Currency

Ideas

Context

By abandoning its ability to create or destroy its national currency, the State has agreed to sell itself to private interests by being forced to borrow, with interest, from structures more or less independent of its power, and often international.

Furthermore, the creation of money has been entrusted to central banks that deploy credit as the main mechanism for creating money. This leads to long growth and violent recession economic cycles that always hurt the poorest.

Moreover, the main actors of money creation (banks and central banks) are detached from the real needs of economic agents and work for their own benefit. The State and its citizens are thus made dependent on private interests, which are by definition contrary to their own.

Objectives

How should Démocratie Numérique manage its currency?

Money management mechanisms

As a starting point, and drawing on some of the ideas of Anice Lajnef, we could propose the following mechanisms, which will of course be subject to the vote.

As a reminder, the currency of Démocratie Numérique is a citizen-controlled cryptocurrency (CCDC - Citizen Controlled Digital Currency).

Management of the money supply

The money in circulation must ensure price stability. To do this, the money supply must be adjustable to economic activity. While Anice proposes a fixed inflation rate, it seems to me that we should be able to program the currency to simply follow economic activity in near real-time.

Indeed, the State continuously collects taxes, as they are integrated as much as possible into each transaction; it also regularly pays out the Universal Basic Income (it could be daily!). It thus has fine adjustment mechanisms to withdraw money from the system (destroying it after tax) or to re-inject it (creating money through increasing the Universal Basic Income).

The formula that remains to be found here is the one that allows adjustment; but the possible frequency of this adjustment can be so close that the formula does not even need to be very accurate; the important thing is that it allows stability over time.

Incentive to Invest

In an economy where money is stable by definition, inflation no longer causes idle money to lose value. However, this idle money slows down the economy. Therefore, it is necessary to find incentive mechanisms to encourage hoarders to consume or invest.

To do this, the idea is to impose a tax that mimics the effects of inflation on dormant capital; it can be very low (for example, 1% per year, levied every week or month) and can target accounts from a certain amount (10,000, 100,000?) to protect safety savings. These rates and amounts will be determined by vote.

To avoid this tax, targeted individuals or businesses will be encouraged to consume or invest; in any case, to provide their capital to the real economy.

This is not about melting money in the sense that money does not disappear; it is simply levied by the State and reinjected into the economic system. And as a reminder, a significant portion of the State's expenditures is dedicated to Universal Basic Income; it benefits the entire population directly.

Credit

Borrowing is buying time; it is normal to pay for this service. Credit stimulates the economy and allows individuals and businesses to carry out projects, innovate, invest... Credit is essential for the economy of abundance.

However, when credit is uncontrolled and only benefits a minority of private interests, it produces the excesses mentioned in the first part.

A sustainable way of considering credit must be imagined, which is not usurious for borrowers but allows those who take the risk of providing capital to be remunerated, while preventing the transformation of money into "debt-money". Here is a proposal.

Different ways of borrowing:

In this way, the money lent is always either someone's money or guaranteed by a material or immaterial object of value. The temporarily inflationary effect of the collateral-backed loan will be adjusted in near-real-time by the regulatory mechanisms described above.

The Centralizing Body

The centralizing body for financial services is an important institution of Software Democracy as a trusted third party for all financial transactions. It is a non-profit organization whose purpose is to facilitate the provision of financial services and create a competitive market; it cannot be a private bank.

It will allow those with financial capital to make it available securely (the organization can offer insurance services) to borrowers, avoiding the dormant capital tax and being compensated for their deposit.

Starting from a certain volume and a certain maturity of the system, one could imagine this system evolving towards fractional reserves to develop the use of credit and stimulate economic activity; but we know the risks of this evolution and it will have to be submitted to the vote.

Since the goal is always to record all the conditions of these loans and insurance in a smart contract on the blockchain, one of the important functions of the centralizing body is to define the standards of these contracts. The automation of operations will eliminate bureaucracy and corruption while streamlining access to credit.

State Financing

Can the state borrow on the market offered by the centralizing body? In theory, yes, but we remember that the state's accounts must be structurally balanced and approved by the vote.

Moreover, the importance of the state's needs could unbalance the market. One could therefore imagine a system where the state directly launches a subscription with its citizens for financing when necessary.

In any case, it is preferable for the state to finance itself at the national level, with its population and businesses.

Furthermore, since the state is the master of money creation, it can indeed create the currency it needs; it is then through the normal mechanism of money destruction (on levies) that it will control the inflationary effect.

Questions and Limitations

These ideas seem to be able to ensure a healthy functioning of the currency in a system like the Software Democracy; but your humble servant is not an expert in monetary policies.

Do they allow enough flexibility for an economy of abundance? What are the precise mechanisms for adjusting the money supply? Should the centralizing body be public (a service of the Ministry of Economy)? How to ensure a good level of competence of citizens when they vote on monetary policy decisions?

So many questions that will need to be explored during the start-up of the economy!