An Exploration of Imaginary Transactions

Steve Kelsey.  London.. 19^th January 2022

Introduction

The transactional logic that determines the efficiency of wealth creation and the growth of our civilisation emerged at an early point in human history and has evolved into the complex system we see today. This model has evolved over time, becoming more complex and increasingly abstract as it has been applied to global scale activity, and now runs our world. There is nothing natural or inevitable about the transactional logic that controls wealth creation, it is the product of human thought just like any other invention. It has been very successful, but there is scant evidence throughout its long history its logical foundations have ever been put to the test. That there is a need for experimentation in transactional logic is certain. The current transactional logic artificially limits the efficiency of wealth creation and therefore limits the survivability of our civilisation at a time when we are facing major challenges. In this thought experiment I explore the logic of transactional models and the alternatives that might challenge this singular paradigm.

Acts of Balance

This is a shorthand description of transactional logic for three participants.

• A.B.C. are participants in transactions
• W = a unit of wealth
• £ = a money form equivalent to X (it could be $, €, or RMB- the currency is not important)

In a typical market transaction

Time	Action	Result
Step 1	A gives £ to B	B receives £
Step 2	B gives W to A	A receives W

This works because both parties, A and B, have received equivalent value in the exchange. A has received money equivalent to the value of the wealth, B has received the wealth. What is not obvious, but is equally important for exchanges, is that the swap happened simultaneously. Equality and simultaneity are the fundamental requirement of a fair transaction.

Consider now

Time	Action	Result
Step 1	B gives W to A	A receives W
Step 2	C gives £ to B	B receives £

The end state for A and B is identical, both are satisfied by the exchange, but what about the new party C?  That depends on who C is, and what relationship C has with A and B. C is a transactional partner acceptable by both A and B. Typically it is an authority with the ability to provide funding that is beyond the capacity of either party and, equally valuable, C can provide the simultaneity that a fair transaction demands. In the case given above, B may not be able to fund the purchase of the wealth in a timely manner but will have that ability in the future. C is an authority that B has entered into an agreement with.

C provides an alternative transaction that is extended in scale or time beyond the capabilities of A or B.

 The attributes that enable C to provide this extension to the transaction model are

• C is trusted by A and B
• C has financial and temporal resources beyond A and B
• C can enforce commitments on A and B

Obviously, we recognise C as a bank or a credit company of some form

But C need not be any of those things. All C needs to be is a resource that can extend transactions over time. What other form might C take?

C more options

C might be a community.

As an example of a community let’s take something familiar, for example an insurance company. An insurance company is a community of people who agree to share the risk of any one member incurring a cost beyond their ability to pay. This works because the transaction is equitable, and payment is simultaneous (For this argument I am going to assume the Insurance company is fair and always pays its claims). It is equitable, because the access to a pay-out is on the same terms for all, and the cost is shared equally.

Another form of community might be a cooperative society. Cooperatives have existed since there have been groups of people, and they provide a very resilient framework for transactions.[i] Cooperatives are legally defined as

“an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise“.^[1] “

With the crypto coin revolution this community approach is being adopted by people through on chain contracts that form Distributed Autonomous Organisations (DAO)[ii]. An online community extends the scope of the cooperative community beyond local geographic regions and can build communities that are global in reach.

What transaction models can we build with a community definition of C?

The hypergraph in fig 1 shows a snapshot in time of a community of five members A, B, D, E, F who have some degree of wealth exchange with one another at the instant in time shown

The hypergraph shows an instant in time with the following transactions

Time	Action	Result
Step 1	A gives W to B, D, F	B, D, F receive W
Step2	B gives W to D	Dreceive W
Step 3	E gives W to F	F receive W

We will assume for this thought experiment that all members are satisfied with their receipt of wealth, but who provides the money to equalise the exchange? That is provided by C.

Time	Action	Result
Steps 1	A gives W to B, D, F	B, D, F receive W
Step 2	B gives W to D	D receive W
Step 3	E gives W to F	F receive W
Step 4	C gives £ to A, B, E	A, B, E receive £

C completes the transaction so that equitability and simultaneity is satisfied.

C can provide the money to any community member because the community members have agreed to give C the ability to do so. The community have agreed that C can issue any amount of money at any moment in time, providing that this is no greater than the quantity of wealth provided at that time. In this manner equitability and simultaneity are preserved.

Money from Nothing?

