The solution, and the logical consequence of the Internet is IMHO for:
(a) Peer to Peer credit - ie a Guarantee Society approach where bilateral unsecured credit is supported by a mutual guarantee;
(b) Peer to Peer Investment - a Unitisation approach where Units issued by an Asset Trust or Capital Partnership would be redeemable in productive use value (eg Kilowatt Hours or Square Metre Years), and would replace secured credit.
In both cases, Banks are disintermediated and must morph to a service provider role in order to continue to be relevant.
An energy dollar operating within an International Clearing Union framework would be the mechanism and reserve currency required for international trade.
The fact that both energy sellers and energy buyers trading on credit terms would pay for the mutual guarantee of performance is precisely congruent to Keynes' specification for the Bancor, where both positive and negative trade balances were to be subject to interest charges.
Most value in circulation would be based upon land rental value as it is already. The difference is that there would be no banks intermediating between mortgagees and depositors, but rather direct Peer to Peer investment in land rental value by Investors in a new generation of quasi REIT's.
So land rental value units would circulate alongside energy units within national Clearing Unions, which would be networked to form the International Clearing Union.
A measure of capital controls is essentially built in to such an architecture, because while land rental units would be tradable by anyone anywhere, they would only - by definition - be redeemable in the country of issue - no other country could issue them. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The fact that the G8 think that they can insist upon a new financial architecture that suits them is a joke.
Re Trust, as Comrade Stalin said:
"Trust - but Validate".
The networked clearing union model I advocate has the validation built in through the payments made for the use of the guarantee on the one hand, and for the use of the productive asset on the other.
I think that we are seeing the death throes of the centralised but connected Economy 2.0 and the emergence of the decentralised but connected Economy 3.0.
The fact of the matter is, IMHO, that the world is awash in capital to the extent that the market price of relatively risk free capital (I mean productive capital such as land) is probably between 0.25% and 0.5% pa.
Investors are just going to have to get used to this, and realise that if they want a higher return then they are going to have to take risks to get it.
Note that no inflation is possible in a truly value-based (as opposed to a claim-over-value based) system. Inflation is IMHO directly caused by the deficit basis of money (asset prices) and government (retail prices).
The cost of credit on the other hand - ie the cost of system operation and defaults - is probably around 1 to 2% pa.
As I have said before, I think that one of the outcomes of the pervasive and viral spread of such a networked clearing and investment model will be a rapid transition of the representative State to a participative State.
We live in interesting times.... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
