Overview | How | Basis | Name | Backing | Implementation | Paper | Presentation | Risks | Benefits

Paper Currency

Once the Common Goods credit economy is running well, a community may decide to create a paper currency as well. Modern security features such as holograms can effectively prevent counterfeiting of small denomination paper currency used only locally. Comprehensive circulation management will still be feasible, as long as the amount of Common Good paper currency is small, relative to Common Good credits.

Local paper currency introduces some additional complexity and problems that we need not address definitively at this time.

a. Problems

Use of a Common Good paper currency (or ANY new local currency) could be annoying. Merchants must either price everything both in dollars and in Common Goods or they must calculate the price every time they accept payment in Common Good paper currency.

Making change is also problematic. Merchants must either perform yet another calculation and give change in dollars, or keep plenty of Common Good change on hand (possibly requiring a second cash drawer)... or refuse to accept it, which would lead ultimately to failure of the Common Good paper currency.

Consequently, we probably will not want a Common Good paper currency unless and until Common Goods become so widely used in our area that prices are commonly marked in Common Goods as well as dollars (possibly many years from now).

b. A Faster Solution

Nonetheless, a large chunk of the local economy is handled with paper currency and it would be too bad to forgo for so long the advantages of replacing it with a local paper currency, once the credit system is working well. The obvious solution is to create a local paper currency that matches the value of official paper currency.

We can parallel the most common official currency denominations, ready to handle the bulk of local cash transactions, by printing just 1's, 5's, 10's and 20's. These bills will be the same size and shape as U.S. currency, to make them easy to handle jointly with dollars, but they will look different enough to be distinguishable at a glance.

c. Name and Design

The paper currency is a substitute for dollars, so it makes sense to include "dollars" in the name. Let's call them "Common Good Dollars". (The picture here is a place-holder, for decoration only, and is NOT a proposed design.)

d. Basis, Issuance and Backing

Common Good Dollars, though denominated like the dollar, will be backed the same way as Common Good credits. The bank's nonprofit sponsor (the Society to Benefit Everyone) will print the paper currency and distribute it to participants in exchange for Common Good credits or dollars. The bank will accept the paper currency as though it were the equivalent value in Common Goods. For example, a deposit of 10 Common Good Dollars would go into the Common Good part of the depositor's account, not the dollar part. Throughout this plan, references to Common Goods apply equally to Common Good credits and Common Good Dollars (paper currency) whenever that makes sense.

e. Rebates

Participating merchants who offer a percentage rebate on credit transactions with other common good bank™ customers will also give an indirect rebate when accepting Common Good Dollars. Their account will be charged for their usual rebate percentage. Half of that rebate will go to the community, as usual. There is no way to be sure who their customer was, though, who should rightfully receive the other half of the rebate. Consequently, the total of those half rebates will regularly be divided among the members, each in proportion to the net amount of Common Good Dollars they have received from the bank (whether as initial distribution, payment for goods or services, withdrawal of Common Goods or exchange for dollars). The effect of this will be to give everyone a small discount (probably about 1%) on purchases using Common Good Dollars.

e. Why two new currency systems?

If matching Common Good Dollars to U.S. dollars works, then why not use dollar equivalents for credit transactions and account balances?

We will probably implement it that way, behind the scenes, in any case. However, we are working toward a new economic model and a new society. It will be important to our success that people learn how the new model works and how our existing economic system causes problems. Using dollar figures with constantly varying interest rates would obfuscate the elegance, stability and fairness of an inflation-free currency. It would be like getting the baby dirty, to match the bathwater. Simple is not necessarily better.

On the other hand, we can minimize confusion by reporting all transactions and balances in dollars, while presenting the percentages in terms of stable Common Goods units (see this example). In any case, it will be best not to introduce paper currency until the Common Good credit system has been operating successfully for several years.

If the United States economic should collapse suddenly and the dollar loses value rapidly (rather than the current gradual devaluation of the dollar), then it may make sense to issue a new paper currency that directly represents the stable-valued Common Goods, instead of Common Good Dollars.