This ability to create money out of nothing seems illogical, an imaginary exchange rather than something real. But if this small community was not a collection of individuals, but a collection of large banks with C representing the Bank of England, the transactional arrangement does not seem so outré. Banks are granted the ability to create money via their licence with the Bank of England, in fact over 90% of the money in the UK economy is created by the major banks. They create this money by means of loans, issuing new money against a contract requiring the person the loan is given to pay the loan back with an additional amount of money to cover the risk of a default. To be able to gain a banking licence a community of people form a company and must meet certain standards and place reserves in the Bank of England. This is simply another form of contract.

In contrast to the major banks, the Bank of England, C in our hypergraph, has the sole right to issue money without constraint. It is ‘the lender of last resort’ and underpins our entire banking system. This right was granted to the Bank of England at its formation on July 27, 1694, by William of Orange, the Dutch King of England. William was not feeling particularly magnanimous that sunny Friday[iii], he needed the loan that the subscribers to the Bank of England could provide. In return for the badly needed loan, William and Parliament granted the founders and initial subscribers to the Bank of England generous terms.

To remove any residual aura of authority and respectability it is helpful to understand who those original subscribers were. [iv] I have taken a random selection from the list of subscribers held by the Bank of England to illustrate typical subscribers.

As this small sample demonstrates, the quality of the subscribers was variable, and this is confirmed in the full list which includes Bricklayers, Painters and Stainers, Clerks and Publicans, Gentlemen, Esquires, Lords and Ladies. It is a community whose members are as varied as any cooperative and therefore nothing special. The only property that binds    them together is their decision to join the community of people that founded the Bank of England to gain the benefit of the terms won from the monarchy for the community.

If we now shrink the scale of our theoretical community back to its initial size, there is no logical reason why the transactional methods invented by the larger group would not apply to the smaller group.[v] The community design is scale tolerant.

 A community inventing its own money form is not unusual. In 1932 in Worgl, a township of 4000 people, 21 citizens representing the townships trades and industries, gathered to form the Worgl Welfare Committee.[vi] Worgl had been a prosperous township but had been hit by a combination of global and local financial problems leading to severe unemployment, an equally serious shortfall in tax revenue and the need to pay 1.29 million Austrian Schilling (a very large sum at that time) to the Innsbruck Savings Bank. The Mayor of Worgl, Michael Unterguggenberger, was aware of the theories of heterodox economist Silvio Gessel and the experiment with a local currency that had been run in Germany, the Wara[vii] banknote. Learning from this experiment the Worgl Welfare Committee launched the Worgl script, a local currency. To delay attracting the attention of the Central Bank of Austria the Worgl script was called a ‘Labour Certificate’ and 12,000 Schilling of Labour Certificates were issued to the Worgl community. The success of this local currency in restoring economic activity was immediate and substantial, returning Worgl to a busy and prosperous town in a matter of weeks. The success was so notable that France sent observers to see how the turnaround had been achieved. Two years after the launch of the Worgl Script the Central Bank of Austria shut down the Worgl experiment and the town returned to economic hardship.[viii]

A more recent example of community solutions to a failure in the supply of money can be found in the Irish banking closures between 1966-76. During this period the largest consortium of Irish banks[ix] went on strike, reducing the availability of money by circa 80%.

During the longest period of the strikes the banks were closed for six and a half months.

Unexpectedly the loss of 80% of the money supply had little effect on the economy because the Irish population adapted rapidly to the new conditions and self-organised an alternative money form consisting primarily of repurposing cheques as improvised bank notes and issuing handwritten IOU’s. Publicans and shopkeepers assumed the role of banks where the public could deposit ‘money’ and the publicans and shop keepers, who knew their customers credit worthiness is some detail, assumed responsibility for accepting or rejecting payments.

This adhoc system worked well, allowing economic activity in the country to continue without interruption. This should not be a surprise as it is always the case that communities invent money forms and transaction methods to meet their needs[x] [xi] [xii]

In this brief historic review, we have seen that banks are authorities by convention only and emerge from communal need[xiii]. Even the Bank of England, which has become accepted as a fundamental institution and instrument of the state, was a community sourced solution to meet the extreme debts created in the country by an extravagant monarchy. This is an often-overlooked cause for the creation of the Bank of England. It is arguable that the Bank was not formed to relieve William III of a debt burden [xiv], it was created to ensure there would be payment of the companies and people the monarch would owe in the future. In essence, it was one community of individuals, led by an inventive few, organising a method of meeting the needs of another. There will no doubt be protests that this explanation underplays the genius of the banks organising founders, but this criticism is easily disposed of. If a community of individuals to fund the bank had not formed, no amount of genius would have succeeded. We see this principle repeated in the digital environment where thousands of money forms are being invented, but only those that attract communities of users can survive. Banks, and the money they issue, are the invention of the communities that create them, and communities will do so repeatedly whenever the need arises.

