Salmoney

Salmoney.......

Salmoney, the Simultaneous Solution

A Simple Model

The task at hand is to create a monetary mechanism which incorporates 100% Money, a Deteriorating Currency, and a Universal Basic Income. I will deal with the Unitary Tax a bit later. Let’s begin by imagining a group of 1,000 people who have moved to a deserted island and have decided to create a monetary system. They decide to name their currency the Frank. Each person will receive a daily allotment of 100 Franks. This is 100,000 Franks a day in total. The various people have brought with them goods, canned foods, clothing, and bottled water. In addition, the island has abundant freely growing fruit, and game animals of various sorts. A market is set up in a central location and money trade begins immediately. Some people go gathering and hunting, some begin to build shelters, others start to clear land to plant crops, some study and explore, and others idle away their time.

The first day is all about equality, but it is an equality that is short lived. Two things begin to operate immediately to disrupt that equality. They are the differences in existing stocks of stored food and clothes and tools, and the other is the level and efficaciousness of their effort in increasing the stock of goods. The end of day finds 500 of the people with no money left, the next 400 have an average of 50 Franks left, and the top hundred have an average of 800 Franks each.

The second day brought another 100,000 Franks and the process of accumulation continued. Prices took a sharp rise. Some rose greatly, more than the doubling of the money supply, some kept an exact pace, doubling from the day before, and some lagged behind. Goods began a qualitative separation, with the highest quality leading the increases, and the lowest quality rising the least. Those who held no money suffered no loss on savings; they did see the effectiveness of the daily allotment diminish. While on the first day they received an equal share of all the money, on the second day an equal share of half the money, etc.

The richest among the group were already carping that inflation was destroying the purchasing power of their savings, and the poorest that the purchasing power of the daily allotment was eroding. These arguments continued forever, but the problems actually began to diminish, at least on the side of the wealthiest. While the value of their savings was diminished daily, their incomes rose proportionally, and they received the daily allotment. After thirty days, the mean loss of purchasing power was about 3% a day, after a hundred days about 1% a day, at the end of a year the loss of purchasing power on each Frank averaged a little more than a quarter of a percent a day, but with their increased incomes and the daily allotment they were maintaining their capital easily.

The end of the first year saw a total of 36,500,000 Franks in circulation. The bottom four hundred held no money. The next four hundred held 10,000 Franks on average, 4,000,000 Franks in all. The next hundred and fifty held 30,000 franks each on average, or 4,500,000 Franks in all. The top fifty held 28,000,000 Franks in all, or an average of 560,000 per person.

Some argued that the daily allotment should be increased, because it no longer provided enough for the poorest in the community to live a decent life. Some argued that the increase should be large, others that the increase should be small, others that it should continue to decrease, others that it should be stopped altogether because they had all the money they needed, and the money just encouraged laziness.

The arguments were as follows.

1. Money to be held constant at 36,500,000 Franks with no further allotment (Fisher, Soddy, Del Mar), except to keep prices constant.

2. The allotment to be held constant until day 10,000 and then allowed to rise at the rate of one ten thousandth each day (Milton Friedman, 4% per annum), money should have 100% reserves, and grow at 4% per year.

3. The allotment to be held constant until day 3,000 and then allowed to rise at the rate of one three thousandth each day (Silvio Gesell, 1% per month), Gesell would require a one percent stamp per month, which would be equal to about the diminution after 3,000 days of equal Daily Breads.

4. The allotment to be held constant at the same rate for one year, and then on day 366 be allowed to rise at the rate of one three hundred and sixty fifth each day. (Salmon Fortunatus Aquarius, Solar Cycle, 100% per year)

5. The allotment to be raised to the level that it held at the end of day thirty, and then allowed to rise at the rate of one thirtieth a day. (Lunar Cycle, 100% per month)

Inflation in the General Interest

Salmoney introduces the concept of inflation in the general interest. This uses the power of money to assimilate and articulate significant amounts of new money, a power used for years for private interests. By doing this for the general public rather than private business concerns, something quite unique occurs. When everyone in the economy is given an equal amount of money, it has the statistical effect of making everyone closer. The pecking order is unaffected, but statistically the income distribution is compressed. This compression counters the tendencies of the free market to widen the disparities in incomes and assets.

