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 imagine a fictional plot where Alice, Bob, and Chris (living next door to Alice) have business relationships with each other. One day they came together for lunch and found that A owes B $100, B owes C $100, and C owes A $100. So, they decided to redeem their mutual obligations and agreed on how to reflect that in their accounting records. After lunch they performed necessary manipulations and confirmed updated balances with each other. In this case all balances are zero and amount redeemed is $100. This result is beneficial for every entity in the cyclic chain of their obligations.
With long cycles of obligations it becomes almost impossible for humans to achieve similar result. However, it’s feasible by utilizing a specific computer system.
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 (as indicated by amount of redeemed obligations). 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 using parallel money is welcome to participate.
