Dear Brett, your valuable ideas deserve a wider discussion in our society. I will grasp your article well and then try to write you some positive feedback. Thank you for this gem of an article, as usual you are brilliant.
"Picture your lungs telling your heart that before it can oxygenate the blood required by the heart’s tissues, it needs energy delivered to its tissues via a pump of the heart". "Credit thinking leads to a vision of money as being a kind of nervous system, rather than a circulatory system".
Some of these explanations are plain beautiful, Brett. Thank you so much.
Holy shit Brett you are my people. I can't tell you how happy I am that you exist and are thinking these thoughts, and are connected to other people who also resonate with what you say here. A friend just sent me the link to this article, and the timing to connect with you is perfect.
Twenty years ago I had an insight built on the mutual-credit understanding of money, and have spent my life pursing and developing it. The credex ecosystem launched on March 21, 2023, and I've just published a book (available in the next few days) on what we've built and why we've built it. It is 100% aligned with everything you have so clearly stated in this article.
The insight I had is one that removes the need for centralized control of balance limits in a mutual credit system by localizing the impact of default to the two parties transacting rather than transferring it to the system as a whole.
If I owe you and you owe me, we're square. In accounting terms I can clear my payable against my receivable and so can you, and we can carry on without money changing hands. The insight, which I have come to call the credex principle, is simply:
If I owe you,
and you owe them,
and they owe me,
we're square.
The "credloops" formed by this principle can be any length, and any "credex" in these loops can be denominated in anything that has a market price, including currency, with exchange rates updated daily in the current implementation.
Credex is not an alternative currency, credex is an alternative TO currency. That's a technical description from an accountant/economist/entrepreneur perspective. An outstanding credex is a conditional asset and conditional liability pair, stored on a shared ledger that finds and clears credloops between credexes while preserving privacy. We've "disintermediated" or "unbundled" modern money into a series of peer-to-peer relationships based on mutual, verifiable, and auditable trust.
I believe that the most important thing in this article full of gold is that you frame us humans as "Layer 0." That's the key to everything for me. I believe in human sovereignty, and I believe that we can and should design our system of exchange around this principle. We are Layer 0.
I would LOVE to talk. My book will be available in a few days through my author website at ryanlukewatson.com, and I'd be happy to share a link where you can read it in advance. Our software is at a "public beta" stage. It works, but it's far from a smooth user experience. But that's a relatively easy piece to develop now that we have the powerful multi-denominational accounting core and shared ledger.
The book is:
Trust Again: How peer-to-peer trust between sovereign humans changes everything
Hey Ryan, thanks for the supportive words. Really exciting to hear about the credex system. It sounds quite a bit like multi-lateral credit clearing systems (people like Tomaž Fleischman at Informal Systems are also working on these systems). Feel free to ping me an email any time
Sounds a bit like 'Bartercard'? As with all these systems, the difficulty is minimizing abuse where one person takes out and then never puts back in to the same level. They are always in (growing) debt. This is the most common reason for these schemes to collapse, as more and more people see what is happening and either emulate the behviour, making the problem worse or at some stage pull out of being part of the system due to the level of abuse. If you have a solution to this problem, that would be a huge advance!
Hi Michael. I see that you are interested in UBI. I would love to hear what you think of the version I've proposed (and implimented as core to credex) at dailycredcoin.com. Currently in Zimbabwe making it happen on the ground where the need is greatest.
Yes exactly! I'm not familiar with Bartercard, but what you are describing is exactly the problem that credex was designed to solve. Credex is mutual credit without a central issuing agency. The solution to the problem is 100% personal responsibility for all IOUs/debt/money issued. Freeloaders can't operate long, and they can't take down the system.
This is terrific thinking, and - to me at least - makes all the sense in the world. Blockchain technology just doesn't cut it for the future we need to build.
It's also already been fully implemented in a post -blockchain paradigm, which is Holochain.
Holochain is fully distributed, energy and cost efficient at any scale, and is as secure as Blockchain with fully data sovereignty for the users, and an immune response against bad actors.
It also allows for forking in which the users can take all their private and public data and transactions with them.
Furthermore Holofuel - currently in the form of an ERC-20 token $HOT - is a fully implemented asset-backed, mutual credit crypto currency build with and on Holochain, which will enter Beta in 2H2023.
