I haven't spoken to this for some time now, but I want to take a moment to return to my pet theory of energy as currency. I have bounced around a few different places and after several compilations, edits and other editorial slight-of-hand, I think I'm ready to deliver the goods...or at leasta beta version.
O~O~O
A major part of the current economic problems are derived from the current uncertainty of the worth and ownership of various real estate backed debt packages. In short, there is no shortage of doubt about how much things are presently worth, actually. Money can be thought of as a placeholder for the amount of energy in the social system. Adapting fromprevious policy, and some current thought, it might be useful to reestablish a hard currency and take the ambiguity out of the situation. Obviously we can't go back to the gold standard, there just isn't enough to actually cover all those T-bills.
The current theory of wealth is that something has value because it is rare. Gold is the perfect example. Gold is very difficult to come by. Gold is also next to useless.With the exception of some very specialized, advanced applications in electronics, you can't do much that's useful with gold. Its too soft and too heavy for anything but ornamentation. In the more openly superstitious past it was credited with supernatural value, but the simple fact is that the very qualities that make it great as a currency also make it useless for pretty much everything else. So why does gold still command such economic power that certain people still want to go back to using it as the backing of currency? Habit, mostly.That said, let's examine the basic argument for the gold standard. The idea of having something behind currency is appealing. If nothing else it gives you a sense of having something stable and valuable, something tangible. On the other hand, if gold is essentially worthless, why would it be any better than fiat currency? Well frankly it isn't. In real terms, gold is only valuable because we've decided it is, or rather we have never thought about asking why, about challenging that notion of value the way we have challenged so many other “facts” of life. It was once accepted that the earth is flat, women were essentially children in thought and feeling and that the sky was an immense crystalline sphere; the whole of our modern world is founded upon the challenging, the testing, of these and other such ideas.
So how do we gain the benefits of a solid, hard currency without falling for the fallacies of perceived value? We must be completely objective, as far as our power of reason will allow, and look for some thing that has genuine utility, genuine value in practical terms of productivity. It has to be a universally valued commodity, and it would be better still if this standard was one that could be adopted universally. The situation would be further helped if said commodity, like the concept of wealth itself, didn't exist in a strictly finite supply. That supply should be finite at any given moment, but subject to increase with sufficient investment, bearing in mind of course that investment must yield profitable returns; this is to say it must increase the over all supply and availability of wealth in the system.
This is important because basing a currency on an absolutely limited supply of anything creates the same circumstances that led to the creation of the fiat currency. Eventually productivity (which generates wealth) leads to consumption, specifically consumption of foreign imports which will eventually lead to there being more of your currency in circulation than can be supported by a given quantity of any single commodity, or eventually any combination of multiple commodities. On the other hand, if the supply isn’t limited at any given moment then you’re currency is effectively valueless.
So what fits the bill? Energy. Not petro-dollars; hydrocarbons (oil, coal, etc.) are just a storage medium, just as carbohydrates (sugar) or lipids (fat) store energy in various living organisms. We want to address energy as a substance in it’s own right: the basic unit of measurement of energy; the joule.
All goods and services can be described by the amount of energy required to produce/provide them to the market. From the amount of inherent energy in them, to the cost of extraction and processing, to transportation and even advertising, everything can be described in terms of what it takes to make it happen and get to the consumer. Differences in processes will result in tremendous motivation to pursue the greatest possible efficiency in order to provide products at a lower cost than competitors, thus helping to maximize profits without necessarily increase costs at point of sale.
All nations have access to energy resources; some are richer than others, due to variables such as territory (sunlight exposure), climate (wind strength) or reserves of stored fossil fuels. However, each has access to a continuing supply of new energy each day, and that energy can be tapped just like gold, and used to engage in global commerce. The stability of an energy-backed hard currency removes uncertainty, establishes universal value standards, eliminates the inequities created by various exchange rates and essentially solves the Triffin Dilemma by not having a single national currency employed as the global reserve. Everyone has got the same money and productivity becomes the sole defining factor in creating wealth.
