendix 1. E.C. Riegel described his proposed money system in The New Approach to Freedom and Private Enterprise Money.

Riegel called his type of system a "split barter system." Currently there are numerous "barter clubs" in operation. Strictly speaking, they are generally not barter clubs in that they utilize some "barter currency" as medium of exchange. Some call this type of trade "reciprocal trade." It is characterized by utilizing a medium of exchange other than those issued by coercive political agencies.

LETSystems use a form of money similar to the Riegel. It should be possible to use the new system to operate a more or less standard LETSystem (whose money unit is conceptually close to the Riegel). (See A Snapshot of Community Currency Systems in Europe and North America)

Money is created when an individual wants to buy something, but doesn't have the necessary Riegels to pay for it. In this case, a transaction takes place, the buyer's net balance decreases, and the seller's net balance increases.

Money is redeemed ("destroyed") when a buyer with a positive balance buys from a seller with a negative balance.

A principle of the system is that the total Riegel balances of everyone in the system will always be zero -- the total positive balances always equal the total negative balances. Hence the Riegel is virtually inflation-proof. (WBE, the entity that operates the Riegel system (paragraph 3 below), could effectively inflate the Riegel by itself running up a large negative balance. So there also needs to be limits on WBE itself -- see paragraph 8 below.)

The purchasing power with respect to particular goods and services, and the exchange value with respect to particular currencies, of the Riegel will also tend to fluctuate because of other factors.

The Riegel is backed by: (a) An initial 80% guarantee -- paragraph 2; (b) The expectation that those with negative balances will produce and sell products and services to eliminate their negative balances; (c) Limits on negative balances -- paragraph 8; (d) Default insurance -- paragraph 9; (e) Allowing negative balances based on the established trustworthiness of debtors -- paragraph 10; (f) The pledging of assets as collateral to safeguard large negative balances -- paragraph 11.

The Riegel is intended to serve as a standard of value, a medium of exchange, and a unit of account. It is not intended to be used as a store of value. Members of the Riegel economy can use precious metals and other instruments as stores of value.

Important question: Why not just use gold as money? Why do we need a Riegel or similar system? This question is addressed in Appendix 3.

For more information on E.C. Riegel and alternative money/ currencies, see Appendix 2.

2. Initial Value and Guarantee
The initial "reference value" of the Riegel could be defined at about FRN 1.00 (US$1.00). During the first six months of operation of the system, WBE could guarantee that anyone with a positive Riegel balance can exchange those Riegels at a rate of FRN 0.80 for each Riegel.

In Appendix 4, I give three suggestions for defining the Riegel reference value. The definition I regard as most functional is defining the Riegel reference value in terms of the U.S. Consumer Price Index, specifically one Riegel = CPI / 160. This yields: Jan 98: One Riegel = 161.6 / 160 = $1.0100 Feb 98: One Riegel = 161.9 / 160 = $1.0119 Mar 98: One Riegel = 162.2 / 160 = $1.0138 Apr 98: One Riegel = 162.5 / 160 = $1.0156 See Appendix 4 for more details and qualifications.

3. World Business Exchange
I propose that the software be developed by a group of individuals who form a business or company called, e.g., World Business Exchange (WBE), and that they follow the "free software" and "open source" policies of the Linux development model as indicated above.

I further propose that WBE, in addition to being the coordinator of the software development, also operates a WBE money/currency system. WBE is responsible for the rules of this system, managing and operating the system, maintaining a system to determine creditworthiness of members, processing transactions, etc. -- see below.

WBE could be "domiciled" in a venue, such as Belize, Antigua, Anguilla, etc., which provides the greatest economic freedom, privacy, and security. WBE should have no physical office or assets in its venue of "domicile."

WBE needs to operate its money/currency system in a profitable manner.