Congratulations, you are ready to understand the passive monetary system and the power of type A transactions. The science of money that you describe is already formulated and proven:
Hi Rubén, thanks for your comment. Would you like to elaborate? There's lots of stuff on that website you post, so it would be helpful to have a summary
Commons Engine began an incubation dojo for those that are laying the foundation for new social and economic systems. I call it a dojo as you have to come in with the idea that you will gain mastery but it will have its challenges. We take projects in the realm of social impact and right now 4 inspired in bioregional resiliency. Its tough to get some of them out of the crypto idealism because they see it as a way to finance themselves and their project and they dont understand the flexibility of mutual credit which can also operate as fiat or asset backed. What you mention as "the big opportunity is to redirect their latent creative energy and technical prowess towards new hybrids" has been true for us for a long time, thus the example of Holo's HOT ERC20 vs HoloFuel our mutual credit. We are trying to stir and what I find is mostly the ignorance is about money and new systems. Both. However, because of the "access" to crypto people like to think it will be easy. I love your articles. I learn so much each time. I believe you are mastering the language and ways to tell story.
Good article Brett, I hope the analogies you sketch out it will help people to grasp the basic principles of credit and value exchange. Another articulate monetary theorist who greatly influenced my understanding of money and the exchange process was E. C. Riegel. Spencer MacCallum has the good sense to recognize the value of Riegel's work and made sure that future generations would be able to avail themselves of his brilliant ideas and clear exposition. His works can all be accessed via my website, https://beyondmoney.net/library/. My annotated precis of Riegel's, Flight From Inflation, might be a good place for people to start (http://reinventingmoney.files.wordpress.com/2014/09/precis-flight-tg-rev1.pdf). Thanks again for all your good work on behalf of monetary freedom and a sane world.
This is brilliant Brett. I wish you had a column in The NY Times where you could present/develop these ideas to millions of readers in regular bite-sized nuggets of insight and wisdom. It seems to me that the ideology at the core of neoliberalism is interdependency is a fiction (society doesn’t exist) and developing the understanding that we are locked in interdependency (community does exist and it isn’t ever going away) will be viewed with anathema.
As usual a clear and well argued description of both the monetary system and Bitcoin. As a Bitcoin advocate who isn't interested in hard money delusions I fully agree with your description of it as a commodity as opposed to money.
Yet cannot help but think that what you propose in the last part of this piece, no matter how well intentioned, will forever remain niche and never come close to the impact that Bitcoin or crypto in general has.
Above all appreciate your fight for cash! Been recommending your work to commie friends who passionately hate Bitcoin to convince them cash is essential for a free society.
Thanks for the support Vincent. One of the historical differences between Bitcoin thinking and alternative credit money thinking is that the Bitcoin world is highly 'adversarial', in the sense that the whole system is built around trying to withstand attacks. The Bitcoin token is very crude, but it is very resilient and wily, even if it fails to be the basis of a coherent monetary system.
The hybrid mutual credit systems I describe here, by contrast, actually could work as money, but they have a lot more moving parts and complexity and require a lot more buy-in from the communities that use them. Put differently, people who trade and move Bitcoin around really don't need to care or understand or take much responsibility for the system, whereas a large-scale peer-to-peer rippling IOU credit system requires a lot more engagement from people.
Bear in mind that even a person that knows nothing about the technical aspects of Bitcoin can see that it's a digital collectible that's priced in money and that it can be moved around. By contrast, the mental hurdle required for people to understand mutual credits systems and the liability side of money is big, but what makes them exciting socio-technical challenge to work on is precisely the fact that they actually have the potential to operate in parallel to mainstream monetary systems (rather than simply being commodities traded within those systems) - so, I do accept that they remain niche (for now), but as a project on they have much more scope for evolution than the blunt instruments like Bitcoin (which, I agree, have a noticeable impact as countertrade objects)
Thanks for the support on the cash work too - much appreciated
The mutual credit systems you speak about could be an interesting addition to the monetary system on a local scale for sure. However, they seem by their very nature to require a lot of trust. For example, who maintains and manages the database of IOUs? This is fine in a local, trusted context but make it impractical outside it. You would have to be rooted in the community to really participate no.
And if it becomes possible to transfer the IOUs between people, aren't we just creating the current system all over again? BTW, wouldn't these IOUs in effect not be money, but rather tokens priced in money, just like crypto tokens?
