The more chaos in the collective consciousness, the more that chaos will be reflected in the material systems.
And yes, the both will be feeding off one and other, like a feed back loop.
http://plato.stanford.edu/entries/qt-consciousness/
with respect to the lack of selfish behavior in the face of personal danger and the generosity of the people of Northern Alberta, I would expect nothing else! This is oil country and these people are drillers and roughnecks and welders. You can critisize the upper management of some oil companies but the vast majority of oilfield workers have big hearts and will put their own neck on the line to help others. If i ever find myself in a desperate situation I hope I am on an oil community!
Grover-
So we have two threads here:
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if you were running a developed-nation central bank, what would you have in the "reserve asset" column?
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why not simply get rid of central banking entirely?
Hitting #1 first: reserve assets are a way of both "backing the currency" as well as having a way to remove currency from circulation if the need arises. We haven't talked about that for a very long time, but in the old days when we weren't at peak debt and banks would loan money to real people, having the ability to remove base money from the system was really important. The CB would sell off assets, taking base money out of circulation, which in tandem with reserve requirements (another limit from a dimly-recalled past) would result in fewer bank loans being made, which would cause an economic contraction.
So if we take as given we need a central bank, they must have reserve assets. Equities are problematic since valuation changes - but that's true of gold these days too. If we stick to the major companies, there is less concern. I'd rather have a big company equity on the books than shale driller junk debt, for instance.
And the gun really is to the central banker's heads right now. The choices are:
- low yielding Spanish & Italian sovereign debt
- negative rates on German (and other core-nation) debt
- higher yielding US equities.
Now for #2: do we need a central bank?
I'll make a simple if-then argument: if we don't have fractional reserve lending, then we don't need a central bank. If we do have fractional reserve lending, then we do need a central bank - specifically, a lender of last resort that can act to stop bank runs. The other "services" central banks provide are strictly optional. Lender of last resort is not optional.
The underlying question behind the fractional reserve lending choice is, do you want to have an economy where credit can expand if opportunity presents itself? Credit expansion of this sort is inflationary, but it also allows the economy to take advantage of opportunities. Without constructing a simulation, I don't know the specifics of the trade-off. I tend to think that humanity dearly loves a bubble, and fractional reserve lending definitely facilitates such things. At the same time, if you had a fixed money supply, and there was a big breakthrough in some new technology (say, power generation), the fixed money supply would limit the ability to deploy the new technology irrespective of the attractiveness of the business model. That, or literally all the money would get sucked out of every other part of the economy and thrown into the new area. No more farm or home loans because they simply don't have the same ROI as the fancy new windmills. "Sorry, we're simply out of money", the banks will say.
Likewise, if savers decided they wanted to reduce risk because the economy turned down, loans could easily become impossible to get. That's because in a non-fractional system, duration of savings deposit must match duration of loan or else you're back to needing that central bank again. There might just not be any savings at all in the longer-term CDs at some points in time.
Imagine that. Banks running out of money. Great if you are a saver, but what would that do to business investment, home construction, and the like? I think money gets a whole lot more expensive, but that's just my gut feeling.
Dave,
Thanks for the reply. You read between the lines of my post. I agree that as long as we have fractional reserve banking, we need some sort of backup bank to keep their promises. I suppose if there were real consequences for banks getting into trouble (unlike in 2008,) I'd be more forgiving. The banks get a free pass to make money and a free backup when they fail. We, the public, get screwed both ways.
We've had a great ride for the last century that the Federal Reserve has been in existence. Sure, there have been some rough patches, but look at all the great ideas that got funded by all that instantly available money. While marveling at all the modern conveniences, look at all the problems that have tagged along as so much excess baggage. The problems accompanying our successes are large enough to destroy us. (I think we would get to this point regardless of the monetary system - just not as fast or completely.)
Realistically, the corruption in the system makes continuance of the system a foregone conclusion. Politicians are beholden to moneyed interests … and the bankers always have money available to "invest" in future returns. Once a politician sucks from a banker's teat, the banker owns them. We're unlikely to fix the problems until the system fails.
