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Credit, Currency and Other Animals

by ChrisCook 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.

People-based credit

Asset-based credit

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)

Display:
Nope.

You're still just twiddling bits while Rome burns, and still a slave to the idea that accounting matters, when in fact any accounting system is just quantised politics.

The core concepts continue to be broken here.

If you're still thinking in terms of keeping score and can't answer the question: 'Score of what, exactly?' you don't understand the problem, and certainly don't know enough about it to offer a solution.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Sep 4th, 2013 at 11:49:54 AM EST
I don't say that keeping score is the end-game, because it isn't.

I'm interested in resolution of the existing moribund system and transition to a sustainable and fulfilling economy.

Energy accounting within a decentralised and dis-intermediated framework will IMHO enable such a transition to a knowledge economy where we cease to keep score at all.

If you have a better means of achieving such a resolution and transition, I'm all ears.

In the meantime, I'm busy prototyping.  

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

by ChrisCook (cojockathotmaildotcom) on Wed Sep 4th, 2013 at 01:46:47 PM EST
[ Parent ]
Enjoy your prototyping.

For my money (as it were), keeping score is the problem. Any solution that continues to privilege keeping score as the point of the exercise will fail in exactly the same way that all financial and political systems have failed so far - with massive inequalities of resource consumption and power differentials.

If you want to bury your head in the sand about that and pretend to yourself that you've solved a problem you haven't even begun to think about, while marching to some kind of market-made utopia created by swapping one kind of faith-based token for another, that's fine with me.

Just don't expect me to cheer and clap because I don't support yet another financialised dinosaur system with a few bits swapped around.

The real test of a system isn't what's being counted, but the predictive insight, creativity and sustainability of the decisions it outputs.

Using those criteria, swapping Unit 1 for Unit 2 is going to make no practical difference of any kind.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Sep 4th, 2013 at 04:02:25 PM EST
[ Parent ]
What is faith based about energy? In material form, it's the only tangible object there is.

A token - eg a unit of currency - is not the same thing at all as the abstract unit of account/standard unit of measure by which exchanges of tokens are priced.

You assume that the two are necessarily the same, because the convention is that the empty/base-less credit tokens issued by banks/credit intermediaries are also our units of account.

But it ain't necessarily so. Exchanges of value may be priced in $ without being settled in $.

Accounting in energy transcends politics and ideology.

Would you agree that there is a difference in outcome between 'least energy cost' and 'least dollar cost' policies? If not, I simply point you to Denmark as a case study.

Energy currencies? That is another issue, because energy sources are rivalrous and may be enclosed, so that energy currency issuance could indeed be subject to politics. But an energy unit of account is no more political than a metre or kilogramme. The only question is, does it work for the user?

Knowledge, on the other hand, is non-rivalrous. If I give you an idea I can't take it back. One of the Big Trades of the 21st century - the transition trade if you like - will be the exchange of the value of knowledge and knowhow for the value of carbon fuel saved.

On that subject - and investment in energy efficiency and renewable energy through 'energy loans' using energy prepay instruments - I'm advising a group of ten Near East nations.

This is another - macro rather than micro level - prototype, for which luck is indeed required.

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

by ChrisCook (cojockathotmaildotcom) on Wed Sep 4th, 2013 at 04:57:27 PM EST
[ Parent ]
Energy isn't tangible. And when it's in material form it's not energy.
by Colman (colman at eurotrib.com) on Thu Sep 5th, 2013 at 04:23:31 AM EST
[ Parent ]
Is this going to turn into a thread on quantum field theory?

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Thu Sep 5th, 2013 at 04:54:01 AM EST
[ Parent ]
That would probably be useful.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Sep 5th, 2013 at 09:38:32 AM EST
[ Parent ]
The question I ask all of you is this:

Do 'least energy cost' policies lead to different outcomes to 'least $ cost' or 'least £ cost' policies?

And if so, why and in what respect?

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

by ChrisCook (cojockathotmaildotcom) on Thu Sep 5th, 2013 at 02:08:34 PM EST
[ Parent ]
The question I ask of you is, once you introduce energy as a unit of account and certificates start circulating redeemable in energy (*), how do you prevent more money to be created than there is available energy, and how do you prevent energy certificate hoarding and "cornering the market" so to speak.

(*) I submit that, for psychological reasons, the "energy-accounting-unit" value of a physical energy unit will converge to 1:1 pretty quickly.

Finance is the brain [tumour] of the economy

by Migeru (migeru at eurotrib dot com) on Fri Sep 6th, 2013 at 03:30:16 AM EST
[ Parent ]
Good questions.

Firstly, it doesn't matter how many energy certificates investors hold: they have no right to delivery, merely the right to present the certificates in payment for supply.

But in fact the redeemability of prepay certificates means that they are an excellent investment, because even if other investors are not prepared to buy at the unit market price, if the unit price falls below the physical market price, customers will buy them for redemption.

Think of an ETF with units returnable in the underlying: or a REIT with units returnable in payment for rent.

Secondly, I think we will see an energy clearing union wherein producers/issuers agree to accept each others' certificates in payment for supply, and then account with each other.

Such an energy clearing union would operate as a 'guarantee society' as a variation on a risk sharing P & I Club , managed by a service provider.

The first defence against over-issue is transparency - since sunlight is the best disinfectant, all energy clearing union issuance would be available for scrutiny.  Service providers like Thomas Miller would then act in accordance with agreed rules to manage issuance.

Finally, there is the point that certificates are returnable in payment at the location of the consumer, but issued by producers at different locations.

What this means is that it is necessary for a change in the distribution/utility business model away from intermediation.

But this is already happening, because to transform from an intermediary to a service provider is actually in the interests of the intermediary, because service provision is 'capital lite'.

