Comments: Prepaid cards: offering the ECB a deal it cannot refuse

A barter system like Bartercard, or the WIR, becomes a monetary system the minute members start granting credit to each other.

At that point they need a "Value Unit" eg Bartercard's "Trade Pound" as a reference point against which members may exchange their "Money's Worth" of goods and services.

All that Banks add in their monopoly position as "Credit Intermediaries" is essentially a Guarantee, backed by as small an amount of Capital as they can get away with under the BIS "Basel" accords.

And what we have seen is how Banks have essentially been outsourcing that guarantee to "investors" through the use of credit derivatives and other related financial "toxic waste".

I am working (with Norwegian government support)on pilot schemes in Scotland and Norway of local "Guarantee Societies" whereby local "peer to peer" "trade" credit is granted subject to mutual guarantees.

These are supported by provisions/payments made into a default fund by the user of the guarantee.

In this disintermediated model, a "Bank" is necessary to manage the system and the default fund, allocate guarantee limits and so on. It's just that they don't need to risk any of their Capital.

ie the Bank is operating as a "service provider"

The key is a partnership-based legal protocol binding the Guarantee Society members in respect of the credit received, and which may be settled with conventional central bank money, or alternatively with "money's worth" of goods and services.

This model may be described as a "Clearing Union".

Posted by Chris Cook at September 14, 2007 01:37 PM

This is scary. Should I relocate to some friendlier jurisdiction?

Posted by Daniel A. Nagy at September 15, 2007 08:17 PM

"However, issuers of pre-paid products do not want to know who you are, just what you do. What you are buying is fine. For them, a traceable-but-anonymous product works perfectly because it solves their privacy issues, and gives them the marketing data to offer you precise deals that are likely to be a win-win for both parties."

We prefer not to know either who they are or what they are purchasing.

Dee Lync
Marketing Financial Services

Posted by Dee Lync at August 14, 2008 02:07 AM
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