So, after the system fails, will we rebuild a system exactly like this one? Probably not. Undoubtedly, there will be some components that will survive. If you were to set up a new banking system, what would you incorporate from the old system and what would you abandon? In other words, what do you like about the current system and what is abhorrent?
Grover
Grover-
So here's my sense. Nations with elastic money seem to do better than those without. If the US decided to lose elastic money, our competitors would probably kick our butts. "Sorry, your credit card doesn't work anymore, we're out of money here at the bank." There are lot of unintended consequences to "no fractional reserve lending" I suspect.
The price we pay for elastic money is inflation. People should have the ability to protect themselves from this effect. If we allow gold to be a parallel currency (i.e. there's no tax on moving in and out of gold) then people can have a refuge during times of inflation, a floating gold standard with the free market dictating price.
Here's how I'd restructure the banking system:
Ownership structure: central bank is a publicly traded corporation. Nobody can own more than 5% of the shares. And perhaps retail banks cannot own the shares, nor anyone who owns a controlling interest in banks can own the shares. CB needs to be at arms length from their bank customer base, so they don't end up giving them any sweetheart deals. Shareholders elect (via cumulative voting) the directors of the company (i.e. today's FOMC). Perhaps government owns 20% of the equity, and is able to appoint one of the directors, so they have influence, but no control. Dividends are paid to the shareholders.
Mission: should be reset back to its 1914 roots. Central bank oversees printing of the currency, clearing services, and is the lender of last resort, and that's it. Its not a regulator, a setter of interest rates, a monetizer of sovereign debts, or a rescuer of economies. And lender of last resort doesn't mean bankers get a pass on stupid decisions. It just means that solvent banks that run into liquidity problems can get money when they need it in exchange for good assets so they don't go under unnecessarily. Insolvent banks still get taken down by the government regulator.
Reserves & Base Money: central bank should provide base money in exchange for gold and/or corporate debt. No sovereign debt. Reserve requirement fixed at 10:1. Base money should grow at a rate equal to GDP, but no more. This is the area where I'm less sure about how much authority to give the central bank. Control base money, and you control the inflation rate. Ideally I would have a feedback mechanism whereby the free market withdraws some amount base money from the system (say, into gold) when inflation starts to get too crazy, but that could be subject to abuse. This is my biggest question mark.
Books: central bank publishes their 10K like everyone else, and are audited like everyone else. Specific identity of banks provided liquidity are withheld, but the amounts provided are not.
There are issues of international trade finance that I havent thought about also.
Retail deposit insurance: I'm generally in favor, I like the FDIC, but it shouldn't be complete insurance, only partial - say 80% coverage - paid for by fees, backed by full faith & credit of the Treasury. Banks get this in exchange for being regulated. That way weak banks will still make people nervous, but nobody will get wiped out on a failure. And if banks want to provide more complete coverage, they can get it from private insurance companies. If the private insurance company revokes coverage, that's probably a bad sign for that bank.
Capital structure: savings-account depositors should be higher in the capital structure of the bank than unsecured creditors, but lower than secured creditors - a savings account owner is a semi-secured creditor. Checking-account deposits don't pay interest, and are at the very top of the food chain, above the secured creditors.
Trading: banks cannot engage in trading. All they can do is make loans and take deposits. Banks must retain all the loans they make. No more securitization. No more derivatives.
Postal Banking: basic government checking accounts. Accounts fully reserved at the central bank, no lending, limits on transaction count, low fees, no interest. Must be an actual person to have this account. Its designed as a public banking utility service for poor people, who right now pay 20+ billion dollars in "gotcha" fees every year. Post offices exist nationwide. It will be the only bank with national reach. ATM withdrawls will be very low, or free. Its a "safety net" program disguised as a bank.
Deposit diffusion: no retail bank should own more than 5% of total national deposits. This reduces bank influence on the national stage. Banks may be important regionally, but won't be important nationally.
Ultimately, I'd rather have a (regulated, diffuse group of) private organizations overseeing money than the government. I believe in the power of the free market, as long as it doesn't become a cartel that controls the levers of power. Keeping them individually small keeps power diffuse. Try getting 20 CEOs to agree on something.
Allowing politicians to control, or even influence money supply seems problematic to say the least. "Here's a tool to keep you in power, at the expense of potentially creating massive inflation. Have fun!"
