Journal Marxist Hacker 42's Journal: The reality of a Zero-Sum Game in a finite universe 46
This week, I had an interesting set of discussions on the economy that broke down into what I call the zero-sum myth; the idea that an economy can expand forever and wealth is transfinite. This interesting writeup on Economic Populist shows the big problem with the idea of an ever-expanding economy in what really turns out to be a finite universe- that very quickly, things become unsustainable.
This is similar to what Professor Krugman wrote about on the yield curve at the end of last year, and what New Deal Democrat wrote when he predicted that the 2009 Respite either won't happen or won't be enough to be felt by the normal economy.
I suggest two, extremely radical, solutions to this problem- A worldwide monetary authority producing short-term Freigeld mirroring the Wörgl miracle to lift us out of the depression, followed by long-term action to separate the uses of money to prevent a stock market or banking collapse from affecting small town local economics ever again. The short-term Freigeld could be used to "pay back" debt directly- yet require investors to immediately convert that money back to Currency A (value store) or Currency B (Business Cash Flow) if they're going to use it at all- otherwise it expires. We could print the $650 Trillion in Freigeld needed to pay back all debt worldwide; and have it expire *before* it can be used to create inflation. Likewise, Currency A and Currency B could be balanced to exactly equal the estimated total of goods for sale- thus avoiding deflation or inflation in those currencies. Only Currency C and D would be subject to inflation and deflation- and, as risk-based currencies, be allowed to charge interest in porportion to the risk.
This is similar to what Professor Krugman wrote about on the yield curve at the end of last year, and what New Deal Democrat wrote when he predicted that the 2009 Respite either won't happen or won't be enough to be felt by the normal economy.
I suggest two, extremely radical, solutions to this problem- A worldwide monetary authority producing short-term Freigeld mirroring the Wörgl miracle to lift us out of the depression, followed by long-term action to separate the uses of money to prevent a stock market or banking collapse from affecting small town local economics ever again. The short-term Freigeld could be used to "pay back" debt directly- yet require investors to immediately convert that money back to Currency A (value store) or Currency B (Business Cash Flow) if they're going to use it at all- otherwise it expires. We could print the $650 Trillion in Freigeld needed to pay back all debt worldwide; and have it expire *before* it can be used to create inflation. Likewise, Currency A and Currency B could be balanced to exactly equal the estimated total of goods for sale- thus avoiding deflation or inflation in those currencies. Only Currency C and D would be subject to inflation and deflation- and, as risk-based currencies, be allowed to charge interest in porportion to the risk.
A Few Questions (Score:2)
What happens to the Freigeld as it nears its expiration? Does the entire system become a game of "Hot Potato", as the expiring Freigeld passes, hand to hand, until someone is left holding an expired and valueless piece of paper? I guess this question also applies to Currency B, which also expires.
How do you propose to insulate Currency A from the supply/demand pressures which could drive its value up or down? As a safe store of value, it would be subject to the same price swings of other "safe" investments:
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What happens to the Freigeld as it nears its expiration? Does the entire system become a game of "Hot Potato", as the expiring Freigeld passes, hand to hand, until someone is left holding an expired and valueless piece of paper? I guess this question also applies to Currency B, which also expires.
Well, the way it worked in the original Austrian version, it lost it's value slowly. You had the choice- renew the experiation date by (and this was low-tech era) purchasing a stamp at 5% of value, or sim
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You had the choice- renew the experiation date by (and this was low-tech era) purchasing a stamp at 5% of value, or simply let it start losing 5% of face value per month. Of course, with my system, you could ALSO simply convert it back to Currency A for value storage.
Then the rational choice, for each recipient of Freigeld (or Currency B), would be to convert it to Currency A immediately, upon receipt. Because of the set exchange rate between A and B, there would be no reason to ever hold onto currency B long enough to have its value decline, as there would be no loss by converting from B to A, and then back to B when you need to spend it. Because no one is holding onto B long enough for the depreciation to kick in, it does nothing to increase the velocity of money.
