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The Future of Money

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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Essential Purpose ofMoney

The intention of this paper is how, working from the essential purpose of money, it is quite possible to simultaneously eliminate money poverty and inflation induced by the money system.

Introduction

Voluntary exchanges of goods and services between individuals forge the links between individuals that create and strengthen community.

Completed exchanges between individuals are the events which create an economy.

How are these exchanges effected?

The simplest exchange

A voluntary exchange of goods and/or services between two individuals is the simplest possible exchange.

Completion of simple exchanges presents a major difficulty however in that the search for a single exchange partner requires the investment of much time and effort and could easily fail because each party must offer the other party an item for exchange that the other party is prepared to accept in exchange for what they are offering.

The finding problem would be lessened however if completed exchanges  involved more than one other party. Such exchanges would be complex in nature but quite doable.

A Complex Exchange

Party A receives an item IB, that they want from party B. Then A supplies an item IA, that they have and equal in value to IB, to another party C.

A’s effort to find the exact single exchange partner that they need is drastically reduced even though A has to involve two other parties in the exchange rather than just one.

A new problem arises from this solution however,and that is, how to ensure that IA and IB have equal value?

In order to maintain the value in the exchange a  link between these two separate transactions is needed, i.e. it must forge a link with constant value between the ‘obtaining item’ part of the exchange and the ‘supplying item’ part of the exchange. If this value could be recorded in a manner that is acceptable to all the parties concerned then this problem would be solved.

This is where the concept of money enters into the exchange process. Money is the enabler of complex exchanges. This is because money forges the value link between the obtaining part of the exchange and the supplying part of the exchange. In addition the money enables B, using the money received for IB, to obtain any item IX, that they want, equal in value to IB.

Money is not without a potential problem however. What is this problem?

Money’s Potential  Problem

To serve its purpose money has to be an honest representation of the value of something. The unambiguous recording of the socially accepted quantitative value of exchanged items is what results in honest money. There is no problem with honest money, its face value represents the socially proven value of a specific actual good or service.

Money is only a representation of value however and it is therefore quite possible to produce money independent of any exchanged items. Such money can create a problem  because on issue it represents the value of nothing specific. Consequently it
has to either steal any value that it has, from the value represented by the money already in circulation, thus creating a problem, or, if it can validly do so, represent the value in completed exchanges which value is as yet unrepresented, this is not a problem.

The stealing of value is a problem because it  debases the currency. We know it as inflation. Currently we live with endemic money system induced inflation but this does not have to be.

Eradicating ‘Induced Inflation’

We just need to make a small change to the way in which new money is issued into circulation in order to eliminate induced inflation. This suggested change is now possible because

a) we  use a fiat currency and

b) smart phones are available to serve as electronic wallets.

The change would

a) enable our money system to properly align with economic reality from scratcyh and thus eradicate inflation induced by the money system

b) totally eliminate money poverty.

Some History of Money

Historically the money used in economies was either a fiat currency or a commodity based currency.

Commodity based currencies are not of any interest to us here because since the 1970s, we have, in the Rand, been using a fiat currency.

Fiat currencies are in essence pure money in that they are just recordings of value nothing else. Fiat currencies represent the values of items in completed exchanges or they don’t because they are representing nothing and are thus fraudulent. Fiat currencies are naturally fraudulent on issue, they only get their real value once they have participated in a completed exchange.

Gaining Benefit From a Fiat Currency

The fact of fiat currencies being naturally fraudulent on issue could be utilised to the benefit of everybody in the economy but our current money system does not do this.

The money system should allow anybody, who wants to enter into an exchange but is short of sufficient money to do so, to trigger off the money system to produce sufficient new money to meet the short fall. The new money would need to be recorded against its recipient as non-interest paying debt defrayed as and when, the recipient pf the received new money, receives money for goods and/or services supplied by them. To prevent  free-loading on the wider community there would have to be an enforced cap on the size of the new money debt that any person could hold at any point in time.

Credit cards give this new money facility but credit cards can only be held by people who have bank accounts. People without bank accounts have no access to credit cards and thus have no access to new money.

