Wed Sep 4th, 2013 at 05:09:26 AM EST
Brett Scott, of the excellent Suitpossum blog recently wrote a long and thoughtful article on currency. So you want to invent your own currency?
Since Brett frequents a facebook group in which I participate, I thought I would respond, and the response grew quite a bit to the extent that I thought I would post it here as a Diary.
Excellent article, Brett. There is Value which is subjective, and indefinable - or rather definable only in relative terms and priced by reference to a standard unit of measure of value or 'value standard'.
Then there is Utility, which is objective, being the use value over time of three sources of value: location (3D space); energy (material/static and immaterial/dynamic) and intellectual (subjective Knowhow and objective Knowledge/IP).
Note that you can no more run out of standard units of measure of value (also known as a unit of account, or numeraire) than you can run out of standard units of measure for weight (kilogrammes) or length (metres) and so on.
The problem is that the units of measure we use are deficit-based, being the units of currency which are created ex nihilo by credit intermediaries (mainly private banks, but the alternative is Treasuries and Central Banks).
In my view the only absolute unit is a unit of energy, and we should therefore use such a unit to keep score of transactions. The quantum of that unit should be such that people can relate to it - you don't measure a room in light years or Angstrom units for instance.
So some propose the energy equivalent of 10 Kilo Watt Hours of electricity and others the energy released from burning a litre of n-octane at 20 degrees C, and still others 1 MMbtu of heat.
Note that such an 'energy standard' is distinct from units of energy currency, such as a credit returnable in payment for 10 KwH or a unit returnable in payment for 1 litre of gasoline; ora unit returnable in payment for 1MMbtu of heat.
What's the difference? Simply put, it is relative location. Energy must be moved from the location of the currency issuer to the location of the currency user.
I believe that energy currency will be the global reserve currency of the future, and that we shall see energy currencies exchanged for other currencies by reference to an energy standard. Indeed we shall see existing fiat currencies becoming fixed against an energy standard in the same way that the Euro adopters fixed their currencies against the new (abstract) .
Most money in existence came about through mortgage loans by banks. I think of it as 'deficit-based' (because created and issued by banks) but land-backed, by a claim over the capitalised future use value of location/land.
The point here is that location, and the energy and other value - intellectual value - embedded in the location, has utility, or use value over time.
So that a unit returnable in payment for (say) £1.00's worth of rental value is valuable in exchange, and most people would accept it because they would know they could return it against use of land/location. Not a new idea: John Law proposed a land-backed (centrally issued by bank or treasury) currency for Scotland in 1705.
I am therefore engaged on community land projects, for instance a Market Hall in Perth, Scotland, where one of the outcomes of the investment in (say) 20 years' worth of rentals sold at a discount will also be the creation of a Perth land-based currency returnable in payment for rentals, and hence acceptable by market retailers.
The above currencies are asset based being based upon the (subjectively priced) objective utility of location and energy.
As for people-based credit, there is in fact no need for a currency at all, but there is a need for a mutual credit clearing system incorporating - within a mutual guarantee agreement - a unit of account, a guarantee management system, and a 'chain' settlement system A>B>C>D>E>A in addition to the possibility of settlement of open people-based credit with asset-based currency described above and fiat currencies for as long as credit intermediation lasts.
In reality we don't need the existing system at all. What is needed is an accounting system; a messaging system; an energy unit of account to 'keep score'; and suitable protocols or 'social contracts' bringing these elements together with the people who use them.
So in a nutshell, we will IMHO see bottom up local land-based currency and energy currencies acceptable across locations and borders, with people-based credit serving increasingly mobile populations on mobile platforms such as: Mobino (for a general platform) or Evergreen (for a local platform)