how - other than default - could Units be manipulated?
default is a very real risk. And it's just a small subset of the "political manipulation" ensemble. It's a big enough risk to make an absolute certainty that your units will never fly.
My job as a project finance banker is not to lend money - most of my clients in the energy sector have more money than the banks. It is to take political risk.
subject to a globally valid guarantee.
Who can credibly provide that? I mean, other than the US (in which case, your "unit" will be called the "dollar") or maybe the Europeans (in which case, your "unit" will be called the "euro") In the long run, we're all dead. John Maynard Keynes
But is it not a very real risk with debt denominated in currency as well? True, oil producing countries are not the most trusted of governments. But, let's say Germany creates units redeemable for its wind turbines production, would the fear of default be that strong?*
Although, of course, a central bank can always decide to print more money than it expected to, whereas Germany can't decide to produce more electricity -so the risk of default is probably greater with a redeemable unit.
"in which case, your "unit" will be called the "dollar""
Is that so necessarily? Is the point not to back the unit to something useful that cannot be devalued easily? Would USA directly price their goods in the unit if it existed?
Couldn't the guarantee be provided jointly by USA and the EU? Of course, the next question is would they want to (since that would stabilise the exchange rate somewhat, not necessarily what governments really want). Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
"default is a very real risk." But is it not a very real risk with debt denominated in currency as well?
The point is that it is a separate, additional, source of default. In the long run, we're all dead. John Maynard Keynes
What's so difficult about (say) an International Gas Trade Association whose members - sell-side and buy-side - enter into a mutual guarantee agreement, and back it up with provisions into a default fund in respect of trade balances?
As you say, its the end users who have the assets to back the guarantee - not the banks.
You prove my point that banks should move aside and become service providers in respect of the undated direct peer to peer credit which exists between the Unit issuers and Unit holders.
It's in banks' own interests to move to service provision - don't you understand that? The only capital requirement they then have is that necessary for operating costs. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
So you could manage political risk with debt finance but not with unitisation? Quite a feat, since in fact, because there is no interest burden in unitisation the obligation is less. Conventional debt finance is clearly MORE likely to default.
No, it's less likely to default, because it takes no risk on the unit validity. If you don't want to take price risk (on gas or interest rates), you can negotiate fixed prices / fixed interest rates very easily. In the long run, we're all dead. John Maynard Keynes
The political risk of default by Unit issuers will be addressed through the Clearing Union/Guarantee Society mechanism. ie a globally applicable interactive/consensual framework agreement, not some monolithic centralised quasi Central Bank issuing global fiat currency ex nihilo.
The backing for the mutual guarantee would not come from the limited balance sheets of credit intermediaries - or a single point of failure counterparty probably owned by them (and from which they would in all probability walk away in extremis). It is based upon the balance sheets of end user producers and consumers collectively, which you said yourself is where the financial substance is.
This mutual guarantee would be supported by a guarantee payment/provision collected from both the sell side and buy side (ie analogous to Keynes' Gesellian Bancor proposal), and held by a custodian.
Risk management, access to data/transparency, dipsute resolution etc and the equivalent of monetary policy - ie Unit issue compared to supply capacity - would be carried out by service providers.
It is necessary to view my proposal for energy unitisation in the correct context, and that is the International Energy Clearing Union I have advocated for several years. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
There's no sovereignty given up, any more than there is under - say - the BOLERO contractual platform for transfers of title of goods in transit.
BOLERO is a very interesting beast in relation to international trade finance, with which you may or may not be familiar. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