The people who stand to derive the most immediate benefit are the Third World countries. The G7 have the technology and capacity for manufacturing, and the Third World provides a ready market for the technology and services that will allow them to begin energy production. It's a cheap buy that will immediately yield tangible results for their populations in terms of wealth garnered by delivering early excesses to developed nations while building the internal infrastructure necessary to make use of the available energy themselves in terms of manufacturing, heat, lighting and transit; all this creates demand for workers, thus providing the desperately needed employment that will further spur domestic markets for goods and services. Thus we convert political capital into monetary investment, which yields energy that becomes the basis of the new currency.
Once production has gotten under way, domestic marketing can be targeted inside the G7. The demand increases exponentially, ramping production and boosting productivity, thus spending. It's Henry Ford's basic principle, you pay people enough to buy the goods they make for you. Initial orders within the G7 will almost certainly be from the public sector, but Public Relations and cost effectiveness will bring the private sector in quickly. Once the average consumer starts producing power as well, the cycle of inflation-production takes hold.
With the basic mechanism outlined, we are obliged to look to the political considerations, especially in the United States, which is where the entire process is going to have to begin. The majority of the voting public in the developed world has an instinctive liking for the idea of a currency that is backed by something; they neither understand nor like the idea of floating currency. Currency isn't a sovereignty issue, although on the surface it does look like one. You aren't surrendering control of anything and the argument can be made, easily, that everyone else is following your lead. All you need to do is remind people that they'll be able to essentially make their own wealth; this engages the profit motive.
The point, again, is that we're shifting the focus of wealth, of available resources away from scarcity to production. Since energy is the key requisite for all production and service, having more of it available drives down costs; at the same time greater energy production increases your wealth, allowing you to have more of it available for use. In short, its like printing money, except that the money is actually backed by real value (energy).
The obvious push back on such an initiative would be from those who benefit from wealth based on scarcity. While anyone might have oil or gold on their land, the quantity will be limited by definition. Wind and sun, on the other hand, never run out; tapping energy freely from the environment would be tantamount to printing your own money, with the exception that, being backed by real energy, it would have exactly the same worth in the system.
But doesn't scarcity define wealth? If the amount of energy available is effectively limitless and everyone can tap it, would the currency then be rendered valueless by abundance? A built-in inflationary loop?
Not necessarily. In the first place, the amount of energy is going to be constantly consumed, as well as generated, thus remaining at a functionally stable level from day to day. In the second, while even a small net gain would result in an inflationary progression,continual production of energy will reduce the cost at point of sale through simple supply and demand; plentiful energy reduces the cost of production. This applies both the power needs of production and the cost of materials when measured in terms of energy cost to produce and transport.
Now we draw it together: energy as the medium of wealth causes an abundance of energy to inflate the energy-backed hard currency, while that same abundance also continually drives down the cost of production, thus reducing prices at the point of sale.
How do you store the energy entering the system? Realistically, you don’t do this very much on a wide scale. Goods can be seen as stored energy in our model, but once you have a product you cannot, normally, easily convert this back to energy. Exceptions can been shown in agriculture, but a leather coat cannot be efficiently reconverted back into production energy. This is where currency enters the picture. To be more specific, what we are saying here is that it isn’t necessary to store vast amounts of unused energy in the system in a fuel/battery format. Because we are relying on productivity rather than scarcity, we simply agree that currency markers will be redeemed, in specie by the government, in the order in which they are presented, by tapping the production cycle. We can do this because we know that the renewable supply will continue to produce with as close to absolute certainty as is possible.
One of the core ideas behind a hard currency is that the government only circulates enough markers to cover what's in the treasury. If you go to an energy backed currency, how do you determine exactly how much there is in the treasury? You can calculate this figure on the basis of two knowable numbers; the amount of stored energy reserves you have in terms of hydrocarbons and nuclear fuel and the amount of energy produced from your renewable facilities on average.
The logical place to begin is by establishing your known energy reserves, i.e., coal, oil, natural gas, uranium, and anything else that is a static, naturally occurring deposit of recoverable fuel. Common sense says you might not be able to establish the absolute supply because it extends beyond current detection. That's fine, you set a hard figure of what is known and adjust your tally upward as new resources are revealed or developed. Finally you tally the amount yielded from your renewable sources in a day, on average for a given fiscal year.