Also perhaps allow for local forms of money. Why not let people experiment? They wont be FDIC insured. You could even have gold-money, since gold will remain a parallel currency and it will no longer be taxed.
These are my initial thoughts. Its really a mix of banking post Glass-Stegall, with a deliberately partial FDIC, a postal bank, a rollback of Fed powers back to 1914, mostly-private (and non-bank) ownership of the Fed, and a Fed perpetual transparency requirement.
You touched on what I'd be hoping for in a new monetary system after the Big Reset. I don't want to have to rely on those who run "the system" to do the right thing AND I don't want to have to rely on the regulators to actually regulate. I want the new system to have a way for people to OPT OUT any time we see or believe the system is beginning to work against us. Nothing would seem easier to design and implement than for the new design to allow gold and silver to function as unregulated (market driven) parallel currencies. That would give those in power some wiggle room (eg. Adjusting money supply up or down) but they could only distort things so far before people started opting out by converting digital and paper currency into gold and and silver (or vice versa). After all, if they're legitimately running the system for the benefit of all they should not be intimidated by the people's ability to move freely (without regulations or taxes) back and forth between currency and money (gold and silver). Some day I'd love to go shopping and see every item priced in dollars, gold and silver (buyer's choice). I guess I'm describing a free market for money!!
As in the matrix, we are the ultimate energy source that powers this (or another) system. Unfortunately, the opt-out option, as sexy and desirable as it sounds, will never be an option freely available in any system. We have to take it without asking permission.
Realistically, given that I see big and sudden changes mostly as passing the torch to some other crooks, my strategy would apply at the individual level.
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Do what I have to do within the legal limits.
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Reduce my dependency to the system as much as I can (Total independence is impossible - as soon as you own some land, then you become part of the system).
Doable, not easy, but highly rewarding.
Another strategy, is to finely analyze and understand the system and use it for our own benefit without forgetting who we are.
These two strategies can be seen on PP member's posts. And their writings are very interesting.
blackeagle-
Realistically, given that I see big and sudden changes mostly as passing the torch to some other crooks, my strategy would apply at the individual level.So as a practical matter I agree with you; that's the sort of thing that has happened in the past. Even though we got rid of explicit physical slavery, it transitioned to a new and different form; now most of us are in debt slavery, or slavery of another more mental/emotional kind.
That said, I am starting to think it might be important to have a vision of where we'd like to get to. At some level I'm an optimist. Incredible as it may sound, it is possible that someday, one of us will be in a position to influence an important outcome. You just never know. And if at that moment our fortunate someone doesn't have any positive idea where to take things and instead is only looking to strap on his own personal parachute, it will be a missed opportunity. Its difficult to lead the parade in a compelling way when you are constantly eyeing the escape routes. And if you believe in the plan yourself, it will be a lot easier to explain it to others.
Most people (me included, until Grover asked me that question - and even then I had to explicitly bend things away from the negative) have no idea of what sort of system they'd like to see in place. They just focus on the bad stuff they don't want to see - natural enough, that's how our parents trained us. What does Abraham Hicks say about that?
Since I'm not them, I'll paraphrase. On an energetic level, if you have a clear vision of where you want things to go, it is more likely for that vision to be created. If you have no vision at all, you just take what comes. If you focus instead on what you don't like, then - paradoxically - that's what you tend to end up helping to create. "That which you put your energy and attention on grows stronger."
I'm not saying we engage in self-delusion, but having a clear vision of where we want things to move towards can be a very powerful thing.
Overwhelming images of combating frost in Burgundy vineyards due to the last episode of Jet Stream blockage
http://vinosybodegas.iprofesional.com/2016/05/03/guerracontralahelada/
the cost of global climate change could be . . .
Dave,
i agree totally with what you wrote. We need people that have a vision to move things toward the good side. I just think I am not this person. I also have sometimes the tendency to "complain a lot", and it takes me a lot of energy to look the other way: how to get out of the mess; focusing a lot on the solutions instead of (too much) on the causes; doing, doing and doing.
