Re: [worldcurrency] Join "Capitalism" and accomplish our goals.

[Sam Carana]

Hey, John, I like the slogan, MERIT. But let's discuss all alternatives on their merits. Some people will prefer gold, other people silver. Personally, I see shares as the best alternative.  

 

First, let's see where we agree. Government control over financial affairs has proven to be disastrous. We should get away from the idea that government should have overall control over commerce and money in society. Insetad, free markets are the way to go.

 

So, what are the alternatives to money as it's currently controlled by government? Let's look at all possible alternatives. What are the criteria that affect a successful replacement of money? Let's discuss the various thoughts of everyone on these points. Here are a few criteria that spring to mind, perhaps you like to add more:

 

1. Fraud

 

Alternatives to money can be issued by government or bussiness, either large enterprises, companies, smaller commercial firms, or non-profit organizations or even individuals. Technically, all kinds of things can be used instead of money, such as coins, pebbles or casino chips. But one issue is fraud and counterfeiting. If it's easy to print or make look-alikes at a lower cost than what it says on their face value, then you're in trouble. That's why gold is attractive. The cost of avoiding fraud is a major issue. For any alternative, measures to avoid fraud will add to the cost in different ways.  

 

In some respects, electronic transaction systems offer a higher degree of verification and can therefore better avoid some types of fraud, since they leave a more detailed trail of where the money came from and where it went. This raises privacy questions, as discussed further below (4.). 

 

However, for reasons of privacy, companies can choose not to register, verify and check each and every detail. Instead, companies that issue their own type of money can guarantee transactions in their money to certain amounts, just like credit card companies will guarantee up to certain amounts without requirements for a detailed verification. In calculating the cost of such guarantees, we must take into account the above-mentioned privacy aspects, the hassle and cost of verifying every small transaction, the cost of cancellation of transactions, non-payments, etc. A competitive environment will work out the best ways to handle these kind of issues.

 

My guestimate is that the cost of dealing with fraud and "problem"-payments will add at least a few percentage points to the transaction cost and will proportionally weigh more heavily for smaller transactions than larger transactions.

 

2. Face value

 

Again, all sorts of things can technically be used as money, things like stamps, gift-vouchers and bus-tickets. However, if their face value is expressed in some specific currency (say dollars) then they're not really alternatives to currency. So, it's only a real alternative to money if it says on the stamp something like "good for one local letter", or on the bus ticket "good for one local trip". Gift vouchers would be difficult in that respect.

 

3. Exchange

 

Finally, for any alternative to be successful, there must be easy ways to buy and sell it. Preferably, people can exchange one type of money for another type, transfer ownership, etc. Electronic systems appear more cost-effective then over-the-counter transactions that require skilled and trustworthy staff to handle things. Online systems appear to be the way to go, if we look at the growth in transactions over the Internet.

 

4. Privacy

 

Money can be used with some degree of anonymity and privacy, although that's hard in the case of larger amounts. Banknotes are numbered and even the origin of gold can be traced back in a lab. The best gurantees in this respect are in the free market, where companies have to provide the services that their clients demand, including the associated privacy aspects. Where privacy is a customer concern, the free market will provide solutions that take such concerns into account.

 

5. Appreciation

 

Currency typically depreciates over time. Devaluation of currency is typically caused by government. It may be bad economic management, war, or simply borrowing too much that leads to inflation and devaluation over time of currency. Some things appreciate over time, other things depreciated. Some commodities  deteriorate over time, such as wood, grain and other types of food. Resources such as minerals and oil are more durable. Another factor influencing the long-term value is the cost of safekeeping. Oil is flammable and takes a lot of storage space. Gold is attractive, yet it doesn't appreciate as much as shares do. Why do shares appreciate most? Look at it this way. Gold is a "non-productive" asset in the sense that storing gold only costs money, it doesn't add to economic productivity. Successful companies build wealth and prosperity for the entire society (creating investment and employment opportunities, supplying according to demand, etc.), and they will both pay dividends, while their shares will also appreciate (typically more than gold).

 

6. Back up

 

Additionally, the value of money hinges on asset back-up. In my view, back-up alone will make that the most successful alternatives will come from larger companies who will issue their own types of money. Effectively, that means that their shares will replace money and their assets will act as guarantee. However, it may well be possible for smaller companies to successfully issue coins and notes. As long as their value is guaranteed by sufficiently large companies, this may constitute a good alternative for smaller change, like what we use daily to pay for food and travel. For larger amounts, however, it makes more sense to use shares of companies.

 

7. Technical feasibility

 

The transaction cost in retail has come down dramatically, due to electronic systems that also come with many additional benefits such as tracking of sales and supplies, automatically ordering in cases of shortages, etc.

 

There's still some way to go before we can easily use shares instead of money to facilitate trade. If you need a broker to handle each transaction in the traditional stock exchange scenario, you'll pay at least a few dollars for each transaction if not more. But computers are getting ever more powerful and online services are getting ever-more advanced and sophisticated. It won't take long before we'll have 24/7 online trading for a multitude of stock exchanges. Banks already offer accounts that show amounts of gold, silver or other commodities, instead of currency.

 

8. Politics

 

It looks like politics will be the biggest barrier to take. However, once the above points have been explained sufficiently, politicians will accept that shares constitute the best alternative.

 

Any views?

 

Sam

 

On 6/17/05, John Gelles <john....@gmail.com> wrote:

I sent the message below to google-group "capitalism". The criticism may not apply to "world currency" and "political economy". But the advice does. Can we not join together to accomplish our goals?

My message was:

The issue we face is not "to replace money with shares, or not."

The issue is "democratic-capitalism or democratic socialism."

America once sought the four freedoms (of speech and religion, from fear and want) an, in 1944 FDR's second bill of rights (economic rights, that is -- full employment, high wages, low interest, none but essential monopolies, and cradle to grave economic security based on economic output and democratic values.)

Today we have lost our way. We do not know what we want. Police state socialism proved it stunk -- only North Korea and Cuba still suffer its consequences. China, Russia and India are using various forms of capitalism -- nut none has the degree of political democracy you and I demand.

My guess is that Denmark and Switzerland have the best examples of democratic capitalism -- with common sense socialism in places where it has proved its value over stupid adherence to radical laissez-faire.

Now why don't we get serious? The notion that Switzerland, Denmark, America, China, Russia or India will ever replace money with something vague and private is a notion to lose as fast as we can.

We can replace money with gigantic computerized barter. Such a replacement, with its millions of SKUs (stock keeping units) and yet to be invented sub-systems, is at least decades away. And it may never be needed if we make money yield the four freedoms and the second bill of rights.

This google group is as anemic as any on the web. Let's give it a chance. Perhaps we need a new name. "Monetary and Economic Reform before It's Too late (MERIT)" ?