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Sunday, October 05, 2008

Banking 1 - Utopia

I've been writing a cyberpunk novel (still progressing on my harddrives) that includes a monetary system as follows:

The currency is backed by stock. It appreciates rather than depreciates over time, and instead of physical assets like gold serving as money, which is a waste of gold, the underlying commodity is engaged in productive work while also serving as a unit of exchange.

Further, the currency is not necessarily backed by stock. It IS stock, index funds, or any other tradeable commodity (including metal, product coupons, indentured servants etc.). Prices are quoted in terms of gold or whatever the shopkeeper desires, and the exchange is made on the basis of instantaneous exchange rates on the global market. The market is unregulated and as such runs perpetually.

Nothing physically changes hands; it's all done automatically and electronically. Companies can pay for things by issuing their own stock, though they'd have to be big enough to be listed, and doing so would devalue the stock at the same time. It would be nearly impossible for small companies.

Cash can be produced by simply printing certificates and checking their exchange rates when they change hands. However, anonymous accounts would make cash obsolete.

Individual bank accounts would be a list of serial numbers with constantly fluctuating values. A set of trading rules would govern autonomous electronic agents to trade serials in order to obtain the desired investment portfolio. Shopkeepers would want to continually rebalance their account upon receipt of random currencies. This means that billions of traders would be operating 24/7, potentially eliminating business cycles and market fluctuations.

That depends on the system characteristics- they could also lead to chaotic instability.

The system relies on constant electricity and net connectivity.

Banking 2 will be coming soon. It explains how we start improving the monetary system now.


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