In fact new money should only ever be issued to individuals who are short of enough money to make a desired purchase. This would ensure two things

a) that nobody, capable of making exchanges, is ever short of money, and

b) that ‘money system induced  inflation’ never happens.

 

Honest Money

Money has a representational role. In order to fulfill this role it has two values associated with it, a face value and a representational value. The face value is the stated value and the representational value, which if it exists is the same as the face value, is the single representation in money of the value of an exchangeable economic good.

Honest money is money where the face value is backed up by the value of a single exchanged economic good. Dishonest money is where the face value is not backed up by the value of a single exchanged economic good.

How do we ensure that money is honest?

Historically, in the days of adherence to the gold standard, which most countries, including ourselves, no longer do, this was ensured by the State enforcing a link between each unit of currency and a specific fraction of the State’s gold holding, which is an exchangeable good. This legal link ensured, from issuance, the reality of each unit’s representational value and thus its honesty.

But since the 1970‘s we have not adhered to the gold standard, our currency has become a fiat currency. This means that if the currency is to be honest then each unit of currency in circulation must singularly represent a specific fraction of the country’s total wealth. At present this simply cannot be achieved because the issuing of new currency is happening at one step removed from actual economic activity, the values of which exchanged items are supposed to be represented by the currency. As the State does not issue new money at the point of need it tries to control the volume of currency in circulation by controlling the rate of inflation. This is akin to trying to thread a darning needle with gloves on so it is not very successful in this endeavour.

How could this be fixed? Could we issue new currency at the times and places where economic activity is taking place?

To be able to answer this question unambiguously we need to fully comprehend exactly where new money could be introduced into economic acts and, recognised as such. For this we need to dis-sect economic acts into their component parts.

The Components of Economic Activity

Humans make voluntary exchanges of goods and services with one and other. These exchanges are economic activity. Some of these exchanges are also essential for the continued existence of the exchanging parties.

Before the invention of money these exchanges were perforce simple. After the invention of money this was no longer the case and complex voluntary exchanges became possible.

A Simple Voluntary Exchange

A completed simple voluntary exchange is comprised of the following components:

Physical:

– two parties A & B
– two items IA, belonging to A, and, IB, belonging to B
– two mirror image exchanges where A gives IA to B, and, B gives IB to A

Mental: [i.e. in the two parties’ heads]

– in A’s head two values, IAav for IA, and, IBav for IB, and IAav <= IBav
– in B’s head two values, IAbv for IA, and, IBbv for IB, and IBbv <= IAbv
Note: Whether (IAav = IBav) = (IBbv = IAbv) has no relevance for the completion
of the exchange.

A Complex Voluntary Exchange

A complex voluntary exchange is comprised of two independent components, a Purchase Component and a Sales Component which must both be completed for the exchange to be completed and this will only be the case if both components contain two elements which are the same throughout, i.e. one of the parties and the value of the money used.

NOTE: The age of the money used, i.e. whether it is newly issued or old, determines which of the components of the exchange comes first in time.

Purchase Component:

Physical:

– two parties A & B
– one item, IB, belonging to B
– one set of money, Ma, belonging to A
–  A purchases IB from B with Ma

Mental: [i.e. in the two parties’ heads]

– in A’s head one value, IBav for IB, and IBav = Ma
– in B’s head one value, IBbv for IB, and IBbv = Ma

Sales Component:

Physical:

– two parties A & C
– one item IA, belonging to A
– one set of money, Mc, belonging to C, where Mc = Ma
– A sells IA to C for Mc

Mental: [i.e. in the two parties’ heads]

– in A’s head two values, IAav for IA, and, IAav = Mc
– in C’s head two values, IAcv for IA, and, IAcv = Mc

The two elements that link the purchase and sales components are party A and the values of Ma and Mc, Ma must = Mc.

If A uses old money, Ma, in the Purchase Component then it means that A has already executed the Sales Component of a complex exchange thus the complex exchange is completed.

If A uses newly issued money, Ma, in the Purchase Component then it means that the Sales Component of the complex exchange has still to take place before the exchange can be regarded as complete.

