Mutual Credit Organizations on the rise - Interest-free credit creation

Nice article on the strengths and weaknesses of the Swiss WIR, along with the possibilities of the wider mutual credit movement.    JubileeNet is exactly such a mutual credit network, available for free now (http://www.jubileenet.com/).   The main problem facing such networks is unfamiliarity and lack of marketing.   The average person has no idea how such things work.  The first step has to be education.  What is also especially important are motivated "kick-starters" who are working to bring other people into trade network. 

The article source: http://realcurrencies.wordpress.com/2012/04/19/the-swiss-wir-or-how-to-defeat-the-money-power/

For eighty years a major not for profit, private currency has been operating in the heartland of Europe. In Zurich, almost next door to the Bank of International Settlements in Basel, there is the WIR, turning over the equivalent of almost 2 billion CHF per year.
By Anthony Migchels for Henry Makow and Real Currencies

WIR was founded by businessmen Werner Zimmerman and Paul Enz in 1934. It was a direct response to the Great Depression. They built on the legacy of Silvio Gesell, whose thinking also was the basis for the famous Wörgl Scrip and today’s German Regional Currencies, like the Chiemgauer.
Silvio Gesell is in fact the Patriarch of what I suggest should be called ‘German Economics’ or ‘Interest-Free Economics‘, the theoretical basis for the anti-usury movement. His analysis of Usury inspired both Gottfried Feder and Margrit Kennedy, two other leading lights of the European anti-usury movement. He also had interesting and much needed ideas about land reform.

Where the Wörgl and the Chiemgauer were/are backed by national (banking) currencies, the WIR goes where nobody before dared to go: it is basically Mutual Credit. Mutual Credit based currencies are nowadays used in Barter organizations world wide. Barter in this sense is a misnomer, they do use a means of exchange but not the national currency. WIR is undoubtedly one, if not the first Mutual Credit facility in the world and most certainly the longest surviving one.

Nowadays WIR turns over a little less than 2 billion WIR (1 WIR = 1 CHF) per year. Because many transactions involve maybe 25 to 50% in WIR while the rest is settled in CHF (Swiss Francs), real turn over generated by WIR is maybe up to three times higher. It has 1 billion of WIR in credit outstanding.

Transactions are settled with the use of debit cards or with their on-line banking system.

WIR is operated for the common good and not for profit. About 62,000 small and midsized businesses participate. There are six regional offices through the Swiss republic.

WIR is especially important during downturns. Deflation and capital scarcity make businesses more creative and more willing to deal with WIR’s limitations.

For our purposes WIR is important because it proves that Mutual Credit facilities have a viable business model. It proves currency can be offered at very low cost while maintaining a prosperous and professional organization over the long term.

Limitations

Notwithstanding its major achievements, WIR suffers from some significant limitations.

In the first place it is not convertible to other units. This is a common problem with Mutual Credit based currencies. Until recently, the technology was not available. Amazingly, many people are so used to this situation that they do not even consider it a problem. They will claim that non-convertibility is actually a strength, as it forces participants to shop within the network. However, this is a mistake. Non-convertibility damages the liquidity (what it will buy) of the currency and liquidity is everything. As a result, many businesses accept only certain percentages in WIR. This hampers liquidity even further.

Another problem is that consumers are not serviced. Only businesses can participate. This again badly damages liquidity: businesses cannot pay their employees in WIR, for instance.

Just think of what is possible for modern units leaving these limitations behind them.

Money Power Subversion

Obviously, WIR is very important opposition against the Money Power. The Money Power can be expected to keep a keen eye on it and there are serious indications it has been resisting WIR actively.

There is a persistent rumor suggesting the Banks have told WIR that things are fine as they are, but that they should not vie for further growth. This may explain why they have not developed a comprehensive strategy for consumer participation.

Also, in the 1950′s WIR started to price its credit with interest. Even today interest rates are very low, with 1% rates for mortgages, for instance, but still. Interest is an affront to Gesell’s ideas. It hinders circulation, which was one thing very much on Gesell’s mind. The price for credit, even at 1%, is somewhat high for collateralized (and thus risk free) long term loans. It also lessens the power of the message: that interest free credit is not only possible but a fact.

The last few years WIR has been starting to focus on more traditional banking activities, including ordinary loans in CHF.

This has led Thomas Greco, a leading expert on Mutual Credit, to state that the Banking Cartel has probably found a way of getting its henchmen on WIR’s board of directors.

Conclusion

WIR is a leading example for the entire world. It has proven that interest free mutual credit can be offered on a large scale. Its superior management was a key factor to its success: it was not a couple of dreamers that built it, but down to earth businessmen understanding the issues and the solution.

It is not convertible and it has no comprehensive strategy to compete outright on a full scale with the Banking Cartel and yet it turns over billions per year. These limitations can nowadays be solved. Convertibility for Mutual Credit is now possible. A comprehensive strategy including consumers not difficult to devise.

In this way the Money Power monopoly on currency can be assaulted. Regulators, inimical as they may be to these schemes, are left empty handed: there are no laws against Mutual Credit and they are very difficult to develop, especially against determined market players who understand what they are up against.

Even though today WIR seems to have been subverted, it took the Money Power eighty years. It is fully possible for just a few thousand ambitious people world wide to open up their own initiatives and the Money Power could easily become overwhelmed.

It goes directly at the heart of the matter: the Money Power’s control over the money supply and extortion through usury and the boom/bust cycle. In this day and age of deflation and stagflation, additional working capital is desperately needed by small and mid sized firms. Now, more than ever, are they willing to take a chance when they are offered a real alternative.

The German Regional Currency Movement shows that it can be done even today. In Britain, too, many regional currencies are now starting, most recently in Bristol. This unit is not even circulating yet, but already 100 small businesses have signed up. They desperately need additional cash and new customers and Regional Currencies supply both.

It is no use to wait until the Government cleans up its act. It never will. It is completely controlled by the enemy. Private initiative is the only hope we have. In fact, let’s face it: why would children of the One expect to have their lives be run by sugardaddies like Government? Private initiative is all there is.

Private currencies, competing with the Money Power in the market place are the way forward.

The world was conquered by a few ambitious men serving the Adversary.

It is now time for it to be liberated by a few ambitious men serving the One.

“THERE IS NOTHING MORE DANGEROUS THAN PERSONAL INITIATIVE: if it has genius behind it, such initiative can do more than can be done by millions of people among whom we have sown discord.”

Protocol No.5

Related:

Regional Currencies in Germany: the Chiemgauer
Mutual Credit, the Astonishingly Simple Truth about Money Creation
Mutual Credit for the 21st century: Convertibility
Financial Warfare 2012: Boycott All Banks
Interest-Free Economics