All of this is fine as a small scale experiment, but we are talking about a totally different thing here than trying to create a global system for value transfer that cannot be stopped or censored.
Not sure how much we disagree here. Feels like your biggest issue with Bitcoin is its claim to be the foundation of a monetary system. Which is indeed a) undesirable and b) not going to happen but really good marketing.
Regarding the cash issue, you must have been tearing your hair out to see the like of Farage claiming the 'Defend cash' position. I don't envy your situation over there in the UK... This must be a cross partisan fight or it will fail.
Hi Vincent, thanks for your comment here. Here are some responses:
1) Yes, traditional mutual credit systems require trust and tend to operate in local contexts, but newer wave credit money experimentation is looking to move beyond that (e.g. there are experiments with 'web-of-trust' systems for identifying people that use zero-knowledge proofs)
2) Peer-to-peer credit systems might use similar primitives to a large-scale fiat system, but have many other principles that diverge
3) Crypto tokens are a particular class of non-essential volatile market commodities with monetary prices (aka. they're kinda like a speculative luxury good that requires a fluctuating quantity of money to be handed over to get them), while credits are not really 'priced' at all - nobody in a mutual credit system first looks for a speculative market 'price' for their credits before deciding how much of them to ask for in exchange for a particular good or service. Put differently, countertrade is simply not occurring in most credit systems, and often the credits cannot even be separated from the people in order to be sold on a market (aka. it's hard to commodify the credits)
4) For the record, the Bitcoin system has not created a 'global system for value transfer'. What it's created is a volatile system of countertradeable collectibles with monetary prices that can be swapped for other stuff with monetary prices. That's fine, and that's an achievement, but - as you point out - I find the rhetoric of it being 'a system competing with fiat money' to be bogus, because the entire crypto ecosystem depends very heavily on fiat pricing
5) Yes, the political dynamics of cash are complex: I have a big piece coming out on the right-wing version of the cash argument in Aeon magazine. Will try to post an excerpt on this site when it comes out to alert people to it
Thank you for your outsized contribution to thinking about money! I am persuaded that the successful innovation of an alternative monetary system requires regard for money as credit by at least its designers. The plausibility of scaling a mutual credit system still seams farfetched to me. How can an egalitarian society peaceably accommodate the phycological and cultural variation found in a well constituted economic hierarchy?
Thanks for your support Christopher. That's a big question. A really complex, and interesting, design question in alternative money is how much scope for inequality you want to build in. For example, traditional timebanking systems often fail because they allow for very little recognition of depth of expertise and experience (e.g. if an amateur programmer takes 5 hours to do a simple programming task, they get five credits, but if an experienced programmer does the same work in 1 hour, they only get 1 credit, which feels unfair to such a person). Such systems could be altered to reflect these differences, but a core feature of a standard modern capitalist money system is that people who do almost nothing at all can get paid enormous amounts, and those who do the hardest work often get paid the least. Anyway, it's an ongoing issue to explore
Yeah, what is the optimal directive for new credit distribution? I don't see how it can be effort, intelligence or a good track record of assets management, as none of these promise that the credit will be applied to prosocial ends. It looks to me like a supierior monetary system would have to be intigrated with a superior leadership contest.
Thank you Brett for one of the most lucid accounts of 'money' and 'crypto' I've ever read. I agree with you entirely. For me, 'crypto' is a scam, while money is just token with an arbitrary 'unit' (like an inch) that is used to recognize the 'value' contributed by the holder (and/or their benefactor) to some member(s) of the community that accepts the money, or that the holder has promised to provide value (as when taking a loan which must be repaid out of future 'value-added' through work and/or investment, or past 'value-added' in the form of an asset held as security). On the other side, the community that accepts the money collectively agrees to return the same value to the holder when they (the holder) spends the money. The money is 'backed' by the total natural, human, built, technological, knowledge, organizational, legal and governance resources of the community/(ies) that accept the money. In the case of the USD, that is effectively the whole world. The 'value' of each unit in terms of real resources (goods and services) is ideally settled in a market between many buyers and sellers who all have equal knowledge and power, with the proviso that the amount of money on issue remains largely in line with the growth in the productive capacity of the community/(ies) that accept it. This ignores markets for existing assets where the price may be bid up as a result of new money being created to buy those assets (eg in the case of QE creating new money that has financed the booms in property, collectibles and securities).