That is precisely why banks got into the business of selling quasi-equity instruments such as index funds and ETFs to passive investors - it means the maret risk is with the unwitting investor, not them.

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

by ChrisCook (cojockathotmaildotcom) on Fri Sep 6th, 2013 at 03:04:15 PM EST
[ Parent ]
ChrisCook:
it doesn't matter how many energy certificates investors hold: they have no right to delivery, merely the right to present the certificates in payment for supply.

This is where my little brain blows up once again.

The only way I can decipher the real dealings involved in your scheme takes me somewhere to an empty supermarket in Joe Stalin's Russia.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Sep 6th, 2013 at 04:40:35 PM EST
[ Parent ]
You've not grokked prepay yet.

It does take a bit of getting your head around, because you're probably looking for complexity which is not there.

Prepayment is just what it says.

You pay money (or money's worth) now, and take delivery of goods or services later, receiving a certificate of entitlement (on your mobile phone) in the meantime. The certificate does not entitle you to demand delivery (as a futures contract would) but if you do take delivery from the issuer (or from another affiliated within a clearing union), he undertakes to accept the certificate in payment.

You will probably only accept such a certificate if a discount or profit is agreed which compensates you for the delay. You achieve your discount/profit when you return it to the issuer. It is the return of prepay credit instruments to the issuer which gave rise to the the phrases 'tax return' and 'rate of return'.

At the moment prepay is already normal in relation to consumables, but not recognised a the investment it also is.

Mobile phone prepay is everywhere typically for those who cannot afford or do not want an account. Meanwhile poor people are not only obliged to prepay for electricity because they can't get credit: to add insult to injury pay more for the privilege. Similarly prepaid debit cards for the un-banked.

More to the point, the fiat currency which we currently use represents in reality - whether it is created and issued by private banks or the central bank as fiscal agents of the Treasury - prepayment of taxes.

Reality-based Economics and the Last Big Thing

There's nothing whatever new about prepayment. It's how the financial system worked formally or informally for hundreds, if not thousands of years, and still does in many parts of the world.

My case is that we began a 300 year aberration from the original undated 'stock' (prepay) into the conventional equity (shares of 'common' or 'joint' stock) and debt (interest bearing 'loan' stock such as 'gilt-edged' stock) forms of finance capital.

That era ended five years ago because it resulted in unsustainable concentration of wealth on a cosmic scale. We are now transitioning to a knowledge-based, energy-denominated economy of abundance from an economy of scarcity, and I think the endgame is probably that we will eventually cease to keep score at all.

Finally, it's not 'my scheme'. I'm simply describing, updating and re-introducing in electronic form the way things used to be done but which has been forgotten for centuries.


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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 03:48:13 AM EST
[ Parent ]
I grok prepay. I've been administering a prepay food coop for some years. Everything is prepaid (in euros, but it could be a local currency if everyone agreed on it). However, it's an account and not a certificate system.

The money people put in is credited to their account and the goods they receive are debited. There is no absolute guarantee of delivery: if a producer has problems and can't deliver, all concerned may decide he can keep the prepay without supplying the goods, because the aim of the system is to support local family-level quality farming. (At least, this is a principle written into our contracts -- in practice, producers prefer to waive their rights in this kind of case.)

What my comment above was getting at was that your system is certificate-based, and the certificates are bought and sold on a market. You say there is no guarantee of delivery. I can only imagine you mean dated delivery, because if the certificate is redeemable against supply (delivery? is there a difference?) and there is no supply, we'll see an almighty crash on the market for these certificates. In fact, without a guarantee of supply/delivery, no one will buy the things in the first place.

Or, as you say below in a reply to askod,

ChrisCook:

When examining and judging energy prepay unit issuance you have to have regard to the rate, and the likelihood, of a flow of energy over time.

This implies what I have heard described as 'confidence accounting'. ie the probability that a particular flow will be achieved.

In fact, a right to delivery is essential, or no one will have any confidence in the system. So I don't think you've answered Mig's question:

Migeru:

how do you prevent more money to be created than there is available energy, and how do you prevent energy certificate hoarding and "cornering the market" so to speak.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Sep 7th, 2013 at 02:52:56 PM EST
[ Parent ]
Naturally no-one will hand over value in exchange for a prepay credit instrument unless there is an expectation of access to delivery either by the issuer or someone else.

Clearly there is a need for a guarantee of performance, but a unit of currency - whether in bearer (certificate) form or registered to an account - does not confer upon the issuer a dated obligation to supply upon presentation of the instrument as does a (dated) futures contract.

What it does do is confer an obligation on the issuer to accept it in payment for supply.

In relation to Mig's point, we have to look at availability over time,

There's no reason why an energy generator could not sell entitlements to 10 years' worth of production, or a property owner 10 years' worth of rent.

But they will do so at a discount which reflects the return demanded by investors in respect of that form of value; their judgement of the likelihood of continuing production (or in the case of a property, occupation); and their expectations as to what the unit of currency will be worth in the future by reference to a unit of account.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 05:35:08 PM EST
[ Parent ]
ChrisCook:
There's no reason why an energy generator could not sell entitlements to 10 years' worth of production

My electricity producer recently offered a low fixed ten year price in return for an upfront payment that they could use to build another wind power plantation. So something like that then?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Sep 8th, 2013 at 02:56:26 AM EST
[ Parent ]
My electricity producer recently offered a low fixed ten year price in return for an upfront payment...

Is that purchase transferable? To even another address or person?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 9th, 2013 at 12:09:14 AM EST
[ Parent ]
Good question. I went to check the specifics, but the offer was gone (I saw it months ago, so presumably they have raised enough). If it was standard consumer deal it is transferable to another adress in Sweden with the same customer. But standard deals usually run for up to three years, not ten, so I guess it has to end in a big dunno.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon Sep 9th, 2013 at 04:01:23 AM EST
[ Parent ]
At three years it seems to be a sort of retail level piece of commercial paper offered directly to the customer and thus disintermediated from normal banking.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 9th, 2013 at 10:22:00 AM EST
[ Parent ]
Yes, I had already emphasized dated in my comment.

