E The People's Currency

What do you think? How could this be improved? Do you have something better than per capita GDP as a target? Does this already effectively exist?

Last but not least, if you like the concept: do you know anybody who could pull it off?

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Joseph Cox 2 months ago Author's comment


An offline counterparty says:

"What's the incentive for politicians to reduce monetary inflation tho. Also, part the argument for monetary inflation is to lessen the impact of economic shocks by flighting what would be deflation in a shrinking economy. If you're in debt, the value of that debt increases with deflation, making it harder to service and often creating a feedback loop or deflationary spiral"

I'm not suggesting replacing the currency, just providing people with an alternative to protect against monetary inflation. This would be a private exchange.

The attempt to lessen economic shocks by issuing more money is a black art in the extreme as revealed by the namby-pambyness of currency trading - which is just trading on expectations of expectations and is totally untethered to any 'real' value. Especially since Bretton Woods.

I, of course, am very anti-debt. But the debt only increases with deflation if your debt is fixed. In parts of Europe, banks are paying mortgage holders for holding mortgages.

If your debt moves with LIBOR, it's replacement, Fed target rates or whatever you actually end up with all sorts of manipulations you can't begin to understand are changing the price of your debt. The most dangerous is popular demand - keep interest rates low so people can borrow ends up being a formula for runaway monetary inflation.

Again, you can choose to price debt using a currency like this, but it isn't a replacement currency. The old options remain. This would be akin to people in developing economies pricing transactions in USD because their own currency is unreliable. Well, really, USD are unreliable too.

We just use USDs as the benchmark because nothing else is more reliable.

Sarbelio Jaime 2 months ago Member's comment

I agree with you, Joseph. Now, El Salvador has a consumer economy. We don´t produce anything like raw material or great grains harvest and our exportations are very limited, but our imports and debts.. you build an empire. 90% of our GDP in debts is our record.

Joseph Cox 2 months ago Author's comment

Wow. Probably not the best baseline in that case :) I guess the 'net exports' part of GDP might end up with those earnings being appropriately tiny but also volatile.

Michele Grant 2 months ago Member's comment

I'm not a fan of bitcoin personally. Not just because it's highly volatile, or because nothing is unhackabale, or because governments could outlaw it at any time. But simply because it encourages crime. It is the criminals' currency of choice.

Sarbelio Jaime 2 months ago Member's comment

I see Michele, but do you think bitcoin could be used in a national economy as a base currency?.

Michele Grant 2 months ago Member's comment

I don't have an issue with digital currency. My problem with bitcoin and other cryptocurrencies mostly resolves around the lack of regulation and paper trail, which encourages crimes by enabling criminals. For example, would the Colonial Pipeline hackers have been emboldened to attack the US if they knew they could get caught? Bitcoin ensured that wouldn't happen.

My other main issue is the extreme volatility which I find destabilizing. That may excite risk taking investors but doesn't make for a great currency. I did however fine Mark Zuckerberg's Libra coin to be intriguing as that was supposed to be based on a basket of other stable currencies.

Sarbelio Jaime 2 months ago Member's comment

Certainly, crime and corruption are a disadvantage for bitcoin. You are right, And about volatility, I think there´s must be some stable scenery in the future for cryptocurrencies.

Joseph Cox 2 months ago Author's comment

this doesn't have to be crypto to work.

William K. 2 months ago Member's comment

One effective incentive for politico's to reduce monetary inflation could be to avoid public wrath and possible execution, although that is not my recommendation. Impeachment from office and eternal banning from all financial business should be adequate.

For the current situation in the US, an investigation of using position to benefit "friends" to the detriment of all others might be sufficient. Certainly fiduciary duties are being ignored, which is a rather nasty activity.

Joseph Cox 2 months ago Author's comment

The benchmark is important because it actually sets what the currency does. In this case it means the currency always represents a fixed slice of economic production - almost like shares in a company. No matter what the economy's actual currency does, this remains stable against the economy. If the economy actually grows - however you define it - this is more valuable. If it shrinks, this is less valuable. Either way it is tied to that economic productivity. There could easily be other benchmarks to use - measurement and frequency are the challenge.