Communities of any scale[xv] [xvi]can create money, and that money can be designed in any way to meet the communities need. Understanding this, what alternative transaction models might be created and what are the implications.

Community Coin

The simplest alternative transaction model is to swap out the central bank as the issuing authority and give that power to the community. The community will establish a distributed ledger recording community member individual accounts, and a community owned mint to issue money.

To protect this model from exploitation we will need a few simple rules.

• The unit of ‘currency’ used by the community is fixed by an objectively measurable physical quantity, e.g., the amount of energy required to produce a unit of wealth. [xvii]
• New money is issued by the community to members of the community for the creation of new wealth, a form of Proof of Work.
• The fixed relationship between wealth and money supply over time is actively maintained by the community by adding or removing money to the money in circulation.
• The principle of ownership is determined by the unique identity of a unit of wealth, the ownership of which is transferable between community individuals by mutual agreement.

Several familiar transactional paradigms change with these constraints.

1) The money supply within the community matches the wealth created precisely. Money cannot inflate as it is permanently locked to the work needed to create wealth, the objectively measurable energy cost of wealth. The amount of money in the community grows to meet the community’s growth wealth creation.

2) The direct equivalence between monetary value and a physical measure, e.g., the energy consumed to create a unit of wealth, means that price and cost are conflated and there can be no profit[xviii]. This is acceptable to the community because profit no longer has a role.[xix] All activity to create wealth is paid for by the issue of new money, not capital raised by the accumulation of profit.

3) The community mint can issue money without limit against wealth to be created, e.g., money can be issued for a proposed project to build new infrastructure. This retires the need for loans that must be repaid, and the need to charge interest on loans to protect against default risk. This is beneficial to the community because in this transaction model interest is an inflationary device[xx] that would destroy that the one-to-one relationship between wealth and money.

4) As money is no longer independent of wealth creation it is not possible for mediating agencies to issue fiat forms of community money, nor can they ration or sequester the money supply to artificially inflate or depress the supply of money to community members

5) It follows from 3) and 4) that the community has no requirement for, or need to interact with, a conventional interest seeking financial services sector which diverts energy and money away from wealth creating functions

6) Trade outside of the community is highly rewarding due to being ‘paid twice’, once in communal currency at point of wealth creation, and then again on export sale. The currency earned by exports will enable the community to trade with conventional Fiat communities for items of wealth or services they cannot create internally.

7) A form of Universal Basic Income (UBI) [xxi] is viable as the risk of employers using UBI to reduce worker pay is retired. Where UBI is protected from exploitation it becomes an attractive alternative to means tested benefit payments.

In summary, this is a community economy without inflation, debt, interest, or profit and yet it can meet the needs of its members, grow organically, and fund any project it needs e.g., a fully sustainable infrastructure, comprehensive healthcare services etc.

Transient Money

Another transactional system that we might consider is transient money. If money is a simple measure of wealth and only exchangeable for wealth, then money no longer needs permanence. We do not save newtons when measuring mass, nor insist that metres are kept for prosperity once used, we freely make new measurements and discard the old every time.

We are already familiar with transient money in the form of cheques. A cheque exists to transfer a specific value from one named individual to another named individual or agency. A written cheque has no universality. [xxii] Money as a universal anonymous money form is a convention and not an essential attribute of money. Money that exists only for the transfer of a value from one identity to another is more secure than a permanent money form which can be diverted or corruptly repurposed.

The community mint proposed in the previous section converts to become an auditing authority that confirms the validity of all proposed transactions by performing checks on key information held in the distributed ledger.

• Community Member Unique IDs for wealth owner and customer
• Community Members records of wealth creation
• Community members individual accounts
• Unit of wealth community ID (issued at time of creation and registered with the community database)

The Community Audit then calculates a Transient Money equivalent to the unit or wealth value in community currency (energy based as before) and compares that amount with the seller’s ‘price’.

For security during the transaction each unique identity is encrypted, as is the value to be transferred, as can the locations and timing of the transfer.  The transient money form can have additional security qualifiers attached and should any of the unique attributes attached to the transfer be breached, the value of the transfer is zeroed. These attributes, and the rules of exchange, can be created as a smart contract for use within the community.[xxiii] [xxiv]

Assuming all checks are passed the Community Audit signals the seller that the purchaser’s details are valid, and the proposed ’price’ meets the communities accepted criteria. If any details fail the check the ‘sale’ is declined.  This is similar in principle to credit card processing.  The Community Audit registers the transaction on the community’s distributed ledger, incrementing the seller’s account by the Transient Money value and decrement in the buyer’s account. The Transient Money ID and value is then removed from the ledger. This is the same as the disposal of a check once its money value has been registered in the receiving account.

