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The Sea Dollar

Home Forums Community General Chat The Sea Dollar

This topic contains 90 replies, has 23 voices, and was last updated by Avatar of Altaica Altaica 4 years, 6 months ago.

Viewing 15 posts - 76 through 90 (of 91 total)
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  • #8782
    Avatar of i_is_j_smith
    i_is_j_smith
    Participant

    Again, you cannot setup an exchange for a currency that nobody accepts. I may not be able to pay for my hamburger at McDonalds with a ruple, but I can walk into plenty of money exchanges and get it exchanged for US dollars. Nobody in the entire world will exchange Seabucks for anything. Even after you have a thriving seastead with hundreds of citizens and proclaim yourself a new nation it will take decades before anyone will take you seriously enough to accept your currency. Even Sealand, which has been around for decades and is the most widely known of the micronation attempts, can’t get its currency exchanged by anyone.

    By using a commonly exchanged commodity as a backing for your currency you ensure your citizens will have purchasing power outside the seastead. And, if they choose to leave, they can take their wealth with them in the form of something easily accepted by anyone on the global market.

    If you currency is backed by the worth of the seastead it might have value to you and everyone else on the seastead, but it doesn’t have value to anyone else in the world and those are the people we’ll be buying computers, phones, and solar panels from. Everybody takes gold.

    I continue to agree that storage and protection of all that gold is a problem. But that is an engineering problem, not a problem with the overall idea of a gold standard.

    #8825
    Avatar of elspru
    elspru
    Participant
    barter with price calculation.
    mass^level/abundance*utility
    
    time can be worth a certain mass, like 1 hour = 1/12 kilo
    
    level based on the type of item.
    level one are only aware: rocks, minerals, hand tools,
    level two  has desire: plants, animals, power tools,
    level three  can make choices: computers, humans, designers
    level four  is commitment: contracts, property,
    level five stuff is wisdom/expression:  books, courses, consultation
    level six stuff is   insight: surveyors, psychics
    level seven is gateway: channeling
    
    there are more levels,
    but that should give you the basic idea.
    
    contemporary "fiat currency" or even "gold standard" type currencies,
    only have one variable Utility,  and that's the price of the item,
    with the seller trying to get as much money as they can,
    
    with barter calculation it requires a calculator,
    but anyone can verify the price of something,
    and calculate the price of something new.
    
    #8827
    Avatar of i_is_j_smith
    i_is_j_smith
    Participant

    One: If you think it’s hard getting two people to agree on the best kind of seastead, try to get two people to agree on the value of an item. Whether you are using gold, computers, or “channeling” (whatever that is) you are still basing your currency on a commodity and people need to agree on a value. With a barter system like this, I will want the value of your item to be low and the value of my item to be high. You will want the opposite. With a global commodity like gold or platinum or silver you have a globally accepted price that, while it does fluctuate, is recognized by people all over the world.

    Two: You’re going to have tons of sub-levels in between each level. For instance, you have “power tools” listed as level two. Well I can show you 50 different power tools, and each one will be different and therefore have different values. One will be more powerful, one will have better ergonomics, one will have more options. And something like “computers” will be even worse. Try comparing the “value” of five different computers, all with different operating systems, video cards, motherboards, RAM (amounts and types), etc. Most of these value decisions are just judgement calls that you can’t put into a nice formula.

    And again, you need a high level of liquidity. If I want to purchase a big-screen TV from a vendor in China there is no chance they are going to accept my Level Six psychic powers in exchange. They will, however, take gold…or gold that has been easily converted into the local currency.

    #8869
    Avatar of Richard
    Richard
    Participant

    Really, what are you all arguing about? You already know the anwser.

    Just pretend that it is not you who presides over the design and allocation of money, but rather that you’re the person who is to be accepting the money.

    I’ll offer you four choices. You can be paid in: US dollars, gold bullion, “the seadollar” or aluminium scrap metal.

    You don’t get to decide what is used because you’ve already decided what you’ll accept. The answer is gold/silver or a stable currency from another part of the world. The same anwser it’s been for 10000 years.

    #8872
    Avatar of xns
    xns
    Participant

    Well the original point of the thread was to assess whether it would be possible to create a new currency and accompanying banking system that was resistant to inflation. My theory was that if you defined the value of your currency as:

    Value of One SeaDollar = Total number of SeaDollars/Total amount of foreign currency held by the state bank.

