New Economics Strategy

Justin Peterson

Cryptocurrency and economics

With many countries going into a recession I’d assume that an immediate bounceback for many of the global economies is unlikely. I’m here to inquire about the following theory, and hopefully discuss why it may or may not be viable.

The foundations of this theory would rely on two different types of cryptocurrency. First, the consumer to consumer cryptocurrency((cc) used for person to person/business transactions) and a government cryptocurrency ((gc) used for tariffs and taxes, or for government and corporate transactions).

Now to the best of my knowledge I’m going to lay down the groundwork of what is theorized to be a few prerequisites in order to understand this theory:
1. The government must have some control over the flow of money(the reason for gc)
2. There cannot be one global gc, thus every country would have its own
3. Taxes cannot be paid with cc without there being a high rate of exchange for doing so.

The current theory is this:
The wealth of the entire global market as a whole would account for the initial value of the cc. Current money can be exchanged for its value in cc. The value of gc’s will be determined by the amount of money that is currently controlled by the government, as well as any money owed(through bonds, social security, etc.). Since the government has control over the initial flow of the gc, it has the power to determine its value and account for tax rates. Tariffs are established so that the government can receive the gc’s of other countries. Correct me if I’m wrong, but since there are only a limited number of cryptocurrencies available at any given time, the behavior of the gc’s would be much like holding stock in a country(which could prove troublesome, or could give more power to the people). Whether or not it would be better to charge tariffs in gc or cc is something I do not know, but the amount of power that the government has is equivalent to the taxes that it receives from corporations, thus any products or services given to the government would basically be in the form of tax-write offs. Another possible option would be to only allow for the exchange of gc’s between countries, which are then paid in cc’s by the government. It might also be viable that the government owns assets that can be bought with gc in order for it to hold its value I.e. certain goods at grocery stores, or oil/gas, utilities, homes/properties, etc.
exchange between CC’s would be completely void of any government interaction, thus giving power to the people and acting as a global flow of currency. To remark what was said before, the exchange of goods between corporations can only be done through gc’s, but any consumer to business interactions can be done through cc’s.. this would keep the flow of currency within the borders as you cannot buy something without having it imported first.
With this theory in mind I could travel to any destination and use my cc’s for anything I would like to buy there, if I wanted to establish a business in a country, I’d have to pay taxes with the value of that country’s gc or the equivalent value of my country’s gc. This would enable each country to have power over the next, and that is what I’m afraid of, but it also may not be a bad thing/any different than our current situation (Im no economist).

What are your opinions about this economic strategy and what would be some of the pros/cons of establishing this new form of exchange?

BC

I'm going to give your solution short shrift -- meaning rejection.

It isn't the forms of currency that are at the root of our economic problems at this time.

Our problems are several: insufficient taxation to bear the cost of government (the rich are not paying enough); the political wing of most governments are in the pocket of the wealthiest class; insufficient investment in human capital (heath, education, environment, etc.), pointless production for profit rather than production for use (much of the consumer economy is based on sham needs), and so on.

In other words its the organization of the political economy that is the problem.

Justin Peterson

↪Bitter Crank

Yes I imagined so, that is actually the reason I came up with this theory in the first place.. That is because it gets rid of the need for centralized banks(which the politicians I'm sure would never allow for). However, this theory would almost require the government to rely heavily on corporations to pay their taxes as that is how the government will control most of its gc. Through this process it will be apparent to the citizens how much of the government is owned by coporations, and if the government wants to stay in control it will have to buy that currency back from the coporations, thus increasing taxes on the rich. Also, the argument that increasing taxes on the rich would increase the price of consumer sales would most likely be invalid because the prices have nothing to do with the value of the gc. Another thing to point out is that many corporations that do not interact with the government will need to find their gc elsewhere, which can be done through trades through Health Care Systems, Oil companies, Construciton companies, etc. (all markets that rely heavily on the government, I think). Consider this example, health care companies receive their gc from the government, Mcdonald's does not sell to the government, so they set up a deal in which they receive gc through the Health Care System and in return McDonald's pays the HCS cc's to pay their workers. Because this route of exchange wouldn't necessarily make sense(corporations have to pay gc's to the citizens so they can pay their taxes, as well as having to pay their own, only way to get gc's is through the government), corporations would likely try to find a way to address the government directly thus offering the government almost free access to many of the services of the corporations. In this way, the government will want to hold onto as much of its own gc's as possible, and so instead of taxing the poor(where it would make no sense to give to the poor just to get its own "stock" back, it will instead tax the rich so that it can make deals with those corporations instead of actually giving away any of its "stock". Now with the matters of the political wings belonging to the wealthiest class, the thing is.. well, power of the people. If the people decide to shift to this form of currency the government would almost have no choice if it was viable enough and more thought out than just philosophers on a forum... Also, the wealthiest and the politicians on their payroll would likely not be able to find any way to run the government without actually taxing the rich. That way, if the corporations who own the country are having to tax themselves, they'll likely find a way to offer their services to the citizens instead of actually having to pay their cc's in order to receive the gc's that are required to pay the government. Right?