What is "money" is the key question as it doesn't exist on its own i.e. money is not something that exists independently of humans. For it to function it needs to be defined in a formal logically consistent and commonly ratified fashion, currently and apparently historically that has never taken place. In common usage the notion we are operating on is one that conflates the two mutually exclusive concepts of "measure" and "tradable resource" (commodity) and therefore constitutes a misrepresentation. This misrepresentation is key to the analysis of mainstream money and any alternative people want to implement. From a systems science point of view, it is important to realise that:
a) Any money system that embraces said misrepresentation will necessarily produce an unstable (active) money system precluding that money serve as a legitimate "measure"/record of value, for which a Passive money system in the formal scientific sense of the term is absolutely required.
b) Passive systems cannot function unless they are entirely isolated from any active (stable or unstable) system, which goes a long way to explain why (Passive) mutual credit systems not fully isolated do not survive and have zero impact on the dynamics of the predominate unstable standard.
Therefore, if realistically we want to become free of the current vagaries of the current historical monetary quagmire, without wholly isolating ourselves from society, we need to address the issue of money formally and without delay lest the dynamics of the current erred design fully incapacitate our ability to act.
Brett, i love your insights. You also explain them so well.
Thanks for this refreshing take of crypto-utopism. I've always thought there is something off about it, especially when most of it is about getting rich. I've fallen victim of it, in a way, but also grown weary. Digitizing the idea of Scarcity in a world of Abundance is counterintuitive for me. Your emphasis on the machine, rigid-like "life" of these modalities also show how contrary to Life they are.
I actually believe in a world where money not need to exist; i resonnate especially with the ideas of Gift Economy. In a way, this is a mutual credit system, without a ledger, only faith and love.
I have a sense you and @Charles-Eisenstein would have a lot to talk about.
Also, you might not be familiar with the TRM (Théorie Relative de la Monnaie). In brief, it makes participants issue money daily, based on the quantity of money in circulation (and life esperancy). There has been some implementations, like the June currency, but it seems to lack traction. I like the ideas it builds on, like those of social graph and real life interaction. Maybe you'll find some value in checking it out !
Hi Paperjuice, thanks for the support and really glad the piece is useful to you
A couple quick points: Gift economies, at least in the form articulated by Eisenstein, can actually operate on slightly different principles to mutual credit. Mutual credit is quite explicitly a form of reciprocal exchange, whereas gifts can operate as 1) communistic transfers with no expectation of a return flow 2) as hierarchal patronage used to convey power and 3) as a reciprocal system. It's only in the last case that they start to look a bit like mutual credit, albeit without the explicit attempt to measure and record the obligations (by the way, I'd say the best starting point on all of this is actually David Graeber)
I actually did a very detailed deep-dive into the Duniter system, based loosely on the TRM, in one of my pieces for my paying subscribers (https://brettscott.substack.com/p/unboxing-duniter) - it's an interesting concept, but the actual Duniter implementation has a lot of conceptual flaws I'd say (at least in 2021 when I was looking at it) - they still use a commodity orientation to money, but they just have a unique way of deciding on how much gets issued and when
Dear Brett, your valuable ideas deserve a wider discussion in our society. I will grasp your article well and then try to write you some positive feedback. Thank you for this gem of an article, as usual you are brilliant.
Many thanks for your support Cemil!
"Picture your lungs telling your heart that before it can oxygenate the blood required by the heart’s tissues, it needs energy delivered to its tissues via a pump of the heart". "Credit thinking leads to a vision of money as being a kind of nervous system, rather than a circulatory system".
Some of these explanations are plain beautiful, Brett. Thank you so much.
I'm glad they resonate!
Agreed, John!!
Holy shit Brett you are my people. I can't tell you how happy I am that you exist and are thinking these thoughts, and are connected to other people who also resonate with what you say here. A friend just sent me the link to this article, and the timing to connect with you is perfect.
Twenty years ago I had an insight built on the mutual-credit understanding of money, and have spent my life pursing and developing it. The credex ecosystem launched on March 21, 2023, and I've just published a book (available in the next few days) on what we've built and why we've built it. It is 100% aligned with everything you have so clearly stated in this article.