Thus the following actions have to take place:

a) the Money System must issue A with  a new money debt of Ma to fund the Purchase Component of the complex exchange
b) A has to execute the Sales Component of the complex exchange
c) subsequent to the sale the Money System has to settle the new money debt Ma with Mc removing Mc from circulation as Ma has replaced it in representational value.

The complex exchange is now complete and new money has been accepted into circulation without debasing the value of the currency.

A system solution for the problems caused by the current money system

Societies, and individuals, economic problems are exacerbated by how our money systems operate. The systems were developed for commodity based currencies and as such correctly assume that the Units of Currency [UoC] have not only their face value but also have  a real value equal to the face value right from the point of issuance. This was correct because each UoC was supposed to be backed by real value in the form of a legally stipulated fraction of the State’s gold holding.

We now operate with a fiat currency however and the same is not true for the UoC of a fiat currency. Incidentally fiat currencies are now what most , if not all, countries of the world  use.

At issuance a fiat currency has no real value to back its face value. The real value comes about in one of two ways. The always honest way is when the newly issued UoC directly participates in a completed voluntary exchange.

The dishonest way is when a UoC is issued not connected to any particular voluntary exchange. If its issuance sometimes happens to  coincide with participation in a completed exchange then it gains its real value from that exchange and it’s real value is honestly acquired. If there is no completed exchange for its issuance to coincide with then it has to get  what it can, of a real value, by stealing it from the real value of the already issued currency. In this case the newly issued UoC debases the currency giving rise to inflation.

This is what is happening with our current money system. It operates as if we were still dealing with a commodity based currency, when we aren’t, we are operating with a fiat currency. This means that our money system is following the dishonest way of issuing new money. This explains our constant battle with inflation.

This problem would be solved if the money system was changed to issue new money, as new money debt, to anybody who needed it to enter into the purchase half of an exchange. They would execute the supply half of the exchange as soon as they received money from the sale of a good or service of equivalent value and thereby settled their new money debt.

Such a change would also mark the end of money poverty in society and open the way for everybody to become economically active.

Its implementation would require political will.

a) Because business as usual would not be possible for financial institutions like banks.
b) In order to be able to issue new currency at any point of need it would need to be done through a smart phone and for that ideally we would need to convert to a completely  digital currency.

The Systemic Roots of Money Poverty

The Systemic Roots of Money Poverty

Introduction
False Assumptions
One
Two
A simple exchange
A complex exchange
Some Other Facts about an Economy
The money system

Introduction

Now unlike a commodity based currency a fiat currency has no backing value at the point of issue and, we have a fiat currency. Thus it is actually not necessary for South Africans to be without the authority to trigger the creation of new money for themselves as part of their normal exchange activities. However under our current money system this is not possible.

In view of our massive problems of poverty and unemployment shouldn’t this flaw in the money system be fixed and, if yes, can it be fixed?

The essential purpose of money is to facilitate exchanges of goods and/or services so yes, this flaw in the money system should be fixed.

In essence money is nothing but the recorded, agreed upon, value of an item exchanged between two parties so there is no logical reason why any individual should not be able to trigger the production of new money, should they need it,  to enter into the first half of an exchange, i.e. into the purchase half on an exchange.

Can the money system be fixed to enable this to happen? Yes it can. It just needs the political will to take on the challenge and, it is a challenge. There are significant vested interests who are profiting from the false assumptions upon which the current money system functions.

False Assumptions

One

The first and foremost economically damaging false assumption is that, like a commodity based currency, a fiat currency has on first issue a backing value equal to its face value.

This is simply not true.

However those who behave as though it is true can get away with it because units of newly issued fiat currency will by default either

a) steal what they can of their, backing value, from the currency already in circulation and  thereby cause inflation, which the general populace has come to accept as an unfortunate given of the current monetary system

or

b) if there is insufficient currency already in circulation, for the volume of already completed exchanges, the newly issued units of currency will naturally fall into representing this currently unrepresented value and will not be inflationary.

Two

Newly issued currency cannot be issued free to anybody except as charity.

This is true for a commodity based currency because right from its issuance it has a legally enforced backing value derived from the commodity. Therefore a commodity based currency has to be earned.

