Local credit

At Occupy's Alternative Banking think tank you'll find a mix of economists, ex-Wall Street quants (the redoubtable Cathy O'Neil among them), labor reps and assorted socialists and Marxists, and also young idealists reminiscent of the late '60's. One of these latter presented for us some recent work on alternative money -- not bitcoin stuff, but relational local credit/debit systems. The sharpest head there pointed out that these are already used by airlines as frequent flier miles. The consumer gains credit by buying but can use it only for the local purveyor.

The idea is half-baked. After a couple of minutes I asked: what prevents a large corporation from offering to undercut the local credit with an economy of scale (we'll fly you farther!)? The consensus was, the locals would have to keep faith with the local purveyor. But of course if the local exchange is maintained by faith, there's no need for this alternative credit at all. We talk about capital as if it were a system, and we look at systemic supports in capitalist nations, but really it's just human opportunism wherever there's private property and a market.

The notion of local credit belongs to the youthful idealistic spirit of Occupy. Maybe they can get it to work, but locality seems underlyingly Luddite to me or at best old-style anarchism. The notion of alternative credit, though, that's got appeal. What are the possibilities? It's not so far-fetched. The gold standard was a kind credit limit. Fiat money, by contrast, has turned out to be an unleashed beast, difficult to tame. It could be tamed in flush times, but in bad times, monetary policy, as Keynes said, is like pushing a string. Something to think about.