Echarmion

What are your opinions about this economic strategy and what would be some of the pros/cons of establishing this new form of exchange? — Justin Peterson

It seems incredibly complex and I cannot see what the practical value is supposed to be. Perhaps you could add a paragraph or two on just what you're trying to achieve, and how this system achieves it.

For example, I am entirely in the dark as to why you chose cryptocurrency over a normal currency.

Justin Peterson

↪Echarmion

good point. I’ll do that, but I’ll also explain it here. The point would be that it would reduce the deficit of the current economic system to 0 by granting the government the opportunity to pay back its bonds while still maintaining the flow of currency. Also because of what was mentioned in the previous comment in terms of taxing the rich in order to prevent the government from having to give out its “stock”. Also, it would reduce any type of inflation as the government would not be able to print money, and so the bad habits of government spending cannot be sustained. Also the citizens would be able to find out how much of the government each corporation owns. We all know the world is run by the corporations, might as well make it obvious who’s running what

BC

We all know the world is run by the corporations, might as well make it obvious who’s running what — Justin Peterson

Why not just eliminate the corporations? There's nothing that requires us to have corporations that have the rights of persons (as is the case in the USA). There's no physical law, like gravity or heat transfer, that says we have to have profit making corporations. If we wish to rid ourselves of them, we can (assuming we can muster the will to do so).

Justin Peterson

↪Bitter Crank

because America loves consumerism, and the comfortable lifestyle we’re all used to is a by-product of the corporations that exist in America. If we tried to get rid of them here they’d just base their HQ in another country, and take all of their profits with them. Believe me you, id love to see small businesses take over, but the will to do so would just be near impossible. At least with this strategy, it can be said that most citizens with the slightest bit of wit can see that our economy is going to shit

Echarmion

The point would be that it would reduce the deficit of the current economic system to 0 by granting the government the opportunity to pay back its bonds while still maintaining the flow of currency. — Justin Peterson

How does that work though? If you could just print a new currency to repay bonds, governments would have done so already. Where does the value of the new currency come from?

Also, it would reduce any type of inflation as the government would not be able to print money, and so the bad habits of government spending cannot be sustained. — Justin Peterson

If it can't print money, then where is all the entirely new money coming from?

Justin Peterson

↪Echarmion

Well here’s the thing, the value and the deficit would put the economy at ground at zero. From that point on, no more cryptocurrency can ever exist because cryptocurrency is only ever a set amount and nothing more. It’s basically like filing for bankruptcy, except now the gvt’s credit score would be shit so it can’t get a loan. From then on the people that own most of the country’s “stock”(gc) are the ones who the country was indebted to in the first place. People (should) be alright with this if they understand that right then and there they have the currency at the highest value it will ever be, the govt. will want to buy it back as soon as it can. When it comes to what kind of cc should be used globally, well that’s a different scenario and more complicated, however I don’t think it could be bitcoin or lite coin or anything because people who already have those coins will want to stockpile that as the price goes up. It’s likely that in this case the UN would have to create a new cryptocurrency based on the global market and analyze what countries get how much currency compared to the value of their dollar and the assets that the countries contain as a whole. However, it would not be handed over to the country to mitigate how much is given to its citizens, rather the citizens will exchange their current money for the evaluated rate of exchange for their country.

Outlander

I respect and understand the value of currency. From metal coins to paper notes. Prevents us from having to at best rely on verbal promises or at worst from committing various degrees of heinous savagery in order to have something to eat or a place to rest. Not to say it eliminates the latter, rather after obtaining the currency no further action is mandated as far as the physical wellbeing of the original possessor. Not like that stops some people.