Of course, Currency A will still have supply/demand pressures in relation to currency D- it can't be insulated entirely- but since only gamblers and other social scum use currency D at all, such influence will be minimized at least.
I me
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Then the rational choice, for each recipient of Freigeld (or Currency B), would be to convert it to Currency A immediately, upon receipt.
That's exactly right. If they have no other use (such as paying bills, buying stock, etc), they should convert it to Currency A immediately. There should NEVER be any reason to keep liquid Currency B around.
Because of the set exchange rate between A and B, there would be no reason to ever hold onto currency B long enough to have its value decline
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No to the fourth- you can always just convert a portion of your earnings to currency A to raise capital for a new business, which is the proper way to do so.
Okay. So how would I start a business with a partner? If we each invest 100A into the business, we each own one share. Now, if my partner wants to sell his share of the company, he's basically selling stock. When do we have to use Currency D for this? If we don't have to use D, why can't there be a stock market denominated in B?
Then you simply provide a higher rate of exchange to currency A until currency D (and it's related unstable business practices such as loans and risky investments) no longer permeates the economy. Let D take the crash- make it so that you have to literally bank billions to convert to A- and leave A and B out of it.
It doesn't matter what the exchange rate is. Even if the exchange rate was 1A:1,000,000D, it really doesn't matter. People would just price their stocks in multiples of millions. It
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In that case, I'd suspect that the rate would be changing daily- at a rate many multiples of what the trading shares would be. Whatever it would take to make the casino economy lose money- and regular life gain it.
Okay. You'd basically be increasing the exchange rate as the value of the market, as a whole, grows. As a stock goes up in value, the value of D drops to make up for it.
I think I understand the basics of the system. You have eliminated banking (both interest bearing savings and profitable lending) as a whole, eliminated the corporation as an economic organizational structure, and attempted to contain the effects of speculation (in fact, made speculation in the markets completely unprofitable). Here is my--i
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Okay. You'd basically be increasing the exchange rate as the value of the market, as a whole, grows. As a stock goes up in value, the value of D drops to make up for it.
Exactly. Keep it low.
I think I understand the basics of the system. You have eliminated banking (both interest bearing savings and profitable lending) as a whole, eliminated the corporation as an economic organizational structure, and attempted to contain the effects of speculation (in fact, made speculation in the
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Ah, but you see, with the exchange rate between A and B- the government IS setting the prices- or rather, at least controlling them to a level that equalizes wealth between individuals of the same merit. You could still get rich- but only on your own merit.
That's not the case at all. Under your system, the easiest opportunity for speculation is the variable exchange rate between A and B (or, better yet, between A and C). If, today, the exchange rate was 1A:1B, I would trade in 100A for 100B. I would hold the B until tomorrow, when I expect the exchange rate to change. Tomorrow, the government modifies the rate to 2A:1B; so I trade in my 100B(minus the negligible cost of holding B overnight) for 200A. Bingo, I just turned 100A into 200A, with no productive wor
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That's not the case at all. Under your system, the easiest opportunity for speculation is the variable exchange rate between A and B (or, better yet, between A and C). If, today, the exchange rate was 1A:1B, I would trade in 100A for 100B. I would hold the B until tomorrow, when I expect the exchange rate to change. Tomorrow, the government modifies the rate to 2A:1B; so I trade in my 100B(minus the negligible cost of holding B overnight) for 200A. Bingo, I just turned 100A into 200A, with no productive wor
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What if the government AI though changed it at random, based on variables only the AI, no human being, knows? How would the speculator work if today, the exchange rate was 1A:1B, at 15 minutes past midnight it did indeed go to 2A:1B, but before he got up in the morning it went to 1A:2B? After all, computers never sleep....
Because then A would cease to be a store of value. If people are unable to semi-accurately predict the future value of their money, they wouldn't use it at all. People would, instead turn to gold (or some other store of value). And, when that happens, you've lost control of the currency system. The people would soon replace your system with one which was, at least, predictable.
You make it so risky that such people end up without any method of prediction at all.
