mfioretti: money*

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  1. The last 40 years has seen a steady rise of deficit-hawking, in which the world's postwar social safety nets are shredded because the state "can't afford" them -- think of all the times you've heard of national debt being money that "the taxpayers" will have to pay back, and misleading comparisons between sovereign governments (who print their own money) to households and businesses (who don't), as though sovereign state finance was just a scaled-up version of balancing the family check-book.

    But a pushback has been quietly building against this trend, based in economic theories that treat money "not as a finite abstraction, but a limitless public utility that can be used to meet human needs." These ideas started to move outside of wonkish economic circles with David Graeber's Debt: The First 5000 Years, which became required reading during the Occupy Wall Street years. Graeber sets out the theoretical underpinnings of Chartalism, which holds that "money does not emerge from barter-based economic activities, but rather from the sovereign's desire to organize economic activity. The state issues currency and then imposes taxes. Because citizens are forced to use the state's currency to pay their taxes, they can trust that the currency will carry value in day-to-day economic activities."

    Chartalism became "Neo Chartalism," AKA "Modern Monetary Theory," whose core premise is that "The state can spend unlimited amounts of money. It is only constrained by biophysical resources, and if the state spends beyond the availability of resources, the result is inflation, which can be mitigated by taxation."

    MMT is the key to understanding how governments can pay for pensions, public education and universal healthcare, creating universal prosperity instead of brutal, wildly unequal, unstable states. It's gained so much currency that even archconservative economists are pushing its policies, even when they dare not speak its name.

    These ideas have been around since the early 1900s, growing up as a dissenting counterpoint to Keynesianism, pointing out that Keynes and the neoclassical economists assume that markets will be dominated by "active owners" -- companies run by the people who owned them. But the reality of corporatism is that the majority of companies are owned "passively," by investors whose interests are generally short-term and narrow, and who are willing to destroy the companies they invest in, provided they get a payday in the process.
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  2. The idea: Documentation is often lacking in parts of Africa, leading to land disputes because it isn't clear who owns the land. Even when there are records, sometimes they have been tampered with. A record that cannot be deleted, using something called blockchain, could be used to prevent these disputes. Blockchain is a method of recording data - a digital ledger of transactions, agreements, contracts - anything that needs to be independently recorded and verified. What makes a big difference is that this ledger isn't stored in one place, it's distributed across several, hundreds or even thousands of computers around the world. Everyone in the network can have access to an up-to-date version of the ledger. So it can be an open, transparent auditable and verifiable record of any transaction.

    The application: Cybersecurity company WISeKey is using blockchain technology for the land registry in Rwanda.

    What happened in 2017: WISeKey announced a partnership with Microsoft to support the Rwandan government in adopting blockchain technology, reports technology news site Cryptovest.

    What can we expect for 2018: The first step in adopting blockchain in Rwanda is digitising the Rwanda Land Registry, iAfrikan tech blog reports. The company is opening a blockchain Centre of Excellence in Rwanda, reports the New Times, which could go as far as developing a Rwandan cryptocurrency, similar to Bitcoin.
    Outsourcing IT work to Africa
    Image copyright Getty Images

    The idea: The world has a scarcity of software developers. Meanwhile, Africa has a growing young population. Training software developers in Africa who US and European firms can hire taps into that human capital.

    The application: Andela is a startup company that trains developers in Nigeria and hires them out to global tech companies. The original idea was to teach people a practical skill and then use the money they make to pay for their education, Iyin Aboyeji, one of the founders of Andela, explained to the Starta podcast.

    What happened in 2017: In October Andela raised $40m in funding, reports TechCrunch. The previous year it had raised $24m from Mark Zuckerberg, reports Forbes.

    What can we expect for 2018: There are rumours that it is going to open up in Egypt according to iAfrikan.
    Making it easier to pay for things
    Image copyright Getty Images

    The idea: Many people across Africa don't have bank accounts. Mobile money - sending money via your phone - has already proved a very successful alternative to cash. Africa has become the global leader in mobile money with more than 100 million people having mobile money accounts in 2016, according to McKinsey research. Mobile financial services now include credit, insurance, and cross-border remittances. The problem is that there are too many different systems which do not always work with each other. This means lots of people in Africa can't pay for products online.