As far as cryptocurrency goes is it not, and please correct me if I'm wrong at any point, just a bunch of 1's and 0's? Could someone not hypothetically do something along the lines of '-regedit item "cryptocurrency" property "amount" value "9999999999999"' and disable the 'authcodecheck' property on the receiving end to 0. Suddenly, I'm a trillionaire. Give me your mansion. Lol.

So if not exchanged the value is held on the physical computer or some kind of online account?

What if the power grid is down for an unforeseeable time. Things start to go bad and some guy has a bunker and a mob of hungry rioters is seen in the distance. Two guys come up to you. One waving a computer harddrive in your face saying this is worth a million dollars in said currency, and happens to be telling the truth, saying he will give you 90% of it to take him in. And another guy who has a half-eaten cheeseburger and a few packets of croutons, who also knows how to fish, and says he'll split half of it with you to do the same. You only have room for one. Who do you take in?

Justin Peterson

↪Echarmion

consider this, let’s say there’s 20trillion dollars in current money in circulation + promised debt. The valuation of how much is given back to the people the country is indebted would be in relation to how much is currently in circulation, but doesn’t account for the promised debt, so they would receive more than gc’s than its value in dollars, because after the gc is settled then the amount in circulation will be equivalent to circulation + debt (so during that time I can pay my taxes with 1 gc instead of 2).

Frank Apisa

Bitter Crank
8.7k
We all know the world is run by the corporations, might as well make it obvious who’s running what
— Justin Peterson

Why not just eliminate the corporations? There's nothing that requires us to have corporations that have the rights of persons (as is the case in the USA). There's no physical law, like gravity or heat transfer, that says we have to have profit making corporations. If we wish to rid ourselves of them, we can (assuming we can muster the will to do so). — Bitter Crank

Right on, BC.

If not all of them (I think definitely not all of them)...certainly most of them...and for sure the ones that deal primarily with NEEDS rather than WANTS. (With an expansive definition of NEEDS.)

And I would suggest expanding your idea to profit making in general, rather than just "corporations."

We should start immediately with Healthcare. Every profit motive for healthcare insurance should be ended tomorrow. No insurance companies, salespeople, commercial pitches for healthcare insurance should be allowed to endure...PERIOD.

We can move on from there.

Frank Apisa

↪Bitter Crank

Yep!

Justin Peterson

↪Outlander

well that’s not how cryptocurrency works. In fact it would be easier to hack the digital money we have these days than it would be to hack cryptocurrency(feel free to fact check me on that), but more than 90% of our money is digitalized anyway, and the government pulls those 1s and 0s outta thin air to pay back bonds and debts. Anyway the reason crypto is more secure is 1. cryptocurrency is encrypted and that encryption takes a looongggg time to figure out. 2. It’s decentralized, so anyone with a steady enough machine can start making blocks. What a blockchain is essentially is a chain of ledgers. You start off with all these coins and they’re set, as the money flows these ledgers are stored on literally everyone’s computers(eliminating cyber attacks because there’s no centralized point of attack I.e. wellsfargo.com,PayPal.com, etc.), as these Blocks are created, they are put in a chain so you cannot alter a block that’s already put in the chain and thats what makes it so secure. The biggest issue with cryptocurrency is once it’s sent, there’s no centralized authority to talk to about “getting a refund” or anything, because it’s already part of the chain and cannot be altered. Another thing to account for is the fact that you can actually lose your coin wallet, so if you have millions on one wallet and you lose it.. well, it’s gone. To account for this I think the government would have to transition to a new currency ever so often, which eventually would make the process easy (not so much for the people that lost their currency) as pushing a button, but at least it would counteract the money that’s lost forever through deflation. Not to mention the fact that the money lost would end up back in the government’s pocket, which actually benefits them. Think of it like putting metal disks on a rod, once you stack one metal disc on top of another, the one on the bottom cannot be taken off.

