Plan B – 7

The Money Supply

The chain of command I have designed cannot morally declare any monopoly. In practice they might attempt such a monopoly but because the command structure is from the ground up, the people at large would have to endorse it, else those responsible for the forbidden viewpoint would be “de-selected” (thrown out of office).

So, it is assumed that they would establish a base currency  with which the free market would contend … with whatever solutions they might devise.

The Basic Form of Money

Today we have digital and hard currency. The digital form in required for ease of commerce at both the large and small scale. Hard currency is required for privacy (anonymity). In a basic system of my design both would have a 100 digit random number and a consecutive number the highest number of which would be the total number of bills of that denomination in circulation. These are anti-counterfeiting measures.

Of 100 digit numbers there are 10^100th power possibilities. Thus, a 100 digit number is sufficient to insure that no one will ever guess a number that they might then counterfeit. To counterfeit a bill, you must have the bill in hand and make an exact duplicate. However, if you make such duplicates, they will be detected by the prepared security system wherein anyone can scan his bill and test its authenticity on the internet by comparing it to the government’s database.

They would not test all the numbers on the bill. The 100 digits are stored is several different locations and the last fifty digits can be held back completely as insurance against multiple database breaches.

Let’s assume that the in use database tests twenty five digits and finding these accurate, you receive a “genuine” response. Then you know the bill is fair with a probability of one part in, say, one trillion depending on the number of bills in circulation. The next twenty five digits are in an unused database which is at the ready in case the first database is ever breached. The remaining fifty digits are stored in secret, protected vaults in groups of ten on hard drives disconnected from the internet … probably never to be used. These are the emergency verification stashes.

The consecutive numbers denote the total number of bills of that kind. If you sample a statistically significant number of these bills (mathematically, it’s not that many) … you will get a statistical distribution which infers the money supply for that bill.

Thus, by checking the random number for authenticity and the total money supply distribution, it can be determined with good accuracy whether the money system is being manipulated or is faithful.

To counterfeit this money system …

You would have to have an accumulated valid database to work from. Let’s say a Walmart checks all $20 bills for authenticity. When the “genuine” response is sent back to them … after months of such requests … they might build up a database of valid numbers and sell the list to counterfeiters.

But … the database knows who made requests for those numbers and keeps that history. When the counterfeiters make and pass the bogus bills, multiple places will request validation as would be the rule at large institutions (big chain stores, banks, etc.). If a bill is validated at two locations spatially displaced by too great a distance, it can be flagged as counterfeit … and that bill is struck from the valid list. So, if a bill is checked in Los Angeles and again validated in New York an hour later … clearly, at least one of the two has been counterfeited. The validation paths for multiple such bills will then point to the Walmart location where the valid database was created.

For hard currency, standard anti-counterfeiting measures would also be employed concerning paper, ink, design works, etc.

If a stable, non-debt based, monetary system is in place, commerce can flourish. Other countries will then want that currency as a store of value and the money will flow out of the country resulting in deflation. When the money supply lessons, it will be necessary to “kill” one bill and make 10 lesser bills to take its place. Thus, we “burn” 1 one dollar bill and replace it with 10 “dime” bills. We then have enough pieces to use in commerce without devaluing the money that went to other countries.

[One would hope that other countries would do the same with their currency and free commerce could occur without this deflation.]

When the other countries see that their dollar will buy much more in the country of origin, that money will come back to buy goods, now cheaper in the country of the bill’s origin. This imbalance will equalize and trade deficits will disappear into economic equilibrium.

I recall reading a book by Harry Brown about forty year ago stating the same thing about trade deficits and inflation … where he said something like … “Can you imagine paying $5000 for a Volkswagon?”.

I couldn’t imagine it.

I still can’t imagine it :o(

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