“SUYO” — Simple Undeniable Yank-proof Ownership

Accelerating our unavoidable evolution to a more rational world.

Give unto Caesar ........

Submitted by zClark on Thu, 16/Mar/2006 - 08:37

Wed Mar 15 11:21:03 2006 – Money is an invention

Money is an invention.  Whereas vital increases of production via the division of labor (specialization) or per cooperative efforts (economy of scale) are simply observed consequences.  No money is necessary for neighbors to avoid a fatal failure by bartering wares or working together to easily accomplish an otherwise daunting task for just one person.  But as soon as the scope of interactions increase much, then either money, slavery, or both have been needed to further accelerate exhilarating productivity gains.

A magnificent mass of material is available that substantially covers the history and theory of this great invention - we consequently need not develop nor extend this work further.  Our objective instead is merely to look about and perceive the ramifications of well developed technologies as they relate to a new area of freedom to be ‘underwritten’ by liberated monetization.  The essence of this is, of course, liberation of mind (will/choice) - since nothing is monetized until you choose to perceive it as such (and use it as money).

Eric Watt Forste has a nice review on The Theory of Free Banking: Money Supply Under Competitive Note Issue by George Selgin.  Eric starts with, “The advent of digital cash and secure private electronic transactions shows the way to an inevitably deregulated economic future. But again and again, proponents of the new technologies of private digital cash are confronted with the question ‘What will the new money be based on?’ In a free marketplace, of course, the right answer to this question is ‘Whatever you want.’ But the new technologies do raise more penetrating questions that get down to the root of monetary theory. What is money? How can we arrange for a marketplace that provides a stable money, free of either inflationary or deflationary instabilities?
    Conventional answers to this question call either for the use of some centralized authority, with monopoly power over currency issue, or for the use of a commodity standard (and a one-to-one reserve ratio), the supply of which can only respond weakly to changes in the demand for money. Such weak response leads to price disequilibrium.

    Later he says, “Selgin's case is that unrestricted competitive note issue on a fractional-reserve basis can provide a price structure more stable than can be provided by any monopolized system, and also (here's the surprise for traditional libertarian monetary theorists) more stable than can be provided by a nonfiduciary commodity-money system such as that endorsed by Ludwig von Mises or a fixed-supply fiat-currency system such as that endorsed by Milton Friedman.
    Further down the review we read, “Given that we are currently running a dollar economy, how can we make a transition from the Federal Reserve system to a free-banking system without at the same time taking on the tremendous uproar of shifting to an entirely new unit of reserve currency? Selgin has a proposal here as well. There's no particular reason why the bad old Federal Reserve Note cannot serve as the reserve currency for a free-banking system. First, we will need to remove the existing restrictions on branch banking and other liberal banking practices, and much of this deregulation is already underway. Second, we will need to ...
    And he finally ends with, “Contemporaneous with these hoped-for regulatory reforms, we can expect to see the technology of digital cash and cryptographic banking developing apace. While crypto mavens are busy explaining how these banks could function technologically, the theory of free banking explains how they could function economically. It provides an answer to the question ‘Under a digital cash system, what would the money be, exactly?’ What the money would be, if we deregulate banking at the same rate as we develop the new technologies, is cryptographically-secure bearer claims on deposited goods.  Whether those deposited goods are Federal Reserve Notes, troy ounces of gold, or shares in an index stock fund, would depend purely on what you wanted to deposit with a bank in exchange for bearer claims. Since I myself am a big fan of Harry Browne, I'd love to be able to bring some gold in for deposit at my local cryptobank, and accept my digicash in exchange just for the beauty of the thing. Those who prefer to deal in cash based on silver, or dollars, or pounds, or Swiss francs, or shares in the S&P 500, or whatever, would be free to do so. Which is just what we ought to expect from a market system.

My extensive quoting of Mr. Forste's review is largely due an appreciation for it's bold forward looking perspective (especially for it's time).  And while it comes closer to the vision of this blog more than anything else I've read, there are still several deeply embedded propensities which poorly serve our cause.  The single biggest moral impediment is the ever-present evidence of a waiting and hoping for regulatory reforms (i.e. permission of ‘authorities’).  While the biggest logistical encumbrance is the near obsessive enchantment to maintain the traditional key role of big banks.