4. Membership
Any individual, group, business, or company is eligible for membership, provided they satisfy criteria to be determined by WBE. One of the criteria might be that coercive agencies not be eligible for membership. Membership should be free. (The membership for a company in a typical barter club costs several hundred dollars per year. Any system such as WBE which charges membership fees is likely to eventually be outcompeted by a system that charges no membership fees.)

Of course, anyone (including coercive agencies) is free to use the WBE software in any way they wish to set up their own systems with whatever membership requirements and rules they wish.

5. Global Village Bank (GVB) & Nella Pages
(It seems that GVB is no longer online. In any case, this Section is only relevant to the Riegel part of the WBE system.)

See and I propose that GVB be used as a model to develop the WBE system. Anyone interested in playing a role in the development of the WBE/Riegel system should study all aspects of GVB.

Following are the major differences between WBE and GVB: (a) With WBE, every member has the power to issue money. With GVB there is a central money-issuing authority. (b) The nella (GVB money unit) is not convertible into commonly-used currencies. The Riegel is freely convertible into anything else. (c) The nella economy will be isolationist with a limited appeal. The Riegel economy, which easily integrates economic activities between the Riegel and commonly-used currencies, should have a much greater appeal and offer vastly greater convenience. (d) WBE charges demurrage (negative interest, explained below) on certain positive balances, thereby encouraging economic activity and accelerating the speed of circulation.

(The GVB system is currently "on ice," but you can open an account and do a few other things.)

6. Convertibility
Any member of the WBE system should be free to make a market between, on the one hand, Riegels and other WBE money/currencies; and on the other hand, gold, silver, $s, DMs, etc. From the point of view of the WBE system, gold, silver, $s, DMs, etc. are simply products like any other, so no special provision has to be made in the WBE computer system to achieve convertibility.

The e-gold system could play a role in convertibility in that any WBE member could open an e-gold account. Two members who both have e-gold accounts could use them to buy/sell Riegels and other WBE money/currencies from/to each other.

A major drawback of practically all other "barter systems" (more accurately called "split barter systems" or "business trade exchanges") and alternative currency systems is that their currencies are often not convertible and that some members get stuck with large positive balances they can't easily spend on products and services they need or want. WBE convertibility eliminates this problem and widens potential acceptance in the marketplace.

7. Demurrage and Interest
(This may apply to parts of the WBE system.) I propose that a "demurrage" (negative interest) be charged on positive Riegel balances, on a sliding scale. The purposes of demurrage include encouraging trade and economic activity and promoting long-range thinking. For more details on demurrage, including historical examples, see:

I propose the following demurrage formula for positive balances: (a) No demurrage charge on the first Rgl 1,000, or monthly average of previous 3-months' transaction volume (MA3/3), whichever is greater; (b) 0.5% demurrage charge on the second Rgl 1,000, or MA3/3, whichever is greater; (c) 1.0% demurrage charge on the third Rgl 1,000, or MA3/3, whichever is greater; (d) 2.0% demurrage charge on the fourth Rgl 1,000, or MA3/3, whichever is greater; (e) 3.0% demurrage charge on any positive balance beyond (d).

(There may have to be a different formula for lending - and other financial institutions. See paragraph 11 below.)

I propose that no interest be charged on negative balances, making the Riegel an interest-free form of money. (However, there needs to be default insurance to cover the risk of members leaving the system while balances are negative, i.e., defaulting.)

Demurrage constitutes earnings by WBE. At the end of every month, WBE adjusts account balances to reflect demurrage payments and receipts.

8. Limits and Defaults
Obviously, a potential weakness of the Riegel system is that someone can buy products and services, building up a negative balance, and then dropping out of the system and/or disappearing.

For each member of the system, a limit negative balance can be set, depending on the creditworthiness of the member. This limit can be changed from time to time to reflect the changing creditworthiness of the member, based on criteria to be determined.

Rules need to be specified to determine what constitutes a default. Members with negative balances are expected to "pay off" or "produce off" their debit balances over time.