Incredible as it may sound, it is possible that someday, one of us will be in a position to influence an important outcome.Already happened with good results (I put aside the political hijacking): Buddah, Moise, Jesus and Mohammed.
And also with terrible results: Hitler,
Yes, someone someday will will be in a position to influence an important outcome. If everyone act at his level, stay honest and be not naive, then, reaching a critical mass will certainly help find the good leader. If the entire society stays too passive, then I don't see how things can change for the better.
of these things that concern you, Dave and Blackeagle.
Can't speak for others, but you lost me with five counts of "Central Bank".
I probably lost you the first time I mentioned the word bank. 
"Can you give me a banking system without any banks at all in it?"
Dave,
I've been away from the computer for the past week. I realize that this line of thinking is akin to questioning how many angels can dance on a head of a pin. When the system breaks, lots of things we take for granted will not exist. Whatever system does emerge will have to incorporate the leftovers or invent something completely novel.
Your system sounds more or less like the current system with tweaks where needed. It seems that everybody likes a flexible money system while the going is good. It is when times are bad that folks want hard tangibles rather than soft promises. If the current system breaks, that preference likely will be the trigger. That is the biggest flaw that I see with the current system. That said, I do like most of your suggestions for dealing with the current system's shortcomings. They are steps in the right direction.
I liked THC's idea of parallel money systems where gold and silver can compete with debt based money without regard to tax implications. The dollar price of PMs would be a direct measure of relative value. Because of the current tax implications of PMs, they act more like a commodity than a currency. Even though my dollars lose value over time, they still have the same nominal value - hence, no tax implications.
Should bitcoin (and other cryptocurrencies) be another parallel currency system(s) allowed to be untaxed? I'm a fan of lower taxes, but government's insatiable appetite just means that taxes need to be levied elsewhere. Also, listing prices in multiple currencies becomes cumbersome quickly. What is and what isn't a currency (subject to nontaxable status) in the free market? Should a merchant be able to legally limit what they'll accept as currency? What happens if they choose not to accept paper dollars?
Grover
Ok, so here's the thing. We have (more or less) one decision to make, and everything flows from that. Forget for a moment the desire to toss out the old system because you're pissed off. Pretend you're coming at this anew, so you don't let (justified) anger at banks or stupid central planners color your viewpoint. You are designing a system, and there's no place there for anger - or so I say anyway.
In an attempt to avoid triggering anyone (and you know who you are), I won't use any words that people might find distasteful, such as "central bank", or even "bank".
Primary decision point: do we have elastic money or not?
1. No Elastic Money Option:
All money storage places can only lend out the deposits they have on hand. (Presumably we have such organizations - nobody wants to just deal with cash. Electronic bill-pay is awfully convenient, so is delegating the task of guarding your cash to someone else.). As a depositor, you can select where your money goes: either a "storage-only" account where you pay a fee for the service, but your money can never incur a loss, or a "risk-lending account" where your money can be lent out to others, and you can either receive interest or possibly suffer losses. Money storage places make money on the spread they make, paying something to the risk-lending depositors while receiving income from the interest they receive from borrowers, as well as money storage fees from the storage-only accounts.
In this system, no participant in the system is allowed to create money. The money we start with is the money we end up with at all times. Inflation is limited to just that caused by increased velocity rather than being a multiple of velocity times an increase in money supply. This system is inherently deflationary if population and/or the economy grows. If there is a panic, money will be hoarded and we will simply run out of circulating money to conduct business - the lack of ability to grow the money supply will be worse than a gold standard in this case, since at least gold gets mined at 2% per year.
Some organization has to print the actual paper currency, as well as handle clearing between the different money storage organizations. This org can either be public, or private.
Within the no-elastic-money case, we have another decision point. Do we require that risk-deposit terms match loan-duration terms?
1a) Durations must Match:
If a borrower wants to borrow a depositor's savings for a 5 year term, the depositor must agree to keep money in the money-storage-place for that same 5 years. This ensures no money-storage-place runs, but it also ensures that long term loans probably don't exist. (Who ties up money for 30 years - I mean, for real. Anyone you know?). If we choose this case, there is no need for a systemic lender of last resort, but there is no pot of money avaiable for long term lending - or you could borrow money that might be called in at any moment if the depositors decide to panic. (That particular situation hasn't worked so well in the past; you lose your farm because someone else gets nervous and you can't come up with the loan balance in 30 days).