Inflation in the general interest distributes new money that derives its purchasing power from the diminution of all other monetary divisions. It puts the storage of purchasing power on a twin track, one private, and the other communal. The amount of purchasing power taxed away from existing cash is immediately distributed to everyone equally. The average person receives exactly what he loses.

Inflation in the general interest is an adaptation of Gesell’s invention of Stamp Scrip. Instead of taxing money through an explicit affixable stamp, money is taxed implicitly through diminution. Each new currency division created taxes every other division already in circulation. It gives money a half-life, the other half is shared equally by humanity at large.

V. The Bank of Fortunatus. Daily Bread and the Trued Price

I trued my first bicycle wheel in the summer of 1984. It was at the Portland Bicycle Collective in southeast Portland. The spokes connected to the center of the rim in a fairly straight line, but alternated the connection to the hub between left and right. Each spoke had an adjustable nut-bolt that could compress or lengthen depending on which way one turned. There was a brace to grip the wheel by the prongs of the axle that extended from the hub, allowing the wheel to spin freely in a highly stable manner. A reference pointer is suspended next to rim of the wheel. When the wheel is spun slowly, the reference point allows one to see if the wheel is out of round, or is bent to the left or right. When one has finished the analysis, the Trueing can begin. If there is a bulge in your tire rim, it must be pulled in, but in order to pull in, you always end up pulling sideways as well, because the spokes are not on the center of the hub. This means that to adjust the rim of the wheel in or out requires right or left compensation. To adjust the wheel to the left or right requires an in or out compensation.(Like the ups and downs of the business cycles, and the left and right of politics.) If the adjustments are not based on accurate readings of the reference point, or the adjustments are too great, or too small, or on the wrong spoke, the wheel will continue to wobble and eventually collapse.

The bank of Fortunatus will issue a form of Salmoney that I have termed Excalibrator. We will begin where the simple model ends, at the end of one year. Everyone has received exactly the same Daily Bread for each and every day. Some have a lot, some have many, some few, and some have none. One year’s issuance of equal Daily Breads establishes the capital component of Excalibrator. At this point the Daily Bread begins to grow at the same rate as the capital component and thus establish the system shape and mechanism. Each will grow at 1/365^th daily, establishing the system constant,

Population x Daily Bread x 365 = Capital Component.

While the number of currency divisions for a given Daily Bread increase daily, the proportion of the Daily Bread to the total sum of currency divisions is constant. Two DBs will be the same proportion of all money, always.

This rate, 1/365 per day, was chosen to achieve a daily rate for doubling money each year, but when it is compounded daily it approaches the transcendental number e,

(1 + 1/365) raised to the 365^th power = 2.714

All existing monetary divisions are diminished by 1/365 each day, which means that 364/365 of the purchasing power of existing monetary divisions are maintained. The communal stream of purchasing power completely compensates any holder of cash up to 365 DBs through their receipt of their own single DB. The amount of currency divisions will double about every eight months, giving Excalibrator a half-life of eight months. This means that each person will have received an equal share of half the money in circulation within the past eight months.

Using Daily Bread as the price referent requires a daily adjustment in the nominal price. It grows at a little more than ¼ of one percent a day. Using the 100 Franks a day figure from our simple model the Daily Bread would rise to 100.27 Franks on day 366, 100.54 Franks on day two, 100.82 Franks on day three, 200 Franks a day on about day 240, and 271.4 franks on day 731, the first day of the third year. After about eight years it would be about 100,000 franks a day.

To avoid dealing with large numbers the currency divisions will be retired at regular intervals, folded into other currency divisions stair stepped up at multiples of 1000. For instance 1,000 Rubles would be equal to 1 Frank. 1000 Franks would be equal to 1 Real, which would be equal to 1/1000 of a Mark ad infinitum. This is Shepard Tone Money. A Constantly Rising Scale, that stays in the same place. The DB on day 366 is 100 Franks, 270 Rubles. On day two, 100 Franks, 540 Rubles. At around eight years it would be 100 Reals.

All purchases would still be subject to a negotiated price, with sellers seeking a higher amount and buyers a lower amount. Just because something is listed at a price doesn’t mean that someone else will buy it, but when any transaction is made in money it will yield a figure that can be stated in DBs for that day.