Justin Peterson

It’s worth pointing out that cryptocurrencies would eliminate banks, which IMO is a big plus

Echarmion

consider this, let’s say there’s 20trillion dollars in current money in circulation + promised debt. The valuation of how much is given back to the people the country is indebted would be in relation to how much is currently in circulation, but doesn’t account for the promised debt, so they would receive more than gc’s than its value in dollars, because after the gc is settled then the amount in circulation will be equivalent to circulation + debt (so during that time I can pay my taxes with 1 gc instead of 2). — Justin Peterson

Right, so if the state owes me 1000 bucks, I get, say 100gc immediately. So the state prints money to immediately pay off all debt, but that will just result in massive inflation, no?

Well here’s the thing, the value and the deficit would put the economy at ground at zero. From that point on, no more cryptocurrency can ever exist because cryptocurrency is only ever a set amount and nothing more. It’s basically like filing for bankruptcy, except now the gvt’s credit score would be shit so it can’t get a loan. — Justin Peterson

No loans mean a lot less flexibility though.

It’s likely that in this case the UN would have to create a new cryptocurrency based on the global market and analyze what countries get how much currency compared to the value of their dollar and the assets that the countries contain as a whole. — Justin Peterson

It's entirely unrealistic that the world gets together and actually agrees to this. So is this more than utopian fantasy?

Justin Peterson

↪Echarmion

“Right, so if the state owes me 1000 bucks, I get, say 100gc immediately. So the state prints money to immediately pay off all debt, but that will just result in massive inflation, no?”

Well it would cause no more inflation than if everyone now just withdrew their government bonds. Some mathematicians a lot smarter than me would be able to figure it out but think of it this way, if I make 100k a year, and I usually pay this much in taxes, and it would usually take me X amount of time to pay off those taxes with the money currently owed to me, then I get this many gc’s for the TOTAL amount of gc’s, but since there would be less in circulation at that time you could actually pay off a years worth of taxes for less than if all the gc’s were in circulation, does that make sense? It’s like if a company owns 95% of the stock and I own 5%, it’s going to be a lot more valuable than if the company owns 50% and other people own the other 50.
Also, the rate would be more like $1000 = 1250 gc.

“No loans mean a lot less flexibility though.”

And yes you are right, the government can’t pull money out of thin air anymore, but if I personally don’t go to the bank and pull out $100,000 to buy that new Ferrari I want I’m going to be a lot less flexible than if I did pull that money out. It’s no different for the government.

“ It's entirely unrealistic that the world gets together and actually agrees to this. So is this more than utopian fantasy?”

Utopian fantasy? Maybe, but if you look on the news many economies are going to absolute shite right now, UK just admitted it, the US knows it, and I’m sure a lot of other countries are going to follow suit. And actually no I think countries would love the idea, take China for example.. their currency is so inflated that the value of one yen is close to absolutely nothing. If you were to tell them that they could have a currency that holds just as much weight as the American dollar, they’d probably be all for it. Not to mention the American dollar is already almost the staple of the global economic system anyway, if we started using it as a means of exchange they’d almost have no option but to accept, not to mention the value of the currency would be a lot more viable. It’s like paying someone back with a house instead of an IOU, the currencies actually exist, but in the system we are in now, promising to pay back a loan with money we can create out of thin air is like saying “You give me this money that is worth something now, and I promise to pay it back later but I can’t promise that it’ll be worth anything when I do.” Even the security of cryptocurrency alone would be enough for governments to consider it.

Echarmion

Well it would cause no more inflation than if everyone now just withdrew their government bonds. — Justin Peterson

Everyone withdrawing their government bonds would cause total chaos and very serious economic damage. So your statement that it "wouldn't be worse" is not reassuring.

ome mathematicians a lot smarter than me would be able to figure it out but think of it this way, if I make 100k a year, and I usually pay this much in taxes, and it would usually take me X amount of time to pay off those taxes with the money currently owed to me, then I get this many gc’s for the TOTAL amount of gc’s, but since there would be less in circulation at that time you could actually pay off a years worth of taxes for less than if all the gc’s were in circulation, does that make sense? — Justin Peterson

No, it doesn't. I can't make out what you're trying to say.

And yes you are right, the government can’t pull money out of thin air anymore, but if I personally don’t go to the bank and pull out $100,000 to buy that new Ferrari I want I’m going to be a lot less flexible than if I did pull that money out. It’s no different for the government. — Justin Peterson

That's an asinine example. The government doesn't buy Ferraris.

take China for example.. their currency is so inflated that the value of one yen is close to absolutely nothing. If you were to tell them that they could have a currency that holds just as much weight as the American dollar, they’d probably be all for it. — Justin Peterson

You've got this entirely backwards. The chinese Yen is artificially weakened relative to the dollar, because China relies on exports, and a strong Yen would hurt exports. For a country with a weaker economic productivity per capita, a stronger currency is often a disadvantage.

