Thursday, May 24, 2012

Community Based Banking (4) Money Records

The task of the record-keeper is to keep a record of who in the community is owed something and who owes something to the community.

In an act of charity, one person gives and another receives. There are no outstanding debts.

In barter, both people give and receive at the same time. The transactions are reciprocal, so there is no outstanding obligation.

In a market transaction, giving and receiving are not reciprocal.

  • After a sales transaction, the seller has given, but has not received.
  • The buyer has received, but has not given.
The record-keepers will record that the buyer has received, but not yet given. The buyer has taken on an obligation to give something to someone in the community. More likely, they will have had a previous obligation from the community wiped out. The seller has given, but has not yet received. The community now has an obligation to give something to them. More likely, he will have had a previous obligation to give someone to the community wiped out.
If someone has a positive record, they have given things to other people in their community without receiving anything equivalent in return. They are not someone wanting something for nothing, so people in the community should be willing to supply them.

The person who has given but not received will be recorded as plus x. The community has an obligation to that person. The person who has received, but not given will be recorded as negative x. They will have the agreed to the price of the purchase that they have deducted from their account. They have an obligation to the community that can only be settled by giving something of similar value to someone else in their community.

The unit that debts are recorded in does not matter, provided everyone understands it and uses it. It can relate to a particular commodity or to a currency that has existed in the past. People can look around and see goods and services priced in the units adopted, so they can see what the unit is worth.

Historians record that pounds, shillings and pence were used as units of account in Western Europe hundreds of years after these coins had stopped circulating. Coins in these denominations did not exist, but people still used these units for recording debts and other market valuations. When I was growing up, guineas were used at stock auctions even though these coins have not existed here for more than a hundred years.

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