Talk:Energy Unit of Account

A reply by Thomas Greco , to http://cashwiki.org/en/Energy_Unit_of_Account

Chris,

Definitions are essential to proper communication. We agree that a currency is a credit instrument and that a credit instrument is a promise.

The word "currency" derives from the phrase "to pass current," which means to circulate (http://legal-dictionary.thefreedictionary.com/pass+current) or to pass from one to another. That means it is (more or less) generally accepted in payment within some domain.

The promise is made by the currency issuer when he uses it to pay for value received from someone who voluntarily accepts it; then the promise is fulfilled when the issuer accepts it back in payment for goods or services he typically makes available to the market.

Thus, a unit of currency is created when a provider of real value accepts it from the issuer as payment, and that unit of currency is extinguished when the issuer accepts it back as payment from the holder in payment for value he provides.

E. C. Riegel provided a great deal of clarity on the nature and purpose of money. He generally used of the term "money" where we would use the word "currency."

One of Riegel's clearest insights about money/currency was his statement that, A would-be money issuer must, in exchange for the goods or services he buys from the market, place goods or services on the market. In this simple rule of equity lies the essence of money. I would add that to have a viable currency it is not enough for the issuer to simply place goods or services on the market, but that those goods or services must be the sort that are in everyday demand. Thus I cannot agree with you that "the only generally acceptable currency on this basis is an energy currency." Surely, energy can be a sound basis of issue, but so can anything else that is valuable and in general demand. Many scholars in free banking have articulated this point, speaking of "shop foundation" or "goods foundation" or "service foundation" or even "tax foundation" as being proper bases for currency issuance. See for example, the writings of Ulrich von Beckerath and Heinrich Rittershausen at https://reinventingmoney.com/library/.

The rental value of land (and buildings) would also qualify as a proper basis of issue under the service foundation rubric.

Regarding the units in which a currency is denominated, we also have a range of options, which includes units of energy like joules of kilowatt hours but the basic criterion is that it be something that is freely traded in some established market. That is what provides the ongoing value benchmark. I have outlined in my books a few other criteria to be used in the selection process. But my preference is to base the unit of account on a market basket of basic committees. See Part III Segregated Monetary Functions and an Objective, Global, Standard Unit of Account at https://reinventingmoney.files.wordpress.com/2014/09/money_and_debt_part3_lo.pdf

Yes, clearly "the acceptance of such an instrument (currency) requires trust in the promissor." As I have expressed it, the acceptor must believe that the issuer is first of all solvent, and also ready, willing and able to deliver valuable goods or services in exchange for his currency. The use of some guarantor is surely one possible approach to grounding that trust. In a mutual credit clearing association, the risk of default by any one issuer, (i.e., a member who has been granted a line of credit or overdraft privilege) is spread around to the entire membership group. This is a sort of self-insurance by the group.

A note about frequent flyer miles. I do not consider frequent flyer miles to be currency because they do not circulate. They are vouchers that airlines (and associated businesses) provide to customers either as rebates on purchases or as incentives for doing something (like accepting a credit card of a designated bank). Further, since they are denominated in units other than legal tender units, and the prices of the services for which they can redeemed are changeable at the whim of the airline, there is an added measure of uncertainty about the value of frequent flyer miles.

Regards, Tom