    This would further be supported by that bank accepting foreign currency at a pre-determined exchange rate for loan repayments.

    King Shannon of the Constitutional Monarchy of Logos.

    #8878
    Avatar of wohl1917
    wohl1917
    Participant

    if I read your equation correctly you’re saying: One Seadollar is equal to the total number of Seadollars DEVIDED BY the total amount of foreign currency held by the (central) state bank? If that’s the case, it wouldn’t matter what you’re rate of exchange is unless you were constantly changing it to compensate for the fluctuations of the various FIAT currencies in your bank… The only way to curb inflation is to base currency value on a fixed commodity that does not deteriorate, shrink or grow rapidly like gold or silver. There will still be inflation caused by market forces (supply, demand and interest lending) but not by value fluctuations of the money itself. Silver is the commodity that the currency of the Republic is based on primarily because gold is vastly over priced right now driven up by speculators. In the past, the traditional price ratio between silver and gold was twelve to one, or one troy ounce of gold was of equivalent value to twelve troy ounces of silver. That ratio was fairly constant for hundreds of years…

    < http://ocr.wikia.com/wiki/Oceanic_Citizens_Republic_Wiki>

    Avatar of Foam
    Foam
    Participant

    An honest currency is not very hard to create. Simply back it by a basket of commonly traded commodities. A bank stores some amount of each commodity in the basket and allows people to buy a share of the stored commodities. The amount in value they have stored with the bank is their account balance. At any point, their account balance is redeemable for an amount in commodities equal in value, although the bank can choose, from commodities in the basket, exactly which commodity it redeems the balance for.

    From the account balance on the bank, people can trade money around and make payments like we are used to. One big difference is that storage of actual commodities is relatively expensive, so people will actually be charged money to have an account open with the bank, rather than being paid interest. Of course, the money in the account balance can be invested and interest can get paid on that investment, with all the associated risks, in order to pay for the storage. Fractional reserve banking is still possible with an honest currency and probably preferred.

    #8926
    Avatar of greyraven_r
    greyraven_r
    Participant

    I agree regarding the basis of precious metals, I despise and distrust a representational economy.

    Coins can easily be embelished, and printed bills can similarly be interwoven with the weight of precious metals equal to their face value (at the time of issue).

    #9161
    Avatar of J.L.-Frusha
    J.L.-Frusha
    Participant

    At first, it’ll be more convenient to use other countries currency. Let them deal with anti-counterfeiting and such. It’s easy enough to swap currencies, with Internet exchange-rate info. Pick a reasonably valued, fairly stable economy, use their money, as day-to-day funds, be prepared to exchange for travelers, visitors and in-coming people.

    Right now, there is more U.S. cash in foreign hands, than is in circulation within the U.S. and its’ territories. I’d take that as a sure sign of reliable performance, over all the doom-and-gloom in the economic forecasts. Feel free to choose a standard, when there are enough people to make it worthwhile for someone to actually open “Seastead National Savings and Loan.”

    I’ve already posted more or less the same thing in another topic… I believe it is named “Currency.”

    Later,

    J.L..F.

    If you can’t swim with the big fish, stick to the reef

    #9609
    Avatar of CrosiarCM
    CrosiarCM
    Participant

    Before I go into detail with my ideas regarding a Seastead currency, I want to explore some of the problems with utilizing a strict gold standard:

    1. It presumes you have lots of gold to begin with. If you don’t have gold, you will have to mine it or purchase it. Gold serves little to no purpose for the Seastead – you can’t eat it, build with it or otherwise utilize it for production. It’s only real value is for external commerce.
    2. It is true that over the long term gold holds up very well as a hedge against inflation. However, there can be large short term swings in the value of gold that would adversly affect the stability of your Seastead currency. When gold goes up, the Seastead would do well. But when gold falls in value the Seastead would suffer accordingly.
    3. A strictly gold backed currency limits the growth of your money supply and local liquidity, limiting the expansion and growth of your Seastead economy. A fiat based currency suffers the opposite problem, no limit is place on the growth of the money supply relative to the actual economic growth.

    I’m not arguing against gold as part of a larger basket of commodities to back a Seastead currency, as it is very liquid and is universally recognized and accepted as a hard currency. But I would argue that backing a Seastead currency on a strict gold standard would be unnecessarily destabilizing and wasteful of valuable resources that are otherwise needed for the seastead itself. The better option is to back the currency with a broad basket of commodities, preferably commodities that can be used by the seasteaders for both near term use, trade and longer term productivity growth. In this way you have a currency that is based on hard commodities, is not fiat based, and where the money supply can grow with the Seastead economy.

