Packet Money

Packet Money.  No, not a misspelling of  Pocket Money.  The new monetary system that I propose is that all money in circulation is recorded as a uniquely serialized unit of One Dollar on a government maintained computer associated to a unique financial account entity.

Each serialized dollar on the government record with a value of  one dollar and identified to the owning financial entity is mirrored by the same serialized dollar held by a financial accounting entity.  The account entity maintains a total dollar on hand balance with a mirror record of its uniquely serialized dollars with a unit value of on the government central server where the total of all those single dollars with the same associated account identifier total the on hand balance in the account record.

When money is transacted in the new system that transaction is communicated as packets of information over the internet using one IP6v packet per each single dollar.

The small change remainder will be handled by a system that I will dream up later.  This is theory, not application.

We deal with digital money transactions as total dollar amounts payed/received from one account to another account.  We think of money in terms of total to what it is related, paycheck, price.  We don't primarily think of money transactions in terms of money units of aggregated single dollars related to a total.  In some cases we do if all we have are one dollar bills and the price of the item being bought is, for example, $7.  Then seven one dollar bills are counted and given in payment.  A more or less automatic action of the hand counting 7 bills but the mind still primarily concerned with the total to  be paid.

In a world of digital money perhaps it is convenient for us to manage money totals payed and received in terms of our "account: user view of the monetary system as we use it to make transactions and for computers systems and monetary engineers that design monetary systems to have to have a different view that  facilitates system design and operation. That different view would be the dollars themselves, at the granular level of 1 serialized dollar.

We view money as passing from person to person and their related accounts on a computer record.  The total amount involved is variable.  A monetary system design engineer would view the transaction in a manner most efficient to system design objectives.  The engineer might therefore  view system transactions not as money passing from account to account but as totals of dollars changing accounts to which a fixed record monetary unit of one serialized dollar is associated.  Computers can do things like that very easily.  The fixation on an account as the record on which all transactions take place is a legacy of an old school system where accountants posted each individual total transaction amount from one account to another.  That was accounting in the old pen and ink days.

People will continue to perceive money moving from account to account.  They will view it that way for individual transactions and as the total of all transactions on their monthly bank or credit card statements.  The computer monetary management system would look at it all in a different way.  People could look at it from the computer viewpoint like they can look under the hood to see the engine driving the car or the circuit boards driving the computer.  Some might do that if they wish, others do not care to see it.

It might sound like a crazy idea to process money transactions in terms of individual serialized single units of one dollar.  Especially if you are buying a $25,000 car or $500,000 house.  That happens every several years for a car, less often for a house.  Of all the transactions we make in a year, what might be the average amount related to a transaction?  Maybe equal to the price of a tankful of gas?  Who knows? Somebody might.  Maybe on Google.  Say it is $50.   How much more would it cost in terms of processing time for a computer to process 50 serialized digital dollars as opposed to a single amount of 50 dollars.

Money transactions take place over a computer network:

1.  Use a credit card and we do not own the money we are spending.  We are spending money held by an institution that grants us the credit to spend it in return for repayment of the credit extended to us.  Pay the amount due on the temporary loan at the end of the month and the credit costs us nothing.  Don't pay and it costs.  Do you see a business plan here?

2.  Use a debit card and we are spending our own money.  Money in our account somewhere.  Maybe we pay for the use of the debit card service.  Maybe the debit card is free and some institution is making money on some aspect of us using the free card.  In any event.  The money is in our account to make the payment.  In this case, 



There is a given amount of money in circulation today that we use as means of exchange.  When it is not being exchanged it is a store of value.  If not spent it is saved until spent.

Total US dollars in circulation is the  M1 money supply and that is is $1.8 trillion.  Gross Domestic Product (GDP) is about 15 trillion dollars annually.  Fundamentally, what is produced each year equals what is consumed  and that is called Gross Domestic Consumption (GDC).  What workers are paid to produce, they spend to consume.  They produce and consume about 15 trillion dollars worth of goods and services stuff per year.

If the total M1 money money supply used for all the yearly paying and spending of dollars to produce and consume is $1.8 trillion then each dollar gets spent about 8 times per year.  If workers were paid once per month and also spent monthly everything they were paid monthly then for all workers to spend all their paycheck monthly to buy stuff would only require a total money supply of about 1.3 trillion dollars, not $1.8 trillion.  There are things that account for the difference.  They are details in the big picture.  Forget about them for the time being.  This is a big picture look at money in a new monetary system.

The store of money needed in the new monetary system:  $1.8 trillion.  About 98% of the M1 money supply is digital money existing on a computer.  The remainder, 2% is paper currency residing in pockets, under mattresses, in cash registers and bank vaults.  About 60% of all $100 dollar bills circulate outside the USA.