Barcelona Threatens To Print Parallel Currency, Madrid Seethes

Tyler Durden's picture

Submitted by Don Quijones via WolfStreet.com,

Socialist mayor to fulfill campaign promises by “printing” money.

Over the next six months, Barcelona’s left-wing city council plans to roll out a cash-less local currency that has the potential to become the largest of its kind in the world. The main goal of the project, according to a council spokesperson, is to boost economic opportunities for local businesses and traders.

The idea is for local stores and residents to be able to exchange euros for the new currency at a one-to-one parity, and use it to purchase products and services at a discount or with other kinds of incentives. But it doesn’t end there: the new parallel currency may also be used to pay certain subsidies, taxes and local services such as public transport, reports El País. Municipal workers could also receive part of their salary in the new money.

Barcelona will not be the first European city to launch such a scheme. Local currencies are all the rage these days. There could be as many as 3,000 forms of local money in use around the globe, says Community Currencies in Action, a global partnership promoting such schemes that is part-funded by the European Union’s Regional Development Fund. Which begs the question…

Why’s the EU promoting parallel local currencies around the world?

According to the official blurb, it is to support local small and medium-size enterprises (SME) as well as offer new tools for social inclusion and environmental protection. This comes from an organization that has so far shown scant regard for SMEs [read… Small Businesses Dread the Wrath of US-EU “Free Trade” Deal], social inclusion and environmental protection (read this and this).

Perhaps there are somewhat less altruistic motives behind the EU’s agenda — motives such as encouraging people to embrace cashless currencies. As I warned in The War on Cash in 10 Spine-Chilling Quotes, the war on cash has moved from one of words to actions. As such, is it pure coincidence that most of the local community currencies that have been launched so far are in purely digital format, as would Barcelona’s?

Perhaps that explains why local currencies have captured the interest and support of organizations like the Long Finance Group, whose sponsors include the City of London Corporation, and which recently echoed the Bank of England’s calls for the UK government to adopt a purely digital currency in order to save the national economy (no, seriously).

The EU could also have another hidden motive in promoting community currencies: strengthening regional identity, at the obvious expense of national identity. Strong regional identity certainly helps with uptake, which is why you often find the most successful community currencies taking root in regions with a proud traditional heritage. Europe’s biggest experiments with local currency to date include the Chiemgauer in the German state of Bavaria (total amount in circulation: €521,000), the Eusko in France’s Basque region (€370,000 euros), the WIR in Switzerland, and the Brixton Pound in South London (€150,000).

The Chiemgauer, like many local parallel currencies, has a built-in “value loss” of 8% per year – a sort of automatic inflation – to induce people to spend this money as fast as possible before it corrodes away. That’s why it’s sometimes called the “rusting money.” It’s a heck of a lot worse than the negative deposit rates at some German banks (the hated “punishment interest“). Convert this money into euros to avoid this loss? No problem, just pay a penalty fee of 5%. So users – consumers and SMEs – get screwed, but they’re submitting to it voluntarily and can’t bitch about it.

“Direct Assault on Global Trade”

The biggest inspiration for Barcelona’s community currency is an experiment launched three years ago in Bristol, a medium-sized city in the South West of England. Under the scheme, people can purchase Bristol Pounds, either in cash or digital format, at a one-to-one rate with sterling and spend it with one of roughly 800 businesses. After three years in operation, the currency is now the UK’s largest alternative to sterling.

At the time of its launch in 2012, the BBC called it a “direct assault on global trade,” a statement so loaded with hyperbole as to be risible. Since its inception only £1 million has been issued in the Bristol Pound. Not one to be outdone in the hyperbole department the UK Guardian recently ran a piece headlined (I kid you not), “The Bristol Pound Gives Sterling a Run for Its Money” – all £1 million of it.

But the Bristol Pound has survived for three years, which is a heck of a lot longer than most of these schemes. Indeed, so popular has the Bristol Pound become that a large supermarket chain, a number of high street retailers and a budget airline have asked to be included in the scheme, according to the currency’s co-founder, Ciaran Mundy. They were turned down on the grounds that they were either not based in the area or were quoted on the stock exchange.