    To that end, here are my ideas for a Seastead currency:

    Zero-Sum

    The currency should be zero-sum. What this means is that all currency has an expiration date that is printed directly on the note. This follows from the idea that you are ‘borrowing’ against a commodity and that this loan must be paid back at a pre-determined date. Zero sum means that every unit of currency (note) added to the economy will at some point be removed.

    For example, let’s say that you are a supplier of sheet metal that is to be used in Seastead construction. As such, you purchase a large supply to from an offshore company at bulk pricing. Your sheet metal is a commodity that clearly has value, but will take time to sell in the local Seastead economy. So, you want to borrow against this commodity so that you can have local Seastead currency for immediate use. You anticipate that you will have all of your sheet metal sold in 6 months, so this will be the term of your loan. For your loan, notes will be printed that are specifically backed by your sheet metal and with an expiration of 6 months from the time the loan is made. Anytime after the expiration of the notes, any holder of the note(s) can redeem them – for either notes of equal value or in sheet metal. This example is over simplified, and in practice you would never need to actually take the sheet metal, but it does show that each note is backed by the specified commodity. I’ll explain why as we go forward.

    What should be obvious is that being a zero-sum currency prevents the currency from ever becoming fiat based. The amount of currency in circulation is limited to the actual commodities available to the Seastead. Each note can be backed by commodities that are brought or purchased from offshore or by commodities that have been produced locally. This also insures that the money supply will grow with the local economy.

    Commodity Insurance

    Since the currency would be backed by physical commodities, it is important that the commodity itself is insured against loss. This must include all types of loss, such as, fire, theft, corrosion, water damage, etc. So in the example above, before notes could be printed that are backed by the sheet metal, proof of insurance would have to be provided. The insurer would have to physically inspect the commodity as well. The Seastead government would be responsible for approving and regulating the insurer and specifying the required reserves that the insurer must hold. The insurer would likely hold these reserves in Seastead government bonds. The cost of this insurance would have to be paid by the borrower.

    Note Insurance

    It is also necessary that the notes themselves are insured. This protects the holder of the note against the value of the backing commodity falling in value. The insurer will likely require that a percentage of the commodity be held as reserve against this type of loss. So in the example above, the borrower won’t be able to borrow against the full value of the sheet metel, but might be limited to a loan against let’s say 80% of the estimated value. It would also be the insurance company that would actually redeem the notes at expiration – that is why you would never have to take the physical commodity in exchange for your note at expiration. It would be the insurer’s job to take physical possession or otherwise collect from the borrower, as it is the insurer that holds a lien against the actual commodity. The insurer may have other requirements to protect themselves against loss, such as holding the commodity in a bonded warehouse. Again, the borrower would have to pay a fee for this insurance and provide proof of ‘Note Insurance’ before the notes are otherwise printed. It should also be noted that neither the banks nor the government create the actual currency, rather it is the citizens and businesses of the seastead that create the currency on demand as it is needed.

    Centralized Note Creation and Tracking

    It is necessary to have a central authority to actually authorize and create the physical notes so as to prevent counterfeiting and fraud. The Seastead government would be this central authority. The Seastead government would create and print each note “blank”. These notes would have a value printed on them and security features to prevent counterfeiting. These features would include a serial number and bar code that would uniquely identify and track each note. But the blanks would not have the necessary seals printed on them that would make them valid for general circulation and use. These spots would be left blank. These blank notes would be sold by the Seastead government to the approved insurance company that is providing the “Note Insurance”. The insurance company would record electronically with the Seastead government the loan number, the borrowers identification, description and location of the backing commodity, any liens, loan due date/expiration, the commodity insurance number and the note insurance number along with the serial numbers of each note that is being authorized by the insurer to fund the loan. Each authorized note would then receive the insurer’s seal.

    Once the insurer places their seal on the note, the note would be returned to the Seastead government for final approval and authorization. Using the barcode on the note, it would be identified and verified against the database. Once proofed, the note would receive the Seastead government’s official seal making the notes available for general circulation. The notes would then be returned to the insurer. The insurer can give these notes, or any other notes it has on hand of equal value, to the borrower. This means that the borrower does not necessarily have to actually wait for his/her notes to be returned. The insurance company would charge a fee to the borrower for the cost of the actual notes, insurance and for the processing and activation.

