Pfhorrest wrote:What if we got rid of the monopoly on money entirely?
Let anyone issue any kind of money they like. Whether that has any value to anyone else, and thus gets used for anything, will depend on each issuer's monetary policy; what it's backed by, its inflation rate, etc. Currencies which stably retain value and yet are widely enough issued to conduct all the transactions we need to conduct would become most popular and the de facto standard. To do that they would need to be backed by some widespread but scarce resource of stable value; or some diversified portfolio of such resources. They could even be that ABCD$1.00, in essence, equals "IOU one share of this holding company owning a huge, extremely diverse and therefore relatively stable, stocks and commodities portfolio" -- and that, taken to the extreme, could even approach what really makes most sense, ABCD$1.00 = one share of the economy.
Well, how do you back up the value of your currency?
What you're describing sounds like Whuffies at best, Klout at worst, and neither of those are any good.
My point is that it is impossible for the US government to run out of money or default on it's debts unless it just says "hey, fuck all ya'll, I ain't gotta pay shit" or is invaded/razed.
If we all had our own currency, but you held debt in my currency, my currency value is stable as long as the debt exists, since you need my currency to pay the debt.
If the debt is suddenly payable in your currency or steve waterman currency (let debt = debt', YES?) why use mine?
Money is essentially promises. Some people want to avoid money as promises by making money be commodities. Like you pay for things with gold bars or silver dimes. When you use commodities as money, you are not actually paying for things with money. You are doing barter.
There's nothing wrong with barter. One man barters gold bullion, another barters bushels of corn, another barters chickens. Somewhere along the line everybody gets what they need. The chicken farmer gets corn to feed his chickens. The man with the gold gets chickens to eat. The jeweler and the dentist get gold to melt down to make things. It all works out, with the complication that if you don't know how much everything is worth you might make bad deals.
Actual money is promises, and it is backed up by your faith that the promise will be fulfilled. To the extent that you accept gold not because you want gold, but because you have faith that other people will accept gold to give you things you actually do want, the gold is promise too.
Promises are a useful currency only if there are a considerable number of promises that have not been kept yet. When the promise is fulfilled, the money disappears. If there aren't enough promises available to meet people's need for exchange, they will be thrown back on barter.
A promise is only good if you believe it will be fulfilled. Otherwise it is worthless to you, though you might still do charity for people and accept worthless money for goodwill.
Government money is promises by governments. Governments have some advantages -- they don't grow old and die, and within limits they can decide how much stuff to take from their citizens to pay for things. But when a government spends too much or when it's in danger of being overthrown, its promises are valued less. When a government treats its citizens too badly, some of them try to escape and the government must promise rewards to other citizens who prevent escape, and that wastes promises and resources.
Technically governments make it illegal for anyone else to create money. But they can't keep people from making promises, and often people work out ways to trade promises. Recently when they sliced up mortgages thin enough that any single failed mortgage wouldn't have much effect and could be statisticly predicted, and traded them publicly, that was a kind of money that the government didn't regulate or control.
Here is a way we could arrange private money, assuming zero information costs. Each young man takes out loans -- promises -- to get himself established. The value of his promises varies with his prospects. As his income rises he pays back some of his debt, or maybe he goes deeper into debt with the assurance that he will make even more later to pay it back. Ideally before his ability to work drops he will have paid back his whole debt and he will be a net creditor. If not, the value of his promises will drop until he is unable to put out new debt and must live on his income. His old debt trades rapidly at increasingly lower prices. Nobody wants to be stuck with it.
When you die, the debt you owe gets matched off against the debt you own.
The value of the money would depend on everybody's perceived ability to repay their promises. Most people prefer to have some promises they can depend on, rather than owe. So to have promises to trade, somebody has to make promises they will need to fulfill later, and the people who can be coerced into that would normally be the ones who would be least able to pay off later. But young people might expect to do better later, and enough of them could actually do that for their promises to be valuable.
Is that kind of like what we have now? The federal money is backed by your promise to pay back your loans. The banks thought you can and will pay it back, or they wouldn't have extended you credit. You have some hope of working your way out of debt before you are forcibly retired. Since information is not free, bankers make very good income keeping track of your promises and judging how much they are worth.
The Law of Fives is true. I see it everywhere I look for it.