Free money alternatives

thinking about moneyWe have been trained to accept that capital comes from savings. Savers are paid interest, and lenders are charged a little higher rate to cover expenses, and hopefully make a small profit in the end.

Well, we now know this is not the case…

Currency is created out of nothing by private banks, lent out to insiders at miniscule rates, who then buy up bonds, stocks, etc., taking over the planet by using this easy money to concentrate ownership of equity, property, claims on assets (debt, bonds), etc.

Now of course, the buying power of that newly created currency must come from somewhere. It comes from robbing savings and wages through inflation. So in a way savers are indeed contributing to capital, just not getting paid for it.

Complaining is easy, so what can be done about it?

We propose consideration of the following subset of alternatives:

  • Islamic economic system
  • Public central bank
  • Precious metals
  • Crypto currencies
  • P2P bookkeeping

Islam economic system

Let us contemplate two contributions from Islam, namely Riba (interest) and Zakat (tax).

Islam does not permit guaranteed interest payments (Riba) since risk is God’s mechanism of intervention, so it is haram to attempt to eliminate risk through guaranteed interest income. Rather than force the debtor to make stipulated interest payments irrespective of the detriment, it is proposed that the creditor participate in the risk of the investment, and thus returns are more like shared profit.

Zakat is a payment on capital assets, over and above necessities such as a home and tools. Wealth tax, which used to be the predominant tax (on rent) in the West a century ago, uses excess wealth without crippling anyone.

This is not an income tax, where one is taxed even before being permitted to invest. (Registered programs simply postpone tax, and give tax authorities more information on private activities)

Public bank

Unlike most Western countries, Canada’s central banque is publically owned and constitutionally responsible for the currency yet, since 1973, Canada’s own currency is created by private banks (like almost all countries), and lent out as debt at interest.

With public central banking, currency would be created exclusively by the public bank, while private banks would be agents of that currency (ie, 100% reserve requirement).  New currency created by the public bank in order to maintain price stability and economic growth is then available for government budgets (an alternative would be to distribute it as a citizen’s dividend).

The conversion from the current system would be a simple change in bookkeeping where principals on loans paid back would be assets available to re-lend.

Precious metals

A critique of a publically managed currency supply is that politicians are no more trustworthy than banksters.

“Backing” currency with precious metals prevents inflation of the currency beyond the growth in metal reserves. Tying currency supply (and thus economic activity (setting aside velocity)) to the production capacity of gold mines is arbitrary, but arguably better than the current unthrottled inflation (of currency, not consumer prices).

A variation on the theme is permitting savings in publically minted precious metal coinage (as a hedge against inflation of the currency), and having banks freely (and privately) trade the coinage for cash (pegged or floating) like the Mexican libertad proposal.

Crypto currencies

The inconvenience of physical coinage has been addressed with cryptos. Aside from the frenzy of speculation, distributed ledgers (blockchains, directed graphs, etc.) are  a viable way of recording bookkeeping for all to see, with privacy maintained through encrypted transactions, anonymous confirmation, etc.bitcoin

This technology is being enhanced to not only record transaction values, but asset registration, contracts, escrow, etc., and inefficiencies are continuously being ingeniously improved.

P2P bookkeeping

Crypto currencies are indeed a paradigm shift, but probably the two most salient concerns are the universal ledger, and that they remain commodities (subject to barter).

The argument against a massive global ledger is of course the size and communication bandwidth needed (despite efficiencies), placing it in the realm of servers and data centres.

Then the argument against cryptos as a commodity, similar to a precious metal coin, is that it has to acquired with a banker’s currency. Therefore someone looking to acquire a crypto still needs to “earn” a currency in the bureaucratic economy. Furthermore, exchanges are subject to KYC, thus violating privacy.

With a stacked, peer-to-peer, bookkeeping system we can run on smart phones by doing away with mfree from cellphoneassive ledgers and commodities, while preserving privacy and enforceability.

Currency is transparent, and simply used as a unit of measure for bookkeeping as is normally done with accounts payable / receivable (debtors / creditors). Currency arises the moment participants in a contract agree, thus economic activity is not limited by capital, but by skills (ie., full employment).

This credit has thus arisen from real economic activity and can be traded as justifiably as good and services.

The brilliant brains behind cryptos have provided the mechanisms for privacy and verification. But in contrast to blockchains, activities do not need to propagate throughout the universe, but simply between participants.

As with normal business, due diligence is required when extending credit, as one would be responsible for amounts traded (analogous to signing and passing on someone else’s cheque). So too for higher levels of organisation, such as regions, manufacturing co-ops, or supply networks which would vouch for amounts traded externally.

Two level cryptocurrencies will make transacting fast, private, and secure. Participants will personally (not in a bank) hold their money in a secure wallet.

bolting horse


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