9. Default Insurance
In the Riegel system, a negative balance comes into existence when a seller sells to a buyer who doesn't have a sufficiently positive balance to pay for the item or service. The seller is effectively granting credit to the buyer.

I propose that default insurance be paid in respect of any additional debit to a negative balance (i.e., account becomes more negative) resulting from a transaction. (No default insurance is necessary when the buyer has a sufficiently positive balance to pay for a purchase. The amount that needs to be insured is the extent to which the buyer's account goes negative or more negative as a result of a transaction.)

Sellers have responsibility in granting credit. I propose that the seller has to buy default insurance to cover the amount involved. Rates can be determined by WBE (and other insurance companies) depending on the trust- and creditworthiness of the buyer. WBE may grant permission to others to provide default insurance, subject to conditions to be determined by WBE.

WBE will maintain a fund to cover defaults. A member who defaults is removed from the system and the default amount is deducted from the fund. If another insurance company insured the negative balance involved, then that company's account with WBE would be debited accordingly.

Sellers are free to vary their prices to recover default insurance costs.

10. Credit and Trustworthiness
A formula can be developed based on: (a) References provided by existing members; (b) Past performance; (c) Other criteria to be determined by WBE.

A trust and creditworthy index could be calculated for each member and would be available to other members.

11. Pledging Assets
There needs to be provision for an individual or business to pledge assets as collateral for credit. This service could either be provided by WBE or by other institutions, in the form of loans.

People granted loans would have to pay default insurance to the lending party.

(A lending institution could acquire the large positive balance it requires in order to make Riegel (and/or other money/currency) loans by, e.g., selling or pledging precious metals, national currencies, buildings, etc. to WBE in return for Riegels (and/or other money/currency).)

12. Product/Service Listings
The WBE system would include a "buy register" and a "sell register" -- respectively consisting of products/services wanted and products/ services offered. This would make it possible for buyers and sellers to link up.

A classification system will be necessary and the registers would have to be searchable.

WBE will eventually charge a fee for listings in the registers. The initial listings should be free.

13. Computer System & Transactions
WBE would require a computer system to manage and operate the system. All Riegel-type transactions should take place via Internet and should be processed by WBE. When a buyer and a seller agree to a transaction, the buyer will submit the relevant and necessary information -- including verification details -- to WBE, whereupon the transaction will be recorded and the necessary account balance adjustments made, subject to limits not being exceeded.

Provision needs to be made for one-to-many transactions, e.g., to enable a company to pay employees.

The above applies to Riegel-type money, as opposed to currency issued by an issue authority. The WBE software system should also cater for the latter -- see paragraph 25 below.

14. Escrow
WBE may want to allow for escrow transactions.

15. Transaction Fees
Barter clubs typically charge a fee of 10 - 15% on transactions. I recommend that WBE charge no transaction fees. (Any system such as WBE which charges transaction fees is likely to eventually be outcompeted by a system that charges no transaction fees.)

16. How WBE Makes Money
(a) From demurrage charges -- see paragraph 7 above. (b) From Product/Service Listings -- see paragraph 12 above. (c) WBE's website(s) should get many visitors -- thus WBE could sell advertising. (d) WBE will be in a powerful position to market almost anything to its members.

17. Riegel Vending Machines (RVM)
The idea of RVMs comes from An RVM consists of some code (HTML, Java, etc.) that can be pasted onto a website. An RVM is the cyber-equivalent of a physical vending machine. The big benefit of an RVM is that a buyer doesn't have to go to the seller's website to buy; he buys direct from the RVM. He also doesn't have to go to the WBE website to enter the transaction details. Thus the RVM will make many transactions more convenient. (The buyer also provides shipping details to the RVM.)

A vendor can persuade any number of website owners to place his RVMs on their websites. The RVM can be programmed so the website owner gets a commission for each sale. RVMs will be linked to the WBE system, so account balances are automatically updated. RVMs will also provide valuable marketing data to vendors.

To minimize fraud, RVMs will require a high degree of security.