    Decentralized Note Demand

    Currency should only be produced based on consumer demand. It is decentralized because anyone can cause the creation of currency, provided they have the necessary commodity to back the notes. Even the government must be required to provide physical commodities to back any newly created notes and must also be required to get private insurance, the same as any business or citizen would. This is to prevent the government from printing notes at will and devaluing the currency. It also creates a check and balance between public and private interests so that all currency is properly backed with physical assets.

    Funding the Seastead Government

    All governments must have money to operate. Typically this is done by taxing the citizens directly or by excise or duty taxes. Taxing the citizens places an undue burden on the citizen to prove income/expenses and gives the government too much power over the citizens it is to serve. Excise taxes can be unfair as they can disproportionately affect the poor. Alternatively I propose that a fair method of taxation is to tax the creation of money itself. In the discussion above I describe a fee that is paid by the insurance company to the Seastead government for each note. This fee is then passed on to the borrower. In this way, government revenues are directly linked to increases in the money supply and to the GDP of the Seastead.

    Partially Insured Notes

    Although the discussion above assumes fully insured notes, there is no reason that there cannot be notes that are less than fully insured. I would propose a color scheme for the notes that clearly differentiates fully insured notes from partial insured notes, with each color identifying the degree of insurance for the note. In practical terms, this can mean that by accepting a partially insured note you are willing to invest in the business venture specified on the note. Such notes may come with attached coupons for collecting interest as an enticement for holding the note. This would be a way to encourage investment in the local economy. I won’t go into detail here as to the specifics on how this would work in practice, but the concept of investment notes is important as it would be a powerful method for providing venture capital for Seastead business enterprises.

    Local Economy Liquidity

    The real advantage of this system of currency is that you are creating local liquidity and expansion of the money supply. This means that you are making currency available to those that need it most, the producers and suppliers in the local economy, based solely on the commodities they are supplying or producing. While it is true that there are substantial costs for the creation of money in the form of insurance and note production fees, it is important to notice that there are absolutely no interest fees to be paid for these types of commodity backed loans. As such I would argue that the expansion of the Seastead economy is likely to proceed at a much faster rate than other comparable micro-economies due to the increased availability of financing for manufacturers, suppliers and producers. However, in no way does this limit the ability of banks to make interest bearing loans; but to do so, they must use money that has already been created and are prevented from artificially growing the money supply with fiat currency. In other words, banks would be limited to only lending money that has been placed on deposit by their account holders.

    You may get what you want, but will you want what you get?

    #9615
    Avatar of i_is_j_smith
    i_is_j_smith
    Participant

    I agree you will need a lot of gold to fill-up the initial seastead reserve. This would, most likely, be bullion purchased from any of the many mints available. My personal favorite are the 1g, 5g, and 10g gold bullion bars from Northwest Territorial Mint. And don’t forget that you’ll need to store and secure all that gold. That’s why I’ve been looking at platinum instead…the Cohen Mint has nice .25g and 1 troy grain platinum coins as well as larger 1 troy ounce bars. Starting this initial supply is going to be expensive, but no more expensive than building the energy and food infrastructure. The initial money reserve is just another aspect of seastead creation. The nice thing is that many of these mints offer huge discounts for bulk purchases, so by spending a lot of money at the outset and filling the initial reserve we can actually get more initial wealth for less cost.

    I have been thinking about easing my stance on a strict “one-metal policy” because of the way a single commodity can fluctuate. A dual gold-platinum system might work. The point is so that people can easily, and at any time, cash out all their money and leave the seastead with a liquid asset that they can use anywhere they go. That’s why basing the currency on something like “fish” or any other similar type of commodity isn’t viable.

    The central government can continue to make purchases of gold bullion and inject it into the system if there is a need to increase the size of the economy. People will also be joining (hopefully!) the seastead and bringing in their wealth, so that will allow the economy to grow. But there really isn’t anything wrong with the overall economy remaining static. Growth for growth’s sake isn’t healthy, in my opinion.

    As for your ideas on a currency, I just have a few issues. For one, your system requires a printed currency. I’d like to get away from a printed currency and move to a pure electronic system. I think I see how your system could be done in an electronic form, but I don’t know how much harder that would be.

    Another issue is that it doesn’t address a situation where the commodity backing the currency is not a physical item. You mention the example of the person with sheet metal, but what about people whose sole commodity available is their labor? If I was a computer programmer, how would I get bank notes printed if I wanted to purchase something for my house from an outside vendor? Can I use my programming skills as a backing for a batch of printed currency? How would the anybody insure that?