    The application: Flutterwave is one of the new innovations coming through. It makes it easier for banks and businesses to process payments across Africa. It lets customers pay in their local currencies and allows people to send money from the US to a mobile money wallet, charging sellers a small service fee, which it shares with banks.

    What happened in 2017: In the first quarter of 2017 Flutterwave processed $444m in transactions across Nigeria, Ghana and Kenya, it told BBC. From the start the company has processed more than $1.2bn in payments across 10 million transactions, reports CNN. The company received $10m of funding from the US this year, CNN adds.

    What can we expect for 2018: The new funding will be used "to hire more talent, build out our global operations and fuel rapid expansion of our organization across Africa," Flutterwave says. With that, it hopes that more people in Africa can buy things they are not currently able to pay for, like on online retailer Amazon. As the firm's boss Iyinoluwa Aboyeji puts it: "If we are successful, we might just inspire a new generation of Africans to flip the question from: 'What more can the world do for Africa?' to 'What more can Africa do for the world?'".
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  3. Yaroufakis agrees that there are numerous design flaws with the currency. Not least, he adds, “the fact that there are no controls, no democratic checks and balances of a bit issue and no way of back-stopping financial transactions by means of some kind of insurance policy for those that get defrauded.” Yet his central criticism focuses upon what he refers to as “the fantasy of apolitical money.”

    To Varoufakis, money is inherently political. The decisions regarding whether money is produced or not, how it is distributed and who receives it, all have significant political consequences, benefiting certain social groups over others. Bitcoin’s central design feature, that it is not governed by a central bank or decision-making authority, means that responsibility for its distribution is forfeited. This can have profound social and political implications in times of crisis.

    To understand what Varoufakis means by the political nature of money, consider how governments respond to financial crises. When a major financial crisis occurs, it is usually caused by the failure of widespread and interconnected debts. Once these debts fail, what happens is that a large part of the money supply effectively disappears. With this money gone, governments have a choice whether to replace it or not. Choosing not to replace it through the creation of new money (inflation) becomes a political decision with political repercussions. As Varoufakis suggests, “effectively you are choosing to shift the burden of a crisis onto the debtors and usually the weakest and poorest of debtors. So effectively you are redistributing power and wealth against the weaker members of society.”

    If the decision is made to replenish the money supply, like it was in 2008 through Quantitative Easing (QE), then how this money is channeled through the economy will also influence the political economy. In Varoufakis’ opinion, QE was engineered in a way to benefit large corporations.
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  4. After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply be forwarded to the U.S. Treasury.

    The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the Reichsbank printed marks to throw onto the foreign exchange market. The currency declined, import prices soared, raising domestic prices as well. The debt deflation was much like that of Third World debtors a generation ago, and today’s southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).

    In a pretense that the reparations and Inter-Ally debt tangle could be made solvent, a triangular flow of payments was facilitated by a convoluted U.S. easy-money policy. American investors sought high returns by buying German local bonds; German municipalities turned over the dollars they received to the Reichsbank for domestic currency; and the Reichsbank used this foreign exchange to pay reparations to Britain and other Allies, enabling these countries to pay the United States what it demanded.

    But solutions based on attempts to keep debts of such magnitude in place by lending debtors the money to pay can only be temporary. The U.S. Federal Reserve sustained this triangular flow by holding down U.S. interest rates. This made it attractive for American investors to buy German municipal bonds and other high-yielding debts. It also deterred Wall Street from drawing funds away from Britain, which would have driven its economy deeper into austerity after the General Strike of 1926. But domestically, low U.S. interest rates and easy credit spurred a real estate bubble, followed by a stock market bubble that burst in 1929. The triangular flow of payments broke down in 1931, leaving a legacy of debt deflation burdening the U.S. and European economies. The Great Depression lasted until outbreak of World War II in 1939.

    Planning for the postwar period took shape as the war neared its end. U.S. diplomats had learned an important lesson. This time there would be no arms debts or reparations. The global financial system would be stabilized – on the basis of gold, and on creditor-oriented rules. By the end of the 1940s the Untied States held some 75 percent of the world’s monetary gold stock. That established the U.S. dollar as the world’s reserve currency, freely convertible into gold at the 1933 parity of $35 an ounce.
    It also implied that once again, as in the 1920s, European balance-of-payments deficits would have to be financed mainly by the United States. Recycling of official government credit was to be filtered via the IMF and World Bank, in which U.S. diplomats alone had veto power to reject policies they found not to be in their national interest. International financial “stability” thus became a global control mechanism – to maintain creditor-oriented rules centered in the United States.

