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Okay, so you've reinvented the gold standard, but tied it to hydrocarbon calories instead of giant piles of shiny stuff.

You're still not being consistent here. Firstly you've backtracked on the baker units. Secondly you're claiming that energy units and liquid fuel units will be interchangeable.

So will this currency be based on volumes of liquid fuel, or energy value of same?

Finally - what difference does this make? If I can go to a petrol station and buy petrol in pounds, there's no obvious advantage to using an alternative currency instead, even if it's petrol based.

Now - if the important feature of this is that energy resources will be held in trust, I'd like to know exactly how that's going to happen politically.

I certainly wouldn't argue with all global resources being held in trust, with access de-speculated and de-monopolised.

But that's a political problem. Currency is a footnote. OPEC is not, I think, going to be keen on handing over its primary assets - at least not without plausible threats of war.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Feb 21st, 2009 at 02:55:07 PM EST
[ Parent ]
ThatBritGuy:
Okay, so you've reinvented the gold standard, but tied it to hydrocarbon calories instead of giant piles of shiny stuff.

Energy is energy is energy. Calories are calories are calories. There's no "tie" involved, just a specification.

The "Petro" is not a "Value Unit" which changes hands, carbon-based or otherwise. It's a unit of measure of value.

An energy standard could be any amount of energy: its origin is immaterial to the function of measurement.

To specify a Petro as "the energy produced when burning 1 litre of n-octane at 20 deg C" means people can relate to it actual Value Units (a litre of gasoline, or heating oil) they understand, and give them a constant price expressed in the Petro.

We could equally define the Petro as the energy produced when x grams of such and such an isotope decays, but that is not as relevant to most people.

An analogy is with a metre as a unit of length. It's on  a human scale fine for many uses, but not for measuring the distance to Alpha Centauri or the dimension of an atom.

The key is to distinguish between Value Units of money's worth - which may be exchanged for other value - and the "Value Standard" by reference to which the exchange is made.

So a litre of Shell unleaded might always have an energy value in its use as fuel of 1 Petro. But that does not mean that litre is a Petro.

ThatBritGuy:

Firstly you've backtracked on the baker units.

In fact, baker units, butcher units, and candlestick maker units, cannot be the basis of generic currencies, since that would fragment the system as you point out. I merely used the example of baker units as an illustration that it is possible.

It has been done though...

Deli Dollars

I see the credit needed for the production and circulation of everyday goods and services as taking place within a "Credit Clearing Union".

The

WIR Bank

shows how it may be done, with the property backing of a charge over business property, in case of defaults.

I advocate the extension of the WIR concept more widely within a "Guarantee Society" framework.  Participants would make provisions into a default pool and backed up in a default situation by the capability of a defaulter to provide services to the community. ie the "backing" for credit would be hours of "unqualified" Labour.

ThatBritGuy:

Finally - what difference does this make? If I can go to a petrol station and buy petrol in pounds, there's no obvious advantage to using an alternative currency instead, even if it's petrol based.

Good point. Your ability to pay has nothing whatever to do with the currency you use in settlement.

The monetisation of energy is aimed both at providing a workable global "common currency" and at facilitating the transition from carbon-based energy to renewables.

If gasoline is 10 US cents per litre, as it is in Iran, then it gets phenomenally wasted - one day in Teheran is enough to appreciate that fact.

I am proposing that by adopting a "Petro" standard for their domestic and international energy sales they will be able to address the intractable issue of energy subsidies in a new way.  

Gasoline, heating oil and  natural gas prices would be brought up to international levels, and complete mayhem would be averted by issuing Energy Units - priced in Petros - equitably to all Iranians to a total amount equivalent to current consumption.

These would rapidly enter circulation, and would be acquired by those who need them with conventional fiat money (Reals) or otherwise (money's worth). There would be a powerful incentive to save energy, and a great many of the Units would not actually be redeemed, but would circulate instead.

New Iranian energy infrastructure, investment in energy efficiency, and in renewables, would be funded by selling Units redeemable in oil or natural gas, priced by reference to Petros. Rather than making loans secured against the sale price of future production, they would receive an interest-free loan for as long as the Unit remained unredeemed.

ThatBritGuy:

Now - if the important feature of this is that energy resources will be held in trust, I'd like to know exactly how that's going to happen politically.

For domestic transactions governments would be the "Custodian".

For international transactions then a generally acceptable  "Custodian" entity - probably Swiss - would be necessary. I am proposing just that in relation to a "Caspian Master Partnership" and a Global Gas Partnership"

ThatBritGuy:

But that's a political problem. Currency is a footnote. OPEC is not, I think, going to be keen on handing over its primary assets - at least not without plausible threats of war.

I have learnt the hard way that the vested interests of the oil market make it impracticable as a starting point.

