A production based currency: What would it look like?

topic posted Mon, November 24, 2008 - 1:27 AM by  Sean
We know that the current debt-based monetary system is doomed to failure over the long term.

So, what if we borrowed from the best aspects of all known systems of trade, and created a viable alternative?

Credit, ie, debt based currencies have the benefit of being versatile and tradable for anything you need, but suffer from inflation and the long term exponentiality of debt growth versus money circulating in the system to pay those debts.

Gold based systems have the benefit of retaining value long term, but suffer from deflation as they fail to scale to expansions in production. This sets up a situation where it is more advantageous to hoarde wealth than produce wealth, and makes loans extremely difficult to repay or long term investments difficult to secure a return worth the risk.

Barter systems have the benefit of keeping the production of wealth in the hands of those that actually produce it, but they fail in terms of versatility, as what you have to offer might not be what any given counterparty needs or wants. This makes trade unnecessarily complex/creates barriers.

Given the pros and cons of each system, I believe the next evolutionary step is to create a monetary system that is based on production itself instead of debt, or precious metals. This means that producers, instead of banks, would essentially have the ability to print currency, just as was the case in the days of barter, while providing the versatility of debt-based currency, and balancing out the pressures of deflation and inflation that result from a monetary system that otherwise fails to scale precisely to production.

Such a system would hold supreme production of real wealth versus leveraged financial investment, and allow for expansion or contraction without risk of systemic collapse. The inherent need for perpetual growth that is found under debt-based monetary systems would be forever abolished, but growth would still be highly incentivized to provide for general increases in our standard of living and to provide reward for investment risk. Growth or contraction could scale to population changes with ease, regardless of population boom-bust cycles.

This is the general idea of it...

Now, how to make it work?....
posted by:
  • B
    offline 123
    I believe this has already been discussed in 1924. It's called social credit and the money supply is expanded only as the real productive economy expands.

    But I would recommend marrying this with the experiment in Worgl and the ideas of Silvio Gesell and make it a demurrage currency. Then go one better, make it all software so that you get to carry all your currency with you everywhere. No central computers to ever know how much you had, where you spent you money or on what. Ultimate money security and secrecy.

    Change the casino economy on wall street to one of real capitalism where you can 'invest' your capital for dividends and when you are done you only get back what you put in. No stock market speculation, no need to short sell shares because the share price never fluctuates. Capital earns dividends only.

    Create safe havens for capital in wilderness and animal shelter investments.

    Money gets to work for the planet and people again not the 1%.
    • Unsu...
      The idea we have today is to create schemes of "getting something for Nothing."
      I like the example of Worgl, the hometown of Gesell. As the money lost value it
      needed to be spend and everybody was better off.

      I still though believe in some basic savings simply because - "what if a person gets sick and
      can't be productive for a while?" I think it's a good idea to become able to safe 3-6 month
      of cash to be able to recover from something unexpected.

      I don't see, how Gesell's system takes care of the sick. One thing is for sure, we need to get way from exponential growth in regards to population, and money.

      I like to read James Howard Kunstler's blog. Kunstler speaks a honest language but sounds for many too doomsdayish as the wold scenarios seem so be described to be too "fear-based". Well, one just needs to look at the auto-industry and Detroit... The city looks as if a civilization is breathing its last breath. As an individual, I find him actually highly positive as he has the courage to look at the world with some "down to earth" wit.
      • B
        offline 123
        There are 'fixes' to allow savings. I would allow money to be saved without bearing interest by investing the capital into the stock of a company. They price of the stock would never fluctuate. You would be paid dividends and can sell the stock back to the company at any time for what you bought the stock for. That would be a form of savings account. I would also allow for 'investment' into wildlife sanctuaries working the same way. Non interest bearing but you money does not decrease.

        As far as health care we really need to move to a public health care system and get rid of all these parasites in the insurance industry. That savings to the companies would propel the US once again in manufacturing.
        • Unsu...
          I so agree:
          Watch frontline, they just had a show on this issue.

          They compared 5 countries - 5 health care systems...
          We are so behind with this Milton Friedman privatization sickness.
          • B
            offline 123
            I do so hope that the current financial meltdown has once and for all proved to the World that Milton Friedman is a fool.
            • Unsu...
              I recently read the book by Naomi Klein, "The Shock Doctrine - on Disaster Capitalism."
              She mentioned in it how shocks are created to make people feel helpless. War, natural
              disaster are used to create such a helpless feeling in us so we are not able understand
              what is coming - usually another privatization attempt of a vital resource, for instance.
              When we are under shock we become childlike... see. It happened so often, see Iraq, see
              see New Orleans and how all the schools became charter schools, etc.

              Now, with the economic meltdown, and the possible peak oil scenario, we are in for such a deep
              dive that I think the only thing which can turn things around is some of our basic human
              "goodness" and our firm determination not to become corrupted "no matter what will happen."
              I mean many people are too shocked to understand what is happening... yet, this time, I don't
              think this is planned. It's all out of control.

              Things are going to be interesting and positive thinking is necessary to make the best out
              of what is to unfold. Seems we all need our own currency again - everywhere... and we need
              a land-reform as well, when things can't be trucked across the country any longer.

              I also ask myself, how we attracted the current situation (most of us had nothing to say) and the simple answer is "greed attracted more greed" as we cultivated Vegas mentality of wanting "something for nothing." Perhaps at some point in time, we will come to understand that the form of disaster capitalism based on pure greed, was nothing but total mental sickness.

              So, communism is down, capitalism is about to fall (peak oil will do just that) what new system could we create to supply basic for needs? I am sure things need to be simplified and intensely localized to survive what we are in for.

    • Tim
      offline 0
      these ideas are very similar to some developed by my wife and I, see where they are explained in detail. The barter community (for both business and private offers at the same time) uses a demurrage currency (sometimes called negative interest), to facilitate the exchange of goods and services. The trick is - as ever - not only to have an interest-free currency, but to address the question of how it can come into circulation and what (if anything) it is backed by. Production-based has been suggested here, which seems fair enough in terms of having true values reflected in the currency - but I'm not sure how that could be put into practice - who can issue how much of what, and who shall decide the answers to such questions... We have been looking for self-regulating ways of doing things, to avoid the possibilty of manipulation (and the plain headache) of having any sort of central authority. What we came up with is converting old money into sensible assets (local sustainably run business and production), and using these assets as backing for the currency. But not an authority which issues the currency en masse, but rather the ownership of said local businesses is via (small) investments of many local citizens in their local Coop, for which they get personal ownership cerificates - which they can, if they want, deposit as backing for a credit facility on their account. Thus the new currency only comes into circulation (a) as required, and (b) always value-backed. As a friend, Dante, put it: "A mutual credit system, where the credit line is limited and guaranteed by the shares owned by each individual participant". More briefly, a collateralised mutual credit complementary currency :) Hope this helps.

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