A Whole Different Magnitude

While the Bristol Pound experiment has been a big success on a tiny scale, Barcelona’s move toward adopting its own currency is a proposition of a whole different magnitude. With a metropolitan population of 3.2 million people, Barcelona would be far and away the largest city council in the West to trial such a scheme. The council is also proposing using the currency to pay some salaries, social benefits and public services, which could propel the amount in circulation well into the millions, if not billions of euros.

Predictably,the opposition to the scheme in Madrid is fierce. In June, the Bank of Spain’s deputy governor Fernando Restoy delivered a shot across the bow by warning that the scheme proposed by Barcelona’s activist mayor, Ada Colau, was “impossible” as well as “undesirable.”

To launch its own currency Barcelona City Council would have to go directly against the wishes of both national regulators and the central government. It would hardly be the first time in history that it had. Indeed, many of the leading figures of Catalonia’s pro-independence movement, including the region’s premier, Artur Mas, have already called for mass civil disobedience of Madrid. And there are few more potent acts of disobedience than the creation of one’s own currency.

Which begs the question: could Barcelona’s local city currency serve as a springboard to a region-wide parallel currency? After all, if Catalonia’s leaders are genuinely serious about breaking away from Madrid and creating a new nation-state (still a sizable”IF”), they will need to dramatically reduce Catalonia’s financial dependence on the central government’s treasury, the Bank of Spain and by extension, the European Central Bank. The only way to do that is to launch its own currency. As Greece’s Syriza party learnt the hard way, it’s no good threatening to go your own way without first having a parallel currency in place.

Granted, this is the grandaddy of all nuclear options. It is far more likely that Colau’s primary motive in launching a community currency on this scale is somewhat more mundane: i.e. increase local government spending. It’s what she pledged to do before the municipal elections. And there’s no easier way of increasing government spending than printing your own money and then using it to pay salaries, benefits and public services!

The big challenge will be getting local people and local businesses to trust the new form of money, as well as finding a local financial institution willing to back it up with euros. Without that, the currency could lose credibility. Without credibility and trust, fiat money loses value very quickly. And that’s when seemingly easy solutions give way to excruciating pain.

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So Close's picture

And not a word in the MSM.

Oracle of Kypseli's picture

When you are the richest region, it makes sense to have parallel local currency to avoid federal taxes and to keep people from spending too much outside the region. Not sure this has much to do with cashless push.

Doña K's picture

The question is what do the largest holders of excess profits in this currency do with them?

Like: Can you buy PM's with it?

 

Ghordius's picture

of course. for example by setting up a little shop, often with tacky ads that say: "I BUY GOLD". the eurozone has a huge quantity of them, nearly everywhere

Anasteus's picture

Yes, everywhere safely stored in China and India.

Ghordius's picture

as far as I see, the main flow of physical gold goes like this US -> UK -> Switzerland -> Singapore / Hong Kong -> China

meanwhile, in the eurozone gold changes hands, yes, but does not leave in great quantities, while India is still trying to stop the flow into it

OrangeJews's picture
OrangeJews (not verified) Son of Loki Oct 26, 2015 12:21 PM

So... this is like Bitcoin?  Create another thing out of nothing and expect people to use it and hold it as if it were real?

Handful of Dust's picture
Gold Demand in China May Gain to Record, Bullion Bourse Says

 

http://www.bloomberg.com/news/articles/2015-10-26/gold-demand-in-china-m...

 

Even the Chinese do not want to hold onto paper. They understand that all paper currencies collpse with time.

JustObserving's picture

The privilege to print fake fiat fulsomely must be zealously guarded. Your bankster overlords, like Goldman, will look askance at such a move

malek's picture

You sure TPTB aren't rejoicing - a cash-ban under the disguise of doing some good?

BandGap's picture

Isn't this fake fiat backed by fiat?

Isn't this essentially fiat to replace true bartering?

So many questions, so little time.

XitSam's picture

They don't give you the time to ask questions. Faster, Pussycat! Spend! Spend!

Dead Canary's picture

I think Barcelona should be going for little disc's of metal.