Then you've also removed any element of rationality from the market. Without a somewhat stable market, both for currencies and goods
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Because then A would cease to be a store of value. If people are unable to semi-accurately predict the future value of their money, they wouldn't use it at all. People would, instead turn to gold (or some other store of value). And, when that happens, you've lost control of the currency system. The people would soon replace your system with one which was, at least, predictable.
You're right. I suppose a better way would be to simply euthanize the speculators.
Then you've also removed
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One doesn't need to buy the oven, one can build one relatively easily. It's stupid to assume that if I was to bake just one cookie, a rock on a fire wouldn't do the job nicely. I can certainly deny that economies of scale exist when to get them, one has to limit the methods to do the job.
Your missing the point. Even if you build an oven or bake the cookies on a rock in a fire, there is some initial cost. If you value your time at $5 an hour, and it takes you 1 hour to build an oven (or find a suitable rock on which to cook), your oven just costs $5 instead of $100. That still means that if you made one cookie, you'd have to sell it for $6 to make up the cost of production. But, if you made 100 cookies, you would only have to charge $1.05. Economics of scale strike again.
I'm not trying to im
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Who said anything about needs. I'm talking about voluntary exchanges of value. You can explain your logic to your plumber, when he wants $50 an hour to fix your toilet, and you think he should only be paid as much as a burger flipper. I don't think you'll have much luck getting him to fix your plumbing. People make just as much money as someone is willing to pay them, no more and no less. I'm willing to pay my surgeon more than my garbageman. And both are willing to accept what I pay them.
I simply
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The inequality however is all artificial, as artificial as the money system and the economy itself. It's an INVENTION, not an act of God or nature, a shared myth backed by guns and governmental power.
Which inequalities are artificial? The differences in knowledge? The differences in abilities? The differences in physical capabilities? What's artificial about the difference between the strong and the weak? What's artificial about the difference between one who has knowledge of brain surgery and one who does not? People are different. Those are all observable differences. How are they illusory?
Speaking of guns and governmental power, how would you enforce your mandatory equality, if not with guns? When I
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Which inequalities are artificial? The differences in knowledge? The differences in abilities? The differences in physical capabilities?
The difference in rewards for equal effort.
What's artificial about the difference between the strong and the weak? What's artificial about the difference between one who has knowledge of brain surgery and one who does not? People are different. Those are all observable differences. How are they illusory?
Because in the wide view- you need th
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The difference in rewards for equal effort.
The problem being: I'm not paying for effort I'm paying for goods. If you're a good carpenter and build a nice cabinet, and I'm a lousy carpenter, and exert the same amount of time and effort, yet have nothing to show for it other than a pile of wood with some nails in it, no one is going to pay for my effort. They're going to buy your cabinet. In the same vein, if you can bake twice as much bread as I can per hour, people aren't going to spend twice as much on mine (assuming they are of equal quality). Why
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The problem being: I'm not paying for effort I'm paying for goods.
Then you're not being a citizen of a community, you're being a hermit. Behind every good is a human being's effort- otherwise, it would make more sense for there to be no private property at all.
You might wish that reality were different, but it isn't. If I'm paying for something, the price I'm willing to pay has nothing to do with the amount of effort which went into its production. I'm going to pay based on the qua
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Then you're not being a citizen of a community, you're being a hermit. Behind every good is a human being's effort- otherwise, it would make more sense for there to be no private property at all.
Elimination of private property is the end result of your system. A person's time and labor are the most personal and private property. Because, under your system, I'm not able to dispose of my labor in a way I see fit, it ceases to be private property. My labor becomes the property of the community. What you are proposing makes everyone a slave to everyone else.
Unless you are going to force people to pay for my bread (which costs twice as much as yours, because I'm not a good baker), no one will buy it. Yo
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Unless you are going to force people to pay for my bread (which costs twice as much as yours, because I'm not a good baker), no one will buy it. You expect people to pay more for exactly the same product, just because more labor went into it. So, who are you going to force to buy my bread? That man's money (more of his private property) is now being spent in a way that he doesn't want. So, money ceases to be private property.