But it should now be clear that there is no distinction between "delivery" and "supply". If there is any doubt that the commodity will be delivered/supplied, the sale of certificates will be difficult to say the least. So waffly language such as

'confidence accounting'. ie the probability that a particular flow will be achieved

expectation of access to delivery

there is a need for a guarantee of performance

won't cut it. You actually have to garantee investors that there is sufficient supply to cover the certificates issued -- and more importantly, investors have to be convinced of that, or they will put their money elsewhere.

The function of these certificates as a form of money would therefore be strictly limited by a quantity of kWh, or rented accommodation/duration. The difference between this and the gold standard isn't clear to me.

The social usefulness of the certificates would seem at best to be simply a form of advance subscription with an advantage attached (discount). But who is addressed by the system? People with enough money to subscribe in order to gain a future advantage. One of the privileges of those who have enough money is in fact to save money by bulk buying, for instance, while those who live from hand to mouth pay top dollar for necessities (old example of the shilling in the gas meter?). Given that those who have no money ahead of them are far more likely to be living in rented accommodation than to be home-owners, what access will they have to your proposed rental scheme? In other words, what increased equality ie power-sharing would be achieved by it?

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Sep 8th, 2013 at 05:33:53 AM EST
[ Parent ]
You pay money (or money's worth) now, and take delivery of goods or services later, receiving a certificate of entitlement (on your mobile phone) in the meantime. The certificate does not entitle you to demand delivery (as a futures contract would) but if you do take delivery from the issuer (or from another affiliated within a clearing union), he undertakes to accept the certificate in payment.
If denominated in a delivarable (such as energy), what prevents more certificates from being prepaid thanit is physically possible to take delivery of?

And no, "transparency" doesn't cut it because the producer will always enjoy an asymmetric information advantage. And not everyone is a hedge fund. Buyers also have differring levels of informacion.

Finance is the brain [tumour] of the economy

by Migeru (migeru at eurotrib dot com) on Sat Sep 7th, 2013 at 04:56:28 PM EST
[ Parent ]
My capacity to utilise the underlying value has no relationship to how many units of currency I may acquire as an investment. I can always dispose of the surplus to another user if mine is the best offer below the physical market price.

Moreover, no matter how many I buy, I can't corner the market with an undated instrument.

Fiat currency is and always has been a tax prepayment - whoever issues it (whether public or private) - and it is irrelevant how many units of it I hold, although historically I would have expected some sort of return to be convinced to do so.

Transparency is necessary, but not sufficient. There is also a requirement for a manager to conduct due diligence and a monetary authority to supervise the manager in accordance with agreed standards.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 05:53:29 PM EST
[ Parent ]
Transparency is necessary, but not sufficient. There is also a requirement for a manager to conduct due diligence and a monetary authority to supervise the manager in accordance with agreed standards.
I am confused, I thought The Market™ would provide.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Sun Sep 8th, 2013 at 05:55:16 PM EST
[ Parent ]
Fiat currency is and always has been a tax prepayment - whoever issues it (whether public or private) - and it is irrelevant how many units of it I hold, although historically I would have expected some sort of return to be convinced to do so.
The return is the opportunity cost of not having any on hand, which is substantial, either because of fines incurred for tax nonpayment, or the need to pay interest on borrowed money if everyday counterparties demand cash payments.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Sun Sep 8th, 2013 at 05:57:54 PM EST
[ Parent ]
Opportunity cost denominated in what?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Sep 12th, 2013 at 01:39:10 PM EST
[ Parent ]
Disproportionate forfeiture of assets and liberties.

Specifically, goons with guns will take your stuff and put you in the slammer.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 12th, 2013 at 07:13:43 PM EST
[ Parent ]
I think the crucial point is that fewer prepay energy credits are delivered then the amount of energy produced/consumed. Because then what Chris writes holds true, investors can always sell them to consumers at energy price. Otherwise it doesn't.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Sat Sep 7th, 2013 at 04:03:28 AM EST
[ Parent ]
When examining and judging energy prepay unit issuance you have to have regard to the rate, and the likelihood, of a flow of energy over time.

This implies what I have heard described as 'confidence accounting'. ie the probability that a particular flow will be achieved.

Over its design life, a wind turbine will produce a 'pool' of energy production, and part of that will be shared with landlords/communities/maintenance contractors.

The balance is then available to be 'unitised' into prepay electricity units which may - if the electricity sale price is adequate - be sold forward to fund the turbine.

The process of project assessment will be similar to that which Jerome probably makes every day of the week using conventional finance capital.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 04:38:16 AM EST
[ Parent ]
This is new
Firstly, it doesn't matter how many energy certificates investors hold: they have no right to delivery, merely the right to present the certificates in payment for supply.
At least new to me, I don't know how longe you've been including this so sharply stated in your presentations.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Sat Sep 7th, 2013 at 04:51:14 PM EST
[ Parent ]
Well, a citizen of the USA might buy certificates for 300,000 Kilowatt-hours from a Swedish producer but could not very well expect to take delivery in the USA. But they could probably sell them to someone in the European grid, but not necessarily at a profit, but probably at a profit if the timing is good.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 9th, 2013 at 12:21:44 AM EST
[ Parent ]
In other words this is a new derivatives market on which those with money will seek to make arbitrage gains?
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Sep 9th, 2013 at 01:54:52 AM EST
[ Parent ]
Perhaps not the specific program to which askod referred, but certainly a general program of public sale of such prepays could become a derivatives market.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 9th, 2013 at 11:23:32 PM EST
[ Parent ]
Mig was referring to Chris Cook's proposal, and so was I.

