Demurrage Exchange of Ideas

John Turmel

Tom Greco

... between John Turmel and Tom Greco

Tom Greco (TG): paper vouchers can be drawn against a member’s account as a temporary convenience for making small transactions or to pay non-members of the system for goods or services. These vouchers should have a limited period of validity (expiration date) to assure that the credits return promptly to the ledger system.

John Turmel (Jct) : Why would my poker chip IOU have an expiry date? What use does that serve? How long is too long?

And that means someone gets stuck with a useless piece of paper if they don’t manage to spend it back to you in time.

TG: In any case, the paper vouchers should never be more than a small portion of the credits circulating in a community exchange (credit clearing) system.

Jct: Why?

TG: John, the health of an exchange system depends upon the continual circulation of credits and timely redemption of obligations. A system credit, whether represented on a ledger or as a paper voucher, is evidence of someone's obligation to deliver goods or services. Whoever issued the credits in the first place by receiving goods and services is obliged to redeem them by later accepting them as payment for his goods/services. Credits cannot be allowed to remain idle for too long a period of time. Anyone having a surplus of credits should either spend them or allocated them to someone else as an investment. That person will then spend them and enable the original issuer to thereby redeem them. Ledger credits, above a specified amount, can be reallocated to investments as part of the membership agreement, (your credits are not lost, just reallocated to savings) but paper can be hoarded or permanently lost. That's the reason for the expiration feature. Loss can be avoided by spending the vouchers or depositing them to your ledger account. I believe i explained this in my book, Money: Understanding and Creating Alternatives to Legal Tender.

TG: Credits cannot be allowed to remain idle for too long a period of time.

Jct: Why? How long is too long? 

TG: Anyone having a surplus of credits should either spend them or allocated them to someone else as an investment.

Jct: Why would someone else need your chips as an investment when they can get their own chips interest-free at the cage? 

TC: That person will then spend them and enable the original issuer to thereby redeem them.
Jct: Why does the original emittor need to redeem that particular chip. Why not just pay his debt off by earning others? 

TC: Ledger credits, above a specified amount, can be reallocated to investments as part of the membership agreement, (your credits are not lost, just reallocated to savings) but paper can be hoarded or permanently lost. That’s the reason for the expiration feature.

Jct: Because someone may lose their poker chips, there should be an expiry? I see no reason what should be so. Someone else will find them and cash them in. Just like regular chips or money. Do we want an expiry feature on our money because some people may lose some?

TC: Loss can be avoided by spending the vouchers or depositing them to your ledger account. I believe i explained this in my book, Money: Understanding and Creating Alternatives to Legal Tender.
Jct: And loss can be avoided by not having chips that expire for no good reason.

NOTE:  The original article by Tom Greco is posted at this website:
Demurrage: Is It A Good Idea For A Local Currency Or Exchange System?
http://beyondmoney.net/monographs/demurrage-is-it-a-good-idea-for-a-local-currency-or-exchange-system