A Radical Idea for Money


I have this idea floating in my head. It is not finalized by any means, but I think it is totally feasible given our current technology.

The idea stemmed from the thought, “What if everyone owned their own bank?” and then “What if they own their own banks?” This runs along with the idea of “If the masons run the world, why not become a mason yourself?”

What do banks do? Simply put, they create money. They hand out pieces of paper and expect people to store their pieces of paper with them. Now, a bank needs some sort of collateral, usually precious metals, before people will trust that their currency means anything. But if you look at my previous post where I explain, at a minimal level, Mosler’s idea that money is credit, you might see where I am going with this.

Suppose I show up at the grocery store. I say, “I’d like a loaf of bread.” The grocery store says, “Have you any money?” And I say, “Well, not now.” They’ll say, “I’ll give you the loaf of bread if you promise to bring money later on.” I get the bread, and later on, I give them some money, and the debt is settled and everyone is happy.

Suppose I went back home and wrote “$1” on a piece of paper and went back to the store to buy a loaf of bread. Rightfully, they would say, “You really think of that as money?” If I said, “Well, this is a promise from me to pay you $1 in the future, and look, I signed it myself!” Well, they might just accept that as money, but they will expect $1 in the future.

Suppose I showed up in the future with a new piece of paper with “$1” written on it, and they said, “You really think that is money?” If I said, “This is a promise to pay you $1, which should satisfy your $1 credit with me” they might go for that. I don’t know. It sounds an awfully lot like refinancing.

Now, suppose it worked like this. I give the store a $1 bill I made up, and then the store showed up at my house and say, “Remember this $1 bill you gave me? I want you to settle the score right now.” I say, “What do you want?” and they say, “Give me 15 minutes of labor” or something, and then the debt is settled.

Now, to close the loop.

The store hires me as an employee. They pay me with store credit or rather Jonathan debt. When I buy stuff from them, I can buy it with Jonathan credit or rather store credit. The Jonathan debt can be redeemed with store credit, and the store debt can be redeemed with Jonathan credit.

This is the key here: Me and the store have a relationship, where we are mutually benefiting each other. I work in the store, they give me food, but we keep track of how much work I do and how much bread I eat, and we try to make things settle.

What if the store wanted to pay Billy, and the gave Billy some store credit. I mow Billy’s lawn, and he says, “I can give you Billy credit, or I can give you some store credit” and I say, “I’ll take the store credit, because I happen to have some store debt to settle.” Then I take Billy’s store credit that he gave me and I cancel some of the store debt that I accumulated.

This should sound terribly confusing, and it is, but let’s use computers to keep track of stuff. To wit, I would keep my own computer that lists all the store credit, Billy credit, Sam credit, Joseph credit, and everything else I have. Simultaneously, I list all by store debt, my Billy debt, my Sam debt, and so on and so forth. Every time it comes to a trade, we can negotiate to trade in one form of credit or another. The fact that we are connected means we likely share a third party that we both deal with and we might likely agree to trade in that currency rather than in our own.

Suppose I decided I wanted to scam the system. To the store, I am Jonathan. To Billy, I am Bob. To Jim, my name is Edward. This would make it really hard for the store to trade my credit with Bob and Jim. In fact, there’s pretty much no way for the store to know that the Jim I know is the same Jim they know, and so we wouldn’t know that we can settle our debts by exchanging Jim credits. So this actually doesn’t benefit me. In fact, it’s important that I am public about who I am and people know that I am the same person.

Each person has to build up a reputation. Maybe the first time I buy a loaf of bread, the store says, “You can only buy 1. I don’t want to allow you to have more than 1 loaf of bread of credit.” After a year of buying and selling with the store, they know I am always good for a loaf of bread so they say, “You can have up to 10 loaves of bread of credit.” As my reputation and trust increases, they are willing to extend me more and more credit, perhaps vast sums if they know I was always good for it. Thus, the store would have to track each person it deals with and their credit worthiness, independent of everyone else.

If I shared my same persona with other entities, and I connected them for the store, then I could say, “Hey, I shop at Store X, and you trust store X, and you can ask them: I’m good for 1,000 loaves of bread.” Store Y could then verify that I am indeed the same Jonathan at Store X, and Store X certainly is willing to trust me that far, and then decide that they’ll start me off at 100 loaves of bread rather than 1.

In fact, stores can refuse to deal with me at all until some reputable 3rd Party vouches for me. For a kid starting off life, that could be the adult parent, for instance, or it can be some clearinghouse which tracks the credits and debits for you.

The point I wish to emphasize is that in such a system, *trust* and integrity are the currency. You either show up with some currency from some reputable source in hand, or you build that reputation for yourself by keeping your promises.

I think such a system would work, and at the same time, make banks and such obsolete in that everyone would have their own.

The beautiful thing is that there would likely be a currency exchange market that would develop, which would basically send price signals over who is trustworthy and who is not.

I think that would be a very good thing indeed.


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