What askod describes seems to be simply a discount-for-early-subscription offer.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Sep 10th, 2013 at 02:15:00 AM EST
[ Parent ]
So there's no such thing as chemical energy then?

Disregarding quantum field theory.

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

by ChrisCook (cojockathotmaildotcom) on Thu Sep 5th, 2013 at 02:01:44 PM EST
[ Parent ]
<sigh> Would that be tangible ("perceptible by touch") or material?
by Colman (colman at eurotrib.com) on Thu Sep 5th, 2013 at 02:07:16 PM EST
[ Parent ]
Material as in matter. Delete tangible.

Score one to Colman

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

by ChrisCook (cojockathotmaildotcom) on Thu Sep 5th, 2013 at 02:10:29 PM EST
[ Parent ]
Thermodynamic free energy, all about rearranging matter. Whatever.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Fri Sep 6th, 2013 at 09:14:02 AM EST
[ Parent ]
If one has ever gotten across even a 50V, 20Hz ringtone they would likely concede that electricity is at least sensable, if not tangible.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 9th, 2013 at 12:28:30 AM EST
[ Parent ]
Would you agree that there is a difference in outcome between 'least energy cost' and 'least dollar cost' policies? If not, I simply point you to Denmark as a case study.
What are we looking for when we look at Denmark?

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Fri Sep 6th, 2013 at 03:32:22 AM EST
[ Parent ]
Accounting in energy transcends politics and ideology.
It is a political decision to account in energy.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Fri Sep 6th, 2013 at 03:33:00 AM EST
[ Parent ]
Nope.

It's a consensual decision.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 04:23:12 AM EST
[ Parent ]
When did agreement start to make decisions apolitical? Around the same time as the end of history?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Sep 7th, 2013 at 07:21:21 AM EST
[ Parent ]
"This time is different."

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Sep 7th, 2013 at 07:29:53 AM EST
[ Parent ]
Mutual, consensual and participative agreement is very different from politics as usual.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 02:23:47 PM EST
[ Parent ]
There's "politics as usual" ie party and party personnel etc, and then there's the political sphere of human thought and action. Jake's point is that agreements (definitely including mutual, consensual and participative agreement) belong to the latter.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Sep 7th, 2013 at 03:05:04 PM EST
[ Parent ]
You're using a narrow definition of 'political' that makes the term less useful (or more useful to plutocrats).

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Sat Sep 7th, 2013 at 04:40:21 PM EST
[ Parent ]
Warren Mosler: MMT to Congress: You are the scorekeepers for the US dollar, not a player! (July 30th, 2011)
That correct analogy is between scorekeepers in card games and your role as scorekeeper for the US dollar.

As scorekeeper in a card game, you keep track of how many points everyone has.
You award points to players with winning hands.
You subtract points from players with losing hands.

So as the scorekeeper, let me ask you:

How many points do you have?



Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Thu Sep 5th, 2013 at 04:57:19 AM EST
[ Parent ]
What exactly does a $ point represent?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Sep 5th, 2013 at 02:16:00 PM EST
[ Parent ]
Nothing. It's fiat money after all. That's why using it as a unit of account is not deflationary.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Fri Sep 6th, 2013 at 03:26:19 AM EST
[ Parent ]
And in answer to your question 'keeping score of what exactly?' my answer is 'whatever we keep score of now and a lot more besides'

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Sep 4th, 2013 at 02:25:51 PM EST
[ Parent ]
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) €.

I look forward to this speech at the UN.

"See what the Euro did?  We can do that for you!"

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Sep 6th, 2013 at 07:56:59 AM EST
You could put the $ on an energy standard tomorrow.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Fri Sep 6th, 2013 at 03:05:42 PM EST
[ Parent ]
You could put any currency on any standard you want tomorrow.  The question is: Why would you want to?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Sep 6th, 2013 at 03:25:26 PM EST
[ Parent ]
I think it's one of those 'When you have a hammer, everyone looks like a true Scotsman' arguments.

Most of these suggestions - including Martin Hay's disaster - confuse the various functions of money in not very insightful ways.

I think it would be interesting to have currencies that make all the different functions explicit, so you would know for sure whether your transaction was based on a claim of future resources, or executive rationing, or a simple power play, or any of the other things that people get up to while trying to hoard and/or spend imaginary tokens.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Sep 6th, 2013 at 03:31:26 PM EST
[ Parent ]
That is a fascinating idea, which I will try and think some more on.
by Zwackus on Fri Sep 6th, 2013 at 09:08:26 PM EST
[ Parent ]
There are plenty of people aiming to design just such currencies and good luck to them.

I take the view that most people would understand and accept in payment a local currency based upon and returnable in payment for the use value of land. The majority of fiat currency is in fact indirectly based upon capitalised land rental value.

I also take the view that most people would accept a currency returnable in payment for energy use.

Other currencies? Be my guest, invent what you like and see who accepts it.

But people-based (P2P) credit in respect of goods and services is not the same as currency, and is not to be confused with P"P debt in respect of existing fiat currency.

It is quite possible to envisage a community credit card owned by local businesses and people in common, and operating on a 'not for loss' basis as a utility, managed by a service-provider-formerly-known-as-a -bank.

Such a community credit (mobile SIM) card will require neither deposits nor currency for settlement of obligations because settlement may take place by chain generation A>B>C>D>E>A of open balances.

Such a mutual credit clearing system does require a meaningful unit of account, however. I'm open to suggestions as to what such a unit of account should be.

In my view, only a unit of energy works as a unit of account.

Unfortunately, Martin does not understand how the existing system works and that is a big mistake on ET.