1b) Durations Dont Match
If durations of deposits don't match duration of loans, then gratutious money-storage-place runs can happen to otherwise-solvent MSPs. Probably good idea to have a lender of last resort to stop that sort of thing. Lender of last resort can be either private, or government-owned. That's a third decision point I'll leave to you to ponder. Which would you trust more?
2. Elastic Money Option
If we choose the elastic money option, we have to assign the responsibility for overseeing the method of money supply growth and shrinkage. In an elastic money situation, someone has the power to create new money in order to faciliate commerce. Elastic money avoids the fate of "running out of money" for loans, both during expansions and (possibly) contractions too.
There are two candidates I see: government, and the private sector.
2a. Public elastic money
Government decides how much money is in the system. When they want to expand, they simply print more money than they collect in taxes and spend it into circulation. When they want to contract, they spend less than they collect. Mechanism for influencing the government's conduct can be left to your imagination. I'd suggest some sort of direct-democracy vote on "how much new money to inject" this year. I would not leave it up to "elected representatives" because that has been shown not to work so well.
Direct democracy requires an intelligent and educated electorate, otherwise you are back to having idiots in the control room of the nuclear power plant.
Side effect of this: there is no government borrowing. Any deficit is, by definition, using printed money. One bonus of that: no interest payments on the debt. Interest payments more or less occur via inflation.
By definition, since voters control money supply, there can only be the MSP's from case 1. You have some very restricted loan types - most likely, any loan is callable within 30 days, and if things get bad, "being in debt" means losing the thing you borrowed the money for, and individual private MSPs can still run out of money.
2b. Private elastic money
Private elastic money is about delegating the expansion or contraction of the money supply to the private sector, for projects that materially contribute to society by fulfilling an unmet need by funding the expansion of some good or service with new money. In this arrangement, inflation is deliberately traded off against the possibility for improvement. Furthermore, the responsibility for performing this assessment is delegated to the private sector and the marketplace rather than being a part of a government bureaucracy.
For this to work, criteria must be established that assess the likelihood of success as well as the potential contribution of each project. Once the project is done, it must be assessed again, to see if it succeeded or failed.
One can immediately see lots of ways for this to go wrong. If the criteria are too fluffy, money will be created like crazy. If there is no severe private-enterprise penalty for failure, likewise, money will be created like mad. Project failure must lead to existential risks for the private sector money-creator, for discipline to be maintained. Likewise, the judgement of "what is failure" must not be an easily-influenced academic or bureaucratic assessment, but rather the cold assessment of the marketplace. There must not be any friendly bureaucrat to appeal to. A private sector solution must have private sector discipline: "If nobody wants this thing, your project has failed - and you take a loss." Otherwise, regulatory capture means everything always succeeds.
Also, too, the person being funded by the money-creator must have skin in the game. If the project fails, the project owner must also suffer losses. Perhaps the funder can post assets as collateral for the new money, so the money-creator has the ability to mitigate losses.
Good news is, new money can be provided for any duration, since money never runs out. But if so, that requires a lender of last resort.
You see where I'm going with all this.
It boils down to the following:
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Elastic money or no elastic money
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If elastic, private money creation or public money creation?
Is the discretion for growth in the money supply delegated to "the marketplace", or left in the hands of the central government?
Each decision point implies constructing a particular structure. Its not me that wants banks or central banks, they are simply a natural outgrowth of decisions made. I want elastic money, I'd like longer term loans made for valid projects - bingo, I get fractional reserve lending and require a lender of last resort.
If those things aren't important to you, if you trust government and/or "the people" to make decent choices, you can have a different structure.
Grover-
I realize my message was largely non-responsive to yours. I was talking to someone in my own head. :-) Let me try again. (Although I still really enjoy the stuff I wrote: "features dictate structure")
It is when times are bad that folks want hard tangibles rather than soft promises.Its because a bunch of implicit promises get defaulted upon. There are lots of implicit promises in our system. It might be a good idea to make them explicit. "As a depositor who gets interest, you could end up losing money." Or, "if you want to forego interest and instead pay us a fee, you have no chance of losing money." If the structure is really clear on where the defaults happen, then there is less need for commodities. Maybe anyway.
