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The Future Monetary Ecosystem

The Future Monetary Ecosystem thumbnail

Over the next generation or two, there will be increasingly visible turf wars between money-suppliers with four very different motivations. It’s not really a fair fight, but it isn’t as one-sided as it used to be.

The spoils

The general term for the benefit associated with the issuance of a currency is seigniorage. Historically, the term has been associated with the profit made by a government from issuing currency, especially the difference between the face value of coins and their production costs. At the risk of outraging pedants we can use the term more broadly to include a wide range of benefits accruing to the issuer.

The spoils may be in the form of direct financial benefit (like the interest charged on credit-money created ex-nihilo). Or they may be indirect, in the form of influence that can in due course be traded or cashed-in (for example preferentially allocating credit to favoured partners).

There is, however, a further dimension. Money congeals as wealth. The location of wealth signals the ‘revealed preferences’ of the underlying money-system. Sure, there’s luck, inheritance and sometimes energy, enterprise and hard work. But mainly there’s the money system.

The motivations

a) OneWorld. The cherished belief of a certain section of the international elites that governance is best left to those who know best (i.e. them), and that societal and economic diversity is somewhat of a nuisance, entailing the never-ending energy-sapping suppression of a series of hare-brained ‘alternatives’. If this seems like a conspiracy-too-far for you, feel free to skip this section but remember that just because you’re paranoid doesn’t mean you aren’t being persecuted.

This direction of travel can be portrayed as a natural extension of monetary scope – if money is ideally a universal lubricant of exchange, then the more universal the better. Focal points for monitoring progress of this ideation are: Bilderberg, the future of the euro, and (most importantly) the evolution of the SDR (Special Drawing Rights) [1,2], the IMF’s ‘international reserve asset‘.

b) National Sovereignty. The nation state is the traditional home of the fiat currency, and indeed gives those currencies their primary raison d’etre – the compulsory requirement to pay your taxes in them. Unfortunately national governments have had a well-documented history of abusing their money-issuance privilege – usually via the simple expedient of issuing tons of it before elections to create a feel-good effect; occasionally in more subtle ways.

The current arrangement of outsourcing money-as-credit creation to the banks is at the subtle end of the spectrum (see The Bank-State Bargain [3]). It obviates the need for governments to have to bother much with real national strategies (typically characterised as ‘picking winners’ rather than ‘sustaining the planet for future generations’). They can concentrate on tinkering.

It’s not quite as attractive as printing money and putting it straight into your own account, but the revolving doors arrrangement ensures that political apprenticeships can often be traded for corporate gravy. Put it into your mates’ accounts and wait for payback. The arrangement is underpinned by a sense of inmpotence as national governments race to the bottom (regulation, tax) in response to corporate threats of absenting themselves. TINA.

But this gradual diminution of sovereign influence does beg the question – can’t corporations do the money thing themselves and cut out the sovereign middle man.

c) Private Money. As is often said, anyone can create money – the problem is getting it accepted as payment. Private entities cannot coerce quite like a government, but they increasingly have huge market power that can be brought to bear if they think they can profit from operating a currency. They can use this power to construct unique value propositions. And are likely to do so.

The potential for the likes of Amazon, Facebook, Apple and Google to operate their own currencies has been given a boost by the cryptocurrency phenomenon. All are already actively looking at payment systems and it seems likely that the next generation competition for commercial banks will come primarily from out of sector. The crypto-angle has opened up the possibility of currencies that cannot easily be closed down by the state, as many of the successful alternative currrencies of the 1930s eventually were. Of course private for profit currencies are unlikely to make use of the fully distributed consensus model of Bitcoin, being more interested in permissioned blockchains with the gatekeepers being – yes Google, Facebook, Apple or Amazon. But the possibilities of the blockchain are encouraging disruptive thinking.

One starting point for initiatives in this area is Hayek’s writing on the denationalisation of money [4]. Hayek generally thought that competition was the answer to everything, and he saw money as no exception. He thought monetary policy to be ‘neither desirable nor possible’, and identified government as the major source of economic instability. And while his writing predates our current over-financialised economy, he certainly anticipated the ‘parasitic’ secondary activities that could attach themselves to a monetary monopoly and saw competing currencies as a solution to that.