Not to mention the American dollar is already almost the staple of the global economic system anyway, if we started using it as a means of exchange they’d almost have no option but to accept, not to mention the value of the currency would be a lot more viable. — Justin Peterson

The American dollar is already the main currency for international exchanges. Almost everyone already accepts it as a means of exchange.

but in the system we are in now, promising to pay back a loan with money we can create out of thin air is like saying “You give me this money that is worth something now, and I promise to pay it back later but I can’t promise that it’ll be worth anything when I do.” — Justin Peterson

That's not really how loans work. When you give out a loan, that's when you create money out of thin air. And then you have to work to create the goods to actually back that loan. When banks give out loans, they don't actually give you some of their money. Only a small fraction of the loan is backed by money the bank actually has, and even that money stays in the bank.

Justin Peterson

Everyone withdrawing their government bonds would cause total chaos and very serious economic damage. So your statement that it "wouldn't be worse" is not reassuring. — Echarmion

Well I guess then the limitations on when people can withdraw would still be enacted.

No, it doesn't. I can't make out what you're trying to say. — Echarmion

So this would solely be based on income tax. If I make 100k per year, lets say I pay 25k in taxes. Lets say that I have 25k in government bonds. It's basically like saying okay, I'll give you enough gc to pay off your taxes for one year, plus the amount of time that accounts for the accrued interest. Contradictory to what I was saying before, it might be better if.. while the TOTAL amount of gc exists at the start, the only amount of gc circulating would be equal to the amount of american $$ that is in circulation, thus 1 gc = 1 USD.

That's an asinine example. The government doesn't buy Ferraris. — Echarmion

Don't they? Have you seen how much the government spends on military funding, congress paychecks(they get paid their whole lifetime if I'm not mistaken), etc. (emphasis on the military spending). The point I'm trying to make is while we are enjoying these luxuries now, it will not be sustainable in the future. There is no telling where all the government money is going now, but I can almost guarantee that many of the budget cuts are not being applied to where they are absolutely necessary. Refer to Warren Buffet's 7 laws to reverse the deficit:

"I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election."

You've got this entirely backwards. The chinese Yen is artificially weakened relative to the dollar, because China relies on exports, and a strong Yen would hurt exports. For a country with a weaker economic productivity per capita, a stronger currency is often a disadvantage. — Echarmion

Hmm interesting I didn't know that, I'll refer then to Venezuela, Sudan, Iran, Liberia, etc. whose inflation rates are sky-high. Correct me if I'm wrong, and if you could elaborate on your statement so I can better understand it, I'd appreciate that.... But with high inflation rates, say of 50%, then the value of any previously owned money goes down 50%.

The American dollar is already the main currency for international exchanges. Almost everyone already accepts it as a means of exchange. — Echarmion

Exactly, so transitioning between the American dollar and the American's gc would be almost effortless, so long as there was a process with which the American dollar can ge exchanged for the gc in a way that would hold its value(in conjunction with what I said before about 1USD = 1 gc).

That's not really how loans work. When you give out a loan, that's when you create money out of thin air. And then you have to work to create the goods to actually back that loan. When banks give out loans, they don't actually give you some of their money. Only a small fraction of the loan is backed by money the bank actually has, and even that money stays in the bank. — Echarmion

Exactly, I don't understand your argument. Could you elaborate a little bit please? What I'm referring to when something is created out of thin air is when banks create promissory notes to the government to promise to pay back a loan with money that doesn't exist. That is the essence of why I believe that our current system doesn't work. That money that doesn't exist is put into circulation and causes inflation which is what caused the 2008 recession. That is why this system would be hard to integrate, because the banks run the economy and this system would rid the need of banks. The structure of loans then would be incompatible and that would cause issues, but in my opinion, transferring to this system of exchange is as close to the integration between the Gold Standard and trading with commodities as we can get. However, the loans that I was referring to were with government bonds, in which the government is in debt because of its inability to pay back those bonds, so it creates fake money to do so, or am I wrong here?

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