The Daily Bread (DB) is a ceterus paribus price. If all other economic conditions and relations remained unchanged then prices would rise in exact proportion to the rise in the quantity of money. This does not mean that prices will stay the same, they will not, but having the datum of a DB price, one can judge money against itself. Ceterus Paribus is transformed from assumption to parameter, parameter of the existential referent of price. One can see the relative value of all commodities to money, even money.

Excalibrator is organically progressive in its effect and its cost. The significance of an equal benefit increases as one descends the economic ladder. The significance of cost increases as one ascends.

Excalibrator will generate a measure of price, the Daily Bread (DB), which is both a true price and a trued price. A true price in that it will refer not only to an amount of cash at a point in time, but refer as well to the fraction of the total amount of money in circulation at that point in time. A trued price in that it will generate a constant compression pulse that will compensate for and interact with the tendency toward separation inherent in the operating of the free market.

Increasing the bidding power 1/365 in any auction will not disrupt it, especially if all bidders are given an equal share of the increase. Markets will be stepped up and allowed a better chance to clear. The effect of the pulse of equally issued devices of purchase will make everybody economic voters, shapers of the econosphere. The Daily Bread measure creates a nominal inflationary spiral, but an effective inflationary helix, the trued price.

Capital Component = 365 x population x Daily Bread

And as the Daily Bread is a constant ratio of the capital component it also grows at 1/365 per day:

Daily Bread = 1/365 x Capital Component/Population = Trued Price

Excalibrator.......

The Quest

Salmoney is a monetary system with a built in universal human subsidy as its foundation. Excalibrator is a specific form of Salmoney.

The purpose of Excalibrator is to put a functioning currency into the hands of any group of people in the world. Be you a city, a province, a nation, a co-op, a fraternal or religious organization, you will be able to create and sustain a market for the monetary exchange of the products and services of all the people in your group. Excalibrator was achieved through a Grail Quest. It is my sincere hope that the currency created will put the power of Arthur's Sword into the hand of each and every one of my sisters and brothers on this fair world.

Excalibrator will:

Establish an equal, universal human subsidy.

Contain and enhance competition by counterbalancing the market trend to take from the weak and give to the strong.

Measure price precisely and deliberately by establishing a transparent and definite amount of money.

Provide equal access to money by issuing all money through the population at large and making all other forms of issue unacceptable.

Not change the relative position of anyone in the pecking order of the free market.

Not use a confiscatory tax.

Finance these measures through a constant and transparent diminution of the currency.

Create a community of interest in the success of your neighbors.

Base its value on the full productive capacity of humankind

The Design

1. Create and issue daily an amount of money equal to 1/365th of all the money already in circulation. This can be printed money or journal entries, or computer bytes. Give each currency division a unique and public identification code.

2. Divide and distribute it equally to all people. Give them currency, or credit their accounts. This amount is the Daily Bread (DB), an amount that every person in the economy will have a direct relation to every day, because they will receive it.

3. Eliminate the rights of all other entities to create money. Do not accept money created through fractional reserve credit. People may loan only their own money that actually exists.

4. Quote prices in Daily Breads, DB's. The amount of money increases at the rate of 1/365th a day, so does the Daily Bread. Stores would quote their prices in Daily Breads (DB's). For instance, a jacket might have the price of 2 DB's. If the DB is $100 dollars, the price of the jacket, would be $200. The next day, with the same price listed on the jacket 2 DB's, the customer would pay $200.46, or 1/365th greater than the previous day. In eight months the price listed on the coat would still read 2 DB's but the coat would cost $400 (or four reales, see below)

5. To avoid dealing with large raw numbers, introduce a series of currencies each one thousand times more valuable than the last. Daily Bread would begin in America with dollars. Calling the next currency division Reales, 1000 dollars would equal one Real. 1000 Reales would equal one dinar. 1000 dinars would equal one shekel etc. ad infinitum. The largest note would be 500 currency divisions. Excalibrator will have a half life of eight months and a shelf life of about 14 years. It would then be converted to a denomination two places down the chart, at a rate of one million to one. Shepard Tone Money (see below)

The Rationale

Daily Bread is a measure of the real price. It is a simultaneously related to the total volume of money, and a specific currency division. It changes at a constant rate. 1/365 per day, essentially the base of the natural logarithm e on a yearly basis. This is the constant (K) in the system. A printed conversion chart, which could be for a large number of years, or a simple cash register program makes the daily adjustment. Unlike the tremendously flawed notion of a Consumer Price Index (in essence an index of an index) with all of its inherent problems, the DB is a transparent representation of both the macro and micro functions of money. It yields information of a precise and fundamental nature to individuals and the economy at large as to what is truly going on with money.