    And what about the use of the currency in outside transactions? No seastead will be fully self-sustainable, and products will need to be purchased from outside vendors. If I want to purchase a big LCD TV from a vendor in China, how do I do that? The seastead’s own currency will certainly not be accepted by outside nations, regardless of the commodity backing it or the number of insurance companies that insure it.

    And again this doesn’t address the issue of wealth liquidity. If I get fed up with life on the seastead and want to leave, how do I liquidate all my wealth into an easily transportable asset that I can take with me and use in my new home?

    I think the economic system of the seastead needs to be simple. A bunch of precious metal sitting in a vault that you can take whenever you want is as simple as it gets. Once you introduce a whole complex system of note printing, dynamic commodity backing, and currency insurance it can really bog the system down. We should be aiming to simplify the way existing nations do things, not making them more complicated.

    #9620
    Avatar of CrosiarCM
    CrosiarCM
    Participant

    Hello j_smith,

    First, thank you for your reply. My message was already getting a bit lengthy, so I left out many details, as I’m sure you can understand. I should also say that I’m already working on the initial stages of implementing this in an electronic form and have a potential investor for the project. Part of my reason for posting this now is to get feedback prior to my detailed presentation to the investor that has already expressed interest. Although the current designs are for an online barter system, once the system is created, it will be equally viable for use in a Seastead economy. And if all goes well, it should already be created and in use. I believe it is important to begin implementation of necessary support systems prior to the actual building of any Seasteads.

    i_is_j_smith wrote:

    I agree you will need a lot of gold to fill-up the initial seastead reserve. This would, most likely, be bullion purchased from any of the many mints available. My personal favorite are the 1g, 5g, and 10g gold bullion bars from Northwest Territorial Mint. And don’t forget that you’ll need to store and secure all that gold. That’s why I’ve been looking at platinum instead…the Cohen Mint has nice .25g and 1 troy grain platinum coins as well as larger 1 troy ounce bars. Starting this initial supply is going to be expensive, but no more expensive than building the energy and food infrastructure. The initial money reserve is just another aspect of seastead creation. The nice thing is that many of these mints offer huge discounts for bulk purchases, so by spending a lot of money at the outset and filling the initial reserve we can actually get more initial wealth for less cost.

    My arguement against this is that the money you are spending on these reserves would be better spent on other commodities that are actually needed by the Seastead. Also, I do not argue against having reserves for trade and would expect the Seastead government to purchase bullion and use this bullion as a commodity to back the creation of more local currency. This again increases the local money supply and adds to the basket of available commodities. Further, when Seasteaders need hard currency for a external transaction, they can simply purchase it from the Seastead or anyone else that is in business as a currency exchanger. And yes, I believe the hard metal reserves should include gold, silver, platinum and other precious metals. The broader the spectrum of commodities in the basket, the more stable the local currency. In addition I would also have the Seastead hold Euros, Dollars and other foreign currencies in reserve and print local currency backed by these as well. The truth is that when you are buying supplies for the Seastead you will need fiat cash that is recognized by the rest of the world.

    i_is_j_smith wrote:

    I have been thinking about easing my stance on a strict “one-metal policy” because of the way a single commodity can fluctuate. A dual gold-platinum system might work. The point is so that people can easily, and at any time, cash out all their money and leave the seastead with a liquid asset that they can use anywhere they go. That’s why basing the currency on something like “fish” or any other similar type of commodity isn’t viable.

    No, basing the local currency strictly on fish is not viable, but making it part of the commodity basket is. If I am running a fish farm, insuring the future production of fish is not a problem once you have a well established base-line of production. Hence, allowing a fish aquaculturist/farmer to borrow against future fish production is exactly what you want. It will give the fish farmer the needed capital to purchase supplies while waiting for the fish to mature for market. Your local currency should encourage investment in local production.

    i_is_j_smith wrote:

    The central government can continue to make purchases of gold bullion and inject it into the system if there is a need to increase the size of the economy. People will also be joining (hopefully!) the seastead and bringing in their wealth, so that will allow the economy to grow. But there really isn’t anything wrong with the overall economy remaining static. Growth for growth’s sake isn’t healthy, in my opinion.

