Regional Economic Communities

A business and community paradigm which is viable in the long-term – a concept worth living

National currencies – explained briefly and compared with the Grok

How national currencies work

Surprisingly, the way our current financial systems work is so complex that even experts are often in disagreement on many facets of the system, not to mention ideas of how it could be improved or replaced. So this page mentions only briefly the aspects most relevant for a comparison with the Grok, while providing weblinks to some in-depth articles.

Here we take money to mean only that which is issued by a central bank, and defined as legal tender for all debts, public and private. This money is normally issued in the form of coins, banknotes and credits and provided directly only to commercial banks, whose job it is to pass it on to natural and legal persons. In both cases – central bank to commercial banks, commercial banks to people and businesses – the money is provided as credit, which must normally be repaid with compound interest (notable exception: Islamic banking).

When a commercial bank grants a credit, normally no money is actually paid out. Rather, a positive balance is accredited to that persons giro or check account, and a corresponding negative balance to their loan account. Payments can then be made from the giro account, and repayments (interest and principal) must be made as agreed to the loan account. These account balances are not money, but rather the promise to redeem them with money if and as required to do so. All further "bank products" and "financial products" are also not money, but various adaptations of promises and obligations concerning money.

These promises of money are often referred to as "checkbook money", to distinguish them from central bank money. The salient point is that commercial banks multiply the purchasing power issued by central banks as money many times over, by creating a much larger volume of checkbook money. The amount of loans which a commercial bank may grant, i.e. the extent to which they can create checkbook money, is not unlimited. We have described the mechanism of the money multiplier briefly on the following page.

Central banks in turn have the responsibility for a stable currency, which normally means that the amount of purchasing power in circulation must have a stable relationship to the economic activity. In earlier times this was guaranteed (or better: limited) by having gold or silver as the actual currency, and bank notes referred to specific amounts of precious metal kept somewhere safe. No major modern currencies have such a backing or intrinsic value, they are simply declared by the government to be "legal tender". Thus they are referred to as fiat money, from the latin "fiat" meaning "let it be done". Note that legal tender by law forces the using community to accept the currency at face value, barring them from discounting it when trust in it falters.

Central banks and governments are in the process of squandering this trust, by respectively printing and borrowing more money than their underlying economies justify – the former a process known as "quantitative easing", and the latter becoming evident as national debt mountains. The quantitative easing is neccessary because the system as we see it now has to rely on growth, without which the governments could not afford to service their debts. Put another way, they have borrowed to the limit of assumptions on future growth, and so now they can't do without that growth. Yet we all know that unlimited growth is not possible with limited resources.

National currencies (fiat money) compared with the Grok

The way the Grok works is explained in general and in practice throughout this section on the Market Community, and in terms of money theory on the preceding page about Grok theory. The following table now compares it to fiat money (i.e. the current brand of national currencies such as Dollar, Euro or Pound).


Fiat Money

The Grok

Coming into existence

Central Banks (e.g. the Fed, the ECB) print and mint money and provide it, together with "real" money credits, to commercial banks.

The Grok exists only as an online trade currency and does not come into existence through any central agency.

Coming into circulation

Commercial banks provide money to their customers as credit.

The account holder herself brings currency into circulation at the moment it is required to remunerate a transaction – up to the personal secured creation limit.


Most banks require compound interest on all loans granted, and reward savings with compound interest. Compound interest is an exponential function.

Interest (of any sort) is forbidden; In fact the converse applies: All positive balances are subjected to a circulation safeguard fee, so positive balances get less with time, not more.


There is no intrinsic value nor any commodity-backing to modern money; the only "backing" which it could be said to have is the trust of the people in the government and financial system.

Creation facilities, which can be used at the account holders discretion to create Groks, are only granted on the basis of deposited securities.

Is there enough available?

Central banks try to ensure sufficient liquidity yet avoid inflation by purchasing and selling financial assets (e.g. treasury bills, government bonds, foreign currencies) and also by adjusting their interest rates for money to the commercial banks. They may also change the reserve requirement of commercial banks or employ yet other means. In practice however all methods are indirect and regulating the money supply an almost impossible task.

The potential amount of Groks in circulation is limited to the sum of all creation facilites granted. The three very different types of security which can be used to acquire a creation facility (financing certificates, mutual guarantees or points earned for work performed) should provide sufficient liquidity.

Perceived value

Compound interest on savings make the currency more attractive than wares, which depreciate in value. This has resulted in a fatal fascination with money – at the expense of social values and natural resources.

The currency has no conceptual advantage over wares since savings also depreciate in value. This helps people to recognise the value where it really is – in local firms and farms helping to meet our basic requirements.

Wealth re- distribution

Only the very rich receive more interest on their wealth than they pay as hidden interest on their purchases and as taxes. All others have a negative interest balance. Thus the rich get richer and the poor get poorer.

No interest means no automatic concentration of wealth. If the market community opts to charge a high level of fees and uses them to provide a basic income for all private account holders, wealth distribution will flatten rather than peak.

Ethical viewpoints

Redistributes wealth from bottom to top, provides passive income, requires growth, perceived as a profit-making business rather than a profit-free public service, encourages speculation, privatises profit but socialises loss, striving for profit causes strife and social unrest, undermines democracy (propagates the values and interests of the rich and multinational concerns throughout society) ...

As yet, this concept being new, we have no experience with its effects. We certainly have done our very best to design it in such a way that social, cooperative behaviour is encouraged, and misuse should by design be almost impossible. Without interest and without any central fiscal authority the deficits of fiat money cannot happen with the Grok.

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