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Money Defined U99
This brings us to money and investment, a subject we’ve discussed before, but one that deserves a return to fundamentals. Let’s start by defining money as two things: 1) an IOU and 2) a claim on property.
An IOU is simply a note that communicates a debt obligation. If Sally takes care of Brenda’s kids for 2 hours, Brenda could write Sally a note saying she did that and that she owes Sally two hours of her time. Sally now has a piece of paper saying she is owed 2 hours of time by Brenda. It probably doesn’t matter to Sally who performs the 2 hours of service for her so she could potentially use it to pay someone else. That person could then claim the 2 hours from Brenda. In this way the IOU is transferrable and becomes a recognizable form of money.
A claim on property is, quite literally, the ability to acquire goods/services. A claim on property is a legal power usually given to banks. We do so presumably to catalyze future growth but there is no escaping the fact that this process allows us to give wealth to certain people at the expense of others.
In our monetary system, both ideas converge in the reality of the currency we use every day. It is used as both an IOU and a claim on property. We use money for legitimate trade (IOU) and we also create it arbitrarily (claim on property) to make investments with.
For a moneyless system we need a replacement for both IOUs and claims. We have discussed a system where people make claims on a central storage pool (where all production goes) and the claim is then evaluated based on the rating of the claimant and their need. This can be done either collectively (CRBE) or individually (SRBE). Orders are then fulfilled according to who has the highest need/rating. Investment would also be handled as a claim from an individual or group that is then rated by the community or the individuals possessing the claimed goods.
This approach could, of course, be used to handle IOUs as well. The “payment” for something simply comes in the form of ratings. But IOUs imply a peer to peer transaction that might bypass the central storage pool. In this case, we could have a real system of IOUs that is tradeable like money. This system, like others, would be rated so if it were in danger of giving individuals too much power, it could be phased out by the community. Communities could choose whether to track transactions of this nature or not. It is quite possible that a system like this, in conjunction with the central system, would be for convenience only and not generate any macroeconomic concern. There would be no entity (ie a bank) that could create this type of paper arbitrarily.
A voluntary community, however, can also have “banks” if they so choose. The process by which they work, however, wouldn’t be hidden. The banks would simply be committees that were voted on and would have the power to be first in line for investment goods/services. In other words the committee would rate the projects desired for investment, send them to the central storage pool, and those investments would then receive priority against the claims of individuals. Priority could come with conditions, of course, like the proviso that an investment claim cannot interfere with basic necessities of life (ie no one starves to fund an investment claim). The advantage of this approach is that the committee may be able to think more dispassionately about the investment (vis a vis the public) but also do its work in a transparent way (unlike banks).
We might pause to reflect here on banks in the same way that we reflected on capitalism’s productive capacity above. It is possible that banks are a necessary evil because if we don’t have an institution that forces investment, not enough will be made. The beauty of banks is that they can just create money and maintain the illusion that society isn’t really paying for the new investment. If we ask people to pony up the money up-front, it is likely that we will under-invest in our economy and will experience substantially slower growth. Furthermore if all we do is make clear what is going on, as in the investment committee idea above, we may still end up underinvesting.
I believe our ratings-based approach can overcome this problem. By leveling out wealth inequality and democratizing investment I think we will generate better and more investment than we have currently. However, it is healthy, in general, when critiquing contemporary institutions, to ask why those institutions exist in the first place and why they continue to exist in spite of their problems.
Banks are illustrative of a fact we have pointed out ourselves: that there are two different economic systems, one for consumption and another for investment. It is quite possible that communities in a ratings-based economy will choose to maintain this idea in some form.