Safecoin and 'The Real Bills Doctrine' of Adam Smith

I wonder if Keen has studied Crypto currencies as yet. He might be a good one to alert about SAFE

I would guess yes, and he’s on twitter: http://twitter.com/ProfSteveKeen

Edit: interesting blog by Steve Keen:
http://www.debtdeflation.com/blogs/

For sure… and he’s a big fan of Minsky ala ‘The Minksky Moment’

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I find this aspect particularly interesting and a lot of this is related to the “Quick Question” thread. I’m no economist, but would say my views are roughly in allignment with Adam Smith (from what I have read). My main reason for proposing the alternative system (B) was (to me) a logical statement made by him concerning charity: I would have to paraphrase it to:

“The provision for the Weak/vulnerable is too important a thing to rely on benevolence alone.”

The political objection to this is the coercive nature of tax.
The option I suggested removes this objection.

Smith also believed in the efficacy of trusting the judgements of the common man, over the various economic intellectuals or “experts” with their agendas. My proposal would be exactly the “common man” economics Smith is talking about - definitely not the expert view.
We also quarrel in a Left/Right very polarised fashion - what’s wrong with the more equitable middle ground? Why aren’t we meeting minds and finding solutions to objections, rather than shouting our opposite opinions?
I’m suggesting we don’t allign to previous/current experts in this regard but implement a new social/economic model for the common man, agreed among ourselves - by our society.

He was Scottish as well, whereas I’m sure the free market system was some wicked sassanach invention.
Just trying all angles now…… :smiley:

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All good…after reading the Professors take on the ‘Real Bills Doctrine’, do you have any comment on whether ‘Self liquidating credit’ has any potential as an overlay market system on Safecoin?

Yes, I will have, but I was so wrapped up in the other thread, I only noticed this post this morning and found it full of interesting stuff. (I’m on a bit of a mission to persuade Maidsafe to down tools and delay the project, so one or two objections from the community to fend off… :wink:) I quickly skimmed it and just replied “for now” as I’m of to work - just for half day though. Cheers will reply later-really interesting stuff.

When initiating what I feel is an important topic regarding an important network, I sometimes like to remind myself to be awake to potential division before it occurs:

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Hi Chris, just got back and watched/read your stuff. Your question was how would all this work with safecoin.
I’ll answer as best I can from my understanding of things (as a non coder or economist). I may only be able to break things down a bit in order for a more technical or qualified person to grasp the processes at work and then build on it to give you a better answer? I might be able to give some clues or spark something that others might pick up on…… that’s probably the extent that I can help. Sounds like one for Janitor or someone.

The mechanism appears to be:

A bills B, in other words :

A sends a parcel to B

B signs the parcel
B sends signed parcel to A

A retains the parcel

The parcel will be “opened” after 91 days

Opening the parcel simultaneously:

1 Causes “whoever is holding the parcel” to be paid the “original value” inside it by B
2 Causes the parcel to be destroyed

B can initiate a self destruct of the parcel at any time, the holder being given the value

A can pass the parcel to anybody else (say C) within the 91 days

A signs parcel and sends to C etc

It appears to be as simple as an ABC situation, with a process akin to a game of pass the parcel. I would also probably more think of bitcoin as the gold/value and safecoin/smart contract as the bills.

If you are talking more about where all this fits into the economic debate (as I now think you were) then if I refer back to the Model A) against Model B) thing,
A) is a totally free market economy reliant on charity and B) the same but replacing charity with an equitable tax system

All the ideas of the Prof/Adam Smith are consistent with Model B

The Austrian economics/Mises etc crowd are consistent with Model A

Both models can incorporate the idea of real bills. That is because “real bills” fall into the “ economic” aspect. Both A) and B) have an “economic” aspect. B) also has a social aspect incorporated into the economic aspect, whereas A) relies on charity

The idea of “free bills” is consistent with the fundamental goals/ethics of Maidsafe I believe.
The concept of “Discount” is also consistent and seems a much better mechanism than using interest on loans via banks to create credit.
The issue I see is some form of time-stamping mechanism would need to be involved somewhere along the line.

Thanks for your contribution, it’s pretty deep stuff. We assume that finished goods will just be there for us on the shelf when required…‘just in time’

To have an alternative supply chain mechanism built on this network would be a great backup and it needs to work on a local basis.

I’m going to dig and try to get a clearer picture of the mechanism, maybe I can get the Prof excited about safecoin in place of gold…

Ahhh…I think I got you. If you take my option B) model and add on the “technical implementation of the “real bill” mechanism, then I would propose this as a workable eco-system.
To create credit, instead of banks charging interest, (the mechanism by which credit is created by banks): Credit is instead created by way of Discount on signed Bills of trade or “Real Bills.” Effectively these are like limited life-span Safecoins/smart contracts to the value of the Bill (in Bitcoin or safecoin or other).
The whole safecoin model is in fact the same principle as the Real Bill model except Safecoin don’t have a use by date.
The idea is that these Bills can be traded freely like cash between different links/traders in the production chain.
in the Real Bill system the source of “credit” ” is “consuming”. This is achieved by having the value of the Bill decrease either in incremental steps through time, or with each transaction – it loses value – this is the Discount. This encourages trade in the Bill, as it will be passed among traders in exchange for goods or to pay a supplier quickly – it encourages trade or “consuming”.

Lets say someone sells bananas retail (A) who in turn has a wholesale supplier, (B) who in turn is supplied by an importer © who in turn is supplied by an exporter.(D)

Say B is holding a Bill signed by A) to the value of 1000 safecoin, (It is essentially a 1000 Safecoin Bill in other words) -which was in exchange for 500 bananas.

