Tuesday, December 8, 2009

Why Shire Hours?

Reposted from Community Currency Magazine

Why would I want to use Shire Hours when I can
use regular money?
Three reasons:
1. Shire Hours is more efficient, and therefore
cheaper for payments than regular money.
2. Shire Hours is more community-oriented
than regular money.
3. Shire Hours is not prone to inflation.
The explanation will involve delving into what regular
money is and how banks actually work.
To understand why Shire Hours is more efficient than
regular money, take into account that when we say
“regular money”, we’re not talking about paper money,
but rather bank account money, which accounts for
over 95% of money out there. Banks charge fees
to lend and take care of this money. Think of all the
people who work directly and indirectly for the banking
industry. Someone has to pay all these people’s
salaries, not to mention the profits that banks regularly
rake in. Whether you are charged directly or not, you
pay for bank fees because they are factored into the
price of every item you purchase. How come Shire
Hours doesn’t need to charge fees? Read on:
When you have money in your bank account, you
probably realize that the bank doesn’t actual have a
little bundle of paper money in their vault with your
name on it. Instead, what they have is a little number
in their computer with your name on it that tells them
how much they owe you. You trust that if you should
ask for a cash withdrawal, the bank will be able to
come up with the money. A bank account is really the
bank’s IOU, or obligation to you. And if you think about
it, paper money is just the government’s obligation to
you, redeemable as payment for taxes.
Since we trust that our banks will be able to issue us
useful government obligations at any time, we are
generally content to pay one another by having them
shuffle their obligations from one person’s account
to another, using checks, or more recently, debit and
credit cards. Often obligations must be shuffled behind
the scenes to a different bank through a central bank,
or through several banks in the case of international
transfers. This shuffling is exactly what Shire Hours
mimics, except instead of shuffling obligations only
between banks, it shuffles them between anyone,
including banks, if they wish to participate.
Banks take the money they get in deposits and lend it
out. Actually, since most payments are made without
ever withdrawing actual cash, and since most cash
simply gets deposited right back in a bank anyways,
they may lend out up to 10 times the amount of
deposits they have. This is how most money gets
created: banks simply bring it into being by adding
to someone’s account balance and calling it a loan –
money is nothing but bank obligations, after all.
Banks owe many times what they have in cash, and
yet stay solvent because every borrower promises
to pay back the amount they have borrowed. When
a loan is paid back, that bank obligation is fulfilled –
in other words, that money is destroyed. To earn the
money to pay back the loan, a borrower must perform
some service of value to someone else who has
money to spend. That is what gives money its value:
borrowers want to take it in exchange for their services
in order to pay back their loan. If a bank can’t recover
the money from a loan, the bank must deduct the
unpaid amount from its profit or risk going bankrupt.
Banking regulations ensure that banks follow a strict
accounting code. The whole arrangement is a rather
ingenius way of keeping score of who is doing their
part in society, especially given that it was developed
well before the advent of computers. To ensure that
it is profitable, then, a bank must only lend to people
who are going to be able to reliably earn money and
who can be trusted to pay back what they owe. So for
a bank to lend you money, it must learn how you are
going to earn money in the future, and how well you
have fulfilled your obligations in the past. Often this is
a time-consuming and labor-intensive process, which
is one reason that banks employ so many people: The
borrower-lender relationship is fundamentally a trust
relationship, and forming a trust relationship takes
time and energy.
Shire Hours is a financial system that recognizes
existing trust relationships between human beings
and works within that structure, instead of imposing a
structure by demanding that we all put in the effort to
form trust relationships with institutions that we would
otherwise have nothing to do with.
But more importantly, when a bank lends you money,
it is making a value judgement, not only on you and
whether your activities will be valuable, but on society
at large and whether they will judge your activities
as valuable. A bank is an institutional entity, and as
such it can only value what it can measure: things like
income, profit, rates of production, forecast growth,
etc. It cannot value things that are truly important
to human beings such as love, community, and
relationships. Human beings working at banks might
do the best they can, but ultimately the relationships
between bank employees and bank clients are rarely
very deep because they are formed solely for financial
reasons. And bank employees can only exercise
discretion within the tightly controlled framework of the
bank’s corporate regulations.
We have a system where nearly all economic activity
depends on the presence of sufficient money to
enable it. 95% of that money is created by banks for
people or purposes that they deem valuable. Yet what
banks value is at best a shadow of what we truly value
as human beings. Is it any wonder that our economic
lives are so out of balance? That what we feel we must
do for money so rarely seems to be in harmony with
what we truly want to do? That the more successful
we become economically, the more the fabric of our
communities seems to break down?
With Shire Hours, the point is to keep track of who
is contributing to the things most valuable to you, by
those who are closest to you, who share your values
the most, and who are most familiar with your personal
situation. Money is a fantastic way that we have
invented to organize cooperation among ourselves,
and using it, we have been remarkably successful at
exploiting natural resources to produce an abundance
of material goods for our enjoyment. But as important
as it is, there is more to life than the enjoyment of
material goods. Technology makes it possible to
adapt our economic systems to better reflect what we
actually want out of life. Shire Hours is one of the many
new systems that have become possible because of
the internet.
So, by all means, continue using regular money. But
give Shire Hours and other new systems a try where
you can and see if new possibilities don’t open up for
you. https://www.shirehours.com/ Shire Hours is a
part of the Ripple project to develop a peer-to-peer
network protocol for making decentralized Ripple
payments between users on different computers. To
learn more, please visit the Ripple project homepage.

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