    Yes, people will be bring in their wealth, but it is important in such a small economy to leverage that wealth for the benefit of all Seasteaders. Understanding how to maximize financial leverage is critical for creating a sustainable and stable economy. This means creating a finacial system that allows for reallocation of assets to where they are needed within the Seastead while maintaining freemarket capital systems that provides risk and rewards for investors commensurate to the capital being injected. Exchanging of wealth for a local currency that is based on that same wealth is a fair and reasonable system that people can understand. You need to also understand the power of the elastisity of the money supply. Elastisity of the money supply represents how many times a currency changes hands before it is removed from the local economy. Your inital elastisity will be very low, around 1, but a modern economy will have an elastisity of 8-12. That represents a huge leverage of the local currency and resources in growing the Seastead economy.

    I should also mention that offshore banking is another potential revenue source for seasteaders. I won’t go into detail here as it is a little off-topic.

    i_is_j_smith wrote:

    As for your ideas on a currency, I just have a few issues. For one, your system requires a printed currency. I’d like to get away from a printed currency and move to a pure electronic system. I think I see how your system could be done in an electronic form, but I don’t know how much harder that would be.

    Although I describe a printed currency (actually I envision placing the currency on plastic cards with holograms, not paper), the system is currently designed as a pure electronic system. I skipped details of this for brevities sake. Basically the inurer and Seastead government would have public and private encryption keys. The currency would be described in an XML document. Both the insurer and government would digitally sign the document with their private keys. Authenticity of the electronic note would be verified by using the public keys to check the electronic signatures and by electronically checking the notes serial number against a public database. The Seastead government would record the current holder of the note (the bank, not the consumer). The note would then be held for you by an online bank (to prevent electronic counterfeiting). You would hold a debit card that you would use for transactions and purchases, just as you do now. In practice the bank would handle all of the note details for you, and you would never need to know the details of the notes as recorded in the XML files. You would just hold a debit card with a balance that can be spent. For an account holder with a debit card there is zero complexity.

    i_is_j_smith wrote:

    Another issue is that it doesn’t address a situation where the commodity backing the currency is not a physical item. You mention the example of the person with sheet metal, but what about people whose sole commodity available is their labor? If I was a computer programmer, how would I get bank notes printed if I wanted to purchase something for my house from an outside vendor? Can I use my programming skills as a backing for a batch of printed currency? How would the anybody insure that?

    There are two labor situations to address. First is if you are working for an external entity, call this outside contract labor. In this case you are doing work for some outside company that will be paying you in, oh let’s say, dollars. These dollars will likely be paid to you by direct deposit, electronic ACH, paypal or international funds transfer. No matter the method, if you choose to exchange these dollars for local currency, you can do so at the Seastead government or at a local bank (once big enough) or with anyone else that is will to make the exchange for you. Likely this will be done completely online. Let’s assume the exchange is being done by the Seastead. In this case they will simply commoditize your dollars – print local currency that is backed by your dollars. This will all be done electronically, so you would simply be exchanging money in your dollar account for your local currency account with an exchange fee taken out.

    The next case is if you are doing work for a local person or company. In this case there is no need to create currency backed by your labor. They just pay you for your labor with local currency they are holding, just as anyone would do now.

    I think what you are really asking is if monitization can be made from intellectual gains. The answer is yes. Let’s say you have a business venture that is producing computer games for sale. The company needs cash during development of the game for payroll and to cover other expenses. Assuming your company has a track record of producing quality games that sell, you should be able to get some amount of insurance for the future value of your game and use this to create currency. However, it is unlikely that any insurer would insure the full value of future anticipated revenue for your game – no matter how good your track record, all businesses have associated risk. So while you could likely expect to get some currency for your future intellectual production, it would not be enough to sustain your full expenses. In this case you might want to explore printing notes that are not fully insured, thus lowering the overall cost of your insurance and giving you more leverage against your future revenues. You could use these less-than-fully-insured notes to pay your employees, assuming they are willing to take them. By holding these notes, your employees are effectively becoming investors in your business enterprise, assuming some of the risk associated with the production of your game. While holders of the notes could loose money in this venture, it is also just as likely that they would make money via the dividends that are paid to the note holders when the game hits market and produces revenue for your company. Your employees are likely to find other Seasteaders who are willing to accept these notes as payment – with the same hope for future dividend profits. This again creates local liquidity and spreads risk to those willing to take it.

    i_is_j_smith wrote:

    And what about the use of the currency in outside transactions? No seastead will be fully self-sustainable, and products will need to be purchased from outside vendors. If I want to purchase a big LCD TV from a vendor in China, how do I do that? The seastead’s own currency will certainly not be accepted by outside nations, regardless of the commodity backing it or the number of insurance companies that insure it.

