I have written often in this blog about my concept for digitized, uniquely serialized debt free monetary system with each uniquely identified dollar has a unit denomination of one dollar. Once created the uniquely identified unit dollar would exist forever, as least as long as money is necessary. Search the blog entry history for my riffs on that concept.
In our current debt money system all money is created as a function of contractual debt between the banking system and the entity it loans money to. The money loaned is created out of nothing. When the loan is repaid the debt is extinguished. It goes back to nothing. While money exists in the system it exists as both a debit to one party and a credit to the other in accordance with established balance sheet accounting methods.
The loan contract is both the beginning and end of the existence of money. Created by a two party agreement. Terminated when the loan is repaid. While money exists between its creation from nothing and termination back to nothing as a function of the debt establishing contract is serves as a medium of exchange used by public and private entities.
What if each unit digital dollar created in the debt money system was assigned a serial number when it was loaned by a bank to a debtor. The debtor would then spend it into the economy where it would be re-spent over and over as the medium of exchange. Each spending transaction would be recorded in a block chain method that established a lineage of who received/spent that dollar all the way back to its original debtor.
The next step requires a suspension of disbelief but it happens all the time in the movies to create a good story so we just accept it without question. That would ruin the story so do that now because otherwise I have no logical system design in which this could actually be done. Given enough time I might come up with one but that is not the point of this blog entry. The point is yet to come.. I hope.
Disbelief suspension mode on............
As the debtor repays the original loan that cause digitized, serialized unit dollar of money to be created out of nothing by the loan that dollar, along with its serial identity goes out of existence. Maybe the history of when it existed is retained just for the heck of it...whatever.
If the block chain of the dollar's life span was a public record then anyone could trace its existence back to its origin and original receiver of a loan and its ultimate repayment evidence from the history record. The alternate to going out of existence by repayment is being written off as a bad debt. The original holder of the contractual loan that created the debt is identified in either way. The tracing process back through the block chain might be done with anonymized tokens but the original debtor would be identified at any given time including after the loan is re-payed or settled by being written off as a bad debt.
In this "what if" system the true nature of debt money would be conclusively and publicly established and revealed to anyone that wished to trace any given digital dollar with a unique identity in their digital account possession all the way back to the birth of its existence.
Interesting situation for academic interest in what kind of systemic information would be generated by such a conceptual design. Information that was in the speculative domain of economics as a best guess of explaining what money is and what money does.
Disbelief mode off........
I hold a dollar with its "birth serial number" in my bank account. The debtor pays back a digital serialized dollar from their account with a different serial number. The original loan debt dollar is mine in my account but the serial number goes out of existence because the loan was repaid by a dollar with a different serial number from the debtor. In that case the serial number identifying and legitimizing my digital dollar in my account gets the serial number assigned to dollar that the debtor paid to reduce the balance of the loan. In the case of a bad debt write off my dollar still gets as a serial number replacement the serial number of the dollar written off as bad debt.
In this conceptual situation the debt dies dollar by dollar as it is repaid but the serial number associated with that dead dollar lives on as it is perpetuated by replacing the original debt dollar serial number with the serial number of the dollar that paid off or otherwise settled the original debt. That replacing serial number is of course traceable in the block chain to the original contractual debt that gave it existence.
What if the debtor happens to pay off the original loan with a dollar that by chance has the same serial number as originally loaned to the debtor. It could happen. What then? I don't know. Call that dollar bank profit. It could be a few dollars a year.
All money is traceable to debt. It is debt money. This is a concept that would validate its unit based existence as debt money.
Hey, but there is a better way than bending over backward to validate the existence of debt as a creator of debt money as our monetary system.
Make all money debt free digital uniquely serialized unit value denomination of one dollar money. In this conceptual system contractual loans by the central banking system is an application of the monetary operating system not the operating system that creates the medium of exchange application.
There! Finally got to the point!!!!!!!!!!!!!!!!!
Post Point:
If new loans were made in this conceptualized monetary system at the same rate that old loans were paid off then where does (did) the existing pool of money that we use as a medium of exchange originate? It is not possible to have that pool of money originate in bank loans if loans are paid off as fast as they are made! Some other entity went into debt to created the money we view as assets in out pockets or accounts. That other entity is the US Government and the excess of government spending into the economy over the amount of money it withdrew from the economy over time is called the National Debt. Public National Debt is equal to Private Sector Savings. Our Private Sector Savings are the pool of money we use as a medium of exchange among ourselves. Our money is debt money originated and is the cummulative result of our government going into debt increasingly since our government was formed to maintain a pool of money called our medium of exchange.
Our medium of exchange pool of money is founded on the creation and management of National Debt. Otherwise called Public Sector Debt. About $16 trillion. It is a revolving account out of which we pay, among all the other things we pay for, our private debt due on loans. Total private US debt is about $45 trillion. Total private debt is a revolving thing. As old loans are paid off with the medium of exchange extinguishing debt dollars, new loans are made with creating the debt dollars out of nothing and injecting them into the $16 trillion dollar pool of medium of exchange money. The net amount of total private debt is growing however. So is the gross amount of public debt. However, how much did that growth in public debt actually inject into the total of our medium of exchange and used to buy goods and services consumption to stimulate production? If it did not go to that purpose then where did it go? Where does it exist now, wherever it did go?
Good questions to be answered by uniquely serializing every single unit value digital dollar.
This is an unusual way of looking at and then think about the relationship between a debt based dollar and its serial number. A dollar in the debt based dollar system lives only during the time between when a loan is made and a loan is repaid. It comes from nothing then it passes on to nothing. The serial number assigned to that dollar is its soul. The dollar dies and the soul separates from its relationship to that mortal dead dollar that no longer exists to reside in a living dollar existing in the medium of exchange pool of all dollars until that dollar must die some day in time as a repayment of a loan and the serial number soul it bore in life goes on to live in yet another living dollar existing in the medium of exchange.
The trick here is that the dollar that repays the loan and dies is not the dollar with the same serial number of the dollar that was originally loaned. All dollars are the same so it does not matter that the loan paying dollar had a different serial number than the loaned dollar. In the gross analysis all dollars are debt dollars and have the ability to settle debt independent of their serial number which merely a controlling management device. Serial numbers associated with the dollar do not pay debt. When a dollar is used to pay debt its unique serial number is detached from that dollar and replaces the serial number on the unit dollar that was in fact originally loaned.
Actually, since every dollar in the theoretical debt money serialized system has a unit denomination of one, the serial number is the dollar.
Think about that!
In the Bitcoin system the unit of payment is a previously block chain validated transaction with a certain associated numeric value. It is the payment of block chain validated transaction(s) each with a variable transaction numerical Bitcoin value equal to or exceeding the current numeric value of the required payment transaction that is the vehicle of the transaction. Payment is essentially made with transactions "owned" by the payer and indirectly with the Bitcoin values to which they are associated. Since payment is with owned transactions then the total of the payment of sufficient transactions to exceed the required Bitcoin amount must be refunded to the payer as a transaction called "change".
Medium of exchange unit is a matter of system design. It could be a transaction. It could be a serial number identification having the constant denomination value of one unit. They are both block chain units of measure.
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