I liked THC's idea of parallel money systems where gold and silver can compete with debt based money without regard to tax implications. The dollar price of PMs would be a direct measure of relative value.Yes, I liked it so much, if you scroll back in the convo, you will note that it was he who was being approving of my suggestion to do that. As a (non-mainstream) goldbug, I like the idea of a built-in escape hatch. I assume things will get all wonky at some point in the future, and I want the next system I participate in to have a designed-in way out available to everyone. Just having the escape hatch legally written into the structure will make the gang in charge more cautious about going nuts - it will act as a check/balance to their power.
Should bitcoin (and other cryptocurrencies) be another parallel currency system(s) allowed to be untaxed? I'm a fan of lower taxes, but government's insatiable appetite just means that taxes need to be levied elsewhere. Also, listing prices in multiple currencies becomes cumbersome quickly. What is and what isn't a currency (subject to nontaxable status) in the free market? Should a merchant be able to legally limit what they'll accept as currency? What happens if they choose not to accept paper dollars?I think in practice we'd all use USD for transactions, and everything else will get converted at the current exchange rate. Like the bit-gold visa. Transactions occur in dollars, things are priced in dollars, but your gold account is appropriately debited at the current x-rate. Think: "transaction currency" vs "reserve currency."
I could see argument for having the same treatment for bitcoin - but I don't have a firm position on bitcoin or other currencies vs taxes. While I like elastic money, I also want my tax-free gold escape hatch. :-) I don't mind having a special carve-out for gold here.
Rather than asking what money is, perhaps it's better to ask 'what do we want money to do?'
I get the sense, and correct me if I'm wrong, that Dave wants to make money/currency available to explore ideas (i.e. if scarcity exists under a commodity backed system and someone comes along with an idea to cure an illness then it may not be possible to pursue that goal given the inherent constraints). I get the sense, and again correct me if I'm wrong, that Charles wants to make money/currency available to enable full employment (i.e. allow someone to utilise their skill-set in exchange for payment where the current system does not permit).
My idea of money/currency would be a mechanism which reduces waste - or what might better be described as reducing 'entropy'. I think systems run best when they are efficient and that any overhang (i.e. debt, resource depletion, environmental degradation) reduces that efficiency and thereby acts as a barrier to prosperity (please note: I take prosperity to mean health and happiness).
Immersing myself in Gail Tververg's work and the nature of debt helps me understand the degree of 'overshoot' that fiat systems permit (dare I say 'pre-determine'?). She clearly articulates that debt is required to extract the vast amounts of energy that our system depends on whilst at the same time increasing entropy due to the complexity of our current system (i.e. excessive debt, bureaucracy, overpopulation) and now an inevitable contraction in all three must occur.
Typically we'd rely on a market to eliminate waste but I think that ship has sailed and is never coming back. I get the sense that monetary reform needs to be hit from multiple angles at once, such as education, application and direction, just as much as monetary units and accounting - and that there isn't a singular 'neat' solution.
Instead it'll come down to meeting the following issues head on;
What society do we want our monetary system to build/enable?
How do we get there?
How do we maintain it?
For me, most of these items are just as much a matter of awareness along with any gold vs fiat - again I find Catherine Austin Fitts' 'tapeworm economy' a useful illustration in generating awareness. It might even be the case that some people don't like gold because we have to bore holes in the landscape to get it out of the ground.
But going back to the three questions; we have enough historical evidence/examples to build an accurate model of how and where monetary systems/policy go wrong. Personally, I'd focus on the waste issue.
At the minute we are working for the system, the system isn't working for us.
All the best and excellent dialogue,
Luke
Luke-
I think you have the right view, on both my viewpoint as well as Charles too.
What am I really worried about?
Well, let's imagine we need to build out a new power system and a new distribution system in the near future. If we have a commodity money system with no ability to create money, well - we will have no inflation, and also no power system. No windmills, no solar, no power at all except the small bits and pieces that savers happen to be able to support at the moment.