Eventually, I expect communities, local communities, to protect their own
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That's only in the ideal system where all producers know about each other's business. Otherwise the *ONLY* thing you can tell from price is the value a producer puts on their good.
No, the price at which the transaction actually takes place tells us what the good is valued at. I can try and sell bread for a million dollars a loaf. If no one buys any at that price, it's not worth it. If I lower my prices to $1 a loaf, and people buy, then we have found the value of the bread.
Under my system, the price will *always* be the additive cost of the inputs- materials + labor. Always. Never more, never less.
This is a big problem with your system. You think that materials+labor is the total cost of a good. It's not. Whenever you operate a business, there is risk involved. You might make a good that no one wants to buy.
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No, the price at which the transaction actually takes place tells us what the good is valued at. I can try and sell bread for a million dollars a loaf. If no one buys any at that price, it's not worth it. If I lower my prices to $1 a loaf, and people buy, then we have found the value of the bread.
And you're saying that people wouldn't *also* buy at $.33/loaf? Or $33/loaf? Depends on how hungry they are, but in reality, the necessary bartering over price no longer taxes place- people pay what thei
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And you're saying that people wouldn't *also* buy at $.33/loaf? Or $33/loaf? Depends on how hungry they are, but in reality, the necessary bartering over price no longer taxes place- people pay what their local grocery store wants them to pay.
No, there is an upper limit to what people will pay: the cost of making it themselves. People only pay what the grocery store asks, because it's a fair price which most people are willing to pay. An agreement between buyer and seller is still reached, even when there is no direct bargaining.
IF your decision to open a business is rational (that is, based on a real researched need in the market, which you can provide at a fair price without going in the hole) there is no risk. Only irrational decisions carry risk.
Have you really thought about this? With a bakery, there is risk of a fire, risk of equipment breakage, risk of spoiled ingredients. There is risk in every business. Think of farmers. They must purchase seed and equipmen
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No, there is an upper limit to what people will pay: the cost of making it themselves.
Thanks to my computerized bread machine, including my standard programmer's salary for myself, the cost of making it myself is about $.15/loaf. It will be lower when I get those windmills installed and can make my own electricity.
And yet my wife *still* goes to the store.
People only pay what the grocery store asks, because it's a fair price which most people are willing to pay. An agreemen
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Assumption of fact not in evidence. You don't know what people are willing to pay, without direct bargaining, it's just a guess at best, data mining and mind reading at worst.
Admittedly, an auction would be the best way to price everything. But an auction or haggling with the seller take time. For most purchases, the amount of time saved by paying the price at the store outweighs the savings from haggling. You only see haggling in the modern economy for large ticket items, where the money saved is greater than the time spent: cars, and houses.
Not if you actually keep up your investments instead of trying to depreciate out long term. The risks are largely artificial, and can be mitigated greatly with a little application of science.
You admit that those risks can never be eliminated. As long as you cannot guarantee zero risk, you need profits to entice people to take t
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Admittedly, an auction would be the best way to price everything. But an auction or haggling with the seller take time. For most purchases, the amount of time saved by paying the price at the store outweighs the savings from haggling. You only see haggling in the modern economy for large ticket items, where the money saved is greater than the time spent: cars, and houses.
Yep, and in so doing, we're losing information- a lossy compression scheme. Now there are two ways to deal with the loss of info
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Yep, and in so doing, we're losing information- a lossy compression scheme. Now there are two ways to deal with the loss of information- one is more haggling, of course. The other is no privacy. I prefer the later, for the same reasons you place below- choice.
But, your system only works if everyone you trade with makes the same choice as you. And that's fine by me; make your choice, it doesn't affect me at all. The problem I have is that you try and force me make the same choice as you. Under my ideal system, you would be free to interact economically with whoever you want, and under whatever terms you agree upon, with no restrictions. If you want to start a community that operates by your rules, fine. I don't have a problem with it. What I have a problem with i
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But, your system only works if everyone you trade with makes the same choice as you.