I believe I understand it better than most, and I'm willing to learn from anyone. But I've found that the best way of learning is by doing.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 04:19:59 AM EST
[ Parent ]
A>B>C>D>E>A appears to be a chain sequence as typed, but is actually a wave. You can choose to see "credit" circulating clockwise, "debt" circulating anticlockwise or both taking place at the same time.
by martinahay on Sat Sep 7th, 2013 at 04:44:11 AM EST
[ Parent ]
the use value of land.

I think the majority of people have no idea what 'use value' is. And unless you're planning to throw open the big estates and country parks in the UK and allow people to grow food or put up holiday cottages on them, 'use value' is meaningless anyway.

I'll try to explain this really simply - most people do not understand financial abstraction.

They understand that they can buy stuff, or not buy stuff, and do stuff, or not do stuff.

They particularly understand whether or not they can do more buying and doing of stuff than their neighbours can, because this kind of competition is encouraged and praised as a fruitful activity.

A few understand gold is shiny, and people seem to want it, so gold is good.

Everything else will forever remain a mystery to at least 95% of the population. (Including most politicians and not a few bankers.)

The majority of fiat currency is in fact indirectly based upon capitalised land rental value.

No, the majority of fiat currency is based on faith in the future, and violence - or threat of same - in the present.

Land ownership happens to be one of the claims on resources this system encourages. There's nothing primary about it at all.

I suggest you read the introduction to Polanyi ARGeezer mentioned in today's Newsroom, because it explains all of this much more succinctly than I can.

But the basic problem with all your suggestions continues to be that you're still essentially a marketista.

I'm not. Changing units of accounts does nothing to destroy market ideologies such as the Holy Rite of Competitive Acquisition.

And it's the ideologies that are the problem, not which metaphorical fingers people use to count with.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Sep 7th, 2013 at 09:11:03 AM EST
[ Parent ]
And it's the ideologies that are the problem

Classical economics pretty much culminated with John Stuart Mill and Karl Marx. In his work On Socialism Mill noted that, while the capitalists system was the most effective system known for generating wealth it did not follow that private ownership of that system was the most efficient means of distributing that wealth. Marx of course went further. That is what brought the 'neo' to classical economics.

Henry George showed just how damaging the classical economists could be in the hands of someone who cared about fairness to the people. At the same time economics was coming to be a more standard university discipline. Several of the very wealthy wanted to make certain that a version of economics was taught that was favorable to their interests. Add to that the fact that the most likely employment outside of academia for economists was in banking and in the administration of large privately owned trade and manufacturing concerns and it is not hard to see why neo-classical economics developed.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Sep 7th, 2013 at 11:05:19 AM EST
[ Parent ]
I most certainly am a marketista.

Just not markets with value-extracting middlemen - public or private - in them. That's so Last Century.

It changes the game entirely if intermediaries are bypassed, and that is precisely what they are doing because with conventional financing and funding terminally fucked it is their only remaining option.

There is no profit or loss or double entry book-keeping in such a bottom up networked market, but there is shared risk and reward, and there is shared surplus and there is a meaningful unit of account for as long as the market persists pending the arrival of a gift economy.

The accountancy of such a networked market is interesting.  

But I won't go there just yet. :-)

Ideology? I'm not into ideology. I'm into seeing 'what works' to do what we need to do, and seeing who joins in.

In my view we won't see a Party create Policy in future: we'll see the Policy create the Party/Movement.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 02:39:25 PM EST
[ Parent ]
The reason you would want to go onto an energy standard is because of the outcomes.

But in order to achieve those outcomes you also need a new generation of governance protocols to replace the existing ones.

Since people may consent to whatever protocols they wish, it is in fact possible to bypass - or perhaps reconfigure - the existing intermediated relationships.

Both Public=State and Private=Plc are obsolescent because conventional finance capital is simply unnecessary.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 03:54:49 AM EST
[ Parent ]
How are the outcomes any different from other fixed currency regimes?  You're still fixing the currency to a "commodity" whose value is disconnected from your country's macroeconomic needs in the name of achieving some imaginary "true" value.

We got away from fixed currencies for a reason.  The Eurozone is currently engaged in a fine display of why we did so.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Sep 7th, 2013 at 07:00:49 AM EST
[ Parent ]
The problem is that so few people understand money, banking or 'money and banking'. 19th and early 20th century monetary economists such as Irving Fisher, John Maynard Keynes and Allyn Young clearly understood the problems of the gold standard. The UK only really came out of the Long Depression when large quantities of gold started coming out of South African mines. Then prices started rising again. It was the financial collapse of 1873 which led Walter Bagehot to write Lombard Street, describing how the banking system of the day worked to assure that cash flows were available to meet cash demands. Part of the problem we have in understanding the current ongoing crisis is that we have largely forsaken 'the money view' and taken our eyes off the money.

In The New Lombard Street Perry Mehrling describes his view as being based on 'the money view' and notes:

...a fundamental premise of this book is that a "money view" provides the intellectual lens necessary to see clearly the central features of this multidimensional crisis. The reason is simple. It is in the daily operation of the money market that the coherence of the credit system, that vast web of promises to pay, is tested and resolved as cash flows meet cash commitments. The web of interlocking debt commitments, each one a more or less rash promise about an uncertain future, is like a bridge that we collectively spin out into the unknown future toward shores not yet visible. As a banker's bank, the Fed watches over the construction of that bridge at the point where it is most vulnerable, right at the leading edge between present and future. Here failure to make a promised payment can undermine any number of other promised payments, causing the entire web to unravel. (p.2-4)

Mehrling goes on to describe how 'the money view', which was what Walter Bagehot described in the late 19th century in Lombard Street, has come to be eclipsed over the last four decades by 'the economics view' and 'the financial view'. These terms are Mehrling's analytical constructions:
On the one hand we have the view of economics, which resolutely looks through the veil of money to see how the prospects for the present generation depend on the investments in real capital goods that were made by generations past. On the other hand we have the view of finance, which focuses on the present valuations of capital assets, seeing them as dependent entirely on imagined future cash flows projected back into the present.