The insight I had is one that removes the need for centralized control of balance limits in a mutual credit system by localizing the impact of default to the two parties transacting rather than transferring it to the system as a whole.
If I owe you and you owe me, we're square. In accounting terms I can clear my payable against my receivable and so can you, and we can carry on without money changing hands. The insight, which I have come to call the credex principle, is simply:
If I owe you,
and you owe them,
and they owe me,
we're square.
The "credloops" formed by this principle can be any length, and any "credex" in these loops can be denominated in anything that has a market price, including currency, with exchange rates updated daily in the current implementation.
Credex is not an alternative currency, credex is an alternative TO currency. That's a technical description from an accountant/economist/entrepreneur perspective. An outstanding credex is a conditional asset and conditional liability pair, stored on a shared ledger that finds and clears credloops between credexes while preserving privacy. We've "disintermediated" or "unbundled" modern money into a series of peer-to-peer relationships based on mutual, verifiable, and auditable trust.
I believe that the most important thing in this article full of gold is that you frame us humans as "Layer 0." That's the key to everything for me. I believe in human sovereignty, and I believe that we can and should design our system of exchange around this principle. We are Layer 0.
I would LOVE to talk. My book will be available in a few days through my author website at ryanlukewatson.com, and I'd be happy to share a link where you can read it in advance. Our software is at a "public beta" stage. It works, but it's far from a smooth user experience. But that's a relatively easy piece to develop now that we have the powerful multi-denominational accounting core and shared ledger.
The book is:
Trust Again: How peer-to-peer trust between sovereign humans changes everything
available in a few days!
I hope we get a chance to connect soon.
Hey Ryan, thanks for the supportive words. Really exciting to hear about the credex system. It sounds quite a bit like multi-lateral credit clearing systems (people like Tomaž Fleischman at Informal Systems are also working on these systems). Feel free to ping me an email any time
Sounds a bit like 'Bartercard'? As with all these systems, the difficulty is minimizing abuse where one person takes out and then never puts back in to the same level. They are always in (growing) debt. This is the most common reason for these schemes to collapse, as more and more people see what is happening and either emulate the behviour, making the problem worse or at some stage pull out of being part of the system due to the level of abuse. If you have a solution to this problem, that would be a huge advance!
Hi Michael. I see that you are interested in UBI. I would love to hear what you think of the version I've proposed (and implimented as core to credex) at dailycredcoin.com. Currently in Zimbabwe making it happen on the ground where the need is greatest.
Yes exactly! I'm not familiar with Bartercard, but what you are describing is exactly the problem that credex was designed to solve. Credex is mutual credit without a central issuing agency. The solution to the problem is 100% personal responsibility for all IOUs/debt/money issued. Freeloaders can't operate long, and they can't take down the system.
Sounds interesting. I'll take a look
This is terrific thinking, and - to me at least - makes all the sense in the world. Blockchain technology just doesn't cut it for the future we need to build.
It's also already been fully implemented in a post -blockchain paradigm, which is Holochain.
Holochain is fully distributed, energy and cost efficient at any scale, and is as secure as Blockchain with fully data sovereignty for the users, and an immune response against bad actors.
It also allows for forking in which the users can take all their private and public data and transactions with them.
Furthermore Holofuel - currently in the form of an ERC-20 token $HOT - is a fully implemented asset-backed, mutual credit crypto currency build with and on Holochain, which will enter Beta in 2H2023.
Voila, loving the zero ❤️.
See for yourself:
https://www.holochain.org/
https://holo.host/
And furthermore ...
social intelligence for the distributed web
https://neighbourhoods.network/
Thanks for sharing Hank. I know Art Brock had a long history of mutual credit thinking before he co-founded Holochain
Congratulations, you are ready to understand the passive monetary system and the power of type A transactions. The science of money that you describe is already formulated and proven:
https://www.moneytransparency.com/technical-syllabus
Hi Rubén, thanks for your comment. Would you like to elaborate? There's lots of stuff on that website you post, so it would be helpful to have a summary
Commons Engine began an incubation dojo for those that are laying the foundation for new social and economic systems. I call it a dojo as you have to come in with the idea that you will gain mastery but it will have its challenges. We take projects in the realm of social impact and right now 4 inspired in bioregional resiliency. Its tough to get some of them out of the crypto idealism because they see it as a way to finance themselves and their project and they dont understand the flexibility of mutual credit which can also operate as fiat or asset backed. What you mention as "the big opportunity is to redirect their latent creative energy and technical prowess towards new hybrids" has been true for us for a long time, thus the example of Holo's HOT ERC20 vs HoloFuel our mutual credit. We are trying to stir and what I find is mostly the ignorance is about money and new systems. Both. However, because of the "access" to crypto people like to think it will be easy. I love your articles. I learn so much each time. I believe you are mastering the language and ways to tell story.