The key benefit of this architecture is that it can never be owned by an individual, or a self-appointed group from within the community.  To further protect the interests of the community members, the methods used to provide transactional and money value security can be extended to the community network itself, with similar penalties for attempts to subvert the community network, e.g., the permanent isolation of the insurgent entity and the removal of all rights to existing and future monetary or wealth assets.

Zero Money

What is not so obvious in the previous section is that money as it is conventionally described has been replaced completely by money as a measure of wealth creation. This measure is nothing like conventional money’s role as a store of value, it is simply a measure of the energy used to create the unit of wealth. However, it remains ‘payment’ for the effort of creating wealth because it accurately measures the contribution to wealth creation for the community made by a community member. All community members have their wealth creating contributions recorded on the community distributed ledger in their individual accounts.

Wealth is free to be distributed and consumed because the ‘cost’ of its creation has been ‘paid for’ as it was created. This is a difficult concept if you are used to the idea of needing to earn money to pay for something, but it is no more than a perspective change. When you work to earn money, you are creating wealth as you work. The unit of wealth is then put into the market to be sold. The sale generates an income from which you are paid. This is necessary because you, or the company you work for, must accumulate funds by selling wealth before you can be paid. This is because you or your company have no other source of income. However, in a community where it has been agreed that the Community Mint can issue money as wealth is created, wealth is paid for as it is created. There is no longer a requirement for further ‘payment’ by a 3^rd party. Wealth is free to consume because the community has paid for it in ‘advance’. As the need for a value carrying money form is retired, we can return ‘money’ to its original role some 6500 years ago as a simple measure of wealth creation. This is a pure measurement system, and the community has no money in circulation.

Where community members have contributed, they can consume for free because the produce/product has already been ‘paid for’ and in this model consumption is revealed to be a creative function. By asking a cook to provide you with food you are giving them an opportunity to create wealth, just as asking a taxi driver to take you to your destination you are providing them with an opportunity to create wealth. Consumption is always a wealth creation opportunity.

Where the consumption of wealth is free there may be attempts to exploit the system, and so the community will need to protect its wealth by applying controls. The first control is membership of the community, and wealth creation is a fundamental qualification for community membership. To be a community member you will need to provide a minimum level of wealth creation. The precise level will be set by agreement by the community members, but a logical starting point would be that community members must meet or exceed the average community member wealth creation rate to fully participate in the consumption of wealth. Members who fail to meet this condition for an extended period might have their ability to consume reduced to a basic level, somewhat like a consumption UBI. Continued exploitation might see community membership revoked permanently.

The need to prevent exploitation of wealth and resources is a constant burden for any community, but we now have available some powerful counters to attempts to degrade a wealth creation rather than a money creation community economy.

Thinking Money Introduction

These alternative transaction models can be protected with the application of digital money techniques[xxv]  The use of encryption methods combined with distributed ledgers provide robust security, but the introduction of money-as-code principles can go considerably further than this. Now we have money as code we can exploit all the functionality that software offers and consider a money that thinks.

Money with intelligence and agency is not as extreme as it might seem. The evaluation models used in banking and trading operations, coded as algorithms, run much of day-to-day financial transactions. We can move the location of appropriate algorithms from finance industry servers to community servers or community member Apps to perform the same functions for the community.

Using Smart Contract methods money can be given agency and can make autonomous decisions that protect wealth creation from the ‘making money’ policies of mediating agencies and provide security for both the community model and the money form it chooses to use.

The choice of a centralised server or a fully distributed network is not just a systems architecture question but a political choice for a community. The development of peer2peer and mesh net[xxvi]  [xxvii]techniques allow a fully autonomous distributed architecture that can be operated from a plurality of mesh nets running on mobiles and other distributed autonomous networks, e.g., orbital infrastructures.

The evolution of money from a passive and anonymous medium of exchange to an active agent with identity and intelligence will form a challenge to conventional concepts of money sovereignty, but in the context of alterative transaction models and the communities they serve ‘Thinking Money’ will provide robust protections from predatory or exploitative attacks.  I provide more a more detailed exploration of these techniques in “Thinking Money S Kelsey. 2021.”

Motivations

If we understand that alternative transaction models are possible a question still remains, why would we want to adopt them?

The evolved hierarchical money distribution model in use today is so familiar, and has existed for so long, that’s its design objective is difficult to see. Irrespective of whether you subscribe to the orthodox or to the heterodox schools of thought, money originates from a source, an authority(s), it then passes through layers of mediation which enact certain functions, and then reaches wealth creators, the people who build and maintain our civilisation. This three-stage model, from source, through mediation, to wealth creation, was originated in the earliest civilisations and can be seen today in the structures of nations and companies irrespective of their ideology or location.