Joseph Cox 2 months ago Author's comment

In reaction to an offline question about automation impacting the price of labor...

I'm not concerned about inflation per se. I'm concerned about a particular kind of inflation: monetary inflation.

You pump up the money supply and erase people's savings.

In order to counteract this, people invest in things meant to give a return or they try to benchmark against a cost of goods measure which is hopeless in a world in which the definition of a good is constantly changing.

By tying to GDP you are looking at the production side of the equation.

Automation doesn't matter. Total per capita income would remain the same or even rise with more efficiency - you'd just end up with dumb jobs priced out.

They key is the currency is tied to the size of the economy and doesn't become worth more or less without the economy growing or shrinking.

Stock Profit 2 months ago Member's comment

Very thought provoking.

Joseph Cox 2 months ago Author's comment

One thing that really appeals to me is the relationship to average income. IF your coffee was 2 units, you'd know that was 2% of average daily earnings (although not yours). If your car were 20,000 units, you'd know that was 200 days earnings. It would actually make things more tangible in terms of normal work effort, the kind of debt taken on for purchases etc....

Sarbelio Jaime 2 months ago Member's comment

Well, I would like an anti-inflation currency with a high degree of exchange and easy convertibility. Digital, of course, and accepted in all the world.

Joseph Cox 2 months ago Author's comment

If you wanted these characteristics adjusted for your local market there could be versions of the currency for that market. All it needs is reliable and regular GDP (or another metric) reporting. El Salvador is dollarized, but a local version of this need not be. It could be paired to El Salvador economic data and provide the benefits of a local currency without the instability such a currency would normally have.

Sarbelio Jaime 2 months ago Member's comment

Good point Joseph. The thing is reliable and regular GDP reporting, as you know, we have an authoritarian government and do not like to give economic information.

Alexis Renault 2 months ago Member's comment

Sorry to hear that. What kind of information do they share? Maybe come to the US!

Sarbelio Jaime 2 months ago Member's comment

The information that they like. I think the correct word is propaganda, about their inexistent success in combat against corruption and violence.

Joseph Cox 2 months ago Author's comment

I forgot about El Salvador's government.. whoops. China's GDP isn't exactly transparent either. This would limit markets where you could pull this off. The US is a good one then - this is like the USD but more fiscally stable.

Joseph Cox 2 months ago Author's comment

Anti-inflation: check. High degree of exchange: check. Easy to convert: check. Digital: check. Accepted in all the world? This depends on two factors. First, the exchange can only operate in one currency (due to buyback), but others can buy and sell this with whatever currency, good etc... they want. So it could be globally exchangeable so long as it is popular enough for financial intermediaries to provide the service. As far as being able to spend it, I could imagine a debit card that holds this currency and exchanges it for whatever local one you're spending on the spot.

William K. 2 months ago Member's comment

It is an interesting concept, except that it seems to reward mediocrity. Between my extensive skill set and my serious work ethic I routinely deliver far more value per unit of time than most other folks. Those folks who are members of extortion gangs (AKA Unions) might get more cash for delivering less value, that is how extortion works.

But in this description I saw no means of adjusting income to match the value of service delivered. If that is actually the case the the whole idea is complete foolishness. And I do not understand how the scheme would "protect the value of my earnings." It looks a bit like those in power would rapidly become far wealthierthan those not in power, and that is intrinsicly wrong.

Joseph Cox 2 months ago Author's comment

This isn't about earnings, just a unit of currency. If you earn more, you could buy more of it. If you earn less, less. The goal is just to have a currency that counteracts inflation by auto-adjusting to something tangible - in this case GDP per capita. If GDP rises in USD terms (which could be due to economic growth or inflation), then this currency is worth more USD. If GDP falls in USD terms, then this currency is worth fewer USD. It doesn't adjust income at all - it just protects income from Fed manipulation or the vicissitudes of stocks, bonds etc...

Joseph Cox 2 months ago Author's comment

Another thing this would mitigate is the dark arts of Fed monetary policy, allowing people who want it something much more transparent.