Fair credit for community empowerment

A self-adjusting source of liquidity


In a mutual credit system, whenever a user goes into overdraft she is in fact receiving credit from the rest of the network and whenever a user holds a positive balance he is granting credit to the community. This means issuances of PAR are not backed by an asset like gold, legal tender or another cryptocurrency; instead, every PAR in circulation is guaranteed by the transactions that take place within the community. The amount of tokens circulating is adjusted at all times to the needs of the economy.

The fact that someone is holding a negative balance of PAR necessarily implies that another member of the system is holding a positive one. Therefore, it must always be the case that the sum of all balances adds up to zero, i.e. there is no financial wealth within the system. It is because of this that PAR can successfully perform its function of means of exchange, unlike conventional money. Those who sell more than they buy—i.e. have a positive balance of PAR—do not earn an asset which can be used as a means of investment or speculation, as is the case with legal tender. They have instead put their surplus at the disposal of the rest of the community, in accordance with Gesell’s idea that money should always be in constant circulation, either being spent in exchange for goods or being lent to those who need it.

In this way, through MonedaPAR prosumers effectively have access to liquidity with no need to rely on the traditional banking system: they rely on no one but themselves. Members of the network can thus trade even in contexts where legal tender liquidity is scarce, whilst the network’s capital is kept within itself, fostering its growth. To make the system fair for everyone — and therefore successful — it should be the case that members with negative balances should try, over time, to cancel their overdrafts by selling their goods or services so as to achieve equilibrated balances of PAR. Everyone would thus be taking from the community an amount of goods and services equivalent to the amount she offers.

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