by David McCarthy
It has often been said that money involves a social agreement around what people use as a medium of exchange, and as to how the whole system is structured. That being so, in most cases, our “social agreement” is simply to be passive and follow the status quo. We allow the decision to be made for us, and we follow the conventional pattern. In authoritarian societies, that may be one’s only choice.
But in a society where we have some fundamental economic freedoms, such as our own, we are able to exercise those freedoms and use alternative currencies. Questions remain, though, as to why we would want to do that, and what specific social agreements are involved with a particular alternative currency. Interestingly, we may be able to answer the first question (why use it?) by exploring the second about the social agreement.
Simply raising this question and coming into consciousness about money being based on social agreement is part of the educational side of the The Hudson Valley Current’s mission. And as with most learning processes, the real fun begins when you take a hands-on approach and actually try something. The currency system that we have started is a local one situated in the Hudson Valley and is based on mutual credit. These two features—its local quality, and the fact that Currents come into being and flow through interest-free mutual credit—are expressions of the underlying social agreement that makes the Current possible.
Concerning the local dimension of the Current, we can say that the social agreement is to build a more healthy, resilient economy, and to build it ourselves right here in the Hudson Valley. There is a great deal of momentum and interest building around that goal. The whole “shop local” movement is truly becoming mainstream at this point, and that is a very welcome trend. Trading with the Current takes this localizing movement to a deeper level, because it represents an actual commitment to local trading. Using the Current means that you both earn and spend locally, since Currents are not convertible to Dollars, and the system is not used outside the region.
Although shopping local with any currency creates a better circulation pattern and reduces the draining effect that comes with, say, shopping at the big-box stores, using the Current does that and more because it fosters local supply chains and trading relationships that are fully local.
As important as the whole localist vision is to understanding the Current, there is something even deeper that comes to light as we examine its basis in mutual-credit.
In entering this community, you are making a two-fold commitment: to trust, and to be trustworthy. If you think about it, trust is co-created. For someone to truly become trustworthy in practice, someone else needs to extend trust. Someone has to believe that you are trustworthy. This co-creation of trust is very strengthening to communities. We can go beyond the sort of impersonal and uncooperative pattern of self-absorbed, self-interested lives, into a much more vibrant, healthy world of conscious community. Of course, this all ties back into the local aspect, because when you really know the people personally you are doing business with, there is a great chance of developing mutual trust in practice.
Another aspect of the social agreement here, and one that is of real importance, is to keep the value of the Current at an agreed upon price level. At this point, the agreement is that one Current equals one Dollar in value. In other words, the prices you ask for or pay in Currents should be the same as they would be in Dollars. This may be hard to understand at first, but especially if people start trying to get higher prices in Currents than they would in Dollars, that effectively devalues the Current and devalues all the goods and services that are exchanged in the system. So we ask that all members keep their prices at parity with Dollar prices. In the future, if the Dollar were to go through extreme inflation or deflation, that agreement may change, but in any case it is important that the community abide by a common standard.
Well, coming out of an understanding of the social agreements underlying the Current, can you see the benefits involved? We like to talk about those benefits as a win-win situation. There are benefits to you, and to you in relation to the community. For yourself, you get a new source of liquidity (i.e. money you can use) in the form of an interest-free line of credit. You also get access to a ready-made (and growing) network of like-minded people who are automatically interested in your goods and services. As for the community, you get to be a leader in building a more just, resilient, and prosperous economy right here where you live.
David McCarthy is: Author of Civil Endowment—The Transformation of Economic Power, Co-founder & Board Member of The HV Current, organizer of the HV New Economy Meetup