| 
  • If you are citizen of an European Union member nation, you may not use this service unless you are at least 16 years old.

  • You already know Dokkio is an AI-powered assistant to organize & manage your digital files & messages. Very soon, Dokkio will support Outlook as well as One Drive. Check it out today!

View
 

FrontPage

This version was saved 14 years, 5 months ago View current version     Page history
Saved by Steve Hopkins
on October 19, 2009 at 12:45:46 pm
 

How do you think a new economic system will opperate? 

 

Hi! Xavier Shay and Steve Hopkins will be doing a session at Trampoline. At this stage (apart from a fair amount of reading we've been doing) this is all we know for sure. We also know that the presentation will address some of the following themes. 

 

1) Currency

2) Trust

3) Transparent economic systems

4) Peer-to-peer and trust

 

But we thought we try a Fred Wilson and open up our presentation and see what ideas and thoughts you guys could provide. It's everyone presentation, after all. 

 

We will update all of this space more and more (and probably link to our presentation when we have one!) so that you can follow along and let us know whether we're talking about the right things. 

 

Cheers till then!

 

Xavier and Steve. 

 

Thoughts from emails so far:

 

(thanks to Jan Stewart)
 
Just read something Maslow wrote on economics:
It can be assumed that classical economic theory, based as it is on an inadequate theory of human motivation, could be revolutionized by accepting the reality of higher human needs, including the impulse to self-actualization and the love for the highest values. 
 
I wonder if economists talk about that?
 
*********************
 
"democracy is the worst form of government except all the others that have been tried". Perhaps the same can be said of our money system?

The biggest problems we have are people ones - a government that takes misreports key figures and spends too much debt.

The Clinton administration did a great job of not spending a budget surplus, Bush came in an doggedly implemented all of his election promises at great expense, plus a war, to undo all this good work. In the past 5 years(?) congress let lapse a law that required all new gov spending to be backed by a new source of income, so spending could blow out again. Social Security is in big trouble in the coming years because it hasn't been designed to cope with the expected influx of elderly - more so because a lack of real resources. The government can print money, but that doesn't help it if there's not enough nurses*.

The fed reserve is run by economists who generally understand what it takes to make sound monetary policy. Even though they're a separate entity, they can still be undermined by politicians who aren't economists.

These aren't failures in the money system per se, they're just people being stupid, selfish and/or shortsighted. This will be the downside of any system, I imagine. GFC was the same problem. Risk spread from treasury bonds (no risk) to junk bonds (high risk) used to be 23% (23% higher interest rate on the riskier investment) - it had dropped to 4% before everything went haywire, which is ludicrously low.

Will the internet and increased transparency and engagement help prevent these sorts of failures in the future?

Inflation isn't necessarily evil. It encourages liquidity (discourages hoarding) which I think is probably a good thing. A free market does create greater stress levels though (creative destruction cycle - if you're inefficient you get replaced), and hoarding is stress free for some people, so this is why a lot of people aren't fans. I believe it's an acceptable trade off for an efficient economy - I embrace change more than most though.

 
One of the interesting things I've stumbled upon (which is probably economic policy 101) is that countries tend to hold a lot of cash in their accounts to help smooth out cash flows. Imagine the US as freelancers (very simplistic example, but it works). When you freelance, you tend to hold more cash on you than when you're an employee because you're never quite sure when that invoice will get paid (I've personally felt this - Xavier you're probably the same). So the US (and, more importantly, every other country) holds a fair amount in their coffers to allows for costs they may experience (wars, emergency funds spent, health emergencies, large imports etc etc) between income (large export invoices paid, tax payments, yada yada.) This is especially relevant in a country like Australia, which still makes a lot of its cash from resources (Uranium, Aluminium, Steel etc etc). Whilst the companies that create the profit from these things take most of risk, the countries still need cash to make those transactions happen. 
 
So, countries hold cash. Most countries, hold their cash in the standard international currency they benchmark against (for Australia, the US). This keeps liquidity in the market. As of April 2008 (according to the IMF) 66 countries around the world use the US Dollar as their exchange rate anchor. 
 
Money, like any other product or service, is exposed to fluctuations in supply and demand - and it is this that has kept the US market quite liquid (even as it's suffered through the crisis). 
"The US Government, for it's part, finds it quite easy to finance its current account deficit: the foreign central banks (like the Reserve Bank of Australia) are a kind of captive market" - Foreign Affairs magazine. 
Anyways - I'm quite keen to phrase our presentation around a couple of key points. 
 
1) Currency is a product/service just like anything else. It is susceptible to competition just like anything else, it's just that nothing on earth compares to the US dollar at this stage - if aliens invaded tomorrow landed in Obama's office however, I'm pretty sure no amount of trillions of dollars would appease them. If they operate in Xion Dollars, the US Dollar loses it's market (just like any other product or service)
 
But, natural resources (and energy!) would. I think we could see our currency literally move more towards actual currents. Why don't we trade in power? in electrons? 
 
2) I'm keen to take these large, marco discussions back down to a more tangible point. What does the next type of bank look like, give then above? 
 
I'm not so tied to #2 - I just think it's interesting to consider what a new model of 'bank' would offer. What about a bank that took current dollars (US say) and invested them into the power market. Then, people traded in KwH? It's also relevant where carbon/climate change comes in. As climate gets worse, the most efficient way to produce 'currency' is to do that without needing to spend currency to make it. So to import coal (or dig it out of the ground before producing 'electricity' actually becomes a very inefficient and costly business to be in.)
 
Building a solar panel, or a wind farm would be too - but would be more cost effective in the long run. 
 
UNIQUE IDENTIFIER
Is it necessary to have a robust unique identifier for each human on the planet to make a trust system work?  Reputations are built up over time, and when agents representing humans are interacting with each other they need to feel comfortable that an interaction with two agents (with different and possibly conniving strategies) is not actually representing one human.
 
 

 

Comments (0)

You don't have permission to comment on this page.