How Money Works: Changing to a New Monetary System

Through my “how money works” posts last week (one and two) we discussed some of the problems of our current monetary system and some of my ideas of how the system could be changed to create a debt-free system in which the economy can flourish, there is no unlimited inflation (the system is not inflationary in nature) and the ability to exchange is organically adjusted to society’s exchange needs. However the most important problem of this idea is actually a very simple question: how do you replace the current monetary system? On today’s post I am going to talk about this matter and how I believe the current monetary system could be replaced in a very natural way.

When you think about changing our monetary system one thing comes to mind: money and power. The current system works wonders for a very small minority – who are very powerful- and therefore have no intentions whatsoever to change the status quo and will in fact defend it to the last consequences. Democratic reform is also an irrational expectation since the government is funded and lobbied by those who are interested in keeping the system running. Revolution is also a very unwanted course of change since it demands social fallout, reconstruction and a lengthy process which society most likely will not be willing to endure unless the current situation becomes unbearable.

How do we change the monetary system then? The answer is that to change the system we need to work from within it, we need to work from the system’s insides and make our solution a more desireable mechanism than the current one. Money – as I said on the first post on this series- is nothing but an agreement so we, as a society need to agree to enforce another monetary system. How is done in practice? We need to come up with a way to implement this monetary system in a way which is parallel and complimentary to the current one with the current system being replaced gradually as larger segments of society move to a new implementation. The only realistic way in which a new monetary system will be implanted is if the population moves organically to it as it coexists with the current one.

The main challenge of this is to create a system which can coexist with the currency system and eventually replace it. The system I proposed on the second post of this series has the potential to do this and how successfully it is done will have a definitive impact on how successful the new system can be. The proposed system could start from structures analogous to banks (let us call them exchanges) where people get the ability to start using the credit/debit system. A minimum number of people would need to be the “seeders” of the system in order to allow a healthy start of exchanges within the new monetary system. Such a system is completely legal as it does not create any type of money – as defined by government- but merely acts as a vehicle for exchanges. Since all debit/credit transactions net zero the exchange corporation is not doing anything but helping people exchange goods. An efficient group of seeders also doesn’t need to be that large and small communities are ideal to implement the first exchange corporations (with small sub-communities in cities being the next step).

Another interesting question is the interaction with regular currency. Obviously if this system is bound to replace the old one gradually it needs to have some form of interaction with the current monetary system (it needs to coexist). Supposing zero interaction would be unrealistic. How does current currency interact with the debit/credit system? As any other thing would interact. When someone wants to exchange regular currency within the system a person who gets the currency receives a certain debit while the person who gave the currency receives credit. The credit/debit exchange rate changes as the perceived value of the “regular money” commodity changes as it does for any other different commodity. The net sum of all credit and debits is always zero and this “regular money” is just treated as everything else. Note that in this system regular money can become completely worthless while credit/debit has an intrinsic value given by the needs of exchange which has no potential for inflation (remember that net sum is always zero).

In this scheme of things an exchange corporation is created which interacts with community A. In the community everyone starts with zero and a fixed debit potential which can then be adjusted to their “exchange history”. In the community businesses and people agree to accept the exchange methodology provided by the corporation and they start to carry out their business. People work to get credit, spend this credit on businesses which do the same, etc. Some people need to get regular money from their credit and they exchange credit for regular money with those members willing to carry out the exchange. Regular money circulates as any other good within the credit/debit exchange system. Some people want to save and exchange their credit for real stores of value (like metals) while others just use it to carry out business (as highlighted above).

Another interesting point is how the corporation “pays” for its functioning (workers, etc). It does so here through a fee structure, it debits all users a small amount and credits it to its workers and contractors. Now the interesting thing here is to remember that the credit/debit balance is always zero so the workers and contractors spend this credit within the community meaning that it quickly returns to users within the community. The corporation is therefore an “engine” for the economy, it is not like a regular bank (which hordes interests) but it – by mere consequence of the system’s characteristics – recirculates all its functioning expenses back into the community.

My idea is that within this exchange community you would soon have a very well functioning structure in which there is money creation/destruction as a mere consequence of how exchanges need to be carried out. The exchange¬†corporation acts as both an exchange control central and as an “economic engine” as it forces spending/earning through its mere functioning. The first key to the development of my money management system is therefore to start within small communities in ways which are organic to the current monetary system. As things grow more and more people get into this and eventually there is a background structure to the real monetary system which replaces it by mere nature. A natural process which is independent of political will and revolution.

Of course the above descriptions are not without problems and it will certainly take me a book (or a few books!) to go through all the methodology, practical implementation and solutions to problems that may arise from all the above mentioned intentions. However it is clear to me that organic integration is the only realistic way to replace the current monetary system, it will never be done through the willingness of the bankers or politicians.

Now tomorrow I will go through another very interesting topic many of you have asked about which is how to replace the current notion of “credit”. How can someone acquire an expensive good like a house? how can you replace “loan structure” ? You will see that the current system offers very organic solutions to this problem that do not hinder the creation or business or the achievement of people’s goals (own a house, car, etc). If you would like to learn more about my work in trading and how you too can build your own systems and strategies to trade the markets¬†please consider joining¬†Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading in general . I hope you enjoyed this article ! :o)

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3 Responses to “How Money Works: Changing to a New Monetary System”

  1. yoshi says:

    Sounds good. As you are the originator of this idea, I propose that you are the founder of this new organization, and money system. What if the small communities started out over the internet? It connects everyone, so this organic growth can and would be exponential. Look at the growth of Amazon.com for example. It provided a need that no one else did at the time (ie warehouse storage, and internet distribution) and has seen tremendous growth over the last fifteen years……….
    This would be providing a unique need that no one else is providing, and I can see tremendous possibilities for organic growth here as well….

    • admin says:

      Hi Yoshi,

      Thank you for your post :o) I am glad you like the idea! Using the internet is probably a good step at some point but I am not too sure its a good idea from the start as the internet is too global and uncontrollable. The system demands some sort of initial control as you need to make people accountable for unpaid debit (a topic of a future post) and you also need to prevent criminal use (especially “regular money” laundering). Definitely the internet will be used when we test this first but “membership” will be limited to a small community and then expanded to larger and larger populations. The idea here – which I will explore further on the book I intend to write about this – would be to get a community which is functional enough involved first. This means you need to get a good number of small businesses involved so that people within a small town can “close the loop” of living expenses (or get as close as possible to that). You want people to be able to buy at least food and basic living supplies through the system but also allowing them to “communicate effectively” with “regular money”since in the beginning the interaction with regular money will be a must (as highlighted on the article). Thanks a lot for your comments and support :o)

      Best Regards,

      Daniel

  2. albo says:

    we really need a change in the world, but know one who wants change has the full power to change it, the people who make the chooses dont want it to change

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