This is not true for a fiat currency which has no backing value at the point of issue. It only gets its backing value from the completion of the second half of the first exchange it participates in, i.e. when the new money’s user supplies [sells] something of equivalent value into the community and thereby settles the new money debt.

People may or may not have enough knowledge to be comfortable with the above informed reasoning so let us make sure that we know what the fundamental components, including money, of an economy are.

The foundational element of any economy is the voluntary exchange of goods and/or services. How then does money become part of such an exchange? Now exchanges can be either simple, i.e without the involvement of money, or complex, i.e. with the involvement of money.

A simple exchange

A simple exchange is one which involves the following:

Physical elements:

Two parties, A & B
Two different items, IA & IB, to be exchanged
Two simultaneous exchange processes, A gives IA to B and, B gives IB to A,
[ i.e. two simultaneous zero sum games]

Mental elements:

In A’s head are the values Vaia & Vaib with Vaia = Vaib
In B’s head are the values Vbia & Vbib with Vbia = Vbib
[For the exchange to complete it is clearly not necessary for
(Vaia = Vaib) = (Vbia = Vbib).]

A complex exchange

A complex exchange is one which involves money. When completed it must result in the same result, economically, as a completed simple exchange, i.e two zero sum games which cancel one and other out, otherwise it is economically flawed in which case the value of any new money used in it remains unbacked up by the value of an exchanged item and thus a possible source of inflation.

A complex exchange happens in two halves, these halves happen independently but with a link maintained by the constant value of the money involved.

First  Half of Exchange

Physical elements:

Two parties, A & C
One item IC, owned by C and desired by A
A set of newly issued money Mn, owned as ‘new money debt’ by A
A purchase process where A gives Mn to C in exchange for IC

Mental elements:

In A’s head the value Vaic and Vaic = Mn
In C’s head the value Vcic and Vcic = Mn

Second Half of Exchange

Physical elements:

Two parties, A & D
One item IA, owned by A and desired by D
A set of money Md, equal to Mn, and owned by D
A sale process where A receives Md from D in exchange for IA
A uses Md to settle A’s new money debt, Mn, as Md=Mn
[The backing value of Mn, now in circulation, is socially affirmed.]

Mental elements:

In A’s head the value Vaia, where Vaia = Md
In D’s head the value Vdia, where Vdia = Md

Now let us look at some other facts about economies.

Some Other Facts about an Economy

As already said at base any economy is comprised of voluntary exchanges of goods and/or services; that is all.

To prevent any confusion in the meaning of exchange as used here it must be made quite clear, that an exchange here means a voluntary swapping of ownerships of, either goods and/or services, between two independent parties. Basically each party is participating in two zero sum games simultaneously which when, completed and  taken together, cancel one and other out so each party gains.

These exchanges fall into one of three groupings as follows:

G1. Completed exchanges
G2. In process exchanges
G3. Exchanges that are still only in somebody’s mind’s eye.

Money is just a socially accepted way of representing the socially affirmed values of the goods and services in the economy. This means that honest money can only come from G1 exchanges  because these exchanges are completed and therefore the values involved in the exchanges have been unambiguously, socially, affirmed.

Money can also be seen as signifying a contract between the individual, who holds it, and the community, a contract to supply goods and/or services of value equal to the face value of the money.

The contract from the community’s point of view is  always to supply, to the holder of the money, goods and/or services to the face value of the money.

The contract from the holder of the money’s point of view depends on whether it is a fiat or a commodity based currency.

If it is a commodity based currency then the holder must have earned it therefore there is never any contractual demand placed on the holder.

If it is a fiat currency then there could be a contractual demand placed on the holder depending on the money’s usage history as follows

– no usage history, i.e.new money

In this case the first user of the money is contracted to supply, into the community, goods and/or services of value equal to the money’s face value in order to give it backing value.

–  already used, i.e old money

In this case no user of it must have earned it and is therefore not contracted to supply anything into the community as they have already done so.