Mostly we'll just descend down the bad side of peak oil, our ability to respond strictly limited by a commodity money system which was structured to avoid inflation at all costs, even if it means the end of the very civilization from which it sprang.
This is in the back of my mind when I think about a system where you can't create money from thin air. It means no inflation, but also no flexibility, no ability to fund important projects. I don't think people really understand the full implications of what they are asking for. Its a jail cell from which there is no escape. Definitely, it successfully fights the last war (the one where gold was $20/oz in 1914 and is 1250/oz today), but I think it leaves us ill-equipped to fight the next one.
I'm not sure if you and others are asking too much of our money system, if the goal is for the money system to "make/encourage/incentivize people to act responsibly." If people were responsible, they'd act properly regardless of the money sysytem. Should we try to design money so that people somehow become better than they normally would be? Is money truly to blame for the world's sins? To me money just seems neutral. It doesn't on its own make people act badly. They do this on their own.
Money isn't the root of all evil. Its the LOVE of money that causes the trouble.
CAF suggests that transparency is the key. If you know that someone else is acting badly, they can be shamed back into line. Its the ability of someone to act badly in some remote area of the world, make a bunch of money from their bad acts, and then have respect of their community where they live without those around them realizing just what they did to get rich.
At the same time, I'm totally prepared to be convinced if someone comes up with a new system that I feel can work, given humanity's propensity to create bubbles, and engage in fraud.
I probably just lack the imagination to create such a thing myself.
Ultimately while I think Charles has good intentions, allowing local creation of a national money system is a problematic model. Any national money system acts as a "commons", and each local region will want to seize as large a chunk of the commons as possible, with the net result being of course a hyperinflationary "tragedy of the commons." Trying to police such a system involves having to constantly swim upstream. If you have local creation of local money, there's built-in restraint involved in not pooping where you live. That's why the local currencies work relatively well - you have a "local feedback" incentive for not making trouble. But allowing local creation of national money is a structure that's just asking for trouble, because the incentives are flipped.
If his system were strictly local, that would take care of all my objections. Local discipline would apply, and people would be motivated to self-police at that local level.
Dave,
Thanks for answering my requests for information. Your first post essentially said that we have to have elastic money or switch to a commodity based monetary system that can't meet current/future needs. That seems pretty limiting. Which is the lesser evil? Our current elastic money was conjured up by a bunch of bankers who wanted to benefit themselves and future bankers and shift the cost to debt slaves. If you look at GNP as a big pie, they get an increasingly larger slice each year. Are their services increasingly valuable each year … or is the game rigged? There's got to be other options out there.
I'm not a fan of central bankers or banks in general. I'm also not too keen on regulation. Regulation only shuts the barn door after the horses have left. If they try to close it ahead of time, those being regulated complain that the regulators are running amuck.
As a prime example of failures in all 3 groups (CBs, bankers, and regulators) we only need to go back to 2008. Remember when Paulson and Bernanke met with Congress to push the $700 billion bailout plan? The banks took on unwise bets, regulators let it happen, and the Federal Reserve bailed them out. Did anyone go to jail? Nope. Did the big banks get broken into smaller pieces so this threat couldn't occur again? Nope. The problems are bigger all around.
The system is destined to fail again and again until it fails so catastrophically that the elastic money literally snaps. It won't matter so much how we got to that point. What will matter is what happens afterwards. What parts of the current system are worth keeping and which parts should be scrapped? Is debt based, elastic money a good idea? It certainly has gotten us to this overextended position. (I don't consider that a good thing.) What real alternatives are there?
I like Luke Moffat's questions. What do we want, how do we get there, and how do we maintain it?
Dave, I'm asking you because you really, really like this stuff. You've thought about it enough that it makes sense to you. You can even explain it to people so they understand (a small portion for a fleeting moment, at least.) Assuming you could set up a monetary system, what features would it include? What features wouldn't it include? What self referencing mechanisms would keep it in check?
I'm not sure there is such a system out there. Perhaps our fate is to endlessly repeat currency mistakes. Meet the new boss. Same as the old boss.
Grover
Edit: I just read your response to Luke. I think I'm asking too much based on your post. Feel free to expound, or leave it alone.