What would happen if the Greeks did this?
Some large grass roots organisation (a union, for example) decides to set up a cooperative bank-like operation ("BLO"). This BLO issues "coupons". Technically, this BLO is just a national office with computer capacity and a few employees. There are no branches. Any individual possessing a mobile phone may have a coupon "account" with the BLO. An individual may then borrow a maximum amount of coupons from the BLO. The loan is nearly interest-free, say an interest rate of 0.1% which is only to cover the expenses of the BLO office and computer/network costs. This interest (or perhaps it should be called "rent" since it is in a different currency), while negligible, must be paid in Euros (additionally there may be a negative interest on coupons held, see below). The coupon loan has limited duration, a few months. When the loan expires, the borrower has the right to a renewed loan, but the maximum amount allowed may have been adjusted up or down in relation to the last loan received. More on this below.
All agents (individuals, firms) possessing coupons may use them for transactions with other agents. All transactions are done via mobile phone, using one of the technically proven schemes already in operation in some developing countries. There are no paper coupons in circulation. People and firms offering goods and services will now decide to accept a certain share of coupons in payment, while the rest must still be in Euros. The fraction is decided freely by the seller, and may also be changed at any time with circumstances. The same holds for wages: employers and employees may agree on a certain share of wages being paid in coupons, a share that may be re-negotiated as things develop.
The coupons are pure fiat money. They do not have any mechanism giving an intrinsic value like money issued by a central bank, which ensures this by being the sole currency that may be used to pay taxes.
People will therefore accept coupons in payment only because they believe that others will accept them too. This is a process which may be unstable both ways: confidence building more confidence, or decreasing confidence leading to collapse. By limiting the amount of coupons in circulation, based on feedback from the average acceptance of coupons as a share of payment together with euros, it should be possible to uphold the needed amount of confidence in this means of payment. The amount in circulation may be limited by renewing loans with a lower amount, when earlier loans expire. Then the borrower will have to accept a reduction of the amount in his/hers account. To avoid runaway inflation in coupons, one should probably start the process by issuing few initially, and letting the flow grow based on the observed impact.
Coupons may alternatively be levied with a negative interest of say 12%, following Silvio Gesell's famous proposal. Then loans do not need to be retired. Additional loans are instead issued based on the negative interest flow received by the BLO. The stock of circulating coupons is then constant. Technically, a Gesellian negative interest is easy to implement since all transactions are done electronically.
By introducing coupons like this, it should be possible to exploit a large underused resource that Greece has, unemployed or underemployed people. Enabling them to work will ameliorate the dramatic decrease in living standards for most people, that is today's bleak alternative.
Cheers, Trond Andresen
Institutt for teknisk kybernetikk
Fakultet for informasjonsteknologi, matematikk og elektroteknikk
Norges teknisk-naturvitenskapelige universitet (NTNU)