Thanks so much for the support Ferananda (and thanks for reminding me of the HoloFuel system - I'd love to do a deep dive into that at some point!)
Let me know, happy to give you a tour ;)
Good article Brett, I hope the analogies you sketch out it will help people to grasp the basic principles of credit and value exchange. Another articulate monetary theorist who greatly influenced my understanding of money and the exchange process was E. C. Riegel. Spencer MacCallum has the good sense to recognize the value of Riegel's work and made sure that future generations would be able to avail themselves of his brilliant ideas and clear exposition. His works can all be accessed via my website, https://beyondmoney.net/library/. My annotated precis of Riegel's, Flight From Inflation, might be a good place for people to start (http://reinventingmoney.files.wordpress.com/2014/09/precis-flight-tg-rev1.pdf). Thanks again for all your good work on behalf of monetary freedom and a sane world.
Thanks so much for the support Thomas. It means a lot. Also, thanks for those links - I'd love to do a deep dive into Riegel's work some time
Start with a quick scan of Riegel's Money Freedom Declaration:
https://beyondmoney.net/money-freedom-declaration-of-e-c-riegel/
Then move on to precis and critique of his book, Private Enterprise Money, at:
https://beyondmoney.files.wordpress.com/2021/10/thg_precis-of-pem-1.pdf
This is brilliant Brett. I wish you had a column in The NY Times where you could present/develop these ideas to millions of readers in regular bite-sized nuggets of insight and wisdom. It seems to me that the ideology at the core of neoliberalism is interdependency is a fiction (society doesn’t exist) and developing the understanding that we are locked in interdependency (community does exist and it isn’t ever going away) will be viewed with anathema.
Thanks for the support Fred! If you know anyone who wants to give me a column at the NYT, feel free to put me in touch ;)
I totally agree with you on the interdependency point: if you haven't already seen this, you might like my piece called Money through the Eyes of Mowgli, which delves into this https://brettscott.substack.com/p/money-through-mowglis-eyes
As usual a clear and well argued description of both the monetary system and Bitcoin. As a Bitcoin advocate who isn't interested in hard money delusions I fully agree with your description of it as a commodity as opposed to money.
Yet cannot help but think that what you propose in the last part of this piece, no matter how well intentioned, will forever remain niche and never come close to the impact that Bitcoin or crypto in general has.
Above all appreciate your fight for cash! Been recommending your work to commie friends who passionately hate Bitcoin to convince them cash is essential for a free society.
Thanks for the support Vincent. One of the historical differences between Bitcoin thinking and alternative credit money thinking is that the Bitcoin world is highly 'adversarial', in the sense that the whole system is built around trying to withstand attacks. The Bitcoin token is very crude, but it is very resilient and wily, even if it fails to be the basis of a coherent monetary system.
The hybrid mutual credit systems I describe here, by contrast, actually could work as money, but they have a lot more moving parts and complexity and require a lot more buy-in from the communities that use them. Put differently, people who trade and move Bitcoin around really don't need to care or understand or take much responsibility for the system, whereas a large-scale peer-to-peer rippling IOU credit system requires a lot more engagement from people.
Bear in mind that even a person that knows nothing about the technical aspects of Bitcoin can see that it's a digital collectible that's priced in money and that it can be moved around. By contrast, the mental hurdle required for people to understand mutual credits systems and the liability side of money is big, but what makes them exciting socio-technical challenge to work on is precisely the fact that they actually have the potential to operate in parallel to mainstream monetary systems (rather than simply being commodities traded within those systems) - so, I do accept that they remain niche (for now), but as a project on they have much more scope for evolution than the blunt instruments like Bitcoin (which, I agree, have a noticeable impact as countertrade objects)
Thanks for the support on the cash work too - much appreciated
The mutual credit systems you speak about could be an interesting addition to the monetary system on a local scale for sure. However, they seem by their very nature to require a lot of trust. For example, who maintains and manages the database of IOUs? This is fine in a local, trusted context but make it impractical outside it. You would have to be rooted in the community to really participate no.