Once we’ve determined how to establish the contents of the treasury, we can begin figuring out the best possible way to make this work for the people at large, in order to both promote greater productivity and generate political will in wealthy nations such as the United States.
Governments begin investing in production of energy, by investing in renewable energy capture projects (wind, solar, etc). Tax payer funds are used to add to the amount of energy in the system, with revenues from production rebated to them on a monthly basis, minus tax on income. These returns add to the over all energy-backed currency value of the system, being stored as cash in banks (where it will earn interest)while the tax revenue is deposited by the government. Obviously, this plan works best in areas of fairly low population with plenty of environmental energy for capture.
At this stage, we turn to the matters of efficiency and productivity. Simply put: The citizens (consumers) are best served by being as efficient as possible in order to reap the largest possible rewards from production returns. Add to this the prospect of privately adding additional energy to the system, in return for further reimbursement, and you encourage even greater productivity.
The question that might arise that this would lead to everyone just generating energy instead of building goods and providing services. The answer is no. Simply because a private citizen could sit back and do nothing but collect on energy production, does not mean that they will. There will continue to be a demand for food, clothes, houses, transportation and luxuries. Someone will meet these demands because it is profitable to do so. Even if we reach a point where energy/currency production far exceeds consumption and provides an essentially free pool of capital exchange, there will still be demands that will need to be met, however little it may cost to do so.
On the other hand, a certain amount of mass-production may go out. With an abundance of energy-backed currency, many people will prefer to go into smaller scale, craftsmanship oriented production. Since essentially anyone could create a generic, mass-produced product at little cost, there could easily be a renewed focus on the craftsmanship of a particular commodity. This could lead to a renaissance of The Artisan. As energy is captured/produced, and used to back additional currency, you have to put that currency directly into the hands of the producers. In short, you have to make sure that every extra joule put into the system gets banked, where it in turn accrues interest and getsloaned out.
With large amounts of energy constantly being captured and stored, a continually growing supply of stored energy driving down costs, and the power of compound interest acting as a force multiplier, an economic system based on an energy backed hard currency would become supercharged; a pool of almost freely available energy/wealth, underpinned by constant production, provided that production exceeds consumption as the general rule.
Using this model, we can easily imagine a society, on a global scale, where eventually anything becomes possible simply because the energy/wealth is available to be thrown at it. Inefficient, cumbersome beginnings aren't prohibitive and open the door to costly scientific and technological Research & Development.
The current theory of wealth is that something has value because it is rare. Gold is the perfect example. Gold is very difficult to come by. Gold is also next to useless.With the exception of some very specialized, advanced applications in electronics, you can't do much that's useful with gold. Its too soft and too heavy for anything but ornamentation. In the more openly superstitious past it was credited with supernatural value, but the simple fact is that the very qualities that make it great as a currency also make it useless for pretty much everything else. So why does gold still command such economic power that certain people still want to go back to using it as the backing of currency? Habit, mostly.That said, let's examine the basic argument for the gold standard. The idea of having something behind currency is appealing. If nothing else it gives you a sense of having something stable and valuable, something tangible. On the other hand, if gold is essentially worthless, why would it be any better than fiat currency? Well frankly it isn't. In real terms, gold is only valuable because we've decided it is, or rather we have never thought about asking why, about challenging that notion of value the way we have challenged so many other “facts” of life. It was once accepted that the earth is flat, women were essentially children in thought and feeling and that the sky was an immense crystalline sphere; the whole of our modern world is founded upon the challenging, the testing, of these and other such ideas.
So how do we gain the benefits of a solid, hard currency without falling for the fallacies of perceived value? We must be completely objective, as far as our power of reason will allow, and look for some thing that has genuine utility, genuine value in practical terms of productivity. It has to be a universally valued commodity, and it would be better still if this standard was one that could be adopted universally. The situation would be further helped if said commodity, like the concept of wealth itself, didn't exist in a strictly finite supply. That supply should be finite at any given moment, but subject to increase with sufficient investment, bearing in mind of course that investment must yield profitable returns; this is to say it must increase the over all supply and availability of wealth in the system.
