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The Future of Money

April 10, 2016

The system which monitors our use of money is in essence dysfunctional and as a result it creates all sorts of unnecessary mis-allocations in the economy.

A healthy economy is created from voluntarily completed binary exchanges of goods and/or services, nothing more and nothing less. Such completed exchanges are the events which create an economy.

From an economic point of view these events are like atoms because if split up they immediately cease to be the holistic economic events that naturally create a healthy economy.

A healthy economy is constructed from healthy economic events. Economic events are healthy when both parties are fully satisfied with the completed exchange.

Our current money and money system basically prevents healthy economic activity in two ways.

1. Through only representing the ‘quantitative value’ element of completed exchanges money ignores the equally important social impacts of completed exchanges.

This enables economic actors to be destructive, either environmentally or socially, in how they earn money because money currently has no moral colour attached.

2. Through removing the power to produce new money from the individual and giving this power to the State the current money system immorally removes this capability from  where it naturally belongs.

The State then delegates this immorally appropriated power to produce new money to financial institutions like banks. Banks will only supply new money to their existing customers in the form of interest bearing loans and as a consequence the unbanked are denied access to new money.

In addition these new money loans are actually worthless. We have a fiat currency which means that on issue new money naturally cannot have backing value. It has to participate in a completed exchange before it has backing value.

Thus the banks are:

a) defrauding their customers,  when charging interest on new money loans

b) causing inflation, because the new money, when first put into circulation, is worthless, i.e. has no backing value

The banks only role in the economy should be to act as brokers between investors and  borrowers, that is all. New money should only be issued to individuals when they are in need of it to enter an exchange process.

Money was invented because one on one exchanges are difficult to arrange. The purpose of money is to facilitate the voluntary exchange goods and services between one individual and multiple others.

From a single individual’s point of view the exchange process that results in an economic event consists of a receiving half and a giving half. The use of money enables the two halves of an economic event to be separated from one and other both in space and in time, but the second, the giving, half of the event still has to be completed by the individual if an economic event is to  result.

The reality is that once the use of money in exchange processes becomes the norm within an economy an individual has to have enough money to be able to enter into any exchange process. Consequently by removing the individual’s power to trigger the production of new money, should they need it, the current money system is curtailing the freedom of the individual, who is short of money, to enter into exchange processes.

To create the basic conditions for a healthy economy we need the reform of both money and the money system. There would be a lot of work involved in the reform but well worth the doing of it

1. We should switch to a wholly electronic currency. This is quite technically feasible but the implications and the details of this switch would have to be worked out by all stake holders.

2. An electronic currency should enable an identifiable instigator to be recorded for each unit of the currency thus giving its birth a moral colour. A rolling record of the identities of up to [10?] of the most recent holders should be also kept so adding to the depth of its moral colour.

2. The money system should be changed so as to only issue new money to individuals who need it to make purchases.

3. Banking functions should be restricted to dealing only with old money. Any dealing with new money should not be allowed as part of banking operations.

There will be many benefits associated with such reforms. To list some major ones:

– no person who is capable of being economically active need ever again be short of money to make a purchase

– inflation, induced by the way the current money system operates, will stop

– there will be no costs of securing and handling physical money

– people, after looking at the instigator and holder history of any unit of currency, will be able to refuse to accept it as payment if they wish


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