    This is why the Seastead government and/or bank must hold foreign currencies and other hard assets in reserve. You simply exchange local currency for the foreign currency you need to make you external purchases. If you can become a banking haven, your Seastead currency may eventually become accepted overseas as well, which is certainly is a lofty goal to reach for.

    i_is_j_smith wrote:

    And again this doesn’t address the issue of wealth liquidity. If I get fed up with life on the seastead and want to leave, how do I liquidate all my wealth into an easily transportable asset that I can take with me and use in my new home?

    I assume you would try and sell your shares in the Seastead to someone else that wants to give Seasteading a try. You would exchange your local currency for a foreign currency and leave. There is no guarantee that you will get back what you invested for your share in the seastead, but that is the business risk you accepted when you got into the Seastead. Yes?

    i_is_j_smith wrote:

    I think the economic system of the seastead needs to be simple. A bunch of precious metal sitting in a vault that you can take whenever you want is as simple as it gets. Once you introduce a whole complex system of note printing, dynamic commodity backing, and currency insurance it can really bog the system down. We should be aiming to simplify the way existing nations do things, not making them more complicated.

    I don’t know of many vendors that accept gold bullion for payment. You would need to sell your gold/silver/platinum before you could purchase anything. I see nothing about that that is less complex. Although the underlying mechanism I describe has complexity, for your average Seasteader there is none. Go online and exchange your local currency for whatever currency you need and transfer it to your offshore Visa debit card. Now you can spend it whereever you want. And yes, it is possible to do this if the Seastead keeps at least some of it’s gold/silver/platinum/foreign currency reserves in an account at an international bank. Nothing could be easier.

    At this point I guess I should mention that I am a computer programmer and have extensive experience in writing software that does electronic transactions with banks, so I do actually know how to implement the above.

    You may get what you want, but will you want what you get?

    #9624
    Avatar of tusavision
    tusavision
    Participant

    A currency backed by any material/comoddity that can’t be mined within your borders make’s your economic growth completely dependant on importation. It’s a recipe for disaster IMHO. The traditional response to inflation on a gold standard is some people become professional gold miners who fight inflation by flooding the market with new value.

    For a new country with no farm land: it may be advisable to use food as currency at first: aka soybeans, wheat, corn, ect. There’s already an international commodities market so this doesn’t do much to hamper trade relations however it would encourage domestic farming.

    To prevent foreign “counterfeitting” would be a matter of tariffs on imports of food.

    Alternatively: the ocean is full of Uranium. A uranium backed currency would create jobs in the uranium refining industry. I’m now sure how big a gas centrifuge is, but it’s potentially something that could put people to work.

    Biodiesel algae farms or an oil drilling based economy could work as well.

    Every ship could have their own currency backed by a different commodity which is in demand, and the central bank could be on the main international ship which all other ships dock at. That main international ship could make it’s entire sustainence off of forex fees.

    Why not have the main international ship issue a currency which has it’s components made of different precious and non-precious metals? Particularly one’s of industrial value? IE: Silver, Copper, Nickel, Zinc, Tungsten and Gold. The coins will have no face value. Just a weight, and a mint proof garunteeing their content.

    Obviously: the coins which are the most difficult to counterfeit will be in the most demand.

    #9629
    Avatar of CrosiarCM
    CrosiarCM
    Participant

    Hi Lewis,

    tusavision wrote:

    A currency backed by any material/comoddity that can’t be mined within your borders make’s your economic growth completely dependant on importation. It’s a recipe for disaster IMHO. The traditional response to inflation on a gold standard is some people become professional gold miners who fight inflation by flooding the market with new value.

    For a new country with no farm land: it may be advisable to use food as currency at first: aka soybeans, wheat, corn, ect. There’s already an international commodities market so this doesn’t do much to hamper trade relations however it would encourage domestic farming.

