F. Hayek's Free Market Currency System

[jkhereford]

Hi Paul,

I've loved your Money as Debt series and your proposal for digital currency is certainly intriguing.  To what extent are your thoughts on the system based on Hayek's 'Free-Market Monetary System'? http://mises.org/story/3204

I definitely think the digital coin has more promise than Hayek's original since the issuance of perpetual coin combined with self-issued credit allows for a common medium of exchange.  In addition, the use of technology by the digital coin proposal allows for more transparency, and most of all more utility.  But it does seem like the two proposals share a common starting point: private, self-issuance of credit.

But, the proposal for self-issued credit is at odds with my desire for money creation to be solely in the public domain.  My principle objection to our current monetary system is the private issuance of currency combined with artificial, and central, manipulation of the monetary supply.  I've generally been more in favor of a public domain approach akin to Ben Franklin's, in which the government spends currency into existence for public works projects, then hedges inflation via taxation and other means of currency removal.  (Assuming of course, that fractional reserve banking is prohibited and the government is actually working in the interest of the people)  This seems to be the goal of the American Monetary Act.  http://www.monetary.org/amacolorpamphlet.pdf

What are your thoughts on how a self-issued currency compares to the more public domain approach? 

Thanks for the info, as I said, I've liked the Money as Debt series.  Everyone I've shown them to has been generally stunned.

Regards,
James

[Paul Grignon]

Thank you James,

I have read Hayek, Mises, Rothbard, Greco, Zarlenga, Griffin, and many more.  Remarkably I never read E. C Riegel until after I came up with Digital Coin. Riegel is probably the closest predecessor to Digital Coin.

Money as Debt 3, Beyond Money is now being written.  It will explain, in general terms, how the Digital Coin System eliminates the fundamental problems of the current system and unites the three main and seemingly opposed streams of monetary reform, by giving them what they really want.

1.  Gold bugs want a redeemable currency.  Most I have talked to concede that a currency that promises something specific from someone specific would be acceptable to them, it does not have to be gold or silver. Thus this is really just the same as 3.

2. "Return the power to create money" to government people want government to create money against taxes, without debt and interest to banks  Money created against taxes is a claim on something specific from someone specific also.  It just isn't competitively priced in a free market as we can't compare what we paid in taxes with what we got in government services.

3. Alternative currency people want free market self-issued credit, that can be issued by anyone who has something to sell that is in demand,  independent of government and banks.  This kind of credit is entirely "priceable" in a free market.   total credit value = total demand for output.   

The truth is everyone wants a redeemable currency, one that promises a specific value from a specific promiser.

Digital Coin delivers exactly that.   In addition, and most importantly, Digital Coin is not a uniform commodity amongst other commodities. It value is determined by what its Issuer will give you in real goods and services to get it back, NOT by the total amount of all Digital Coin in existence.  This is the fundamental transformation, one reason why I call it "beyond Money" as all previous forms of money from gold coins to bank credit have been based on the concept of a universally acceptable uniform intermediary commodity, whose value is determined by its abundance relative to what is available to buy with it.

I hope this movie doesn't take me three years to make like MAD 2 did.  In the meantime, send people to watch "The Essence of Money". 

The biggest obstacle is from camp #2, the insistence by some that "money" is an exclusively governmental privilege.

Read E. C Riegel's short and powerful essays at http://www.newapproachtofreedom.info/  and see if you still think that after reading.

If Digital Coin were implemented as designed, balanced budgets would be enforced on everyone.  Therefore I include and even emphasize government creation of money, where Riegel would not let government create any money at all.

Paul

[jkhereford]

Hi Paul,

Thank you for the open and detailed reply.  I haven't had any exposure to Riegel so I will certainly read his work - thanks for the exposure.  I've actually read several of the papers on the site and watched the videos more than once, but still have some difficulty envisioning the big-picture of how the system would work.  I have some more questions but will do some additional reading to make sure I can't answer them myself, then will likely be back for further details

In the meantime, I'll be following MaidSafe for the first release.  Good luck on MaD III.

Regards,
James