Amidst all of the talk about crazy aerial acrobatics that the Fed could do to boost aggregate demand through highly unconventional policymaking, I wanted to bring attention to my own crazy idea:

  1. A participating businesses secure a invoice insurance up to a predetermined amount, based on creditworthiness and claims on third parties.
  2. Business A then opens a checking account with the clearing network (CCC) and electronically exchanges the invoice for clearing funds, and pays it’s supplier (business B) immediately through the CCC.
  3. Business B then only needs to open an account with the CCC. Then it faces two options; cash the claim in for legal tender (at the cost of paying the interest for the outstanding period, and banking fees), or pay it’s own suppliers which the obtained clearing funds (zero cost).
  4. At the time of maturity, the network gets paid the amount of the invoice in legal tender, either by business A, or the insurance company (in the event of bankruptcy). Whoever owns the claim at that point can then cash their CCC claim for legal tender without incurring interest costs.

Alternative currency systems not only provide businesses with liquidity in monetary disequilibrium and can provide a smooth transition between use in good and bad times, they also increase the velocity of legal tender within economies.

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