Changing the money system

The money system currently operates on the understanding that new money is only issued by the State. Currently the State is only responsible for issuing physical money. The State has handed over the issuing of new electronic money to the banks who are naturally only interested in dealing with people who already have money. Thus for anyone to have money they must have  got it from somebody else, preferably legitimately, not through theft or fraud. Thus the only way to get money is through someone, who already has it, by them employing you or by them buying something from you. People without money are 100% dependent on finding someone else, who already has money and has needs which they can satisfy. Currently in a money poor community this is very difficult, if not impossible, to do.

This need not be. The money system could administer a changed situation quite easily by creating a non-interest paying new money debt for the receiver of  the new money which debt would need to be settled by its owner when they received money from selling goods and/or services into the community. In other words the money system could issue new money as non-interest paying debt to anybody who wants to enter into a complex exchange and is short of the needed money to enter the first half of  the exchange, i.e. purchase. All that would then be required of them is that in due course they enter the second half of the exchange by selling something, of value equal to the debt, and thus settle their new money debt. There would of course have to be a democratically agreed cap on the amount of new money debt that any individual could hold at any point  in time in order to prevent free loading on the community and the consequent uncontrolled inflation

Such a change to the money system  would

a) offer everybody, and I mean everybody, the opportunity to enter the cash economy, under their own steam, and in a completely natural unforced way that did not require the involvement of anybody else. This involvement of everybody in the cash economy would be of immense benefit to our systemically hobbled economy.

b) ,in addition, if new money could only be issued in this way, end debasement of the currency and thus inflation induced through the flaws in the current money system.

To bring about the change there would need to be significant investments made in changing the current money system. Investments in time, resources and people but ultimately these investments would be beneficial to the whole country and its inhabitants.
We would need to switch to a wholly digital currency. This would relieve the economy of the cost burden of handling physical cash but it would also mean that government would need to ensure that every economically active person had a smart phone which could serve as their electronic wallet. It would also mean that every cash transaction, deposit or withdrawal, would have to start off in the money system run by a Central Currency Authority [CCA] . The  CCA would be responsible for issuing new money and enforcing the cap on new money debt. Thus every economically active person would need to be registered with the CCA in order to be able to transact and so that the CCA could control the amount of their new money debt. Each economically active person would also need to have a bank account to which the CCA would have transparent access as well as being able to deposit new money into it should it be required provided the new money cap was not being exceeded of course.

This simple change to the money system is logical and technically quite feasible, it has already been done, but only for the already banked, in ‘snapscan’ [ https://www.getsnapscan.com/%5D

The Physics of Economy and Money

The economy has become a very complex system in its own right  and money in its turn has become enmeshed in complexity but the way to develop an understanding of each of them does not have to start off with-in the current complexity. In fact we will be much better off by first getting an understanding of the basics, or physics, of both of them because the complexity is, after all, built on the basics.

Money is a by-product of a functioning economy, no economy no money. Thus we need to first understand the physics of an economy before we can develop an understanding of the physics of money.

Historically the money we use in the economy has been either a fiat currency or a commodity based currency. The general category of fiat currencies connects directly with the physics of money consequently we will only be dealing with fiat currencies here. The commodity based currencies do not relate so directly with the physics of money so they will not be dealt with here.

An economy consists of voluntary exchanges of ownership. These voluntary exchanges are in fact the only economic activities in an economy. They fall into three distinct groupings:

G1: Completed, voluntary exchanges of ownership of goods and/or services
G2: In process, voluntary exchanges of ownership of goods and/or services
G3: Potential, voluntary exchanges of ownership of goods and/or services.

Money can be either be an honest representation of the value of a good or service or a dishonest one. Honest money is a by-product of G1 activities only. G2 and G3 activities cannot result in honest money.

There are inherent difficulties in carrying out voluntary exchanges in ownership however and money was invented in order to overcome them. Once money had been invented its use became to all intents and purposes essential. Why is this? Because the use of money enabled the economic integrity of an exchange of ownership to be maintained whilst removing the constraint of, one exchange partner only, on the number of exchange partners involved. The  removal of this constraint allowed for an expansion in possible exchange partners thus opening the way to greatly increased economic activity. Through the use of money an exchange became, in a sense, a set of exchanges between one person and a community of persons.