    To obtain gold or dollars as backing for their own domestic monetary systems, other countries had to follow the trade and investment rules laid down by the United States. These rules called for relinquishing control over capital movements or restrictions on foreign takeovers of natural resources and the public domain as well as local industry and banking systems.

    By 1950 the dollar-based global economic system had become increasingly untenable. Gold continued flowing to the United States, strengthening the dollar – until the Korean War reversed matters. From 1951 through 1971 the United States ran a deepening balance-of-payments deficit, which stemmed entirely from overseas military spending. (Private-sector trade and investment was steadily in balance.)
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  5. US-Saudi relationship has shown strains in recent years. Saudi anger over Obama-era rapprochement with Iran and unwillingness to go full-Gaddafi on Assad has been met with US threats about exposing "Saudi" terror, including the 9/11 lawsuits and the 28 pages. The recent American shale oil boom has meant that Saudi has seen selling less oil to the US, and China is only too happy to step in and take America's place as Saudi Arabia's most-favored trading nation. And now China is setting up a yuan-denominated oil exchange that could potentially mean that the Saudis and others may be trading oil for yuan in the future.

    This is why the CIA and other outside forces are extremely interested in what is happening in Saudi Arabia right now, and why, by extension, the rest of the world should be as well. After all, by now we know all too well what happens to countries that try to back away from the petrodollar, don't we? Only this time, it's not some "minor" players on the grand chessboard who can be taken out of the game with a simple NATO lovebomb campaign. This time we're looking at the potential of Russia and China backing this shift away from the petrodollar en masse. And we all know what that spells.
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  6. Malka shrugged, looked away. "Back to the banker thing, Sergei," she said, "since Nera did bring it up. I get why you work with money -- it still makes a lot of the world go round. You take Frankfurt's various exports and patents and Swiss bank accounts and whatever, and buy us whatever we can't make here. I get that, and I get why it would be a high-rep job; we need it, and most people would find it boring. But you told me you worked for money -- not just with money." She crossed her arms beneath her breasts, where her top shimmered electric blue. "Why?"

    Sergei smiled the long-lipped, eyebrow-cocked smile of someone who is amused in advance at the reaction they're about to get. "I like money," he said.

    "What, you mean, like, physical money?" Malka said. "Like you collect coins and bills? That's cool, I guess."

    "No," Sergei said. "I mean I like money. I like exchange. Abstracted exchange. Simplicity. You give me something, I give you something. We're quits. You don't have to decide what kind of person I am, if you like me, how distant I am from you in social space. We could be masked strangers in a privacy zone. You want something from me, you give me money. I don't care who you are. I don't care what you want it for."

    Comments were flashing in, but Nera didn't stop to read them. Queasy, she thought of the hunch of her father's shoulders in his starched white uniform and red tie, behind the florist counter at the supermarket. She recalled the burn of tear gas at the back of her throat, the sound of shattering windows.

    Jörg looked like he was the proud owner of a performing dog; Malka, like she was equally disgusted and turned on. Or maybe a little more turned on.

    "Huh," Malka said. "'Masked strangers in a privacy zone'...? You know the 'raw swingers'? They hook up with strangers for sex with their services totally turned off. No peeking at comments or reviews or social map -- so they have no idea if it's going to be a total nightmare, right? That's the point, I guess, part of the thrill. They've got this whole thing about how it's so much better when it does work, because of the risk and the authenticity and whatever. So are you saying this is like that, Sergei? You do stuff just for a marker of hoarded value... you don't even know why. You don't know what the effect of your actions are, what you're contributing towards, or what people will say..."

    Pink Floyd ~ Money

    "Pink Floyd: Money." Credit: jah~ off n on

    "All you know is you want the money," Nera said.

    Malka nodded. "Pure greed, no connections, heedless of consequences. That's it? It's a kink? Like a... sick thrill?"

    Sergei laughed. To his credit, he looked a little discomfited. "I guess you could look at it like that."

