Brett Scott — Riches beyond belief

If you want to know what money is, don’t ask a banker. Take a leap of faith and start your own currency

Aeon
Riches beyond belief
Brett Scott | Financial Hacker
(h/t Chris Cook via FB)

Izabella Kaminska @izakaminska
Nice and very accessible piece by @Suitpossum on the nature of our modern monetary universe...

This is a very good article. Brett Scott has thought money through after experimenting with its various forms. Many keen insights.

Chris Cook 

Excellent article, Brett.
 

There is 'Value' which is subjective, and indefinable - or rather definable only in relative terms and priced by reference to a standard unit of measure of value or 'value standard'.
 

Then there is utility, which is objective, being the use value over time of three sources of value: location (3D space); energy (material/static and immaterial/dynamic) and intellectual (subjective 'knowhow' and objective 'knowledge').
 

Note that you can no more run out of a standard unit of measure of value (also known as a unit of account, or numeraire) than you can run out of standard units of measure for weight (kilogrammes) or length (metres) and so on.


The problem is that the units of measure we use are 'deficit-based' being the units of currency which are created ex nihilo by credit intermediaries (mainly private banks, but the alternative is Treasuries and Central Banks).


In my view the only absolute unit is a unit of energy, and we should therefore use such a unit to 'keep score' of transactions. The quantum of that unit should be such that people can relate to it - you don't measure a room in light years or angstrom units for instance.
 

So some propose the energy equivalent of 10 Kilo Watt Hours of electricity and others the energy released from burning a litre of n-octane at 20 degrees C, and still others 1 MMbtu of heat.
 

Note that such an 'energy standard' is distinct from units of energy currency, such as a credit returnable in payment for 10 KwH or a unit returnable in payment for 1 litre of gasoline; or a unit returnable in payment for 1MMbtu of heat.


What's the difference? Simply put, relative location. Energy must be moved from the location of the currency issuer to the location of the currency user.
 

I believe that energy currency will be the global reserve currency of the future, and that we shall see energy currencies exchanged for other currencies by reference to an energy standard. Indeed we shall see existing currencies becoming fixed against an energy standard in the same way that the Euro adopters fixed their currencies against the new (abstract) €.
 

Most money in existence came about through mortgage loans by banks. I think of it as 'deficit-based' (because created and issued by banks) but land-backed, by a claim over the capitalised future use value of location/land.


The point here is that location, and the energy and other value - intellectual value - embedded in the location, has utility, or use value over time.
 

So that a unit returnable in payment for (say) £1.00's worth of rental value is valuable in exchange, and most people would accept it because they would know they could return it against use of land/location. 

Not a new idea: John Law proposed a land-backed (centrally issued) currency for Scotland in 1705.
 

I am therefore engaged on community land projects, for instance a Market Hall in Perth, Scotland, where one of the outcomes of the investment in (say) 20 years' worth of rentals sold at a discount will also be the creation of a Perth land-based currency returnable in payment for rentals, and hence acceptable by market retailers.
The above currencies are 'asset based' being based upon the (subjectively priced) objective utility of location and energy.
 

As for people-based credit, there is in fact no need for a currency at all, but there is a need for a mutual credit clearing system incorporating - within a mutual guarantee agreement - a unit of account, a guarantee management system, and a 'chain' settlement system A>B>C>D>E>A in addition to settlement of open people-based credit with asset-based currency described above.


In reality we don't need the existing system at all. What is needed is an accounting system; a messaging system; an energy unit of account to 'keep score'; and suitable protocols or 'social contracts' bringing these elements together with the people who use them.
http://www.slideshare.net/Chri...
http://www.slideshare.net/Chri...


So in a nutshell, we will IMHO see bottom up local land-based currency and energy currencies acceptable across locations and borders, with people-based credit serving increasingly mobile populations on mobile platforms such as
http://mobino.com/mobino-for-e... (for a general platform)
or
http://evr.gr/ (for a local platform)





Brett Scott  
Fascinating Chris - I need some more time to look over all these ideas, but I'm very intrigued. Will let you know once I've looked further at it





However, it doesn't appear that Scott groks Chartalism.

Javi Javierez Alipro Money is not based in confidence. You need money to pay you taxes, thats an obligation that drives the demand for that money. Since 5000 yers ago we use money (currency is only 2700 years old) based in debt. In our modern society the new money is created by banks or by the goverment, etc...... You dont mention all this staff. ( i apoligize for my english)



Brett Scott
Well, as my example of Zimbabwe (and any other case of hyperinflation) suggests, governments cannot order people to believe in money - legal requirement to use it of course increases the incentive to believe in it though.
This argument about money being given value by its requirement in taxes is often given, but it's worth asking yourself why the government wants taxes - the government wants taxes so that it can then go out and buy things from society, in which case the government relies of society for its tax money to be worth anything, just as much as society relies on government. I understand the point about the legal obligation giving you an incentive to use money, but it doesn't fully explain why we value money
 

On the point of money creation, I do mention that central banks create base money which is then amplified by private banks via the fractional reserve