What is clear is that the source of wealth is separated from the source of money, and that in today’s system, the control of money directs the creation of wealth.

Money decides, wealth provides.

This is an evolved system, and so it is tempting to conclude it is efficient, but this would be an error. The mediation level, the layer of financial control placed between the source of money and the creation of wealth, has evolved beyond its original purpose- the provision of an environment for the creation of wealth, to become a source of control of the money flow for other objectives. These objectives are primary the substitution of creating money as the primary objective for society rather than creating wealth, and the sequestration of money for the benefit of the controlling minority. This is hardly a surprising or controversial argument; the evidence is all around us from the extremes of inequality[xxviii] present in every part of the world, to the scale and increasing complexity of the global financial system.[xxix] [xxx] [xxxi]

The financialization[xxxii] of the global economy means that an increasingly large percentage of money goes towards financial asset manipulation and ‘making money’ rather than wealth creation [xxxiii] As an extreme example, the financial share of GDP for the UK has seen unprecedented growth from 50% of the nation’s total GDP in the 70’s to 500% by 2005. [xxxiv]  By the time of the Global Financial Crisis the financial sector of the UK was larger than that of any G7 country including the USA.  The UK is in an exceptional position; however, a review of the OECD countries confirms that financialization is 40-year trend that has accelerated significantly since the Global Financial Crisis in 2006/7[xxxv].  Emerging Markets (EME) countries are equally subject to increasing financialization[xxxvi]  and the effects of financialization.

• Deregulation of financial operations in the country
• Significant increases in foreign inflows and concomitant debt
• Asset price inflation
• The shift from bank based to market-based investment
• The increase in local business debts levels
• The increase of household debt

The overall result of financialization is to increase debt and, via interest charged on the debt, sequester money from a nation for the benefit of the owners of financial assets.  This purely extractive strategy reduces the money available for wealth creation reducing economic growth and increasing inequality.

If we consider the tripartite structure of source, mediation, and wealth creation financialization is revealed as the mediation level extending its influence deeper into the wealth creating layer and subsuming the role of the source entirely. For the economy under financialization, the mediation level has assumed the role of the source of money and is in the process of reducing wealth creation to the minimal functional level required to maintain the existence of the mediation level.

The evolved transaction logic that we are all used to implies that money must come before wealth creation. But as we have learnt via this brief exploration of viable alternative models, the current transaction logic is a convention rather than some immutable property of wealth creation. This forces a question. Which is more important to civilisation, the creation and concentration of money, or the creation and distribution of wealth?

Civilisational Wealth

Wealth is intelligence embedded in base matter and is created by the intelligent direction of energy. The more intelligence we can add to base matter the greater its value. The more widely we can distribute intelligence applied to base matter the greater wealth a civilisation has. The measure of a civilisation’s wealth is the amount of intelligence it has applied to base matter and how widely this is distributed.

It follows that, for any well managed society, any activity that increases the intelligence embodied in matter, has high value.

It follows that any activity that inhibits the accumulation of intelligence or the application of intelligence to base matter or rations the distribution of enhanced matter reduces a civilisations wealth.

Activities that increase civilisational wealth include

• the means of increasing knowledge
• the means of preserving and communicating knowledge. 
• the means of embodying intelligence in base matter
• the means of distributing embodied intelligence widely.

Activities secondary to the generation of civilisational wealth are any services that enable these means of generation and distribution.

 A well-managed society will ensure that prioritisation will be given to all activities that enhance the generation of civilisational wealth.

 It follows that a well-managed society will ensure activities that inhibit the building of civilisational wealth are prohibited.

The greatest expression of  wealth creation is our civilisation. But civilisation is not just a wealth creating system, it is also our capability as a species, and our survival as a species depends on that capability. There is no established method for objectively assessing a civilisation’s probability of survival, but we can employ probability measurement methods in a general form to gain a sense of a civilisations probability of survival when we compare a civilisation with limited capability with that of one with an extended capability.

Probability space is a mathematical concept that measure the probability of an outcome using three parameters, a sample space, which is the set of all possible actions, an event space, which is a set of all the possible outcomes, and a probability, which is assigned to each outcome. The size of the sample space and the size of the event space determines the number of possible outcomes.  If we consider actions to represent responses to threats,  then the larger the sample space and event space a civilisation’s capabilities offer, the greater the civilizations’ potential outcomes, and therefore the greater the civilization’s chances of survival. If follows that limiting a civilisations’ capabilities by limiting wealth creation limits our civilizations’ chances of survival. This is not an optimal strategy, but that is precisely what our conventional transactional logic is doing.