    "Oh, don't underplay it," Jörg said. "Sergei -- you've written about this. It's a philosophy." Nera glanced at him, and she recognized his expression. A year ago she would have called it an eager openness -- his fascination with the unending variety of people and ideas Frankfurt's flow brought bobbing to his door. But she'd been in his collection of flotsam. Drifter Nera, banker Sergei, autie-genius Tomas, the Finns and Peruvians grilling in the kitchen; they all ended up part of Jörg's menagerie, and by means of them all, he somehow ended up rating as a life-artist instead of a pompous, lecturing do-gooder.

    "Well," said Sergei. "Okay. I think it's more than just kinky." He glanced sidelong at Malka. "Money is... clean. It severs connections. That's not always a bad thing. You say you know what the effect of your actions are. But you don't really know -- you don't trace them all in detail. You don't have time. You just go with the consensus. With fashion."

    "Sure, sure, ratings and fashion are all we have," Malka said. "That's not a new argument or anything, and we are all concerned, I'm sure, with the plight of the low-rated. Nera has done quite a bit of visiting with at-risk lonelies, did you know that? But money seems like a weird solution to that problem, doesn't it?"

    "No," he said, and there was a little bit of a quiver in his voice that made Nera wonder what history it pointed to, "no, it doesn't. With money, poverty is empty of meaning. It's not a judgement on your life and works. It doesn't mean no one likes you, that you're obnoxious or boring. If you're poor in a money economy, you know what you need to do: make money. It's not as... wounding."

    "That's stupid," Nera said. Jörg and Malka turned to look at her, eyebrows raised -- her voice was too loud, too harsh. Her heart was beating fast. "It's dead easy to get your ratings up when they fall. Your services tell you how."

    "Your services tell you how," Sergei retorted. "You have skills, you're charming. You're rated as trustworthy. People want you to babysit their kids. Carry their packages. Cook their food. It's not that easy for everyone."
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  7. Nobody has created the cryptocurrency we actually need just yet.

    You see, Satoshi understood the first part of the maxim, the power to print money. What he missed was the power to distribute that money.

    The second part is actually the most crucial part of the puzzle. Missing it created a critical flaw in the Bitcoin ecosystem. Instead of distributing the money far and wide, it traded central bankers for an un-elected group of miners.

    These miners play havoc with the system, holding back much needed software upgrades like SegWit for years and threatening pointless hard forks in order to drive down the price with FUD and scoop up more coins at a depressed price.

    But what if there was a different way?

    What if you could design a system that would completely alter the economic landscape of the world forever?

    The key is how you distribute the money at the moment of creation.

    And the first group to recognize this opportunity and put it into action will change the world.

    The problem with all of the plans before now, from UBI to socialism (high taxes on the rich to spread the wealth across the game) is that to redistribute the money after it’s already been distributed is nearly impossible. The people with that money rightfully resist its redistribution. And as Margret Thatcher said “The trouble with Socialism is that eventually you run out of other people’s money.”

    But what if the money is NOT already distributed?

    What if we don’t have to take it from anyone at all?
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  8.  For a small but committed group of economists, academics, and activists who adhere to a doctrine called Modern Monetary Theory (MMT), though, #mintthecoin was the tip of the economic iceberg. The possibility of a $1 trillion coin represented more than mere monetary sophistry: It drove home their foundational point that fiat currency is a social construct, and that there are therefore no fiscal limits on how much a sovereign currency-issuing nation can spend.

     To a layperson, MMT can seem dizzyingly complex, but at its core is the belief that most of us have the economy backward. Conventional wisdom holds that the government taxes individuals and companies in order to fund its own spending. But the government—which is ultimately the source of all dollars, taxed or untaxed—pays or spends first and taxes later. When it funds programs, it literally spends money into existence, injecting cash into the economy. Taxes exist in order to control inflation by reducing the money supply, and to ensure that dollars, as the only currency accepted for tax payments, remain in demand.

    It follows that currency-issuing governments could (and, depending on how you lean politically, should) spend as much as they need to in order to guarantee full employment and other social goods. MMT’s adherents like to point out that the federal government never “runs out” of money to fund the military, but routinely invokes budget constraints to justify defunding social programs. Money, in other words, isn’t a scarce commodity like silver or gold. “To people who’ve worked in financial markets, who work at the Fed, this isn’t controversial at all,” says Galbraith, who, while not an adherent, can certainly be described as “MMT-friendly.”

