The CCS is a highly social and community-building model of mutual exchange. The local currency is distributed in the form of a loan which must be renewed every 6 months. Loans are formalised in contracts that are cashable in national currency, if necessary. At the start, all participants are given a loan for the same amount of units, which can be adjusted up-wards or downwards in the future.
How does it work? The local money is distributed in the form of a loan under the condition that if this loan is not renewed or repaid in internal units, the loan can and must be repaid in national currency. The big advantage of issuing the units in the form of loans is that it stabilises the system. It becomes less easy for people to be a member for a short while only, using the initial units they receive and then walk away, leaving others with a trade deficit and a currency under inflationary pressure.
Those who want to obtain a loan have to follow an introduction course about the functioning of the system. Moreover, one should prove to be able to sell some home-made product or service on the local market.
The size of the new and renewed loans can be used to manipulate the total amount of money in circulation in order to avoid inflation or a lack of means of exchange. So, in general, the way the local currency is brought into circulation is a standard amount for everyone, which enables trade. No interest, maybe the printing costs for the money.
Loans must be renewed The loans must be renewed every half a year. If someone sells regularly within the system, the loan is renewed automatically. If a member has not contributed in any way to assist an-other community member and has only spent his/ hers initial units, then the loan will not be renewed. Instead, it will have to be paid back, either in local currency or in national currency. In this way the system incurs to less risk of having too much local currency in circulation and of finding members dropping out and harming the system.
Demurrage A second instrument reinforces the previous: the local currency will be burdened with demurrage. Demurrage is a small liquidity tax on the total amount of units someone possesses. In most cases, the demurrage will be used to pay the trainers of the new members, the organ-isers and to finance the markets etc. Yet, if necessary, it can be withdrawn from circulation to ‘boost’ the value of the unit.
Higher loans Every member can ask for a higher loan, backed by an asset offered as guarantee, to be used for consumption purposes. A reputation or a good name within the community, or an active trade history can be, for this purpose, regarded as an asset.
People who apply for an extra loan and bring in assets, have to pay two things: the cost of the credit-administration (including, if it is necessary, extra risk premium) and interest. This interest will be paid back to the person. The reason to first ask it and then give it back is that in this way, the time-lag can be influenced, once again to manipulate the quantity of money in circulation in order to keep the value at par.
CCS committee A CCS committee (or several) is created that has two main functions:
the use of the available resources within the community
(unemployment = 0, use of existing production capacity = almost
Maintain the value of the local currency (indicator: prices in
money are the same as in the local currency). To comply with this
function, the Committee has the following instruments:
destiny of the demurrage charges. If the local currency is undervalued,
than the (local currency) demurrage income should be kept out of
circulation. If there are no signs of inflation, than the demurrage can
be spend on community projects.
Delay the moment in which the interest is returned to the persons who have taken a loan;
The amount of the loans that are approved;
The period over which the loans have to be paid back;
The amount of the initial loan that is re-financed in a next period.
For an example of how the quantitative management of a local currency
can take place, please click here.