Conclusions

The transactional logic that determines the efficiency of wealth creation and the growth of our civilisation emerged at an early point in human history and evolved into the complex system we see today. Although it is an evolved system, human minds have always determined its direction and design intent. Whatever the original design intent, the result of recent innovations, perhaps starting with the establishment of early forms of banking, are to create a system that favours the mediation of the flow of money to create more money, rather than create more wealth.

There is nothing natural or inevitable about the transactional logic that controls wealth creation, it is the product of human thought just like any other invention. Understanding this, we are free to design alternative transactional logic models, and I have proposed three alternative models as illustrations.

History provides us with evidence that the creation of money is a community driven event to meet community needs, and that community acceptance is as necessary a component of a money forms acceptance as the imposition of acceptance by law. Where a larger community , e.g., the Austrian nation, decides to impose its money form on a smaller community such as the town of Worgl, there can be only one outcome. But should a community decide to invent a new money form today, the protections offered by digital money and money with autonomy and agency makes that result far less certain.

That there is a need for experimentation is certain. The current transactional logic artificially limits the efficiency of wealth creation and therefore limits the survivability of our civilisation at a time when we are facing major challenges. It is clear it is time for  a transactional logic that enhances our civilisation’s survival.

Steve Kelsey.

 London.

19^th January 2022

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[i] “ Research published by the Worldwatch Institute found that in 2012 approximately one billion people in 96 countries had become members of at least one cooperative.^[2] The turnover of the largest three hundred cooperatives in the world reached $2.2 trillion.^[3] Cooperative businesses are typically more productive^[4] and economically resilient than many other forms of enterprise, with twice the number of co-operatives (80%) surviving their first five years compared with other business ownership models (41%) according to data from United Kingdom.^[5]”   Source – https://en.wikipedia.org/wiki/Cooperative#Origins_and_history

[ii]  “DAOs are an effective and safe way to work with like-minded folks around the globe.

Think of them like an internet-native business that’s collectively owned and managed by its members. They have built-in treasuries that no one has the authority to access without the approval of the group. Decisions are governed by proposals and voting to ensure everyone in the organization has a voice”

Source -. https://ethereum.org/en/dao/#what-are-daos

[iii] Under the Julian calendar the 27^th of July 1694 was a Friday. The Gregorian calendar was not introduced in England until 1750, 168 years after its adoption in most of Europe.

[iv] The Bank of England keeps a copy of the list of the original subscribers which you can view here https://www.bankofengland.co.uk/-/media/boe/files/archive/original-bank-subscribers/1694.pdf?la=en&hash=A8027ADBA218D0C588EF8F301D6425C4F3DC851D

[v] There are many ideological objections to this logic, mostly focused on political control of the money supply, but we are not concerned with ideology in this paper.  As Tomas Piketty has remarked “Every epoch therefore develops a range of contradictory discourses and ideologies for the purpose of legitimising the inequality that already exists or that people believe should exist”  Thomas Piketty Capital and Ideology

[vi] The members of the committee were –  Mayor Michael Unterguggenberger, retired official of the Austrian State Railway • Deputy Mayor Josef Gollner, merchant • Deputy Mayor Josef Balser • State Railway official Councilors Jacob Astner Jr., farmer • Johann Astl, member of the regional government, electrician • Franz Danek, merchant • Alois Kogler, State Railway Official • Oswald Koller, electrician • Peter Lanzinger, retired railway official • Sebastian Mitterer, baker • Rosalia Nestler, railway official’s wife • Georg Opperer, retired • Johann Payer, farmer • Franz Pick, railway official • Martin Pichler, member of the regional parliament and tailor • Thekla Sittenthaler, railway official’s wife • Dr.Georg Stava, retired regional government official • Max Steinbacher, ordinary citizen • Johann Straber, farmer • Christian Wascher, carpenter • Fanny Weinmayr, railway official’s wife.

[vii]  “The Wära was a demurrage-charged currency used in Germany introduced in 1926 as a free economy experiment. It was introduced by Hans Timm and Helmut Rödiger, who were followers of Silvio Gesell. “  https://en.wikipedia.org/wiki/W%C3%A4ra

[viii] This is not an unusual result. The success of a local currency is directly related to the probability of it being shut down by the prevailing national authorities, whereas local currencies with marginal success like the Brixton and Bristol Pound experiments, are allowed to continue, perhaps as examples of how ineffective local currencies are. It is difficult not to conclude that for national authorities’ control is more valuable than economic health.

