A crash course in changing the world.
What is money?
Money is a way of measuring and storing value.
Sound too simple? Well break it down. Why do I get paid in money instead of, say, pebbles? Simply, because I can be reasonably confident about how many dollars I need to pay rent, bills, buy groceries and so on through the month (although sometimes I still get that wrong).
From a price I can quickly decide if I think it's good value (a bargain) or bad value (what a rip off). If I had my paysack of pebbles, but the price was quoted in almonds then I would have to either
- convince the seller to take pebbles and then negotionate the value of a pebble verses an almond
- or find someone else selling almonds who will take almonds!
As the standard for measuring value, money makes trade much easier.
Similarly, pebbles wouldn't work as a currency bacause pebbles are available for free. Why would anyone give me anything of value for something they can pick up themselves? It also needs to be something that is inert, i.e. it doesn't change over time. I wouldn't want to be paid in fruit, for instance, because I would have to use them in a couple of days becore it goes bad. Money needs to maintain a set value over time, as far as possible. No currencies currently do this perfectly, but they are much better than any alternative so far.
So which alternate currencies provide a better system than the existing national currencies? If our current financial systems were to collapse and all dollars, pounds and the rest were worthless, (which from the huge deficits that keep growing, is beginning to look like a possibility) what could replace it?
So far, nothing quite seems to fit.
-Local Currencies effectively restrict the national currency to a specific area to keep the 'value' in the local economy. They still rely on a national currency to measure and store value.
-WIR, credit co-operatives and micro-savings schemes are all ways of providing credit to less affluent people. However, if a currency were to collapse, they would not be able to replace it.
- Local Exchange Trading Systems (LETS) are more suitable. From wikipedia "A member may earn credit by doing childcare for one person and spend it later on carpentry with another person in the same network."
However, LETS criteria includes equivalence to the national curreny. If all other currencies collapsed then what decides how do you decide how many hours of baby sitting warrent a new door? What happens if there is a sudden flood of people doing baby-sitting? How does the market adjust to that? Further what happens when you move into using the system for more complex business methods, where you have book keepers, salesmen, operations staff all working on the same product. How do you measure value between them? These problems can all be solved, and have been by current market mechanisims. However, until LETS currencies have way of effectively measuring value in these tense circ**stances, they are at risk of loosing people's faith in them.
- TerraTRC has a possible solution - basethe value on a basket of the twelve most important commodities. However, this has a flaw. It removes the driver for the producers of those tweleve commodities to innovate to lower their prices. If they lower the price of their product, the price of everything else would rise. As such it would be in their interest to keep their commodities as expensive as possible.
- Ven Currency, QQ coin and even linden dollars are virtual currencies which have been used to pay for 'real life' merchandise. The Ven particularly is the most developed of these, even having a floating exchange rate. If other currencies failed, it may well take it's place. However, as the Ven is also based on a basket of commodities, but only ten this time.
There has to be some way of limiting the production of money to stop it becoming worthless. Originally coins were made from rare metals for this reason. Although I'm critical of using 'a basket of commodities' it does seem a much better solution than the current systems. However, I don't think 10 or 12 products is enough. I think a wide range of products and services should be considered. I believe that anything necessary for productive life should be included. I don't think just he bare essentials of life are enough, we need to consider rent, clothing, groceries, electricity, telephone and internet access, transport, toiletries, nappies... basically everything a average person needs (not wants) on an averge day in a developed society. That way, a minimum salary means a minimum lifestyle. Inflation isn't an issue. Cost of living stays set. Providers of the essentials still are driven to lower costs because the variety of things means they alone won't have any effect on the overall strength of the currency.
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