18. Simulation
A skeleton computer system needs to be developed as soon as possible, with the various percentages, fees, etc. as variables. Then the system needs to be simulated, using various assumptions and parameters, to determine workability and viability.

19. Privacy and Security
Communication between WBE members, and between members and WBE, needs to be encrypted, private, and secure. WBE could provide a module enabling members to communicate to each other and to WBE via automatic encryption.

WBE needs to maintain confidentiality of all transactions. WBE needs to be "domiciled" in a venue that requires no financial reporting. Thus WBE will not do any reporting to coercive agencies.

If any members want to report their transactions to coercive agencies, that's up to them. A potential problem that needs to be catered for is the eventuality of one party to a transaction wanting to report the transaction while the other doesn't. At the time of entering into a transaction this issue needs to be settled by mutual agreement.

20. Disputes, Mediation, and Arbitration
WBE, or one or more other entities, need to provide for mediation and arbitration services to settle disputes.

21. Additional Features
The WBE design team needs to analyze current barter systems, particularly those on the Internet, to determine what additional features need to be incorporated in the WBE system.

22. Potential Prospects for the WBE System
(a) Members of other barter clubs (WBE provides huge advantages not available from the others); (b) International traders; (c) People involved in barter and countertrade; (d) Businesses owned by freedom lovers; (e) Freedom-loving individuals; (f) Businesses with "expiring commodities" -- hotels, airlines, radio stations, restaurants, etc. have "expiring services" -- if the hotel room isn't rented in time, the plane seat not sold, the radio advertising not sold, the restaurant seat not occupied, that potential revenue expires and can never be recovered -- "expiring service" businesses are hot prospects for the WBE system; (g) Businesses that would like to have access to an additional market for their products and services; (h) Professionals such as doctors, dentists, lawyers, accountants, consultants, etc. with "expiring time" -- if available time isn't being paid for by a client, the potential revenue from that time is lost forever and can never be recovered; (i) People in the alternative currency/money movement.

The Riegel economy creates a greater potential market for all the above people.

23. Growth and Decentralization
If the WBE system becomes successful, there will be many independent WBE-type systems around the world. They could be organized that members of one system can trade with members of other systems. Every sizable city could have one or several exchanges. Local members should also be able to access the product/service registers of other exchanges. There will also be a variety of kinds of money/currency used by the various systems.

24. Credit Cards and ATMs
Once WBE has become a viable operation, it will be relatively easy to organize the necessary interfaces with existing systems to enable members to use credit cards for purchases and to withdraw cash at ATMs.

25. Coinage and Banknotes
The WBE system needs to cater for an issuing authority having the ability to issue a currency, similar to the way national currencies are issued. The system also needs to cater for the issuance of coins and banknotes. Furthermore, the system needs to enable members to transact via secure, anonymous digital cash.

26. Promoting the WBE/Riegel System
The folks at have developed an excellent method for promoting their business -- see Anyone can get a few free shares just by signing up. And you can get a few more shares by persuading a few other people to sign up. (They also address the problem of some people signing up under more than one e-mail address in order to fraudulently obtain extra shares. GVB experienced a similar problem -- see

As soon as WBE has a "promotable" website, a similar system can be implemented, whereby new members receive a number of Riegels for signing up, as well as additional Riegels for persuading others to sign up. The listing of Riegel businesses could also be "jump started" by initially issuing a number of Riegels to those who list their businesses.

27. Participation
If you're interested in playing a role in the development of the WBE system, please contact Frederick Mann and/or subscribe to the World Business Exchange List. The development of the WBE system will be discussed on the WBE List. Subscribe if you'd like to be kept up to date on developments.

28. Education and Objections
As you can imagine, launching WBE successfully will be a formidable challenge. Certain issues related to what might be necessary to achieve success and how the development team might have to operate, as well as some objections to the WBE system, are covered in Appendix 5 - Education and Objections.

I welcome your feedback to Frederick Mann.

Click here to read Appendices 1 and 2

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