Freedom of Value

Posted: 2nd September 2011 by Khannea Suntzu in Uncategorized
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Thought experiment.

What if a bank or institution in the EU or US decides to issue a coin. The organization issues the coin freely. Everyone can buy it, and it is backed by a basket of gold, silver, a set amount of potabkle water, specific utilities, a number of highly standardized foodstuffs, oil, and (while the amount of backing might differ relative to the other items in the basket) these coins are always redeemable. That means the entity offering these coins guarantees you you can get the items on the list in a place not far from where you live.

Let’s call it this guarantee the foundation the basis of the coin.

What’s more, these credits are voluntary. Everyone is free to use them in standard transactions. Even better, the issuing agency writes an absolute statement of transparency, and constrains by contractual agreement they will aim to never inflate or deflate the coin – the coin is issued with a legal guarantee it us price stable.

Now imagine a big group of banks, financial institutions et all give their full backing to this coin. Store owners are free to accept this coin. Employers are free to pay wages in this coin. Voters and consumers (people in general) would be free to use this monetary entity.

What exactly are the reasons for a country to disallow such a monetary entity. I can imagine a fascist autocracy such as China to disallow such medium – but would would the EU outlaw it? Or the US? I hear you can pay for stuff in New York with Euro – if that is allowed, and the issued currency is guaranteed to be safe, why would any democratic country legally disallow such a currency?

Now envision such a coin is issued, and the EU and US do nothing. And the coin starts appreciating higher and higher against the dollar and euro, because, well, we all know those coins are backed only on the physical constraints of printing more money (i.e. not much backing at all).

What if one such coin were launched. And a month later another, and a month after than ten.

What if a few years from now you’d be able to pay in a grocery with a small sm,art device that ‘automatically selected the most favorable currency versus product ratio’.

I bet such transactions would increasingly not be in either euro or dollar.

Very interesting idea, expect for the small fact I’d be screwed. I’d quickly see either paleocoinages rapidly dwindle and deflate, and I would, being a welfare/disability dependant, see my purchase power quickly depreciate.

But this system would hold a knife versus the throat of currency deflating states to stop stealing by printing.











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