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Topic: Sound Money without Commodities (Read 3834 times) |
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omar
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Sound Money without Commodities
« on: Jan 8th, 2012, 4:13am » |
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Several years ago I started to hear the term "sound money" quite a bit. I guess it was due to all the financial crisis that were and still are going on. Trying to understand what that term means I began thinking about the properties of money and how money works. I realized something quite interesting about money and about a year ago I started writing down some of my thoughts into a paper. Towards the end of writting this paper I started to research the current state of digital currencies and came across bitcoin. Due to the insights I had from writing this paper I knew that the economic design of bitcoin would never allow it to function as a currency, although it will still function nicely as a digital commodity. One of the key properties of a currency is price stability against commodities and bitcoin will not be able to achieve that since the quantity of bitcoins is limited. Anyways, here's the paper, enjoy:
http://arimaa.com/money/
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clauchau
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Re: Sound Money without Commodities
« Reply #1 on: Jan 25th, 2012, 7:25am » |
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Theoretical but clear and interesting, thanks Omar for sharing. I wish similar ideas could be tested in some experiment.
I'm afraid however that it can be summed up by saying "people are the commidities backing up the new currency"! It's going to be abused with children or slavery, isn't it?
I'm also afraid that wealthy organizations are going to create what amount to new currencies with new rules, which people liking their goods or services are going to use, and anything may happen the same it happens nowadays - abstraction, inflation, abuse, etc.
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| « Last Edit: Feb 9th, 2012, 12:00pm by clauchau » |
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omar
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Re: Sound Money without Commodities
« Reply #2 on: Jan 26th, 2012, 11:55pm » |
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Thanks for taking the time to read this and providing some feedback.
on Jan 25th, 2012, 7:25am, clauchau wrote:| Theoretical but clear and interesting, tanks Omar for sharing. I wish similar ideas could be tested in some experiment. |
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Yes, it would be cool to test this in a virtual environment like Second Life or WOW. But in some ways this system is not a new idea, it is a modern version of a form of money that existed in the past. When shells and beads were used as money individuals could gather them easily (but at a limited rate) and add to the money supply and due to wear from use there was a natural decay of the money supply. So the money supply was naturally proportional to the individuals in the economy. That's all this system is trying to achieve artificially. Shells and beads were used a money by many civilizations for thousands of years.
http://en.wikipedia.org/wiki/Shell_money
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I'm afraid however that it can be summed up by saying "people are the commidities backing up the new currency"! It's going to be abused with children or slavery, isn't it? |
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I guess what you are saying is that someone could have a lot of kids or enslave others just to collect the periodic money the individual receives. I suppose this could happen, but I don't think it would be any different than what already happens with forced labor in poor countries. I guess the only difference would be that the enslaved individual would not have to labor to generate the money. Also due to less dependence on the master the enslaved could run away and have a better chance of surviving than they do now. At present if an overworked and under paid worker wanted to leave the factory, they would have no source of income and could not survive very long.
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I'm also afraid that wealthy organizations are going to create what amount to new currencies with new rules, which people liking their goods or services are going to use, and anything may happen the same it happens nowadays - abstraction, inflation, abuse, etc. |
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I suppose that could happen and people would have a choice as to which currency they want to use. I think they would gravitate towards the one which is most stable.
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| « Last Edit: Jan 26th, 2012, 11:58pm by omar » |
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Nazgand
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Re: Sound Money without Commodities
« Reply #3 on: Feb 14th, 2012, 9:46am » |
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I like your system, but it would be better if continuous.
n(t) is the new amount you should have where a=200, b=0.98, and t is time measured in weeks since you had p units of money without any transactions.
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| « Last Edit: Feb 14th, 2012, 10:14am by Nazgand » |
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omar
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Re: Sound Money without Commodities
« Reply #4 on: Feb 22nd, 2012, 11:34am » |
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Thanks for the input. Yes, this is what would have to be used in practice, since a simultaneous update of all accounts would not be possible without pausing the service and causing an interruption.
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Nazgand
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Re: Sound Money without Commodities
« Reply #5 on: Feb 22nd, 2012, 8:15pm » |
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Also, your example settles to the amount 9800. If you switched the steps so that you multiply first and add second, then it would settle to 10000, which would be more intuitive.
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omar
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Re: Sound Money without Commodities
« Reply #6 on: Feb 23rd, 2012, 10:09pm » |
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on Feb 22nd, 2012, 8:15pm, Nazgand wrote:| Also, your example settles to the amount 9800. If you switched the steps so that you multiply first and add second, then it would settle to 10000, which would be more intuitive. |
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I guess you are referring to this example:
Every 7 days 200 units are given to each individual in the economy. This is followed by immediately
removing 0.02% of the total units that have been accumulated by the individual.
It should settle to much higher numbers like one million. I think you might have used 2% rather than 0.02%. But you are right multiplying before adding does allow it to converge exactly to one million. Whereas adding first causes it to converge to 999,800.
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