This is important because basing a currency on an absolutely limited supply of anything creates the same circumstances that led to the creation of the fiat currency. Eventually productivity (which generates wealth) leads to consumption, specifically consumption of foreign imports which will eventually lead to there being more of your currency in circulation than can be supported by a given quantity of any single commodity, or eventually any combination of multiple commodities. On the other hand, if the supply isn’t limited at any given moment then you’re currency is effectively valueless.
So what fits the bill? Energy. Not petro-dollars; hydrocarbons (oil, coal, etc.) are just a storage medium, just as carbohydrates (sugar) or lipids (fat) store energy in various living organisms. We want to address energy as a substance in it’s own right: the basic unit of measurement of energy; the joule.
All goods and services can be described by the amount of energy required to produce/provide them to the market. From the amount of inherent energy in them, to the cost of extraction and processing, to transportation and even advertising, everything can be described in terms of what it takes to make it happen and get to the consumer. Differences in processes will result in tremendous motivation to pursue the greatest possible efficiency in order to provide products at a lower cost than competitors, thus helping to maximize profits without necessarily increase costs at point of sale.
All nations have access to energy resources; some are richer than others, due to variables such as territory (sunlight exposure), climate (wind strength) or reserves of stored fossil fuels. However, each has access to a continuing supply of new energy each day, and that energy can be tapped just like gold, and used to engage in global commerce. The stability of an energy-backed hard currency removes uncertainty, establishes universal value standards, eliminates the inequities created by various exchange rates and essentially solves the Triffin Dilemma by not having a single national currency employed as the global reserve. Everyone has got the same money and productivity becomes the sole defining factor in creating wealth.
The people who stand to derive the most immediate benefit are the Third World countries. The G7 have the technology and capacity for manufacturing, and the Third World provides a ready market for the technology and services that will allow them to begin energy production. It's a cheap buy that will immediately yield tangible results for their populations in terms of wealth garnered by delivering early excesses to developed nations while building the internal infrastructure necessary to make use of the available energy themselves in terms of manufacturing, heat, lighting and transit; all this creates demand for workers, thus providing the desperately needed employment that will further spur domestic markets for goods and services. Thus we convert political capital into monetary investment, which yields energy that becomes the basis of the new currency.
Once production has gotten under way, domestic marketing can be targeted inside the G7. The demand increases exponentially, ramping production and boosting productivity, thus spending. It's Henry Ford's basic principle, you pay people enough to buy the goods they make for you. Initial orders within the G7 will almost certainly be from the public sector, but Public Relations and cost effectiveness will bring the private sector in quickly. Once the average consumer starts producing power as well, the cycle of inflation-production takes hold.
With the basic mechanism outlined, we are obliged to look to the political considerations, especially in the United States, which is where the entire process is going to have to begin. The majority of the voting public in the developed world has an instinctive liking for the idea of a currency that is backed by something; they neither understand nor like the idea of floating currency. Currency isn't a sovereignty issue, although on the surface it does look like one. You aren't surrendering control of anything and the argument can be made, easily, that everyone else is following your lead. All you need to do is remind people that they'll be able to essentially make their own wealth; this engages the profit motive.
The point, again, is that we're shifting the focus of wealth, of available resources away from scarcity to production. Since energy is the key requisite for all production and service, having more of it available drives down costs; at the same time greater energy production increases your wealth, allowing you to have more of it available for use. In short, its like printing money, except that the money is actually backed by real value (energy).
The obvious push back on such an initiative would be from those who benefit from wealth based on scarcity. While anyone might have oil or gold on their land, the quantity will be limited by definition. Wind and sun, on the other hand, never run out; tapping energy freely from the environment would be tantamount to printing your own money, with the exception that, being backed by real energy, it would have exactly the same worth in the system.
But doesn't scarcity define wealth? If the amount of energy available is effectively limitless and everyone can tap it, would the currency then be rendered valueless by abundance? A built-in inflationary loop?
Not necessarily. In the first place, the amount of energy is going to be constantly consumed, as well as generated, thus remaining at a functionally stable level from day to day. In the second, while even a small net gain would result in an inflationary progression,continual production of energy will reduce the cost at point of sale through simple supply and demand; plentiful energy reduces the cost of production. This applies both the power needs of production and the cost of materials when measured in terms of energy cost to produce and transport.
