Description of the system of mutual relations
Financial relations must become humane, and human relations - balanced.
The first can be archived by following the Gold rule of morality - do not "act in relation to other how you would not like, that they acted in relation to you".
The second comes from understanding that even the best internals of people, appearing in the field of defective rules, involuntarily become on service to this system of rules. The rules of balance are called to put in order activity of people by an optimal method and with a positive result for the both, for an society on the whole and for everybody individually.
To be able to organise relations of people and put them in balance we need find way to measure these relations and set proper rules.
Most social and balanced forms of organisation of relation are Mutual Credit systems, like LETS and Time Banks. Members of these system are free to interact each other by-passing regular intermediaries. Intermediaries like commercial banks which usually set antisocial rules for interaction.
To choose right measure is very important, because since it is set it becomes value it self. That what happen with some less-common metals. From this side it is good to choose something most closest to human nature but still evaluable. Also it is good to choose what could not be means of hoarding. So the members could start using the system from more or less equal positions. The best fit with these criteria is “time”, humans’ time. We all have it, we could not stock it. It is pure “human” – let’s make it super value. Every thing we need is made not from stones, oil or dollars but from prime resource – “human time”. Protagoras said: "Man is the measure of all things” For example: http://en.wikipedia.org/wiki/Peters_Rose.
Mutual credit system which using hours as measuring of value is called time-bank. Time Banks systems are well known around the world but nowhere takes significant role due to very simplified financial model. – Hours of any kind of labor treated as equal in value, which restricts system to participants with same value of labor. The complete model of time bank should include in appraisal of hour of labor - time spent for getting required qualification, time required for necessary preparation and time required for additional rest period if this hard work. And finally, regular time-banking ignores the free market – not the best but well working regulator of demand and supply. All these moments are settled in modern version of time-banking – ROCS. www.transaction.net/money/rocs. - Please, read it first.
So, ROCS uses Hours and hours of hard work worth more. – This is the main break through in timebanking.
For the moment ROCS is still in a theoretical rough draft.
Let’s is to prepare ROCS for practical implementation.
Main practical difficulties with ROCS:
CHE – way of practical implementation of ROCS.
1. Basic way to define base unit for ROCS is to choose the simplest (cheapest) labor on the market. Something likes an Hour of watch man’s labor. This will be and the reference point and the measuring unit. Let’s call it – “Common Hour Equivalent” or CHE.
For example if watchman gets 10 Euro per Hour, 1CHE = 10 Euro. If bus driver gets 20 Euro per hour, he gets 2 CHE per hour. In this case every labor will get more or less stable personal/professional index of valueness. Let’s call it P.I. (almost every country uses P.I. system for government jobs).
Every day Euro, as any inflating currency, shrink in its value. But hour of watchman will be always hour of watchman. Calculating in CHE we will get clear view what is really for us coast. Everything costs our time.
For theoretical research let’s define CHE as value of hour of unqualified labor without considerable work load. Or more mathematical – limit of value of hour of labor with load and skill going to zero. What remain from labor without load and skill? – “free time”.
In practice “free time” is not a regular “labor” on the market.)) Better to choose for the base most cheapest labor but still enough paid for living. This could be minimum wage or living wage. Minimum wage is well definite criteria among a lot of countries and it will make CHE as social standard for labor cost. Basically it means you could not pay less then 1 CHE for 1 hour of any labor.
Looks like problem No 1 is solved. But this makes another even bigger problem.
2. CHE is stable, well defined time based currency, but pure regional. CHE in Alaska is more valuable then CHE in Brazil if we compare their value it in convertible national currencies. This is well understood: Due to different environment condition cost of living in different region should be different. To be able to produce labor of 1 CHE in Brazil you need basically X kcal. of food and maybe T-shirt. For Alaska you will need three times more energy, plus extra clothes and warm house. Also level of effectiveness of local economy and availability of natural resources will influence to value of local CHE. So, it could be, 1 Alaska CHE = 4 Brazil CHE.
How to make CHE suitable for overregional use?
Simple solution is set exchange courses between of local CHEs. It will be far from convenient, because even inside one country minimum wages are different from region to region. For example: in Russia there are close to hundred subdivisions with official their own minimal wages. All together it could be thousands local CHEs in the world with million cross-exchange rates. Another thing is these rates not regularly updated, which could cause some speculations.
For practical sense we invent special mathematical shell for local users which interprets all prices in foreign CHEs, on the fly, to his local CHE. You give advertisement with a price in your local CHE and everybody will see it with a price in their local CHE. Additionally it prevents game on the currency market (gambling). The math. shell could adjust currency exchange rates according the present distribution of CHE between the regions. If cumulative balance of region goes minus – the program will decrease exchange rate of CHE for this region - to stimulate export and impede import - (basically to reduce trade deficit). This will prevent region from lack of liquidity and form debtor's prison. Example of currency exchange rates autopilot: https://docs.google.com/leaf?id=0B0DsRyrejjbjNGQxZDI1MDMtOGJkNi00YmUzLWJjYWUtNGYxOTU1ZWY2ZGE2&hl=en
Now if we talk about floating courses of CHE, it looks like CHE is not stable any more. As a regional means of exchange it is still stable. Floating courses of CHE on external market means that value of labor of one region could become more valuable then of another region. (there is a hypothesis http://en.wikipedia.org/wiki/Impossible_trinity that impossible to use fixed exchange rates with free market.) If we like to make balanced system (not a monolith) it should be enough flexible to keep “searching” balance condition of continuously changing economical situation.
When LETS or Time Banks go “over regions”, they encounter with same problems as national currencies.
With first problem helps (above mentioned) the currency exchange rates autopilot. With a second problem should help special organization of mutual credit - Ripple. http://ripple-project.org
In Ripple there are no community credits, all credits are private. If somebody is not paying his credits – only that people will suffer who personally gave him line of credit. So, there is no need central control of issuing. Responsibility for issuing is spreaded among the participants. Another bonus of Ripple – this is a special payment routing. Payment from buyer to seller could happen if between them there is chain of fellows with IOU credit lines. This way of payment routing sets virtual regions and limits washing-out of money from them. Basically the participants decide themselves who is “neighbor” and how much of money is allowed to go out from virtual region through this neighbor.
At the moment Zero Exchange project (http://zeroexchange.sourceforge.net/en/book.html) is going to use Eka-People standard of mutual interaction. Financial side will be based on ROCS system, implemented in CHE-way with Ripple routing.
Deeper theoretical understanding of CHE-way of money.
Economical space is not homogeneous (in a way of richness of resources and rate of production). Time (processes) in different areas of economical space goes not the same. Time runs faster in local systems with high economical potential and slower in system with low economical potential. Similar time dilation near massive objects is described by relativistic mechanics (http://en.wikipedia.org/wiki/Gravitational_redshift). But anyway time is still absolute standard among all systems. It is the same with CHE. When inside the local system it has standard value, but outside the system it looks different.
System near “massive object” is a system with scant resources and/or poor economy effectiveness. There you need more CHE to produce value of 1 CHE in another system.
You can ask what is analog of a system at infinite point from massive objects. So where the time is pure (not dilated). It will be Realm of Ideas, where everything is imagined – it is present same time. The world of unlimited resources and enormous productivity.
Example of transformation of CHE while moving between systems.