The Institute for New Economic Thinking has sponsored a course in Money and Banking offered by Perry Mehrling through Barnard College, Columbia University, and available free online through Coursea in which I have enrolled. The first reading assignment are three topics on the history of banking by Allyn Young, available in PDF through the online course. What I read there, combined with what I already knew inspired the above and much more, but I have decided that this material is better the subject of another diary, which I am currently preparing. If I posted the rest of what I have written it might derail Chris's diary and that is not my intent.          

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Sep 7th, 2013 at 04:06:52 PM EST
[ Parent ]
I'm not fixing the currency to anything because neither a commodity nor a unit of currency is a unit of account. A unit of account is a standard unit of measure for value by reference to which commodities, currencies and other value may be exchanged.

If I accept your IOU in exchange for my widget, and Mig accepts it from me in exchange for his gizmo and ARG accepts it from Mig in exchange for a nice lunch and ARG finally presents it to you in exchange for mowing his lawn then all of us will have made a value judgement in respect of your IOU by reference to a unit of account, in this case the abstract $.

Our value judgement will probably have been based upon our judgement of your capacity and willingness to provide goods and services to fulfil your obligations.

In other words, how good your credit is.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 05:02:48 PM EST
[ Parent ]
I'm not fixing the currency to anything because neither a commodity nor a unit of currency is a unit of account. A unit of account is a standard unit of measure for value by reference to which commodities, currencies and other value may be exchanged.
A simple yes/no question: does your idea work just as well if instead of being denominated in energy units (say, in joules), the prepay certificates are denominated in... I don't know, wazeegles?

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Sat Sep 7th, 2013 at 05:19:02 PM EST
[ Parent ]
ChrisCook:
Both Public=State and Private=Plc are obsolescent because conventional finance capital is simply unnecessary.

unnecessary? it's toxic, a baited debt-trap. it's what your mother should have warned you about.

it's like a guest who always takes more than is given, a cold-hearted chiseler who starts off pretending to be in good faith, leaving you to discover different in time as the cog-diss bites deeper, and you start paying interest on the interest with no end in sight, just a growing weight and sense of indenture to rentiers.

you can invent any new way you want, but until capital figures out a way to enslave it, brute force will be used to ensure it gains no traction, while the public's eyes roll and glaze perusing the byzantine arcanity of the language needed to keep the stark truths from being self-evident enough to enrage enough people to a sufficient incandescence that change will bust through like a mushroom through cement.

i think the problem with your energy units has nothing to do with the idea's viability per se, it's that it presupposes the ability of good sense to predominate over the borg's assimilation of the finest mathematicians, probabilists, odds estimators and margin-hunters, all beavering away for all the wrong reasons behind an array of the best liars money can buy.

we are an astonishingly naive, immature species, for the most part successfully programmed to be led by the nose like so many pigs to market.

you have the dubious honour of being a century ahead of your time, at present rates of evolutionary human self-awareness.

that century will largely consist of a few visionaries pointing to a wiser course and explaining the jargon to help mass self-education of the electorate, as (much like how some prisoners use their time in prison to study the law) we pawns use the downtime of unemployment to study exactly how we ended all herded into debt corrals anyway.

and then read Faust again...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Sep 8th, 2013 at 05:25:10 AM EST
[ Parent ]
This is goldbuggery, version 2.0. Only you have managed to think up a system which is even stupider and more dangerous than goldbuggery, because energy technology is even more unpredictable than advances in mining are.

Currency is a political agreement - a shared social contract which we all agree to use to measure how much of a claim we each have to the common output of human effort.

It needs no specified backing because it is backed by the totality of the formal economy.
Specifying a specific type of output as the backing of the unit of account proves you do not understand what currency is. It also invites massive manipulations - hoarding, cornering, speculation, and a dozen other ills in that specific sector of the economy. As long as this is happening in the noble metals market, that can be tolerated- Vexing as heck to the few people who have actual uses for gold and silver (Electronics. Jewelers) but not that important to the greater economy. Having it happen in the energy sector would be unspeakably bad.

The key problems with our current financial system are: it is too big, to well compensated and too politically powerful. Money has no intrinsic value - that is why we use it to measure the value of other things. Having huge amounts of the best minds of our generation go into finance is a complete and utter waste of those minds.

Secondly: Money creation has been outsourced to the private sector. (via fractional reserves) This is insane. The creation of money means the creation of claims on the output of the economy ex nihil  - From nothing. Money must be created as the economy grows to avoid permanent deflation, but handing this function over to private actors is just bonkers. For all intents and purposes, banks might as well have a license to counterfeit - the effect on the economy is the same.

So what should be done?

Simple. We should destroy the finance sector. People need bank accounts and debit cards, and firms do need to raise capital. The world does not need Goldman for any of that, however. Make the post office do it. I am not joking. Draw up the most boring banking system we can possibly put together, and then make the post office run it. The masters of the universe can fuck off and go put their degrees to actual use.

by Thomas on Sat Sep 7th, 2013 at 05:15:02 AM EST
Not only are you under a complete misconception you are  rude with it. Snark I can put up with: it comes with the rations on this site; but rudeness I cannot and will not tolerate.

I have forgotten more about markets than you will ever bloody know. Manipulation? Speculation? Cornering? I managed the Gas Oil futures contract deliveries for six years as a Director of the International Petroleum Exchange and I have written the bloody book.

What is your qualification for the crap you just wrote?