    I agree with what you are saying here – it would be a disaster IMHO as well. When the seastead first starts-up, the only wealth you will have is what you bring with you, so any currency must be based on this. Most of what you start with is going to be that which you need to survive and grow, such as food, equipment, tools, etc. But as you start producing, it is important that your currency is backed by whatever you are producing and selling. And if you are going to survive for the long haul, you better be producing some products of value that you can use for local consumption and exports. Your local products will reduce your dependence on expensive imports and your exports bring in the needed foreign currency for your imports. Whatever these products are, they are the backing for any currency you have. And I argue that the bigger the basket of products you have, the stronger your currency will be. Having a currency backed by a broad spectrum of commodities requires a currency that is very flexible and can quickly adapt to your local economy. This is the basis for the currency I am proposing.

    tusavision wrote:

    Biodiesel algae farms or an oil drilling based economy could work as well.

    Yes, whatever wealth (hard assets) you have, or whatever products you produce, that is the backing for your Seastead currency.

    tusavision wrote:

    Every ship could have their own currency backed by a different commodity which is in demand, and the central bank could be on the main international ship which all other ships dock at. That main international ship could make it’s entire sustainence off of forex fees.

    Yes, you would need a central authority to handle your currency. But I would argue strongly for a single unified currency for all Seastead. Otherwise your currency, and thus your trade between Seasteads, would be fragmented. Further, you would dilute your trading strength with the outside world.

    tusavision wrote:

    Why not have the main international ship issue a currency which has it’s components made of different precious and non-precious metals? Particularly one’s of industrial value? IE: Silver, Copper, Nickel, Zinc, Tungsten and Gold. The coins will have no face value. Just a weight, and a mint proof garunteeing their content.

    Here is my arguement against having coins made of precious metals (or any other metals for that matter) and also for not storing any significant portion of your precious metals reserves on the Seastead, in coin or otherwise. Being isolated at Sea, you have a real problem maintaining sufficient foreign currency reserves for continued purchasing of your imported commodities. You could keep large amounts of foreign currencies on hand, but then you are just basing your local currency (and economy) on fiat money, which makes your currency just as fiat as theirs. Further, when you do make your import purchases, you will likely be doing so by internet. So having your reserves, whether foreign currency or precious metals, physically on the Seastead limits your ability to use them for these purchases. Basically, you don’t have your reserves where you need them when you need them. Instead you want to keep your foreign cash reserves in an international bank where you can use the funds as needed to make your import purchases. And since you want to keep the foreign cash reserves as low as possible while still maintaining sufficient reserves for the purpose of liquidity, you will convert and hold the larger portion of your total reserves in the form of precious metals. But you won’t want your precious metals on the Seastead. Instead you will want them on the mainland where you can quickly convert your precious metal reserves to foreign cash whenever it is needed.

    Fortunately, there are many ways to do this via the internet. Here, is one:

    http://www.e-gold.com/

    There are many others, including just holding gold/silver/platinum/other options in a commodities account. All of these methods will allow you to quickly convert your precious metal reserves into foreign currencies on demand and over the internet. This accomplishes several goals:

    1. You are not basing your currency on another fiat based currency
    2. You are keeping the bulk of your reserves for foreign trade in the form of precious metals
    3. Your precious metal reserves can quickly be converted to the foreign currency of your choice via the internet
    4. You will have your reserves where you need them, when you need them, to make your import purchases
    5. Your account at an international bank will provide you with a debit card for your internet purchases
    6. Although these reserves are on the mainland, you can still use the float in these accounts to back your local currency

    And yes, although I speak primarily of precious metals above, I would hold as diversified a basket of metals as possible, including industrial metals, so that the Seastead has a proper hedge against price swings in those markets.

    Please do not under-estimate the importance of # 6 above. It means that any holdings that you have on the mainland can still be used to create local currency; so you will still maintain the advantage and leverage of this wealth in the local economy.

    As for production of coins for use on the Seastead, I would encourage the use of a local debit card instead, so that all transactions are electronic. But if you must have coins/printed currency, I would use plastic cards/rounds with hologram laminate on both sides. The hologram would have the seals imbedded in it. The plastic card stock and hologram laminate would then be embedding into a clear epoxy resin to prevent tampering. These materials are going to be of much lower production cost and are resistant to counterfeiting. Other anti-counterfeiting technologies would also be built in, such as barcoded serial numbers, etc.

    You may get what you want, but will you want what you get?

    #9647
    Avatar of Altaica
    Altaica
    Participant

    Non ‘fiet money’ economics is Child Porn Illegal™ in every fiet money economy.

    Case in point The Miracle of Wörgl.

    You should really pin your currency(sic) to the French Meter. It’s allready the legal unit of commece in the EU and standured would wide. ☺ You’ll never run out of them so you call continue to Ponzi scheme-err I mean grow your econimy

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