Friday, March 13, 2015
  Defunging

Vaguely outlining the first stage of an idea, tied closely to earlier thoughts on economics as a verb.

Caveat: The goal is important, but the method I'm suggesting here is non-functional. It clearly won't work. Maybe it will trigger a better idea by a better thinker.

Goal: Seems like there should be a way to re-establish real value without going all the way back to barter. A way to have a portable currency that tells you something about the source of its value. Most big stores won't care, but for those who do care, this currency would allow you to trace how it was generated. This will eliminate fungibility. It will give more discriminative power to merchants, who can encourage specific types of work by pricing things differently. (eg Your money comes from speculation? You pay double.)

Method: First step is to take 'fractional reserve' away from banks. Loans are a destroyer of value, NOT a source of value, so new currency shouldn't be created by loans. Value is created by LABOR and INVESTMENT IN PRODUCTIVE FACILITIES, regardless of whether the investment came from borrowing or saving. And it's better all the way around when everything comes from saving.

So: new value should be created each time someone is paid for LABOR. When the automaker pays an assembly-line worker for a week of wrench-turning, or when you pay the dog groomer for an hour of careful nail-cutting and hair-trimming. New value.

New-value payment should be in the form of a physical thing with built-in data. Smart card or similar. You can then use the smart card directly to pay for your gas and hamburgers, or you can pour its value into your account where it MAINTAINS ITS SOURCE INFO. Your account will then mostly contain value that you created yourself by working, plus a mix of other things like tax refunds and inheritance. Because the tax refund came back from money you created, the gov't would have to preserve your labor-signature on the refund check.

Here's where the idea blows up: When I pay you for fixing my roof, I'm paying with value that I've already generated. How would this system recognize that I'm creating or crediting new value by paying you, while simultaneously decreasing or debiting my own stored labor-value? If my account doesn't decrease by the amount I pay you, I've got a bottomless cup. I don't have an answer for this question yet.

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Later thought: The first part of the goal, snatching currency creation from the banks and handing it to the real creators, is dead easy. The mechanism already exists in many countries and has a painfully obvious name. Value-Added Tax. Whether you actually impose the tax or not, use the basis numbers for VAT to control the money supply, and take banks and the Fed out of the loop. As for the second part, preferential rewards for real creators, how about imposing the VAT backwards? If you are generating value by labor or retail sales, you don't pay the VAT. If you are destroying value by speculating or lending, you pay the VAT for everyone else.

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Another sidenote: This short feature on the history of the 2-dollar bill mentions that for many years the Two did tell you something about the source of its value. Racetracks and whores used Twos almost exclusively. When you spent a Two, it told the recipient how you spent your time.

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Polistra was named after the original townsite of Manhattan (the one in Kansas). When I was growing up in Manhattan, I spent a lot of time exploring by foot, bike, and car. I discovered the ruins of an old mill along Wildcat Creek, and decided (inaccurately) that it was the remains of the original site of Polistra. Accurate or not, I've always liked the name, with its echoes of Poland (an under-appreciated friend of freedom) and stars. ==== The title icon is explained here. ==== Switchover: This 2007 entry marks a sharp change in worldview from neocon to pure populist. ===== The long illustrated story of Polistra's Dream is a time-travel fable, attempting to answer the dangerous revision of New Deal history propagated by Amity Shlaes. The Dream has 8 episodes, linked in a chain from the first. This entry explains the Shlaes connection.

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