Does a metre have backing? Does a kilogramme have backing? A unit of account does not have backing either. It is a standard unit of measure for value, whatever that is.  

Like a metre or kilogramme it just is.

But unlike any other such unit of account, it's actually possible to measure most kinds of value by reference to a unit of energy in a meaningful way. Do you not understand that there is a difference between 'least energy cost' and 'least $ cost' or 'least € cost'?

If not, then I'm wasting my time engaging with you at all.

Currency is NOT the same thing as value. Currency is a credit instrument returnable in exchange for value. It is an undated claim over value.

The value of energy currencies (there are potentially several types) may well be affected by advances in technology. I sincerely hope it will be or the planet is fucked. But that will not devalue energy currency per se although it will affect the relative value of different types. It will simply mean that provided the energy technology is not enclosed or suppressed (a big if) then we will all become a lot wealthier.

A unit of currency is not a unit of measure although historically the two functions have been conflated. It is a generally acceptable credit instrument/claim over value which may be exchanged by reference to a standard unit of measure.

And no, you do not need a government and/or banks to issue currency although that has been customary for 300 years.

There is no such thing as fractional reserve banking and there is no such thing as 'tax and spend'. Gold is an archaic relic with a few uses which make economic sense at a fraction of the price currently being paid for it by people with more money than sense.

So please, return to whatever gold or bitcoin mine you emerged from and don't come up with crap like that until you understand how markets work.

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

by ChrisCook (cojockathotmaildotcom) on Sat Sep 7th, 2013 at 04:47:53 PM EST
[ Parent ]
None of your rant is even remotely connected to anything I've said. Where did I say anything to promote fractional reserve banking or gold hoarding?

I don't care how markets work, because markets don't work. That's Polanyi's point, and it's very much the problem.

So I don't care whether people use gold, bitcoins, joules, or bags full of rabbit pelts to do their accounting.

None of it matters, except as a bit of side entertainment. What matters is how people treat each other, whether social relationships are primarily predatory and exploitative, or primarily collaborative, and how - if accounting systems are used - they either hide and justify, or reveal and challenge the nature of social relationships.

That is all.

Now, when you're done hyperventilating, read what I said, read Polanyi and Graeber, and perhaps we can have an intelligent non-theological discussion about this.

Because right now you're carrying on like a priest who has had his faith challenged, not like someone who's capable of rational argument.

Anyway. Specifically:

Does a metre have backing? Does a kilogramme have backing?

The metre is referenced to physical constants. But the process used to calculate the metre as a unit of length is an entirely arbitrary social convention.

The kg is referenced to a not particularly stable test mass. Even if it were also referenced to physical constants - which is proposed, and may happen soon - the calculation would still be arbitrary.

So yes, both units only exist because they're backed by cultural convention, not because they're objective and independent of convention.

Clearly mass and length exist independent of convention. But that's not the same thing at all.

And trading in metres would be ridiculous.

it's actually possible to measure most kinds of value by reference to a unit of energy in a meaningful way.

No it isn't, because units of energy are also an arbitrary social convention.

In fact energy is a particularly bad way to measure anything, because it comes in so many different forms of different practical usefulness that you'll never find a scientist saying 'a joule' without also specifying, even if only implicitly by context, what kind of energy it's a joule of, and by what mechanisms it can be transformed to and from matter and/or other forms of energy.

If you get irradiated by a slew of 130Gev gamma particles or struck by lightning, do you suddenly become rich in your scheme?

Of course you don't. Not only will you still die horribly, the idea is a nonsense.

So clearly you're not talking about units of actual energy at all. You're talking about bits of metaphorical paper that can be traded and happen to be denominated in energy units - just as they could be denominated in ounces of gold, or casino CFD contracts, or commodity future contracts, or pounds sterling, or dollars, or bitcoins, or renminbi.

You've actually come right out and said these things can't even be redeemed for real energy.

So what are they really worth? No one knows until they try to trade them.

Where? On a market.

And there you go. Same old, same old.

And then you accuse us of not understanding what you're on about.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Sep 7th, 2013 at 05:53:44 PM EST
[ Parent ]
Er - total thread context fail. Never mind.

However - I mostly agree with Thomas. (Which is scary enough in itself)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Sep 7th, 2013 at 08:38:24 PM EST
[ Parent ]
ThatBritGuy:

Where? On a market.

And there you go. Same old, same old.

markets are a manifestation of consciousness, not the other way round.

till we change consciousness we will always think cutthroat when we hear the word 'market'.

it's been so long since it was anything else!

when i see the pit-traders armwaving and shrieking into three cellphones at once do i think 'this looks healthy, humans working hard at making a better world'?

i think bedlam. house of horrors. cacophony. babel. pigs in a trough.

sorry pigs!

humans all looking at huge screens and screaming over each other. who in their right mind can think in their wildest of fantasies that this is how humans should live and trade?

and then when the bell rings on wall st and you see those assclowns smug as a bug in a rug all disjointing their arms from patting each other on the back so much.

going to markets used to be fun, people met many of their needs there, lots to see and learn even if you weren't all about making moolah as prime driver.

what they have become... well the tail has 'bout wagged the brains right out the dog's ears, juvenile dementia as way-of-life.

hard wires crossed and shorting, the robot lumbers on leaving people and countries stomped in its wake, so that these baboons can caper in their hollow, while fat cats preen and strut.

gah, beam me up scotty. if this is the trailer, who wants to see the film?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Sep 8th, 2013 at 06:10:22 AM EST
[ Parent ]
There are different manifestations of energy - in particular, electromagnetic energy, work or heat - and as many different forms and sub-forms (eg gasoline, natural gas, fuel oil) of energy currency.