Yes. Or conversely- if you only choose to trade with those who make the same choice as you. The converse is more important.
And that's fine by me; make your choice, it doesn't affect me at all. The problem I have is that you try and force me make the same choice as you. Under my ideal system, you would be free to interact economically with whoever you want, and under whatever terms you agree upon,
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Well, since my choice is extremely localized to the converse- as long as you don't mind cutting your consumer base to *very* small numbers, you're fine.
It's only local until separate groups decide that forming larger social units provide benefits. Then, they band together and begin trading amongst themselves. You, and your community, can isolate yourselves all you want. People have already made this choice, and the result has been almost unanimous. Almost everyone has come to the conclusion that larger and more diverse societies are better. You're fighting against the tide of history.
My answer, in the long run (in fact the only answer in the long run) is to find something *besides* social, emotional, and psychological profit to motivate you.
What else is there? What actions do you take which don't provide one of t
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You can value whatever you want. My ideal system would not prohibit that
Until, of course, it was profitable for somebody else to do so.
Why do you seek to prohibit others from acting in accordance with their values, when their actions do nothing to harm you?
Because I've seen the effects of freedom- and freedom always ends in the freedom to do harm. ALWAYS.
If you're referring to the "pursuit of happiness", you're free to pursue it. I don't see anything in the
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Until, of course, it was profitable for somebody else to do so.
Profitable to do what? If you mean "profitable for somebody to tell you what to value", then that's why my system would have a government; it wouldn't be anarchy. My ideal government would make initiation of force and fraud (real fraud, like reneging on a contract or selling someone an empty box, and telling them it's a computer), illegal. Under this system, no one could force you to value anything that you didn't want, no matter how profitable it was.
Because I've seen the effects of freedom- and freedom always ends in the freedom to do harm. ALWAYS.
The restriction of freedom is harm. I think you need to
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Profitable to do what? If you mean "profitable for somebody to tell you what to value",
Of course, that's the whole point of advertising....but what I really meant is "until it is profitable for somebody with more money than you to step on your rights". Government can't help that- if you allow for the concentration of wealth to begin with, somebody, someday, will lobby or bribe government to destroy somebody else's rights. It's the centralization of wealth that causes all else.
The
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Government can't help that- if you allow for the concentration of wealth to begin with, somebody, someday, will lobby or bribe government to destroy somebody else's rights. It's the centralization of wealth that causes all else.
Just because the current US government is influenced greatly by wealth, don't presume it is inevitable. A constitutionally limited direct democracy would be largely immune to the influence of bribery and corruption. If you feel the need to keep more of the institutions of our current government, strict one-term limits could be imposed on all elective offices. My ideal federal government, whatever its structure, would be substantially smaller than what we have today; hopefully, too small to trample on the pe
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Just because the current US government is influenced greatly by wealth, don't presume it is inevitable. A constitutionally limited direct democracy would be largely immune to the influence of bribery and corruption.
Athens wasn't- eventually the majority was simply bribed to change the constitution.
If you feel the need to keep more of the institutions of our current government, strict one-term limits could be imposed on all elective offices. My ideal federal government, whatever its
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Athens wasn't- eventually the majority was simply bribed to change the constitution.
My ideal constitution wouldn't allow change by a simple majority; a very large super-majority would be required. It may also have limits as to how quickly an amendment can go from proposed to enacted, to give everyone a chance to think it over. My system would make it as hard as possible to change the constitution, without resorting to a static and unchangeable one. The harder it is to change, the harder it would be for someone to corrupt it.
What makes you think my solution is a CENTRALLY controlled economy?
I didn't mean that there was some national government controlling
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Well, we're getting down to the ends- the real ends:
I should have stated that more clearly: under my ideal system, you could safely ignore them. As things stand today, I guess you can't ignore them. But, don't assume you can't have both financial markets, and local economic stability, just because we don't have those now.
Once you have financial markets, local economies become subject to faraway financial markets. Right now, the United States basically exists to feed 4 metropolitan
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And they didn't arise by accident- that was where those who piled up the money chose to live together.
