Chris Skinner just posted a new post on “Social Money” in which he writes about the challenges of online currencies or real-life complementary currencies. I commented at length and making a connection between currency independence and money independence.
Money is fundamentally social. Which is why the social Web can be expected to impact banking/payments much more than it has so far operationally. I personally view the monetary system we live in today as a sort of AOL of money where one central organization and its affiliates have effectively a monopole on what is money and how it is created. I think that at the time of AOL, people had a difficult time imagining what an open, decentralized and resilient AOL would be, and how much it would force them to transform. Today, in my opinion, we are in the early days of this new decentralized money. We haven’t figure it’s version of HTTP, HTML, browser, SSL and DNS yet, that’s all.
With regards to runs on communities’ money. I think it makes it very clear that an independent community with an independent currency should seek not just a 0 or positive balance of payments, but a balanced current account. As Paul Volcker (I think) said: “Trade matters”. The strength of a currency in other words depend on the resilience on the local economy to outside events. In the real world, free trade ideology and negligence of deficits has already cost some real countries dearly (Iceland) and many other countries including the US are at risk.
With regards to adoption of community currency, I would argue that it is not just a problem of trust. The success of real-life currency is not because people necessarily trust them. It is primarily because demand for it is created by making it the only to pay for tax debts. One way to create demand for a currency is to have local businesses (i.e. org/people with public reputation) issue it and have community member agrees that the non-profit community service entities get their donations only in this currency.
One way to get people to accept a currency to offer to exchange it for something else which generates a positive return. That is the real function of Treasury Bonds with interest payments coming from the taxing power (e.g. The Whiskey Rebellion of 1794, http://en.wikipedia.org/wiki/Whiskey_Rebellion).
If the community agreed to pay taxes, to pay interest on local savings, then people who intended to save some money would probably accept the currency.
One way to get people to accept a currency to offer to exchange it for something else which generates a positive return. That is the real function of Treasury Bonds with interest payments coming from the taxing power (e.g. The Whiskey Rebellion of 1794, http://en.wikipedia.org/wiki/Whiskey_Rebellion).
If the community agreed to pay taxes, to pay interest on local savings, then people who intended to save some money would probably accept the currency.