Each of these will vary in price by reference to a standard unit of energy, both relative to each other, and also with the relative locations of currency issuer and user and value judgement of the user.

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

by ChrisCook (cojockathotmaildotcom) on Thu Sep 12th, 2013 at 01:53:42 PM EST
[ Parent ]
ChrisCook:
If not, then I'm wasting my time engaging with you at all.

no chris, you are not wasting your time...

what's the underlying fear here?

that the tying of currencies to gold and it's inability to mesh with modern economies has anything to teach us about tying currency to energy units?

you can't magic up gold mines, its rarity gives it value, when the vein runs out or becomes uneconomical it's game over.

with energy we can keep opening the vein deeper and wider so we will never run out, so that brings us to the initial core question... if gold were as common as sand it would not be useful as a currency value indicator, so is this the fear with energy?

mig speaks of cornering markets, how could you do that with energy units unless you monopolised the means of producing it? (like central banks have with money and finance (the idea of money))

they'd love to do that of course, that's what rentier do after all, it's their raison d'etre, and governments pretend to be for the 99% but are patently not, as so graphically shown by the numbers mig quoted for 10's of millions of euros fine for having the temerity to remove one's solar panels from the grid in spain.

the number was so obscenely OTT it really showed the true majesty of megalomania these loons are prey to.

that fine is their petticoat showing...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Sep 8th, 2013 at 05:52:07 AM EST
[ Parent ]
melo:
with energy we can keep opening the vein deeper and wider so we will never run out

But locally we can get an energy crisis.

Say that you have a nice mix of wind, solar and hydro. Now climate change moves wind from your wind mills, clouds to your solar and sun to the areas that lead water to your hydro dams. Yes, this can be solved by building new wind, solar and hydro if the geography allows it. But if your currency is denoted in energy, in the meantime the economy will be suffering from deflation (in addition to the energy crisis). That is if you don't get a crisis in confidence - there is not enough energy to back the money!

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Mon Sep 9th, 2013 at 04:21:36 AM EST
[ Parent ]
A swedish kind of death:
Say that you have a nice mix of wind, solar and hydro. Now climate change moves wind from your wind mills, clouds to your solar and sun to the areas that lead water to your hydro dams.

i know this is not your argument, it's way too silly, you are playing devil's avocado.

if we can reverse climate change we still have deserts, if we can't we'll have more.

heck even moving huge gobs of panels is a minute logistical problem compared to say ring-fencing the aqua fallout from fukedupshima, or building out new coal plants.

what mystifies me is that china has less entrenched extraction industry lobbies, yet still has its head up its ass for the most part.

there have been more quacks about renewables lately from them, but opening coal plants and digging it up have to be way more costly than solarising the Gobi and gridding, and that's just economically, before you take into account the effects on climate and our emotional well-being (literally priceless), and absolutely not factored in.

the downline health savings alone would be prodigious...

damn weak tea as arguments go, imo.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Sep 9th, 2013 at 07:17:11 AM EST
[ Parent ]
Can't make a guacamole without squashing some avocado.

But I am partially serious, it would be a bad idea because while you are moving and building new energy infrastructure you would needlessly suffer deflation. And renewables are more resiliant then fossile fuel or nuclear which would be part of any mix if we switched today.

I am also playing avocado, because I don't think there is any risk of energy based currency replacing government violence backed currency. States have no reason to do that, and contrary to Chris I don't think states will fade away. Institutions last and the states has many ways to keep themselves relevant.

So the realistic scenario is energy tokens in addition to government money, in which case an energy crisis may cause a crisis of confidence in the energy tokens, but not deflation as government money remains dominant. It looks interesting as a way to make financing of new energy production easier, as long as it is not turned into yet another financial scam. Right now any and all alternative currencies (that are not horribly poorly constructed) is of interest as states while having the means to marshall the productive resources of society are instead insisting on them being idle, and if human punished for it.

So I guess I am with ARGeezer on this one, it is a partial solution. Which is not to bad.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Mon Sep 9th, 2013 at 02:33:07 PM EST
[ Parent ]
I think having an energy backed currency, especially as it can be shown to be practical, is a good thing. As an alternative form of currency it could possibly add resilience to the monetary system while offering the opportunity for competitive advantages to emerge.  Likewise with land based currencies for which the 'use value' is sold by parcel and time duration. I don't think it would be a good idea to transition the entire economy to such a system until and unless it had been shown that such a currency had definite advantages over the current fiat currency systems and that the new system was adequate to the task of providing the entirety of the currency needs of the society.

On the one hand we have been through a several century long development process for the current fiat money system and have not properly been able to regulate and manage that system in a global economy. Logically we should be engaged in designing adequate and transparent regulation of that system on a global scale, were such action not blocked by beneficiaries of the status quo. Given how fundamental to economic activity the monetary system is I think great care should be exercised in making fundamental changes.

On the other hand, the current system, with its known inadequacies, could well fall into a collapse even more profound than that which we  experienced in 2008-09, so having a group of partial solutions available might turn out to be quite fortuitous.  Another two handed analysis. :-)

But even better would be having ways, leaders and the opportunity to break the current policy impasse. To a very large extent we have Barack Obama to blame for having insured that no substantive change to the financial system arose out of the Global Financial Collapse of 2008-09.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 9th, 2013 at 01:02:49 AM EST
seems to me that the smaller and more local the economy, the less chance it has of being middle-manned to death.

knowing whom you're dealing with tends to keep the lights on.

shadow banking on the other hand...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Sep 9th, 2013 at 07:20:31 AM EST
[ Parent ]
Social pressure in a relatively small community could put some pressure on people with whom one deals. Frauds might have a greater problem becoming generalized. Good laws and regulations would be better but that too often seems too much to ask.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 9th, 2013 at 10:07:22 AM EST
[ Parent ]


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