    According to this small but increasingly vocal cohort of economists, including Bernie Sanders’s former chief economic adviser, once we change the way we think about money, we can provide for everyone: We don’t have to “find” the money to “pay” for universal health care by “cutting” the budget elsewhere. In fact, our government already works that way: Spending must precede taxation, or there would be no dollars in the economy to tax. It’s the political will to spend on certain things, not the money to afford it, that’s lacking.
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  9. A platform cooperative ride-sharing service sounds like an attempt to form a cooperative and compete with Uber by recycling profits and remunerating workers better. Its not a very convincing business plan if only because Uber has resources to undercut its competition until they choke and allegedly acts illegally to sabotage its enemies.

    But a protocol for ride-sharing changes the game completely. Anyone could sign up to the network and announce their intention to travel or willingness to chauffeur. A simple algorithm would connect them and at journey's end they might remunerate each other in cash, Bitcoin, home-brewed cider or anything; the line between giving a friend a favour and earning a crust would be very grey. There would be no middle men collecting rent or dictating how drivers should behave as representatives of the company. The protocol might be extended to support long distance travel, hitch-hiking, pick-up points, packages or even cargo. The open protocol creates a free market - not in the neoliberal sense of Wall Street being able to flush out the economy of any country it likes with imaginary dollars, but in the sense that suppliers and customers can meet with the minimal of mediation and restrictions. This might not be optimal for collecting taxes, but is optimal for granting everyone access to the economy, and probably much more efficient in terms of using our existing transport infrastructure.

    So where is the 'cooperative' in 'protocol cooperatives'? In my view such protocols are are fundamentally cooperative, but there is room for any kind of institutional structures on the next layer. Institutions (like co-ops) are not needed to crunch algorithms and own infrastructure that should be public, but to manage trust and social relations. Transport service providers could aggregate to offer services that individuals could not. For example a group might form to co-own a coach, helicopter, or fleet of electric cars. A co-op might provide a 24/7 private ambulance service, or a house removal service complete with furniture-carriers.

    Likely such a protocol widely deployed would render our transport ecosystem unrecognisable. It might obviate most full time driver jobs in favour of hitch-hiking 2.0 approach. The free market would level out the full time driving jobs and the unemployment of drivers and costs and revenues, leading presumably to a more equal society (at least until driver-less cars took over!)

    The blockchains are already making this happen because blockchains are basically protocols which allow open participation. This article about Arcade City makes it clear:

    In the end, Arcade City will be a protocol composed of Ethereum smart contracts supporting a global logistics network with an entire ecosystem of apps and businesses running on top of our infrastructure. What SMTP is to email, Arcade City will become for distributed logistics.

    For all the bluster about Arcade City being an upcoming platform coop, to me it seems there is no platform in the sense of a thing which can be owned & sold. What then does the brochure site mean when it claims to be owned and operated by its members? It seems to me that the language is wrong.

    The benefits and challenges of co-owning and operating a legal entity such a cooperative within a legal jurisdiction, are quite different to the benefits and challenges of using, governing and stewarding a universal protocol. Regrettably Arcade City has now forked after a disagreement in the board, which poses serious questions about the claim that its members were in control. Technology alone will not create the society we want; at a more fundamental level, we have to learn to work together.

    Professor Jem Bendell and I have explored these ideas further in our new paper Thwarting an Uber Future for Complementary Currencies: Open Protocols for a Credit Commons especially as they relate to payment systems, which we argue is the ultimate Death Star platform.
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  10. In Norway, the Norwegian bank DNB has taken the lead. And since politicians in general are trained to do as financial capitalism bids, we can say with almost total certainty that legislation banning cash will be passed. If cash payment is banned by law, we will no longer have money. Or rather: we will no longer have any control over our own money. Whether we’ll be able to use them or not, will be decided by the banks and the authorities. We can no longer withdraw money from the bank and hide them under the mattress, even if the banks should introduce a five percent negative interest rate. And if the authorities decide that a certain person should be blocked from their account, they cannot buy as much as a bus ticket or a piece of bread. The totalitarian society on steroids.

    This neo-fascism, or this post-democratic society – or whatever we should name this nightmare – is matched by the draconic legislations against so-called “fake news” and the introduction of public-private censorship bodies. As noted before, a militarization of opinion formers worthy that of a dictatorship, is taking place. And it is happening without the slightest protest from those who supposedly support the freedom of the press and free speech.
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