Daily Bread is a social dividend. Each person receives a daily allocation. This serves a reciprocal distributive function to counteract the redistributive function of the market, insuring that the return on the cultural heritage and the increment of association yields to the general public. It serves the function of welfare, old age pensions, life insurance, disability insurance, child support, educational aid, flood insurance, famine relief, unemployment, help for the working poor, and any number of other programs too numerous to mention, without the need for a bureaucracy to screen for eligibility. It is Wieser's paradoxical well.

Daily Bread is 100% Money. That is no person or group may publicly or secretly create other money. This does not mean that money may not be loaned, indeed I foresee for the first time ever a real, non-political market for money. The improved informative value of the DB will allow lenders and borrowers to ascertain in a precise manner what the real rate of return of money is. But banks may no longer create money out of thin air to loan to customers, and essentially shape the economy. The general population, and only the general population should possess that right.

Daily Bread is a currency that deteriorates over time. But instead of using Gesell's notion of Stamp Scrip, which requires a periodic fee in order to maintain the value of a piece of currency, the currency deteriorates through diminution. It yields an inflation rate of approximately 178% per annum on the currency divisions, but this inflation is folded back into circulation. This gives the created notes (be they paper or electronic) a half life of eight months. Unlike every other inflation that has ever occurred this one is done in the real, direct, unmediated interest of the public at large.

The notion of the ascending/constant scale currencies has two sources. I was in Mexico in January of 1993 when they hacked three zeros off their money and everybody went on about their business as usual. Never a better illustration that one aspect of money is truly just numbers. Their second is Shepard Tones. A Shepard tone is a rising scale that begins a two octave ascent softly, is played more loudly in the middle and then fades out at the top. It is followed by another scale an octave lower, and a measure behind, that does the same thing. It gives the impression of a constantly rising scale but it stays in the same place. They are the creation of psychologist Roger Shepard. I found them in Godel, Escher, Bach, many thanks to Douglas Hofstedter.

Notes

I recommend Daily Bread for every country and people of earth. Japan and Bangladesh would both benefit. Government debt and currency speculation would no longer be useful, though I cannot completely predict their demise. It may be created from the top down or the bottom up, the effect will be the same. Any group any where can begin their own. Currencies will eventually blend together. Different localities could create Salmonies with different rates of diminution. I chose the 1/365 a day rate for aesthetic and personal reasons. I find logarithms one of mathematics most elegant creations, and their inventor John Napier to be one of mathematics true geniuses. I credit Von Neuman and Kazner in Mathematics and the Imagination for first making me aware of its formulation. It is the 100% interest, compound continuously, or in this case (1 + 1/365) raised to the 365th power.

The Juarez Plan

The Juarez Plan

The Juarez Plan is Named for Benito Juarez, President of Mexico, who defied the international banks in the 1860's. He led one of history's only successful wars against their power. Mr. Juarez was also born near Monte Alban.


• Jubilee Plus
  

There is a movement afoot, Jubilee 2000,

that would partially resurrect the Mosaic stricture of Jubilee and forgive much of third world government debt in the year 2000. I sympathize heartily with their efforts, I simply believe a fuller application, even extension of the concept would be more beneficial.

I propose that on March 21, 1999 (Benito Juarez's Birthday), or on any day thereafter, the following steps be taken.

Step One: Convert all government debt to the National Currency of the debtor nation at market rates, as of March 21, 1999.

Step Two: The Treasuries of the Various Nations issue an amount of currency equal to the amount owed, and then discharge those debts.

Step Three: The Treasuries of the Various Nations issue an amount of currency equal to the amount issued to pay debts, and divide this equally among the populace.

Step Four: The banks of the world will become banks of exchange, their functions limited to safeguarding accounts and clearing transfers. They must divest themselves of all other functions.

The Plan Will:

Eliminate the debt of every nation on earth

Provide Liquidity to replace bank credit

Create a monetary cocoon for people to survive the transition

Provide the perfect platform for the launching of Excalibrato