Letter F This place, freimarkt.org, is to become a market place for all kinds of goods and services. It will have its own currency, the Freimark. This currency shall be completely independent of existing currencies such as the Euro or the US Dollar, and designed after a different concept. Both Freimark and “conventional money” are agreements between groups of people, managed mostly “virtually” (in the case of Freimark exclusively) by networked computers. But whilst with the Dollar the total amount of money constantly increases (because of the interest) and thus the value of the individual Dollar constantly decreases (inflation), in Freimarkt there will always be exactly 100 Freimark to each participant.

Different from Dollar, Euro or Deutschmark the Freimark is not defined as hundred times a sub-unit such as Cents: in trading and for all calculations it can be divided as much as you like (limited only by the system's precision): 0.5 FM, 0.1 FM, 0.025 FM, 0.01 FM, 0.004 FM...

The „rules“ in detail: everyone starts with 98 Freimark. It is not necessary to initially borrow money against interest from a bank - repayment including the interest would not be possible for everyone (see The Earth plus 5%)! Every month every participant in addition gets one Freimark basic income. Every three months 3% are deduced from each account - that is the circulation safeguard (or compulsion) proposed by Silvio Gesell. The total amount of money thus always stays constant. Now spending money pays off, because someone who amasses a lot money and keeps it ready for usage, but does not actually spend it, is punished.

Participants could found “banks”, where you could deposit your money for use by others (credit), who'd pay back the money after a certain time without interest (but not diminished by the circulation safeguard). The bank would issue service and risk charges from creditor and/or debtor, but significantly less than today's interest, because the money is no longer better than the goods, thanks to the circulation safeguard.

Freimarkt will have a built-in credit, limited to 24 Freimark to save-guard the user from excessive dept and the system from abuse. The credit will be free, but once you've reached the limit, you cannot buy anything anymore.

If a participant with less than 98 Freimark (the amount granted to every member) leaves the system, the amount of money in the system has to be reduced accordingly. This will be achieved by temporarily increasing the circulation saveguard to up to 6%, until the average of 98 Freimark to the participant is reached again. The exact increase would be announced before the beginning of the respective quarter (i.e. three months period).

At the Freimarkt all trades are “financial transactions“ and thus liable to a financial transaction tax (instead of VAT/GST). Initially this tax is only to impede short selling, transactions that serve purposes other than the actual exchange of goods or services. Should Freimarkt one day become an important economic factor, towns, states, unions, and the UN could become participants and demand one percent (or more) of every transaction to finance roadworks, teachers, medical treatment, unemployment benefits, and state servants, or subsidise businesses - in Freimark, of course. The tax would always be adjusted to the demand and public budgets would no longer run into deficit. Until then, all tax revenues will be evenly redistributed to the participants via an increased basic income. Initially the financial transaction tax will be 2%. For standing orders that run longer than three months the tax rate will be divided by half after the third month, to encourage an even flow of money (e.g. the payment of salaries).

To operate the Freimarkt platform itself, if this can not be achieved through donations, a tiny part of the financial transaction tax (maybe 0.001%) should be sufficient.

Every individual should only ever create one Freimarkt account - not multiple accounts at once, nor multiple accounts in a row, because otherwise he or she would get more Freimark than the honest participants. This is not a big problem as long as Freimarkt is only used for transactions of little value, but should the desired growth occur, having participants identify with a unique ID might be a good idea. Even when leaving the system, except when leaving because of death, this ID (such as a government tax number) would have to be kept in the system. Maybe social control is a viable option as well, since everyone will prefer trading in their closer environment (if only to safe postage) - so someone might notice, if one individual has two accounts, and notify a market administrator. Furthermore a single account becomes more trustworthy and thus more valuable, the more successful transactions with different participants are made with it - thus splitting one's identity to several accounts in this system would already incur some disadvantages as well. In addition the starter capital will initially be partly blocked, similar to the bank account some grandparents create for their grandchildren to use when they become adults: the earliest after one year and after a transaction volume of at least 500 FM the account balance can sink below 50 FM.

Participants are of course free to participate in other monetary systems such as the Dollar. This reduces the dependence on a single system. “Exchange offices” could also exist, participants of different systems who buy or sell currencies at rates resulting from supply and demand.

The value of the Freimark unit thus totally depends on the goods (and services) on offer at the Freimarkt: more goods, more value (deflation), less goods, less value (inflation). Theoretically this holds true for other currencies as well, but generally there is only inflation in conventional systems and never deflation. Deflation would be fatal for systems without circulation safeguard, because it would prompt consumers to postpone their purchases, to wait for better prices. And trade would no longer be profitable, if one could only sell at prices that might even fall below the wholesale price. Only the circulation safeguard in the Freimarkt system ensures that money is still spent and the economy does not collapse even in times of deflation.

The “mission statement” above is from July/August 2010 (translated to English in October 2010, one sentence deleted in August 2013)


There are already several only markets with alternative currencies (but without a circulation safeguard) for Germany:

Please let me know about similar systems in English! If you are a programmer, go ahead and build your own free market with a circulation safeguard, then tell me about it! I'm not sure I can get Freimarkt.org running on my own, but I'll keep working on it...

Vlado Plaga, vp@freimarkt.org

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