And if it becomes possible to transfer the IOUs between people, aren't we just creating the current system all over again? BTW, wouldn't these IOUs in effect not be money, but rather tokens priced in money, just like crypto tokens?
All of this is fine as a small scale experiment, but we are talking about a totally different thing here than trying to create a global system for value transfer that cannot be stopped or censored.
Not sure how much we disagree here. Feels like your biggest issue with Bitcoin is its claim to be the foundation of a monetary system. Which is indeed a) undesirable and b) not going to happen but really good marketing.
Regarding the cash issue, you must have been tearing your hair out to see the like of Farage claiming the 'Defend cash' position. I don't envy your situation over there in the UK... This must be a cross partisan fight or it will fail.
Hi Vincent, thanks for your comment here. Here are some responses:
1) Yes, traditional mutual credit systems require trust and tend to operate in local contexts, but newer wave credit money experimentation is looking to move beyond that (e.g. there are experiments with 'web-of-trust' systems for identifying people that use zero-knowledge proofs)
2) Peer-to-peer credit systems might use similar primitives to a large-scale fiat system, but have many other principles that diverge
3) Crypto tokens are a particular class of non-essential volatile market commodities with monetary prices (aka. they're kinda like a speculative luxury good that requires a fluctuating quantity of money to be handed over to get them), while credits are not really 'priced' at all - nobody in a mutual credit system first looks for a speculative market 'price' for their credits before deciding how much of them to ask for in exchange for a particular good or service. Put differently, countertrade is simply not occurring in most credit systems, and often the credits cannot even be separated from the people in order to be sold on a market (aka. it's hard to commodify the credits)
4) For the record, the Bitcoin system has not created a 'global system for value transfer'. What it's created is a volatile system of countertradeable collectibles with monetary prices that can be swapped for other stuff with monetary prices. That's fine, and that's an achievement, but - as you point out - I find the rhetoric of it being 'a system competing with fiat money' to be bogus, because the entire crypto ecosystem depends very heavily on fiat pricing
5) Yes, the political dynamics of cash are complex: I have a big piece coming out on the right-wing version of the cash argument in Aeon magazine. Will try to post an excerpt on this site when it comes out to alert people to it
Thank you for your outsized contribution to thinking about money! I am persuaded that the successful innovation of an alternative monetary system requires regard for money as credit by at least its designers. The plausibility of scaling a mutual credit system still seams farfetched to me. How can an egalitarian society peaceably accommodate the phycological and cultural variation found in a well constituted economic hierarchy?
Thanks for your support Christopher. That's a big question. A really complex, and interesting, design question in alternative money is how much scope for inequality you want to build in. For example, traditional timebanking systems often fail because they allow for very little recognition of depth of expertise and experience (e.g. if an amateur programmer takes 5 hours to do a simple programming task, they get five credits, but if an experienced programmer does the same work in 1 hour, they only get 1 credit, which feels unfair to such a person). Such systems could be altered to reflect these differences, but a core feature of a standard modern capitalist money system is that people who do almost nothing at all can get paid enormous amounts, and those who do the hardest work often get paid the least. Anyway, it's an ongoing issue to explore
Yeah, what is the optimal directive for new credit distribution? I don't see how it can be effort, intelligence or a good track record of assets management, as none of these promise that the credit will be applied to prosocial ends. It looks to me like a supierior monetary system would have to be intigrated with a superior leadership contest.
An excellent piece. The “1000 interdependent people” is a great way to explain the fundamental flaw in UBI.