So while Hayek’s for-profit currencies generally come from a very different political place than value-based Intentional Currencies [5] and today’s complementary currencies, they share the core belief that ‘A money deliberately controlled in supply by an agency whose self-interest forced it to satisfy the wishes of the users might be best.’

d) Peer-controlled money. It is difficult to title this section. The vision is similar to Hayek’s but the ‘wishes of the users’ are determined in a co-operative way and the money is controlled not by a for-profit ‘agency’ but by the users themselves through various forms of co-operative institutions and governance mechanisms (including platform co-ops). I have previously expressed dissatisfaction with the adjectives ‘alternative’, ‘complementary’ and ‘community’; and ‘intentional’ can include a for-profit motive if objectives are explicitly set out, as can ‘value-based’. It can be argued that this form of money is the purest because it is directly controlled by its users; by the people who give the currency value by accepting it in exchange.

The Battleground

We can indulge the late Mr Hayek a bit further by exploring the competitive landscape, both between and within currency models . If we plot on a matrix the reaction of an *established* money-type to an *emerging* (or re-emerging) money-type we can surface a wide range of conflictual issues, including the regulation of private currencies (b/c),acceptable units of account for national taxation (c/b), national debt slavery as political influence (a/b) and the use of currencies as weapons in financial wars (b/b). Interesting stuff but far too much for a short article.

What follows therefore is a summary of two key battleground issues affecting peer-controlled money, (which is a category of special interest to Feasta).

The Ultimate Potential of Shared Value (c/d)

The core idea behind Intentional Currencies [5] is that the value-set shared by the relevant user community should be made explicit and will act as a cohesive force as a currency and its governance institutions develop side by side. However experience with intentional communities in general leads us to be a little cautious not to overstate the power of this idea. All too often communities that on the face of it have strong shared values can fracture and fragment because of personality clashes and power trips. Against this background the ‘honest profit’ metric has its attractions, (as has hierarchical decision-making). Profit is a hard verifiable metric, reassuringly value-free. From this perspective old money provides a service for us – it enables economic interaction with people we dont want to break bread with. It absolves us from social interactions.

Thus if this group of money-systems is to scale and replicate sufficiently to become a central progressive economic and societal force, the evolution of thinking around shared value is a critical success factor. Somehow it has to translate integral fellow-feeling into pragmatic mechanisms for exchange and do so authoritatively but in a co-operative fashion.

Selectivity vs Universality (b/d)

A related issue is that the restricted scope of a value-led currency – the potential preferencing of certain transactions – prejudices the variety of the portfolio of goods and services that are available. The concepts of the Preferenced Domain [6] and the Deprecated Domain [7] are attempts to flesh out this line of thinking. It is possible there will need to be an Intermediate Domain where we are relatively neutral about some goods and services and want to find ways to include them to enrich the offering, but may not want to extend full community benefit to their providers.

Conclusions

Activists in the Peer-Controlled currency space will generally welcome an increasing diversity in the developing monetary ecosystem. Thus the exchange of ideas about how value-led currencies can develop should in itself be a key factor in their progress.

There is certainly a window of opportunity. Decision makers in the higher reaches of international financial institutions will be more concerned with the power relationship with national currencies, so peer-controlled money will be somewhat off radar for while. An ‘offgrid money’ mindset may be helpful. But the same window is open for private for-profit moneys, and multinationals are already fluent in international finance.

One factor working to close the window is the increasing appreciation of the significance of digital/ crypto currency which is already sensitising established international institutions to potentially disruptive developments. Whether more democratic user-controlled currencies can establish a secure foothold before they are re-challenged by a new breed of national/ international digital moneys remains to be seen. No doubt many of the ICOs [8] coming to market now will turn out to be Ponzi schemes, but some are already seeking to differentiate themselves via value-statements (as opposed to get-rich-quick statements) and there may well be one or two that show us the shape of the peer-controlled currencies of the future.

FEASTA



9 Comments on "The Future Monetary Ecosystem"

  1. makati1 on Tue, 20th Jun 2017 7:57 pm 

    Digital money is a bad joke. Only fools believe that something that only exists on the internet can last. I am looking forward to the day it becomes obvious to those fools that that ‘money’ can disappear in a flash, when it does.

