Newsletter: 1. October 2012

Insights from a years hard work

Please excuse the long newsletter silence, which did'nt mean that nothing was progressing. In fact, so much was happening that I never got around to writing a newsletter! In this period we have not yet achieved any notable financial volume in the first ReeComm (Munich) – but we have paved the way to do so in many respects. We have also gained a number of valuable insights, many of which are highlighted in this newsletter, in the hope that others may find them helpful.

Progress in the Munich Cooperative

The Coop now has 105 members and we're close to clinching our first investment in a local organic farm. Clarifying legal aspects, getting the data needed to appraise the investment from the overworked farmers, and the time we ourselves needed for developing ethical and financial criteria added up to a process time much in excess of our hopes, but we're nearly there now. After the first one, subsequent investments should be a lot easier to realise. A very good thing to come out of this process is our commitment to the Common Welfare Economy, founded by the Austrian activist Christian Felber. The ReeComm itself is committed to filing a yearly Common Welfare Balance Sheet, and will require the same from all local businesses in which it invests.

The idea of an activity point system to remunerate work in the startup phase, mentioned in the last newsletter, has (still) not been implemented – mainly due to us being so busy! And now it looks like we won't need it, because a new idea has taken root and is currently being actively pursued:

It's not realistic to see the value of an enterprise as only the things which it owns – the skills of its people and all the work put into bringing it to its current state are at least equally important, it needs all these aspects to be a viable business. So now we see that all the work put into building up the Coop has given it an intrinsic value (independent of its actual stakes in local businesses), which we will use as backing to issue currency on the Marketplace.

ReeComm Marketplace with Grok currency

Here too, we have taken the time to create potent internal structures and software facilities before "going public". The Marketplace Software (a special configuration of Cyclos, specially configured to match ReeComm requirements), and the informative Marketplace website, are both more or less finished, as are all the various forms and internal procedures required. This autumn we'll be turning our attention outwards to gain more members and promote trading. Two things worth noting here are:

1. Rather than create a parallel "Quasi-Currency" such as activity points, it may be both easier and more directly beneficial to give the Cooperative itself an own account on the Marketplace, with a large Grok creation facility. This can be extended in time, as people continue putting more work into building up the ReeComm's CPO, allowing the ReeComm to keep on paying them for doing so. The fact of these active members having a steady inflow of Groks which will want to be spent (due to the demurrage) can be a very powerful motor to envigorate trading, not to mention keeping the people who do all the work motivated!
   Note that this mechanism would not be needed for the Marketplace staff, who can soon be remunerated from membership and transaction fees. However, said fees will not suffice to also pay those who work on other aspects of the ReeComm, which will not earn money in the short or medium term. (That was also a lesson learned: Whereas we originally envisaged getting notable returns from stakes in local businesses and projects, we have now recognised that this will not in fact be the case – one can't expect much income from them, at least not from "smallish" investments).
2. In Germany, as no doubt in most other countries, a licence is needed to offer financial services such as banking, electronic cash or trading in bonds and securities. Naturally these laws refer (primarily) to national currency ("legal tender") – so the question is, how do you formulate the rules for your Marketplace and currency to make them exempt from these laws? What we have learned so far in regard of German law is
   • If you allow trades with mixed remuneration (Grok and legal tender), then you must make it eminently clear that the non-Grok part is the business of the trading parties involved and its remuneration does not take place via Marketplace accounts.
   • You must also make it eminently clear that the Grok is a user-emitted currency of the mutual credit type, and that its creation and use is limited to the registered members (i.e. a privately rather than publicly circulating currency). This in fact is a very important difference to printed publicly circulating local currencies like the Chiemgauer or Brixton Pounds, which simply represent legal tender. The Grok is an independent trading currency whose use is limited to accredited members of the trading circle.
   • Most mutual credit type currencies are issued with the promise of the issuer to provide goods and services as their backing. The Grok adds to this the concept of being a secured currency – that is, account holders have to deposit something of value (preferably of value added to the ReeComm) in order to get a Grok creation facility of the corresponding amount. An important depositable item suggested in this concept is Grok creation rights, a (preferably) assignable value paper whose only use is to allow the owner to deposit them for a corresponding Grok creation facility. Whether these can be originally purchased and/or sold on for legal tender will vary from country to country, and is still not resolved with the German fiscal authority. We're hoping very much that at least their original purchase with legal tender will be accepted, as they could then be a very powerful financing instrument for a ReeComm (in particular since the ReeComm must never pay this money back, neither principle nor interest).
   • What has become clear is that the fiscal authority will not accept the advertising and sale of any sort of assignable value papers on the Marketplace – at least not any noted in legal tender. This means that the Joint-ownership certificates of the CPO can be used as deposits, but not advertised and sold. An easy way around this would be a cooperation with a local licenced broker.

Business Investments or Business Divisions?

As noted above, we have come to recognise that investments in local businesses will not make any contribution to the running and personell costs of a ReeComm in the short to medium term. To get around this problem, the work performed can be remunerated via activity points or even Groks, as suggested above. A further (combinable) option is to put part of the focus into building up own Business Divisions within the ReeComm, which would pay a percentage of their turnover to the ReeComm in return for the work they receive through the public exposure and good image of the ReeComm.

A ReeComm starting up will tend to attract a good proportion of academics and professionals – these are the sort of people who will be thinking more deeply about the background of our modern global problems and interested in contributing to a better world. So why not harness the capacities of these people in a Win-Win construction, allowing the ReeComm to give them something for all the energy which they put into it, something in the form of support for their income. An advantage of this model is that due to the profile of a ReeComm, and thus the organisations with which it comes into contact, the contracts arising will in general be for types of work which meet high ethical criteria, providing the people involved with the type of work they always wanted but often could not get, leaving them forced to accept contracts not matching their ethical standards. Of particular relevance to a fledgling ReeComm could be:

• ReeComm IT-Services ("RITS")
• ReeComm Media Services
• ReeComm Bookkeeping Services
• ReeComm Academy for Sustainable Economics

If you decide to go this way, then you will certainly need to think about how to solve the problem of liability: If an unsatisfied customer claims damages for a contract of a Business Division, and assuming the Divisions are not separate legal entities, then the case will effectively be brought against the ReeComm itself. Internal contracts between the members of a division and the ReeComm itself will be needed to cover such aspects.

Community Currency = Community + Currency

This equation was coined by John Rogers, reflecting his many years of experience with community currencies. John states that many community currencies had the potential to strengthen community and promote new commercial paradigms, but failed due to a lack of focus on community-building events and activities.

Even knowing this we have not found it easy in Munich to organise as many such activities as we would have liked to (although we have managed quite a few and have more planned) – simply because there always seem to be so many pressing duties. In the light of this experience we strongly recommend that you create a working group, committee or some such which has the sole task of nurturing community!

Implementation of the concept is picking up momentum

As you can read on the Initiatives page, three cooperatives have already been founded and registered, all in Bavaria. These three ReeComms work actively together, extending and adapting the concept to different local needs. Whereas the Coops in Munich and Allgäu are very similar, the Coop in Schlehdorf runs an education and recreation centre in the beautiful southern bavarian countryside, based in what was previously a farm.

Resources available to startup ReeComm-Initiatives

If you are interested in implementing (parts of) the concept, then feel free to get in contact with us – we'll be glad to support you to the best of our ability. This can simply be advice, but also suggestions on various organisational aspects, providing our forms and papers as the basis for your "flying start", a flyer explaining the concept, and even web hosting and/or software services.

Warm regards, hoping this will be of help!