Regional Economic Communities

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

Grok alternative currency theory

The Grok:
A user-emitted secured interest-free complementary currency with demurrage.

Let's look at that bit by bit:

  • user-emitted
    There are only two basic ways for any currency to appear in circulation:
    • The currency users issue (emit) it themselves as required (Grok, LETS etc.);
    • A currency issuing authority emits it (Dollar, Euro, Pound etc.).
    In the former case the question of how the emitted currency can come into the possession of its users cannot arise, since they emit it themselves. In the latter case it by nature must arise. Again, there are two basic ways to answer this follow-on question:
    • Money being loaned into circulation as debt, normally with interest;
    • Money creation being implemented as a public service, e.g. governments spending new money into circulation debt-free via public expenditure.
    In two of these three paradigms (user-emitted and public service) we have currency which is not debt and can be interest-free. To our great public misfortune our current monetary system is of the third type – as debt with interest – which is inherently instable and as long as it does function serves to benefit the few by taking value from the many. The good news is that we don't have to wait for political change, we can simply emit the currency we need ourselves, for example Groks (and all mutual credit systems).
  • secured
    Every Grok in circulation is covered by a deposited security which has already added value to the ReeComm. Thus the term "secured" has a double meaning:
    1. No account holder can cheat the community of value, since ultimately the deposited security would be called in.
    2. The maximum amount of Groks which can come into circulation cannot be more than the values which flowed into the ReeComm (notwithstanding that this value will fluctuate depending on how well the ReeComm does with its resources).
    Thus we also use terms like "trustworthy" and "well-founded trust" to describe these two fundamental aspects of the Grok.

    Conventional fiscal models include commodity-backed or collateralised currencies, whereby the currency tokens can be redeemed for the assets providing the backing. The Grok is similar in that there are deposited values behind it, but different in that Groks cannot be redeemed for those values.

    Deposited values can be of three different types:
    1. financing certificates of the ReeComm;
    2. the mutual guarantees of small, coresponsible groups of market community members;
    3. work performed in the startup phase of the ReeComm which could not be remunerated at that time.
    The reason for linking the potential to create Groks to one these values is to prevent abuse of the market community, so that it will deservingly earn an impeccable reputation. So Grok creation facilities, which allow members to bring Groks into circulation, are only provided when:
    1. joint-ownership certificates or creation rights (or similar titles of value) are deposited (and would be used if an account with a negative balance must be closed); or
    2. some members get together and form affinity groups, which mutually guarantee each other a certain amount of credit (in which case if one person defaults, the debt is apportioned to the other group members); or
    3. activity points earned for work performed are deposited (if the depositor defaults, the same value in points will be debited from her deposit, reducing future obligations of the ReeComm).
  • interest-free
    No interest is allowed to be charged on Groks lent. This cannot be enforced in practice, since two people can always come to a private agreement and make a falsely declared remuneration. But see also Enforcibility .
  • complementary currency
    The word "complementary" means "forming a satisfactory or balanced whole" – in this case, supplementing national currency with functions otherwise not covered. "Currency" means generally accepted tokens of exchange.
    Since national fiat money is so malconstrued, it could end up being not complemented by the Grok but replaced by a national clearing union of all regional Groks and other complementary currencies.
  • with demurrage
    The word demurrage was originally used in the context of chartering ships. Wikipedia offers a currency-specific article on demurrage. The following definition, however, is an excerpt from the general page on demurrage:
    "In complementary currencies' field, demurrage is a cost associated with owning or holding currency. It is sometimes referred to as a carrying cost of money. The term was used by Silvio Gesell. It is regarded by some as having a number of advantages over interest: while interest on deposits lead to discount the future and to place immediate gains ahead of long-term concerns, demurrage does the opposite, creating an incentive to invest in assets which lead to longer-term sustainable growth. Furthermore, demurrage acts like inflation, stimulating the circulation of the currency, encouraging economic activity, and increasing employment".

Is the Grok actually a mutual credit system?

Yes and No. Yes, except that in contrast to many conventional mutual credit systems, every single Grok in circulation is covered by deposited securities, to make them trustworthy.

Mutual credit systems allow their participants to go into negative and positive balances without viewing the negative balances as fiscal loans, i.e. without charging interest on them. A negative balance simply means that the participant has themselves issued that much currency. Normal accounting is employed on buying and selling, allowing a negative balance incurred by buying from one party to be annulled by selling to a different party. Until now, such systems have tended in general to accept a lesser or greater degree of risk that participants may cheat the community of value (i.e. run up a negative balance and then drop out). The Grok system precludes this risk by limiting negative balances to the value of money, goods or services rendered or deposited by the account holder to the ReeComm.

So in most respects the Grok does match the Wikipedia definition of mutual credit. Groks are created at the time of the transaction and are interest-free. Account balances are kept and "debts" can be paid off indirectly – it is a multiparty clearing system. There is no managing authority. BUT the Grok differs to many systems in that its value is protected by the deposited securities (see above). So in respect of the two words "mutual" (in the sense of reciprocity) and "credit" (from the Latin 'credere', to believe or trust), which together literally mean trusting each other, the Grok does not fit the definition, because no trust in the other participants is required regarding their conduct affecting the value of the currency. The deposited security – which by definition must be present since no Grok creation facility is allotted without one – will ultimately be called on to close an account with a negative balance. Thus it is better termed a user-emitted and secured construction, making it eminently worthy of trust.

Note that the market community does not exclude those who cannot invest conventional money in one of its financing options and were also not able to perform work for the ReeComm in the startup phase. Such people still have the option to get together and form an affinity group as mutual guarantors; failing that one can still open a Grok-Account with zero balance and zero creation facility. In this latter case people must first work and earn Groks before they can spend them. Together these provisions do represent a paradigm very different to (indiscriminate) trust – they put the emphasis instead on personal responsibility. Regarding the market trade, you can only get as much out as you put in, and you can never have a creation (negative) balance which is not covered by a security.

Social aspects

This may sound a bit "hard" at first hearing, but life itself is causal – we reap that which grows of our actions, so in fact the paradigm of life itself is one of consequences, not of free beer for all. AND it does not preclude a social aspect – many of the people already involved with these ideas are firm believers in unconditional basic income (UBI; also known as BIG - basic income grant); so at the discretion of the general meeting of the ReeComm the fees (transaction fee, demurrage) could be set very high, e.g. 50%, and the intake (less the costs of running the market community) be distributed to all PRIVATE account holders as monthly UBI. We did not want to design any requirement in such respects into the Grok; each local community is free to decide such things for themselves.

By the way: The ripple distributed clearing approach is a circular (in fact: multi-node) trust-based debt and credit redistribution system, allowing the transferal of personal debt from people you don't know so well to people you feel more comfortable with. It thus limits an individual (trust-based) credit facility to the sum of credit limits supplied on trust by people who know that person. A mapping to the Grok seems inappropriate, because the Grok has deposited securities rather than trust as its basic paradigm.

Acknowledgements and resources

First and foremost, heartfelt thanks to Dante-Gabryell Monson from Belgium, who not only provided invaluable feedback but also connected us to many active colleagues.

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