Spigot's picture

Digital currencies allow for an end run around the choke hold of the current financial reign of terror. Use them, but always leak out profits to buy PMs... which you always seem to lose in random boating accidents. Pitty that.

taopraxis's picture
taopraxis (not verified) Oct 26, 2015 11:09 AM

Ever read Orwell's book about the Spanish Civil War? Events over there are not auspicious. Printing currency and pegging it to the euro is not a smart move. Paper machinations of this nature will only exacerbate their economic problems.

Absent strategic defaults and meaningful restructuring of the banking system and a government reorganization, nothing will improve. The reason this has not happened anywhere in the world is that the bureaucracy and the banksters are in bed together and no one wants to get themselves thrown off the gravy train. The people are the patsies but they will eventually be tapped out. The system is doomed. There will be a massive currency reset comparable to Bretton Woods at some point but I have no idea when that will transpire.

Ghordius's picture

LOL

"The EU could also have another hidden motive in promoting community currencies: strengthening regional identity, at the obvious expense of national identity "

keep it real, folks. "The EU" has nothing to say or promote or whatever about currencies (nor immigration or police, actually, but that's another story)

evidence: the eurozone, i.e. the club of countries that use the EUR is 19 countries strong out of 28 EU club members

btw one faction among the pro-EU federalists is actually all about promoting regional identity, hence they are called regionalists, see "Europe of the Regions"

for them, it would be desirable to have all current medium-sized countries to break up in regions as sovereign countries, with the option of staying or leaving the EU

this would mean Catalonia, Veneto, Flanders, Bavaria but also England, Scotland etc. in the same way as currently Denmark or Luxembourg

and most Catalonians that want to exit Spain want Catalonia to stay in the EU, and are so Regionalists

meanwhile, the war on cash is real

but in Europe there are several fronts of it, with Denmark, France and Italy being the worst, while many countries have not joined this particular madness, and probably won't

meanwhile, the very fact that many countries use the EUR but have their own laws about cash makes the war on cash more difficult, then it leads to all sort of nasty comparisons, and pointed questions towards politicians

Urban Redneck's picture

It was the last sentence in that paragraph that set off my bullshit detector- one of these things is not like the others...

Europe’s biggest experiments with local currency to date include the Chiemgauer in the German state of Bavaria (total amount in circulation: €521,000), the Eusko in France’s Basque region (€370,000 euros), the WIR in Switzerland, and the Brixton Pound in South London (€150,000).

And it would happen the one that isn't an experiment, since it's been around since before WW2, has its own ISO code (4217), a monetary base larger than Bitcoin (which was suspiciously the ONLY circulation ONLY, and "misplaced" given the "apparent" descending order of amounts), and it is both asset backed and loaned into existence (providing endless headaches to amateur critics of monetary paradigms).  

Ghordius's picture

"The WIR Bank, formerly the Swiss Economic Circle (GER: Wirtschaftsring-Genossenschaft), or WIR, is an independent complementary currency system in Switzerland that serves businesses in hospitality, construction, manufacturing, retail and professional services. WIR issues and manages a private currency, called the WIR Franc, which is used, in combination with Swiss Franc to generate dual-currency transactions. The WIR Franc is an electronic currency reflected in clients' trade accounts and there is no paper money. The use of this currency results in increased sales, cash flow and profits for a qualified participant. WIR has perfected the system by creating a credit system which issues credit, in WIR Francs, to its members. The credit lines are secured by members pledging assets. This ensures that the currency is asset-backed. When two members enter into a transaction with both Swiss Francs and WIR Francs it reduces the amount of cash needed by the buyer; the seller does not discount its product or service.

WIR was founded in 1934 by businessmen Werner Zimmermann and Paul Enz as a result of currency shortages and global financial instability. A banking license was granted in 1936. Both Zimmermann and Enz had been influenced by German libertarian economist Silvio Gesell; however, the WIR Bank renounced Gesell's "free money" theory in 1952, opening the door to monetary interest.

"WIR" is both an abbreviation of Wirtschaftsring and the word for "we" in German, reminding participants that the economic circle is also a community. According to the cooperative's statutes, "Its purpose is to encourage participating members to put their buying power at each other's disposal and keep it circulating within their ranks, thereby providing members with additional sales volume."