[ix] The Associated Banks are the Bank of Ireland, Allied Irish Banks, the Northern Bank, and the Ulster Bank. These banks went on strike on May 7-July 30, 1966, May 1-November 17, 1970, June 28-September 6, 1976.

[x] The uses and invention of alternative money forms in the early colonies of the Americas: – https://coins.nd.edu/ColCurrency/CurrencyIntros/IntroValue.html

 “[xi]   ‘Informal Money Transfer Systems: “ https://www.un.org/esa/desa/papers/2002/esa02dp26.pdf

[xii]https://www.researchgate.net/publication/329035401_INFORMAL_FINANCIAL_INSTITUTIONS_A_SOURCE_OF_SOFT_LOANS_TO_INDIVIDUALS_AND_SMALL_BUSINESS_OWNERS

[xiii] Early banks were formed without the sanction of any authority. The goldsmiths of the City of London existed as craftsmen long before they adapted to become financial institutions. Similarly, the great Lombardic banks of Genoa, Milan and Florence evolved from mercantile activity towards finance independent of state intervention.

[xiv]  The English monarchy had an extensive history of fiscal incompetence. In 1676 Charles II defaulted on the payment of loans to the London goldsmiths, early forms of commercial banks. His refusal to service his debt caused the collapse of five banks, drastically effecting a further nine banks and causing serious financial embarrassment to an estimated ten thousand wealthy families. He defaulted on the loans by declaring them illegal. Because of this history, William of Oranges demands were treated with great caution by the goldsmiths surviving the reign of Charles II and they refused William III’s request for loans.

[xv]  The average size of the 300 largest cooperatives is $7.6BN. This is far from the limit to the size of cooperative communities.

[xvi] Two comparable but geographically distinct communities, the city of Birmingham in the UK, and the city of Birmingham, Alabama in the USA.

Birmingham Alabama

From published records of the GDP for Birmingham, Alabama in 2017

GDP                      $ 55,910,633,000

Average Salary    $ 22,993

Population              210,966

 If we divide the city GDP by the population, we get a GDP per head of $ 264,984, notably higher than the average salary. This redistribution of GDP is more marked on a per household basis. Assuming a typical family of two parent and two children the average income per household rises from $45,986 to $1,059,936.

Birmingham England

From published records for the GDP for Birmingham, England

GDP                    $114,300,000,000 PPP

Average Salary   $29,425

Population          1,086,000

If the GDP figure are distributed based on the population size the income per head of population would rise to £105,248, or £420,994 per household.

[xvii] For more information on the use of energy as a means of defining and protecting the values of a unit of currency see the companion thought experiment “Physical Money Propositions. Steve Kelsey, 2021”.

[xviii] Orthodox economics considers price to have a primary role in creating efficiency in the marketplace. Price is a signal allowing the consumer to make a rational assessment of relative values, and competition in the market drives the price of a unit of wealth down. In an ideal world this may work but in practice price is heavily mediated by several techniques to maximise profitability, e.g., rationing of supply, advertising, brand, and marketing techniques to increase the perceived rather than the objective value of a unit of wealth etc.  In practice, price becomes a value distorting mechanism, whereas the cost of production can be objectively measured and communicated with precision.

[xix] The role of profit in our contemporary economy has several roles. To provide a means to reward shareholders for their investment. To provide a source of money that might be used for investment. To accumulate a ‘store of wealth’ which may then be distributed at the discretion of the management. In practice, accumulation of money is the primary goal of a modern corporation.

[xx] There is considerable debate today on the role of interest in our contemporary fiat economy. The conventional Monetarist perspective is that interest rates can be used to influence the borrowing strategy of corporations. Reducing the interest rate on money, making money cheaper, encourages companies to borrow and invest and therefore stimulates growth. Increasing interest has the opposite effect reducing growth. The Monetarist argument is that increasing the cost of money reduces inflation by making money too expensive and reducing the demand for money.  Heterodox economists argue that interest is always passed on to the consumer, and therefore has a direct effect on increasing or decreasing the cost of goods and services to the consumer and therefore is directly related to inflation. In either case, interest is ultimately paid by the consumer to the central bank via the corporations. It is always a mechanism for sequestering money that is in circulation.

[xxi] For a comprehensive review of Universal Basic Income see https://documents1.worldbank.org/curated/en/993911574784667955/pdf/Exploring-Universal-Basic-Income-A-Guide-to-Navigating-Concepts-Evidence-and-Practices.pdf

[xxii] The use of cheques by the Irish population during the 1966-76 banking strikes as universally exchangeable units of value converted cheques to notes of value, paper money. This ad-hoc adaptation is a change of the function of cheques and does not apply to this case.