  2. Davy on Tue, 20th Jun 2017 7:59 pm 

    This “peer controlled currency space” is really unimportant in the greater scheme of things. The global system is hard wired to what “is” and in effect. “It” can’t be change and what is operating now must go on or it all comes down. We have taken it too far to unwind. We have excessive debt and unfunded liabilities. This is like a chronic disease of dysfunctional arrangements. This is global with cross collateralization so there is nowhere to hide. Even those places off the beaten path will feel the effects of demand disruptions or supply constraints. No local is sustainable. There is nothing that could be created to unwind such a knot. The way you cure this problem is collapse. Too bad there is no way to clean the slate and start over with a collapse. Collapse will be deadly and dirty and not a rebirth until the fires burn down. The rebirth will likely be an alternative reality.

    In localized places within the status quo in niches and on the fringes here is where alternative currencies have a place but only as a subset and as a dependency. When the curtains fall it will be on all. This really all comes down to demand impulses of far flung consumption forces. There is no one point to reference. It is like a living body with organs and systems needing food and responding with bodily functions. When the aggregate growth impulse finally gives up there will be nothing but a death rattle. Alternative currencies will have little strength once the economic impulse gives up.

  3. onlooker on Tue, 20th Jun 2017 8:02 pm 

    Barter will some day be in vogue again

  4. deadlykillerbeaz on Tue, 20th Jun 2017 9:16 pm 

    If the grid loses power, you had better have some cash.

    Some soap, too. And toilet paper.

    Private money might not be all that fungible, if you know what I mean. Soap and toilet paper will be very fungible and will be traded for something of value in a hurry.

    Unless private money is in the form of precious metals, gold and silver, platinum, palladium, private money won’t go far, back to the source, if it still exists.

    Copper is good to have too and some steel.

    Minted coins that are silver and gold in content will be good to have when there is no electricity at all.

    People do value gold and silver, they tend to have a propensity to hold those two metals when acquired. Can do lots of things, very useful industrial metals.

    Those button batteries are 40 percent silver.

    Precious metals have a better future than digital money, private money can’t be trusted.

  5. JuanP on Tue, 20th Jun 2017 9:52 pm 

    Onlooker “Barter will some day be in vogue again” I like bartering and practice it whenever possible. Seed swaps are my favorite form of bartering. I recently bartered 30 hours of volunteer work for access to 1,500 sqft of land for a year to grow food with a local organic farmer. I also barter with the owners of a local juice and coffee bar; I give them wheatgrass and microgreens trays I grow at home and get free cuban coffee, sandwiches, and coffee grounds and juice pulp for my compost. Most people like bartering 😉

  6. onlooker on Wed, 21st Jun 2017 2:50 am 

    Nice to hear from you again Juan.. Yes barter is mutually beneficial and a logical and good way not just to trade but for a community or communities to have more solidarity

  7. MASTERMIND on Wed, 21st Jun 2017 8:50 am 

    The plan is to provoke Russia to war to cover for the economic collapse. The Elders hopes to get Russia to drop a nuclear bomb on the US to cause chaos. The elites plan to be safe in their silos while the rest of the population suffers. Economic problem solved. Angry US population neutralized...

  8. ALCIADA-MOLE on Wed, 21st Jun 2017 10:48 am 

    @MAST Putin does that by shooting down American planes. Russian planes regularly harass US Military in Alaska and elsewhere in Europe. Just the fact, sir.

  9. bobinget on Wed, 21st Jun 2017 1:13 pm 

    “Disposable diapers may take more than 500 years to degrade. And it’s estimated that more than 27 billion disposable diapers are used in the United States each year, according to the study”.

    Why not ship all those disposable diapers to Alaska and other coastal cities building low lowlands subject to sea level rise flooding.
    After all, 500 years ain’t ten thousand permafrost years butt think of all the hundreds of jokes once President Trump is deposed.

    Think positive. If you knew for sure your home’s foundation would last 500 years, you might be content putting up with a little gas seepage now and again.

    No shit. I tried to burn my grand-son’s used disposables. Forgetaboutit.

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