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Parallel Stimulus : A Community Led Resilience Solution

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29th Apr 2020

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The world is facing an extremely difficult financial picture generated by the supply and demand shock of COVID-19. Parallel Stimulus can offer a temporary solution for people, communities and governments to soften the economic blow.

Hub Culture is working with local, regional, state and federal governments to create Parallel Stimulus programmes in the wake of COVID-19 through a dedicated digital window, MyCOVID19.io. These stimulus programmes enable issuers, regulators, local authorities or federal monetary authorities the capability to issue a digital stimulus asset that can be immediately delivered directly to businesses and citizens. 

The issued asset can be convertible or non-convertible, depending on the desires of the issuer. The system features a real-time auditing system, rebate function, and secure management oversight.

The premise of Parallel Stimulus is two-fold – to drive short term financial stimulus for citizens without destroying the community's wider balance of payments budget, and to entice the global audience of related outside stakeholders to continue spending and engagement in relevant communities.

The system could be compared broadly to M-Life Rewards, the highly successful multi-billion dollar reward system covering Caesars Entertainment, MGM Resorts and other locations in Las Vegas to drive customer spending and loyalty. This program has been credited as a major driver in the company’s transformation into an $8.6 billion dollar annual revenue company by putting rewards into the hands of customers and linking retailers and partners into the program to fund the liquidity of the program.

Parallel Stimulus could consist of an initial liquidity surge by an issuer for residents and customers to spend with a network of approved merchants, who can onboard to accept Parallel Stimulus via a simple online application that links their entity with a digital wallet. Residents who qualify for the stimulus programme would also be able to sign up to receive their stimulus deposit, which can then be spent at participating merchants or traded between members through digital social links/connection. All transactions are recorded onto a privacy managed ledger, with anonymized data available to the government and regulator, or other partners as needed.

Participants signing up to the programme would be asked to lever a variable discount to any purchase made (relative to normal cash) that is automatically distributed at the time of purchase. This discount is applied in equal measure to the consumer and the Issuer. In one example featuring a 10% demurrage, the issuer would each receive a 5% rebate for each transaction in the network, while the buyer receives a 5% credit back into their account balance. This promotes use of the unit over cash for the consumer. Most merchants can afford a 10% margin cost on the cost of a sale if it is compared to a ‘no-sale’ which would have been the result of less capital spending resulting from no Parallel Stimulus programme. In cases where the participant did not want to leverage a discount, they could of course still accept normal cash, (outside the programme), making every transaction voluntary and opt-in.

Let's do some math. Assuming a $5,000 stimulus per citizen, issued to 100,000 residents, the total injected stimulus to the programme would be $500,000,000.00. Given any velocity of money a Parallel Stimulus unit would need to change hands over 20 times, at a rate of 5% rebate on each transaction to the issuer, before the issuer would reach a net stimulus impact cost of 0, and all of its issued ‘money’ is returned to its coffers. All this is done without ever issuing a hard fiat dollar. In this scenario the cost of the programme is borne out by an optional, temporary 'goods discount' by the merchants or sellers in the system and distributed as bonus economic activity throughout the system. 

In this scenario, Parallel Stimulus would not be directly redeemable for cash, fiat money or US Dollars, but it would help to have a redeemer of last resort. For any merchant or seller willing to accept parallel Stimulus, for anything as diverse as utilities, mortgage payments, groceries, or landscaping services, the discount rate would be applied.

It is expected over time the Parallel Stimulus would pool toward certain types of companies who may wish to redeem not across their supply chains but back to intermediaries or brokers, who may wish to offer redemption to cash in a secondary market. The more transactions that occur before this redemption is done, the lower the ultimate cost to society and the issuer itself.

Global Travel Stimulus:

To boost tourism returns to and to drive customer loyalty, Stimulus could be made available in local markets at the community, regional or state level – those who visited a place within the last 12-24 months, or those who are considered desirable visitors from events, conventions and business communities – anyone for whom an email address is available for initial issuance. These customers could be digitally issued a volume of Stimulus to be spent if they come to a place, even when they land at immigration, which could be redeemed in the same method available to local residents. This “Tourism Stimulus” could for example be offered to 100,000 people at $500 per person, with an estimated ‘breakage’ of 10% - estimated at $45,000,000 in value. Again, with an estimated velocity of over 20 transactions per unit at the same rebate levels, the issuer would have earned back the value of the unit stimulus quickly (reclaiming 5% per transaction with 5% going as a rebate to the consumer), and the merchant getting the upside of the additional transaction volume.

It is estimated that it would take 3-6 months for the stimulus to work its way through the system and for the bulk of units to return to issuer coffers, at which point the issuer could re-issue the units to the market, or phase out the programme.

This system would work best to boost the local circulation of goods and services provided by residents, enhancing the local economy without risking damage to the fiat currency by over issuance. The natural attrition rate to the volume of the currency in the market makes it a naturally valuable transaction, as the supply of Stimulus would dwindle the more they are ‘used up’. Best of all, the true cost of the issuance of the Stimulus is absorbed by excess capacity in the retail markets, that would have gone un-used or wasted during the crisis, or as a result of discounting due to dire economic straits.

For more information or to request a demo, upgrade to Regulator membership on Hub Culture, where information on issuance is available.