Implementing multiform of parallel money
Money is a quantified obligation.
(David Graeber)
The phrase in epigraph is taken from the Blair Fix’s article which motivated me to write this one.
Let’s consider obligations arising from a deal made on credit between two entities, buyer and seller. Buyer’s payable to seller becomes a quantified obligation. Normally it is redeemed when the buyer transfers sufficient amount of money to the seller whose corresponding receivable turns into that money. Usually an entity (economic agent) is both buyer in one deal and seller in another one, so obligations among many agents may form cycles. Every such cycle may be reduced by subtracting lowest obligation’s value from every payable/receivable in the cycle. That lowest value represents [partially] redeemed obligation of every entity involved (without any money transfers).
The way of reducing many real-life cycles of obligations (accumulated during, let’s say, a day) is described at armoland.org (ARMO stands for Automatic Reduction/Redemption of Mutual Obligations). ARMO System can compute results of cycles’ reduction and deliver those results to all entities which elect to post their deals to the System. That assumes agents’ participation in so called ARMO Programme. Every Programme is denoted by its name, represented by its participants (i.e. agents registered to the Programme), and characterized by some parameters. One of them is unit of measurement of participants’ obligations what may be considered as parallel money. Parameters must be defined during Programme setup. It is important for every Programme’s [potential] participant to agree that all obligations among participants are homogeneous and interest-free (i.e. deals’ terms of payments, risks and other detail are ignored). So, every participant may decide whether or not a particular deal is qualified for posting to the Programme.
Parallel money does not require establishing a currency to be circulated similarly to conventional one. Outstanding debt may be [partially] paid in any existing currency or in kind (sometimes by a third party on behalf of debtor) or [partially] forgiven by creditor. When debt is settled creditor should post confirmation of receiving corresponding amount of the Programme’s money from debtor, so that the System will update those participants’ balances of obligations accordingly. Every kind of parallel money “circulates” in separate accounting contour where circulation means creating some money when a deal on credit is posted and destroying some money when an obligation is redeemed.
An ARMO System may serve several ARMO Programmes and any entity can also participate in several Programmes. They are scalable from local communities to national economies. ARMO System computes results automatically, human participation only needed to post data about participants’ deals to the System.
Initial goal of ARMO project development was to provide some benefits to potential participants. Apparently the project seems to be also beneficial at macro level. Utilizing parallel money — as described here — may dramatically reduce the amount of national currency required in an economy. In particular, less demand for borrowing may be achieved without increasing interest rates (especially when such increases don’t work). Certainly, those benefits are attainable only with businesses’ involvement and, even better, in cooperation with government. At the same time local ARMO Programmes may provide some benefits for local communities. The major task at the moment is to perform testing of the System’s beta version to see if results are promising. So everybody who feels enthusiasm in creating parallel money is welcome to participate in beta testing.