Although WIR started with only 16 members, today it has grown to include 62,000. Total assets are approximately 3.0 billion CHF, annual sales in the range of 6.5 billion, as of 2005. As of 1998, assets held by the credit system were 885 million and liabilities of 844 million, i.e. the circulating WIR money, with equity in the system of 44 million. These WIR obligations being interest free have a cost of zero. Income from interest and credit clearing activities were 38 million francs."

https://en.wikipedia.org/wiki/WIR_Bank or, if you speak German, https://de.wikipedia.org/wiki/WIR_Bank

Raymond_K._Hessel's picture
Raymond_K._Hessel (not verified) Oct 26, 2015 11:13 AM

I once wanted to be a money printer.

Too much school!

PT's picture

Why do you need money?
1.  Simplifies barter.
2.  To pay interest.
3.  Easy way to buy real estate or other high priced items.

I think number 2 is the one that really screws us all.

PTB:  "We decide how much money you can have and how much it is worth."

Money makes YOU rich.
Money makes ME rich.
Money makes US poor.  Can't do this, can't do that - got no money.
The labour is there.  The resources are there.  Knowledge is there.
Can't acquire labour or resources or knowledge becoz I got no money.
So instead we do nothing.

Just a thought.

Raymond_K._Hessel's picture
Raymond_K._Hessel (not verified) PT Oct 26, 2015 11:16 AM
PT's picture

The money all belongs to Caesar.  No point in having it.  May as well just give it all back to Caesar.  Use something else.  Caesar doesn't want us to have any money anyways.  Oh yes, he wants us to work for money, but he doesn't actually want us to have any money.  Which is kinda strange becoz he wants to lend us money and he wants us to pay interest on the money but he just doesn't want us to have any money.  When you're stuck with a psychopathic fuckwit like that, it's best not to play.  Best to just walk away.

Reaper's picture

May the best currency win.

Ghordius's picture

actually Gresham's Law says the opposite: "When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation "

Reaper's picture

There are two competing governments here.

Ghordius's picture

please explain? Spain's, Catalonia's and Barcelona's?

Raymond_K._Hessel's picture
Raymond_K._Hessel (not verified) Oct 26, 2015 11:28 AM

A real direct assault is and only is barter. I'll fuck your ugly wife if you fix my chicken coop. That sort of thing. One imagines that a website to aggregate local rates and convert to a cash equivalent value would be shut down by Uncle Taxey right quick, but maybe if you had to pay to join such a scheme as a member of a private "club." Then there's that whole thing of taxing my time and effort by dint of taxing me merely for an exchange in which my own personal time, knowledge, skill and effort is traded for something I'll accept 'as' equivalent value + added value {can be more widely traded, can be saved store of value, etc.}. But we already lost that one back when Pharaoh wanted a cut of the grain.

PT's picture

Need money to pay interest.  Need interest to purchase land 'coz no-one has that much cash laying about.  Need to barter.  Also need to find a way to purchase land without need to use a bank or pay interest.  Not easy but it can be done.  People who already have loans need a way to pay off loan ( or default and walk away ).  As long as loans are outstanding, money is needed to pay principal and interest.    Need to purchase land without banks or interest.

Prisoners_dilemna's picture

"One imagines that a website to aggregate local rates and convert to a cash equivalent value"

Maybe I misunderstood you but in Greece the TEM system operates as you described.

FWIW, I think Bitcoin provides a far superior solution than returning to barter. It's money but not controlled by TPTB.

Jonas's picture

So, they will be able to create infinite quantities of new money, and will be able to pay everything with it.

Nice!

Soon Barcelona will be the richest comunity on Earth.

Why did no one think of this before?

all-priced-in's picture

Chicago will be next -

 

Public sector salaries and pensions paid in Chicagobucks -

 

Smiling picture of Rahm will be on the $10,000 CB note - Community organizer in chief Obama will be featured on the $100,000,000 CB note which will be fully convertable on demand into 1/1,000 of a penny of USD denominated zero coupon Chicago municiple bonds maturing in the year 2515.  

 

But they will be backed by the full faith and credit of Chicago so its all good.  

 

 

 

 

I Write Code's picture

I can't wait to have a pocketfull of Kardashianland trillion dollar coins.