Firstly, I think you have this backward. Those are all major port cities. Trade through those ports created the wealth that you see in those cities. The already rich didn't just decide to move to a backwater NYC, and suddenly turn it into a metropolis. Of course, today you see the rich flock to those destinations, because that's where all the high end stores are. But, that was not how they began.
Right now, the United States basically exists to feed 4 metropolitan areas- New York, Seattle, LA, and San Francisco. Everybody else basically exists as occupied territories paying some form of tribute to those four mega-markets.
Drop out. Live with the Amish. Form your own, Amish-like, community. No one is stopping you. If you don't like th
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Drop out. Live with the Amish. Form your own, Amish-like, community. No one is stopping you. If you don't like the current system, don't participate. Why is that not an option for you? It certainly seems to work for the Amish.
Not entirely- even the Amish end up using the commodities markets and the dollar.
Do that, and you will be untouched by the current financial crisis. Use barter and you'll never be subject to the fluctuating value of the dollar. You can have all the community co
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Well, you'd need a strong church to govern it. And a culture with reinforcing traditions.
Which of course- is just like what we presently have, only with different people on top!
Here is where we will find agreement. A government and an economic system is the physical and social embodiment of the values of society. As much as both of us want significant change in our system, albeit in completely opposite directions, we'll not accomplish much economically, without first changing the value system of the vast majority of society.
That is why, to bring us back to your proposed monetary system, I think implementing your monetary system is not a proper first step in the process. I get your
Impractical (Score:2)
The issue would be just like security. Too much of it and people start to work around it.
Those systems are a complete pain in the ass, so people would start to adopt barter standards instead of official money. They'd start bartering in gold and silver of specific weights and pretty soon, no one but the tax authority would be using your money.
Like The Oregon Project, you'd need a level of surveillance and control that is totally infeasible anytime in the near future.
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The issue would be just like security. Too much of it and people start to work around it.
Which is exactly what I want to encourage- local bartering economies being the primary method of trade.
Those systems are a complete pain in the ass, so people would start to adopt barter standards instead of official money. They'd start bartering in gold and silver of specific weights and pretty soon, no one but the tax authority would be using your money.
Exactly! That's EXACTLY what I
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Well, I doubt it would remain local. As people would start to switch to things they can measure and trust -- gold and silver -- it is a very short step to being right back on a large-scale currency system.
Credit agencies don't keep track of cash transactions, since no credit was involved. I purchased a car a few months back from a private individual and paid cash. The only record was the swap of title with the State. I pay my doctor in cash, along with the local vet -- neither report anything to the cre
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Well, I doubt it would remain local. As people would start to switch to things they can measure and trust -- gold and silver -- it is a very short step to being right back on a large-scale currency system.
The trick isn't only currency they can measure and trust- it's getting them to stop trusting people in general, because rationally speaking, they shouldn't.
Credit agencies don't keep track of cash transactions, since no credit was involved. I purchased a car a few months back from
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The trick isn't only currency they can measure and trust- it's getting them to stop trusting people in general, because rationally speaking, they shouldn't.
Agreed.
And yet both WILL appear on the credit report- they do on mine.
I have NEVER seen this happen, and have a current copy of my (admittedly shitty) credit report. I've monitored it for over 20 years and never had cash transactions appear on my report. I'm not sure what to say, except maybe things are different in Oregon...
Hahahahahaha! Serious penal
Drastic change of use (Score:1)
As you insightfully pointed out, the meaning of money we use daily has been already changed drastically, but we still use the same unit. That doesn't reflect the reality.
On the contrary, many currencies are used on the globe -dollar, yen, pound, and euro, etc. Why not use those currencies for purpose-oriented ones as you mentioned above? Many currencies were used in different regions first. Those will be used in differnet ways in the future. We can make the most of existing currencies without eliminating th
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That is, in fact, a very good idea. Based on my reading, I nominate the Guernsey Pound Sterling for Currency A- it's held pretty steady value since 1849.