Let’s say B now needs some “credit” to buy 1000 bananas from C) @ 1 safecoin per banana

B signs the Bill and passes to C) in return for 1000 bananas

B is incentivised to pass the Bill in any case as it is de-valuing.

A) Has 500 bananas
B) has a 1000 bananas
C) has a 1000 Safecoin Bill
D) has shed loads of bananas

Now think of it the other way round:

Imagine D) could do with some Safecoin to pay his farmers:

He could sign a Real Bill for 2000 bananas in exchange for 1000 Safecoin with C)
Instead of 1000 Safecoin written on the Bill, it is now 2000 bananas,
It is essentially a 2000 banana Bill. :smile:

A) has 500 bananas
B) has 1000 bananas
C) has a 1000 Safecoin Bill and a 2000 Banana Bill
D) has paid the workers in Safecoin.

Where it gets interesting is when the price of either Safecoin or Bananas goes up or down. This affects the value of the Bills.

If there is a bumper banana crop and banana prices fall, then the value of a banana bill drops, relative to the Safecoin Bill. The same would be true if Safecoin price rose.

If there was a banana shortage, the value of a banana Bill would increase relative to a Safecoin Bill. The same would be true if Safecoin price fell.

This facilitates credit liquidity in the market for Bills as they can be traded against one another. If you extend the principle out to other “goods” then you can see how a whole credit eco-system can develop.

That is my understanding anyway, I may have misunderstood something.

Edit:
Don’t ask me how you depreciate a 2000 banana bill incrementally :smile:
I think I’ve misunderstood an aspect somewhere, maybe someone can help?
You get the gist anyway?

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Certainly have…reaching for a panadol.

I don’t really want to get involved with the system A/B scenario from the other thread in here though, just complicates things and no way do I want to distract the devs.

If we can stick with the straight up analysis of the doctrine as it stands and assess it’s suitability to the network as we know it…that would be awesome.

Your explanation is number 1 so far… :slight_smile:

Absolutely, no problem, that wasn’t actually my intention in the last post - just got in the habit as it helped me divide the 2 economic models in my head. Whatever model is adopted, it will apply equally - there is no difference A or B. and I’ve said all I have to say on the other matter. :smile:
I just find it easy to say a or b, rather than free market economy etc…it all just gets so confusing in conversation… I thought I defined the A and B as…

however it was unclear in last post. I’ve actually stopped campaigning as no need I’m sure devs have got the gist by now. If I use A or B again, this will be my definition as shorthand for Right/Left everything. :smile:

Thanks for sharing, I loved reading it. I can’t wait to see in the last video (thumb picture) it says “FARCEl.” “Fiddler on the roof”? Hidden deeper meaning word like Farce?

Isn’t this like when companies offer evidence of purchase orders in exchange for credit? The notes representing the credit may all originate from central banks now, but these would have originally been actual claims for an asset (e.g. Gold).

It seems to me that detaching the note from the asset triggered the breakdown. As soon as people considered the credit notes as good as the assets, the required scepticism over actually delivery of the underlying asset on demand disappeared with it.

There is a long history of people still doing things, long after the reason for it has ceased. Post war coconut headphones on post war island is one example, but first world societies have many of their own - “we do this because we have always done it this way.”

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The limitation is that one in the hand is always worth two in the bush, as it were. There is always risk in accepting credit, instead of an asset (which is why there needs to be interest or a coupon to accept in lue)… Unless people forget what the difference is altogether, but then you have the reverse problem.

Credit has its place - promises make the world go around - but there are times when you need delivery instead. I think the monetary system went too far into the credit usage, it broke down, and now we are trying to re-orientate again. I see crypto currencies as very much part of this re-discovery process.

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It seems to me there was an entity named The Federal Reserve created on December 23, 1913 that might have had something to do with it.

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There’s an excellent Radio 4 series (of ten 15 minute programmes) The History of Money.

I say excellent based on only two episodes :slight_smile: and urge those interested in this thread to listen to today’s episode: The Classical Period (15 minutes long)

It contains some really interesting facts about debt, trade and money, including a really important one right at the end. Main ones from memory:

  • money was not created to facilitate trade (a popular incorrect assumption), in fact some of the biggest trading nations were late to adopt it
  • coinage was brought about in order to facilitate war and empire (that figures!) as a way to make, er incentivise, the nearby population to provide logistical resources to soldiers. This made it much more efficient to maintain armies all over the place
  • before coinage, rulers dealt with debt burden problems by forgiving all debt periodically, after coinage this was not attractive, which meant the plebs became overburdened with debt unless other means were found to return wealth to them from the rich.
  • similar philosophies appear to have arisen at different places due to the arrival of money, as well as anti-war movements, often religious, some interesting ones in China.
  • if rulers did not forgive the debts of the masses, or have other ways that returned wealth to them, the rulers generally realised too late, and the civilisation collapsed. Oh dear!

Today’s repetition of the last scenario appears obvious, along with the futility of QE being used to further enrich or our ruling elite (bankers) rather than the populous. Oooh political! :slight_smile:

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Nice find, using material from his book, Debt: The first 5000 years.

He recently did an interview with Keiser about his new book: Utopia of Rules: On Technology, Stupidity and the Secret Joys of Bureaucracy

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Excellent thanks @chrisfostertv

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This is excellent economic-theory-reading @chrisfostertv – I read this when you first posted it, but returned to reread the relevance of ‘financing world trade’.

Thanks for taking the time to put all this together.