How  exactly does money enable this?

To answer this question it is first necessary to unpack the various components of what I term an economic event which is nothing but a completed voluntary exchange of ownership. But we need to unpack a simple economic event first, which is an event that happens without the involvement of money.

A simple economic event

A simple economic event comprises both physical and a mental elements as follows:

Physically

– two parties, A & B, and
– two different items to be exchanged, IA & IB, and
– two exchange processes, A physically gives ownership of IA to B and, B physically gives ownership IB to A

Mentally

– in A’s head values, AVia and AVib, for IA and IB respectively
– in B’s head values, BVia and BVib, for IA and IB respectively

For a simple voluntary exchange to be completed it is clear that for A, AVia must = AVib, , and  for B, BVia must = BVib, otherwise the exchange of ownership would not happen and whether AVia = BVib, or not,  is irrelevant.
As stated above the problem with such simple economic events is that they are not simple to arrange. Why? Because A must be willing to exchange what they have with what B has available to exchange. In other words their respective needs and wants must match exactly with what is available for exchange. Now within any large collection of people there might be two people whose needs exactly match but locating them is difficult.This difficulty puts a natural damper on economic activity.

This problem would be lessened however if the supply and receipt roles of B in the simple exchange could be separated from one and other.  This would enable them to be taken up by two different parties C & D thus opening up many different exchange possibilities. From an economic perspective all that is necessary for this separation to be acceptable is that it should not damage the economic integrity of the simple economic event. In other words the value of what C supplies to A should be exactly the same as what A supplies to D. If that could be ensured then the economic integrity of this, now more complex economic event, would remain unchanged from that of the simple economic event.

A complex economic event

How is a complex economic event created from a simple economic event?

Quite simply by making an independent recording, IR, of the value of IC which both A and C are prepared to accept as being the truth. A could then take ownership of IC by exchanging it with C for IR.

Now as such a recording is standing-in for the economic value of an exchanged item it has to have the face value of that item as well as be owned by the person who claims to own the item. The IR recordings can be produced anywhere but they will only have economic relevance once the appropriate person takes ownership of them.

The socially accepted form of such recordings is known as money. So, in money terms, A gives money M, of face value IR, to C in exchange for item IC.

This is all very well but where does A get M from in the first place?

A gets ownership of M in either one of two ways.

1. A could have received M in exchange for a good or service that A supplied into the economy. M is thus honest money in that it represents the value of a real good or service supplied by A. In this case when M is handed to C in exchange for IC M is equivalent to that good or service and the payment would create an economic event.

2. On the other hand M could have been newly issued into A’s ownership as debt. In this case M would only have  its face value as it does not yet represent the value of a real good or service supplied by A. To complete the creation of the economic event A  needs at some point, to supply into the economy a good or service to the value of M, so that M can honestly become a stand-in for a good or service. In other words A’s use of newly issued M would automatically oblige A to supply, at some point, goods or services to the value of M into the economy. The money received from the sale would automatically discharge A’s newly issued M debt. Unless this happens A’s use of newly issued M is dishonest.

The logical implications of point 2 above

1. If money is involved, and point 2 above is adhered to, we can use the term ‘economic event’ not only for simple exchanges of ownership but also for complex exchanges of ownership because, taken together, the exchanges yield the same result in economic terms as a single, completed, simple voluntary exchange of ownership.

2. Any economically active person need never be short of enough money to make a purchase because any short-fall could be covered by issuing them with new money as non-interest paying debt  which debt would be settled as soon as they sold something into the economy of equivalent value.

3. Realising this change to the money system is, because of modern ICT, quite feasible. It would however require major political will to drive it. An outline of what is required is given in zzzzzzzzzz

Introduction to Short of Money

Modern life is inextricably bound up with money and economics. The intricacies of both of these topics appear to be too complex for most people to grasp so they don’t even try.This is not surprising as both topics have grown in complexity over the years. The complexity is however built on the basics which are quite simple to grasp so the the place to start in developing one’s understanding is not with the current complexity but with the basics.

The set of papers presented here attempt to do just that.