Now we draw it together: energy as the medium of wealth causes an abundance of energy to inflate the energy-backed hard currency, while that same abundance also continually drives down the cost of production, thus reducing prices at the point of sale.
How do you store the energy entering the system? Realistically, you don’t do this very much on a wide scale. Goods can be seen as stored energy in our model, but once you have a product you cannot, normally, easily convert this back to energy. Exceptions can been shown in agriculture, but a leather coat cannot be efficiently reconverted back into production energy. This is where currency enters the picture. To be more specific, what we are saying here is that it isn’t necessary to store vast amounts of unused energy in the system in a fuel/battery format. Because we are relying on productivity rather than scarcity, we simply agree that currency markers will be redeemed, in specie by the government, in the order in which they are presented, by tapping the production cycle. We can do this because we know that the renewable supply will continue to produce with as close to absolute certainty as is possible.
One of the core ideas behind a hard currency is that the government only circulates enough markers to cover what's in the treasury. If you go to an energy backed currency, how do you determine exactly how much there is in the treasury? You can calculate this figure on the basis of two knowable numbers; the amount of stored energy reserves you have in terms of hydrocarbons and nuclear fuel and the amount of energy produced from your renewable facilities on average.
The logical place to begin is by establishing your known energy reserves, i.e., coal, oil, natural gas, uranium, and anything else that is a static, naturally occurring deposit of recoverable fuel. Common sense says you might not be able to establish the absolute supply because it extends beyond current detection. That's fine, you set a hard figure of what is known and adjust your tally upward as new resources are revealed or developed. Finally you tally the amount yielded from your renewable sources in a day, on average for a given fiscal year.
Once we’ve determined how to establish the contents of the treasury, we can begin figuring out the best possible way to make this work for the people at large, in order to both promote greater productivity and generate political will in wealthy nations such as the United States.
Governments begin investing in production of energy, by investing in renewable energy capture projects (wind, solar, etc). Tax payer funds are used to add to the amount of energy in the system, with revenues from production rebated to them on a monthly basis, minus tax on income. These returns add to the over all energy-backed currency value of the system, being stored as cash in banks (where it will earn interest)while the tax revenue is deposited by the government. Obviously, this plan works best in areas of fairly low population with plenty of environmental energy for capture.
At this stage, we turn to the matters of efficiency and productivity. Simply put: The citizens (consumers) are best served by being as efficient as possible in order to reap the largest possible rewards from production returns. Add to this the prospect of privately adding additional energy to the system, in return for further reimbursement, and you encourage even greater productivity.
The question that might arise that this would lead to everyone just generating energy instead of building goods and providing services. The answer is no. Simply because a private citizen could sit back and do nothing but collect on energy production, does not mean that they will. There will continue to be a demand for food, clothes, houses, transportation and luxuries. Someone will meet these demands because it is profitable to do so. Even if we reach a point where energy/currency production far exceeds consumption and provides an essentially free pool of capital exchange, there will still be demands that will need to be met, however little it may cost to do so.
On the other hand, a certain amount of mass-production may go out. With an abundance of energy-backed currency, many people will prefer to go into smaller scale, craftsmanship oriented production. Since essentially anyone could create a generic, mass-produced product at little cost, there could easily be a renewed focus on the craftsmanship of a particular commodity. This could lead to a renaissance of The Artisan. As energy is captured/produced, and used to back additional currency, you have to put that currency directly into the hands of the producers. In short, you have to make sure that every extra joule put into the system gets banked, where it in turn accrues interest and getsloaned out.
With large amounts of energy constantly being captured and stored, a continually growing supply of stored energy driving down costs, and the power of compound interest acting as a force multiplier, an economic system based on an energy backed hard currency would become supercharged; a pool of almost freely available energy/wealth, underpinned by constant production, provided that production exceeds consumption as the general rule.
Using this model, we can easily imagine a society, on a global scale, where eventually anything becomes possible simply because the energy/wealth is available to be thrown at it. Inefficient, cumbersome beginnings aren't prohibitive and open the door to costly scientific and technological Research & Development.