It is something I've considered exploring with UBI actually. Glad you've enjoyed the piece
Thank you Brett for one of the most lucid accounts of 'money' and 'crypto' I've ever read. I agree with you entirely. For me, 'crypto' is a scam, while money is just token with an arbitrary 'unit' (like an inch) that is used to recognize the 'value' contributed by the holder (and/or their benefactor) to some member(s) of the community that accepts the money, or that the holder has promised to provide value (as when taking a loan which must be repaid out of future 'value-added' through work and/or investment, or past 'value-added' in the form of an asset held as security). On the other side, the community that accepts the money collectively agrees to return the same value to the holder when they (the holder) spends the money. The money is 'backed' by the total natural, human, built, technological, knowledge, organizational, legal and governance resources of the community/(ies) that accept the money. In the case of the USD, that is effectively the whole world. The 'value' of each unit in terms of real resources (goods and services) is ideally settled in a market between many buyers and sellers who all have equal knowledge and power, with the proviso that the amount of money on issue remains largely in line with the growth in the productive capacity of the community/(ies) that accept it. This ignores markets for existing assets where the price may be bid up as a result of new money being created to buy those assets (eg in the case of QE creating new money that has financed the booms in property, collectibles and securities).
What is "money" is the key question as it doesn't exist on its own i.e. money is not something that exists independently of humans. For it to function it needs to be defined in a formal logically consistent and commonly ratified fashion, currently and apparently historically that has never taken place. In common usage the notion we are operating on is one that conflates the two mutually exclusive concepts of "measure" and "tradable resource" (commodity) and therefore constitutes a misrepresentation. This misrepresentation is key to the analysis of mainstream money and any alternative people want to implement. From a systems science point of view, it is important to realise that:
a) Any money system that embraces said misrepresentation will necessarily produce an unstable (active) money system precluding that money serve as a legitimate "measure"/record of value, for which a Passive money system in the formal scientific sense of the term is absolutely required.
b) Passive systems cannot function unless they are entirely isolated from any active (stable or unstable) system, which goes a long way to explain why (Passive) mutual credit systems not fully isolated do not survive and have zero impact on the dynamics of the predominate unstable standard.
Therefore, if realistically we want to become free of the current vagaries of the current historical monetary quagmire, without wholly isolating ourselves from society, we need to address the issue of money formally and without delay lest the dynamics of the current erred design fully incapacitate our ability to act.
See: https://www.moneytransparency.com/technical-syllabus
Hi Marc, thanks for your comment. Interesting observations. I'll have to delve deeper into your site
Brett, i love your insights. You also explain them so well.
Thanks for this refreshing take of crypto-utopism. I've always thought there is something off about it, especially when most of it is about getting rich. I've fallen victim of it, in a way, but also grown weary. Digitizing the idea of Scarcity in a world of Abundance is counterintuitive for me. Your emphasis on the machine, rigid-like "life" of these modalities also show how contrary to Life they are.
I actually believe in a world where money not need to exist; i resonnate especially with the ideas of Gift Economy. In a way, this is a mutual credit system, without a ledger, only faith and love.
I have a sense you and @Charles-Eisenstein would have a lot to talk about.
Also, you might not be familiar with the TRM (Théorie Relative de la Monnaie). In brief, it makes participants issue money daily, based on the quantity of money in circulation (and life esperancy). There has been some implementations, like the June currency, but it seems to lack traction. I like the ideas it builds on, like those of social graph and real life interaction. Maybe you'll find some value in checking it out !
Cheers, eager to read more of you!
Hi Paperjuice, thanks for the support and really glad the piece is useful to you
A couple quick points: Gift economies, at least in the form articulated by Eisenstein, can actually operate on slightly different principles to mutual credit. Mutual credit is quite explicitly a form of reciprocal exchange, whereas gifts can operate as 1) communistic transfers with no expectation of a return flow 2) as hierarchal patronage used to convey power and 3) as a reciprocal system. It's only in the last case that they start to look a bit like mutual credit, albeit without the explicit attempt to measure and record the obligations (by the way, I'd say the best starting point on all of this is actually David Graeber)
I actually did a very detailed deep-dive into the Duniter system, based loosely on the TRM, in one of my pieces for my paying subscribers (https://brettscott.substack.com/p/unboxing-duniter) - it's an interesting concept, but the actual Duniter implementation has a lot of conceptual flaws I'd say (at least in 2021 when I was looking at it) - they still use a commodity orientation to money, but they just have a unique way of deciding on how much gets issued and when
Thanks for the comment!
Typo:
Sometimes they try freeze into place elaborate automated methods to artificially replicate dynamism and voice,
...try to freeze
or
... try freezing
Collaborative Finance (CoFi), sounds a lot like the unis and munis using swap lines coming out of Money on the Left.
Interesting - I'll have to delve deeper into that. Thanks Darren