Hey, do casino chips count as private currency?

HenryHall's picture

Tie the new currency at par with the Russian Ruble in order to make them really seethe.

 

Allow Russian notes to circulate freely exchangeable one for one with local electronic currency. That way if the Catalan currency comes under pressure it is very simple and easy for Russia to intervene and help (by printing some Rubles and sending them to Barcelona) - if Russia chooses to help that is. Russia's choice.

RedDwarf's picture

Digital currencies are a nascent and disruptive technology, which by their nature find expression in places where they can fill a demand that could not be met before.  In this case the demand is for local governments to take back some of their autonomy and power from the EU.  No way they could have printed physical 'cash' and got away with it, but they can do this.  The take-away from this is not about some shadow-cabal controlling all governments, the take-away is that the EU is fracturing and that the world is moving away from globalization and back to localization.

hannah's picture

there arent enough trees in the world to print all the money 'printed' into existnce since 1913.....

HenryHall's picture

You don't have to print. You can mint a few Trillion Dollar Platinum coins instead.

PT's picture

Yes there is.  Just print bigger notes.  Luckily we have scientific notation too, so we won't run out of ink too soon either.

hannah's picture

...so we have cash notes the size of postage stamps for $10 to the 1000 power denominations....! history shows that once the real inflation run starts, you cant print new denominations fast enough. germany couldnt print zimbabwe's cash fast enough to keep up.

we will go electronic because we can today with computers and the powers will have to .....

HongPong's picture

The Catalonia region already has several alternative currency networks active. They run on an open source suite of Drupal modules called Integral CES (Community Exchange System). I helped convert the code to Drupal standards and translated documentation into English. Thousands of people are already on these exchanges and some of them have existed for years. CES type systems, which have been around for decades, allows people to start from zero and go into credit or debit to a small limit, which permits expanding the credit base without it getting out of hand. It also helps because it is not fractional banking so you don't have a man in the middle. Also the system has integrated list for bartering and need/wants without the use of the tokens. It is also linked to a clearinghouse so that credits can be transmitted across different local exchanges. 

Here is the home page: https://www.integralces.net/

Here is the Drupal module suite: https://www.drupal.org/project/ices

You can see the list of Spain based exchanges here: https://www.integralces.net/ces/bank/exchange/list/ES (the interface is currently available in Catalan, Castilian Spanish, English and partial French coverage)

Short Spanish wikipedia page: https://es.wikipedia.org/wiki/IntegralCES_(Sistema_de_Intercambio_Comunitario_Integral)

Very extensive developer documentation: http://docs.integralces.net/dox/en/

This entire thing is licensed GPL and helps people live decent lives free of fractional reserve banking, in an era of deflation and low money velocity, the limited creation of interest free local community credit is a very valuable thing indeed, ameliorating the dire economic problems in this region. Gotta get some credit here from you ZH peeps amirite?

VWAndy's picture

Barter Town folks. Produce or die.

Uranium Mountain's picture

Meanwhile in Sweden...

Sweden is on track to become the world's first cashless society.

""In general, the rule of thumb in Scandinavia is: 'If you have to pay in cash, something is wrong,'" writes Mikael Krogerus for Credit Suisse."

http://www.sciencealert.com/sweden-is-on-track-to-become-the-world-s-fir...

Eddy Vluggen's picture

It could not be due to the fact that creating a tangible fiat-currency would be rather costly, would it? And it has nothing to do with the fact that one merely needs a few computers, which is often already available, to introduce the new currency?

You think that there would be anyone contemplating on ordering a lot of metal discs, paying for it, and then hope for adoption? Or do you follow the hype, with BitCoin and StarTrek credits, and almost no risk?

Don't attribute to malice what can be explained with ignorance or stupidity.

honestann's picture

If these people/groups had any brains, they'd simply start buying and selling goods with silver rounds (coins).  If they want to make a local statement, it is a trivial matter to have a private mint create personalized rounds (coins) with whatever local logo and sayings they wish.

To create YAFS (yet another fiat scam) is just silly.  Plus, they are probably full of back doors and thereby also function as spy devices.

onmail1's picture

Great,

and get out of NATO , the satan's instrument