[xxiii]  For an introduction to Smart Contracts see https://blockchainlab.com/pdf/Ethereum_white_paper-a_next_generation_smart_contract_and_decentralized_application_platform-vitalik-buterin.pdf

[xxiv] For a more detailed look at how Ethereum is developing the Smart Contract concept as part of Ethereum 2 this yellow paper is instructive. Please note this is not a formal statement or recommendation by Ethereum  at this time  file:///Users/stevekelsey/Desktop/Physical%20Money/REF/MONEY%20without%20BANKS/Ethereum2%20Yellow%20Paper.pdf

[xxv] Money served early civilisations as an information transfer medium with its own forms of security. Bills of exchange between merchants were marked with unique identities that were known by recipients. Often these bills were marked in ways known only to the participants in trade. The archaeological record shows us that symbols of ownership were first in use in the Halaf period 7500 BCE in the form of clay seals used to close containers.

[xxvi] This is a useful introduction to the Mesh Net concept  http://www.dsn.jhu.edu/~yairamir/Raluca_thesis.pdf

[xxvii] https://www.researchgate.net/publication/229019482_The_Impact_of_Peer-to-Peer_Networking_on_User_Behaviour_and_Network_Design

[xxviii] Causes and Consequences of Income Inequality: A Global Perspective  – Era Dabla-Norris, Kalpana Kochhar, Nujin Suphaphiphat, Frantisek Ricka, Evridiki Tsounta https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf

[xxix] Financialization and capital accumulation in the non-financial corporate sector: A theoretical and empirical investigation on the US economy: 1973–2003 Özgür Orhangazi https://academic.oup.com/cje/article-abstract/32/6/863/1706977

[xxx] The Transition from Industrial Capitalism to a Financialized Bubble Economy by Michael Hudson

Click to access wp_627.pdf

[xxxi] “Bank Size and Systemic Risk” International Monetary Fund report 2014  https://www.imf.org/external/pubs/ft/sdn/2014/sdn1404.pdf

[xxxii] ‘the increasing role of financial motives, financial markets, financial actors and financial institutions in the operations of the domestic and international economies. Epstein, G. A. (Ed.) (2005). Financialization and the World Economy. Cheltenham, UK: Edward Elgar Publishing

[xxxiii]    “Financialization is at its root a system of income redistribution which favours the finance sector over the non-finance sector, financial investments over investments in production, and shareholders and top executives over workers and middle-class citizens. “   

Source – Financialization: Causes, Inequality Consequences, and Policy Implications Donald Tomaskovic-Devey Ken-Hou Lin https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=1365&context=nci

[xxxiv] “Until the 1970s, UK bank assets had been equal to roughly half the value of UK GDP for a century. Following changes, by the mid-2000s, they had risen to five times the value of GDP (Haldane, 2010). In 1979/80, the equity value of the stock market (£30.8 billion) was roughly 40% of government income (£76.6 billion). By 2012 it was worth £1.76 trillion or three times government income (£592 billion, HMSO 2013/14). From 1997 to 2013, the UK’s debt rose from £34 billion in 1997 to £1.3 trillion or 88% of GDP in 2013. By the time of the financial crisis (2007-08), the UK’s financial sector relative to its economy was bigger than any other G7 nation. In contrast, UK industry has suffered a faster decline than all its economic rivals in that same period. In 1970, UK manufacturing accounted for 30% of GDP, 16.3% of total world exports (Coates, 1995: 7), and had trade surpluses of 4-6% annually. 35% of UK employment was in this sector. By 2010, 13% of GDP and 10% of total employment was in manufacturing and the UK was running a trade deficit in manufacturing of 2-4% (Chang, 2010: 90). “

Source Davis, Aeron and Walsh, Catherine 2016. The role of the state in the financialisation of the UK economy. Political Studies 64 (3) , pp. 666-682. 10.1111/1467-9248.12198 file.

[xxxv]  “The empirical evidence clearly confirms the relationships discussed in the literature on financialization, and its negative effects on equality, growth and employment. Each percentage increase in financialization is associated with between 0.49% and 0.81% more inequality (depending on which indicator of financialization is used). A similar increase in financialization is related to a 0.2% slower growth of GDP, and between 0.12% and 0.74% higher unemployment. “   

Source -Financialization and its Consequences: the OECD Experience Jacob Assa, New School for Social Research https://www.academia.edu/1377330/Financialization_and_its_Consequences_the_OECD_Experience

[xxxvi] “Financialisaton in Emerging Economies: A Systematic Overview and Comparison with Anglo-Saxon Economies “ Ewa Karwowski and Engelbert Stockhammer. August 2016 -Post Keynesian Economics Study Group, Working Paper 1616  www.postkeynesian.net