This is why I propose the global market in natural gas as the best place to start.

(a) gas is homogeneous in a way that oil  - with its myriad qualities and types - is not;

(b) Iran, Qatar and Russia have around two thirds of all reserves, and could therefore credibly lead an initiative;

(c) there is no conventional (spot and derivatives) market in gas due to the constraints of long term infrastructure financing.

The mechanism I have in mind would revolutionise the financing of gas infrastructure, and create the basis of an "International Energy Clearing Union".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Feb 21st, 2009 at 04:32:38 PM EST
[ Parent ]
ChrisCook:
So a litre of Shell unleaded might always have an energy value in its use as fuel of 1 Petro. But that does not mean that litre is a Petro.

Indeed not. But you then have the interesting situation where a litre of fuel costs more or less than a litre of fuel.

It's possible some people may find this less than intuitive.

Deli Dollars

...are a different issue. My criticism was that you can't use local currencies universally, and that still stands.

That doesn't mean local currencies are bad or impractical. As always, the problems are political - the ability to create a workable currency is politically rationed.

This idea might work as a one off, but the difference between this scheme and a loan is that buyers are gambling - on the basis of a personal relationship - that they'll get their value back. In the real world some bakers would be able to do this, but some wouldn't, and the value would disappear.

What's different here isn't the structure of the currency, it's the personal and social accountability which it creates. A small business owner who has to personally apologise to customers why he (or she) can't make good on an implicit promise is going to have an interesting time starting another business in the same area.

Personal and social accountability would do more to revolutionise finance than new currency schemes will. The current system is designed to minimise personal accountability. If the CEO of FailBank drives it into the ground, he's not accountable to anyone except his peers at the country club. Governments have been supine and accomodating, so don't expect action there, except perhaps a show trial for an unlucky few.

Customers and victims have no legal, political or social recourse at all. Any alternative form of finance has to change that explicitly.

ChrisCook:

For international transactions then a generally acceptable  "Custodian" entity - probably Swiss - would be necessary. I am proposing just that in relation to a "Caspian Master Partnership" and a Global Gas Partnership"

Why Swiss?

Okay - proposing one particular solution for one particular problem is very different to making the entire world economy make sense again.

What's interesting about the current system is that even though it's as stable as a levitating anvil, it's self-consistent across every level of transaction. Wall St gets rich, everyone else gets screwed, and everyone knows what the rules are.

So far you've proposed a patchwork of solutions which don't necessarily scale - from DeliDollars to Petros to pipelines.

Any system needs to be more integrated than this. And it has to be based on personal and social accountability.

Custodianship won't necessarily fix that.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Feb 22nd, 2009 at 08:13:57 AM EST
[ Parent ]
ThatBritGuy:
So far you've proposed a patchwork of solutions which don't necessarily scale - from DeliDollars to Petros to pipelines.

Well, drilling down into detail in each aspect might give that impression, certainly in the course of answering numerous questions from different perspectives. But I believe I have now developed the basis of a pretty coherent and comprehensive political economy, thanks in no small part to the rigorous examination on this site.

I am proposing as the basis of a political economy a generic partnership-based framework.

This could be seen as a network of clearing networks, based upon shared transaction and title repositories. A myriad types of value (aka "money's worth") will circulate locally, nationally, regionally and globally, but the Value Standards enabling and acting as a reference for this circulation are few.

Firstly, unitised energy value gives us the means for international exchange exactly analogous to Keynes' International Clearing Union and Bancor. The difference is that it would be a globally decentralised WIR style credit clearing union, with a Petro value standard. It would not be the top down centralised authority Keynes envisaged issuing IOU credit objects the value of which derives only from political fiat.

ie an energy standard would form the basis of global trade. Natural gas is a market where this could start.

Secondly, land rental value gives us the means for national exchange. ie units of land rental value would form the basis of geographically bounded trade. Fixing the property credit crunch through unitisation could kick this off.

Finally, "Guarantee Society" agreements give us frameworks of trust which allow us to introduce and exchange the value created by individuals, whether as sole traders or collectively within enterprises. Introducing WIR clones at local level could kick this mutual credit off tomorrow. After all the WIR itself was a response by Swiss businesses to the Depression.

So in summary, energy value, location value, and intellectual value would be the key "fungible" money's worth in circulation.

"Community Partnership" agreements would incorporate both direct investments in local assets in common custody (enabling Community Investment), and also the collective "Peer" guarantee which enables community credit.

I see such linked consensual agreements as enabling all of the functions currently carried out by governments.

Community Partnerships would not be institutions or organisations of government. They are frameworks for self government and self organisation to a common purpose.

solveig tells me I've done enough detailed explanation - it's time to write the book... :-)

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Feb 22nd, 2009 at 09:15:54 AM EST
[ Parent ]

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