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Who assigns the value of the credits?

Short Answer:

We all do!

Better Answer:

Because the Favor is exchanged between members as per their negotiated terms and the prices they set for their offerings, the value of the Favor is in flux just like the U.S. Dollar and is very likely to stick fairly close to it.

There are, though, some factors that could cause the value of the currency to shift:

Do we have to use a variable valuation?

Couldn’t we stabilize the valuation?

Yes and no. A currency can be pegged to something else, but the value of any given thing in the economy is both mobile and a little subjective. We do want to take measures to avoid letting our money become a speculative commodity currency, like Bitcoin. That would hurt the community. But, attempting to impose a valuation which isn’t congruent with the reality of the currency and its context would also hurt the community.

Many grassroots economic initiatives resort to a prescriptive mechanic for artificially imposing a valuation onto a credit clearing system. This generally has one beneficial aspect if done intentionally, it scope and domain limits the currency. That is to say that it protects the currency from out of control growth and speculation and it helps to keep the currency focused on a chosen sector of the market. The most successful example of this is probably the Fureai Kippu, which features several transactional limitations which keep the currency focused on elderly care and prevent it from becoming volatile — which would be disastrous for the sick and elderly people who depend on it.

Time Banks

In a time bank the value is pegged to an hour of time. This establishes the value of the currency pretty tightly according to the occupational achievement of the membership, which is usually about all the same and doesn’t fetch an especially high price in the labor market. You don’t find violin makers, surgeons, law professors, deep sea welders, or gem cutters participating in time banks (though each of those occupations popularly use other specialized economic tools which are just as involved).

If a time bank is very intentional about who joins there are some really fantastic sweet spots. A lot of artisans, teachers, and performers have a hard time finding a wide enough customer base to earn very much — even though their goods and services do command a decent price. This means that they can’t generally afford each other’s offerings at full market price, which results in all sorts of unfavorable exchange issues, not the least of which is simply going without. Time banks solve this problem. But, they break down when anyone enters the system who isn’t in that specific sweet spot.

What about gold?

It has been suggested to this writer at least a hundred times that these community currencies will never have the respect of the true American patriot, help people survive the apocalypse, prevent another Great Depression, or whatever unless they are backed by gold. Yeah, maybe not. That’s okay.

First, we should consider that gold is also a speculative commodity with a market value which long ago exceeded its intrinsic usefulness. Secondly, because this currency system is zero-sum, we could be reasonably said to be backed in gold. We have exactly zero Favors worth of it in the Favor Solutions Network vault, which is — of course — a web server. Come to think of it, there probably is some gold in the server, but we need it for computing so it’s off limits.

In Conclusion

In designing the Favor to be valued by the transactions of its members but also to resist speculation, a statement of faith in people is being made. A deep love of humanity and faith in human goodness bolsters this design. Capitalism tells us that everyone is in it for themselves, and then rigs the game to ensure that everyone plays that way. Socialism tells us that we aren’t capable of working things out, that a central authority needs to micromanage every last resource.

There is no ism here.

The Favor isn’t the manifestation of a messianic doctrine with formulaic solutions, a panacea philosophy like Marx hoped to provide. It isn’t a fight for supremacy and endless ascension as the neo-liberals are hell bent on. The Favor Solutions Network is just a good tool for good people, something to help them do whatever they mean to do with their lives.

Deacon Rodda May 19, 2020