While first studying the private/public encryption scheme, I was profoundly struck by two overwhelming issues (yet neither directly involve secrecy).  First it was a beautiful (almost tear jerking) revelation that absolutely no covert mystery needed guarding to assure system integrity.  Anyone could know the basic encryption algorithms involved and every line of the source code can be fully open - yet it still remains effectively unbreakable!  Second and even more exciting yet was the ability to create an unforgeable undeniable signature for any digital file.  I still remember my awestruck reaction like it was just yesterday;  bye-bye to the main reason for banks and notaries to exist.  I mean, isn't security from thief (while safe-keeping or transferring funds) the principle reason for entrusting ones money to a banking system?  So once ownership of your money (file) becomes wholly swindle-proof, the major legitimate need for banks becomes history.  A galore of gory details beg addressing but it promises to be a joyful task;  and I see no real ‘show-stoppers’ unless it's just a people's fear to be free.  So if we're expecting “... an inevitably deregulated economic future.”  Then let's not look idly to the politicians and banks to enable this (particularly since nothing needs enabling in the first place), otherwise we'll just loose another 18 years while their strangle hold is further secured.

Selgin's book is also apparently quite concerned with price disequilibrium and arranging “... for a marketplace that provides a stable money, free of either inflationary or deflationary instabilities...”, to use Forste's words.  Yet the spontaneous order of Adam Smith's “invisible hand” is also celebrated.  So what is it going to be - trying to effect price control without calling it that or truly trusting freedom?  If sufficient numbers are fretting instabilities, then there will be markets for (exchange rate) insurance and financial derivative instruments to address that concern.  Nonetheless, the perceived value and relative prices of goods, services and competitive monetary items will fluctuate (due to anything from shortages to ground breaking innovation).  Struggling to avoid the unavoidable does not make for a good investment of time nor effort; and hence should not be taken up as some responsibility by those of us providing an arena for an unfolding new area of monetary freedom.

Regarding Ludwig von Mises and Milton Friedman:  both impress me as dedicated to the betterment of our monetary system.  Their ideas however, evolved before the revolutionary developments of unforgeable undeniable ownership which I believe would have excitingly transformed their solution models.

Now moving on to one Michael Linton, he has written several articles for the Well.  My best liked is titled The Money Problem - You need it more than it needs you.  And we need not quote more, as that byline says it all.  Nevertheless, to put it more on point, “You need them more than the money moguls need you.”  Now if money is part of our collective heritage and birthright why should we be placed in a position where we serve it (i.e. the money monopolist) via wage slavery?  The whole system (insult) of monetizing government debt by the corporate Federal Reserve creating credit balances in a U.S. Treasury account (as payment for T-bills & bonds held by the ‘Fed’) perpetually transfers more indebtedness into the hands of the ‘Fed’ (as evermore debt needs to be issued to cover compounding interest payments).  This makes the favor of their money damn costly.  One might think that depreciation of a peoples monetary stock through inflation for the gain of the issuers should be enough to appease them.  But that's not the case as evidenced by the systematic nullification of the currency to the point where it no longer carries any explicit rights to the bearer.  And the trusting souls who gave their silver coin to the banks in good faith, could only withdraw nearly worthless clad after 1964.

So my argument basically is, “give to Caesar that which is Caesar's” and don't waste energy trying to reform him (only hoping to remain under his ceaseless control a tad more comfortably).  We already have a clean means to effect the bases of monetary freedom today.  Hence there is absolutely no reason not to directly implement our simple robust system wholly uncluttered and unburdened by the deeply set agendas of the status quo.  Now is the time to begin broadly implementing “cryptographically-secure bearer claims” on goods and services (deposited/secured with a third party or not).  Concerns such as “... how can we make a transition from the Federal Reserve system to a free-banking system without at the same time taking on the tremendous uproar...” need not be an issue whatsoever.

It is not initially important if over 99.9% of mundane daily transactions continue in a routine way without change (of course that will be the case).  Because the core objective is first to formally recognize (realize) wealth among our system participants.  How that monetized wealth may be converted or moved through purchasing channels is a secondary issue.

Wed Mar 15 23:32:30 2006