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The Argument for Time Money


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Many people have begun to see the flaws in our current central banking system. And a number have already undertaken efforts to propose and introduce alternative or complementary currencies.

Some are advocates of returning to the gold standard, or similar government-based reforms. Others choose to focus on crypto-currencies, which can be introduced and adopted without much need for government cooperation. Some people are driven by certain moral concerns such as being opposed to debt, economic inequality, the payment of interest, or the creation of money “out of nothing.”

In short, the community of new money advocates includes a great many varying opinions. We are not all on the same page.

There are a number of common questions about the CHIPs approach:

  • Why base a complementary currency on time?
  • Hasn’t that been tried before and failed?
  • Can’t we make a kind of money that doesn’t involve people going into debt or paying interest?
  • Wouldn’t it be better to back a new currency with gold or some other commodity?
  • Why not just adopt Bitcoin—hasn’t it already solved the problem?

These questions, and more, are addressed in the last section of the book Got Choices. So feel free to study those chapters for a more detailed treatment. But perhaps a few basic questions deserve their own separate treatment here:

Comparing MyCHIPs With Bitcoin

Bitcoin is modeled after the way gold works. The idea is good in many ways.

After all, gold is the most stable measure of value mankind has ever devised. Gold money, and money based on gold have remained stable longer than any other. And people have a natural affection for gold. So if we are going to create a new digital currency, why not make it as much like gold as possible?

But this idea that gold is the perfect money is a little deceptive. Gold itself is not really money. It is a commodity that has often been successfully used as money. But even under the gold standard, most money was not actually created directly against physical gold reserves, as we might ideally imagine.

In fact, most money exists as credit, or debt—promises made from one party to another. Under a gold standard, those promises may have been measured, or valued in gold. But there will never really be enough physical gold reserves to fully back every unit of money in everyone’s accounts everywhere.

Rather, money has value only if it contains a valid promise to deliver a future value. That value might be filled by gold in some cases. But more often, the value is fulfilled by some other commodity. This could include food, clothing, tools, or housing. Most often, it is ultimately the product of work, or the human effort to give service or to produce and improve other existing commodities.

In the Bitcoin way of thinking, there is a finite amount of money, whether that is physical gold, or mined Bitcoins. That finite supply of money is expected to be spread out as thin as necessary to serve as a proxy for all the other commodities we may trade in. In other words, even though the supply is finite, it is believed, it can serve as all the money we will ever need. It will just have to become more and more valuable as it becomes more and more in demand.

But in spite of the conventional thinking, money is not a finite commodity such as gold. And it is not just a popular convention—merely something we all agree to trade as a substitute for what we really want. Money, at least the dependable kind, has real value behind it. And as mentioned, that value is most often expressed as a future promise of some commodity or another, such as wheat, gold, or human labor.

In the implementation of Bitcoin, as well as other digital cash schemes, one of the biggest technical challenges was how to prevent a single token, or coin from being spent twice. Another significant challenge was how to create a currency that doesn’t have the equivalent of a central bank or government agency regulating it. In other words, how can you maintain a public database, or one anyone can freely write to, and still not have dishonest people trying to unfairly manipulate it for their own financial gain?

Solving these problems lead to the rather elaborate construct of the blockchain database. A blockchain makes it impossible for someone in possession of a digital coin, to spend it with two different people at the same time. It also makes it effectively impossible to later modify transactions that have already taken place. So it serves as a reliable, permanent record of all valid transactions that have taken place in the past.

One glaring problem with the blockchain is, the entire database has to be kept by every computer operating as a node on the network. Said another way, every transaction in the world has to propagate to every Bitcoin node on the Internet. Everyone has to store everyone else’s data. You can imagine how that data file would grow over time if it were truly meant to contain every transaction in the world, or even a single country. It would quickly become unworkable.

Another problem with the “finite supply” view of money is, it is prone to monopolization. For example, when the United States was on the gold standard, it was illegal to own gold privately. The government had to own most of the gold so it could control the supply and effectively guarantee the currency. If not for this kind of onerous regulation, authorities feared large private financial concerns might have the power to buy up vast reserves of gold, and thereby manipulate the value of the currency for their own selfish purposes.

Bitcoins can also be monopolized to some degree, but in a different way. Those who mined coins early in the development of the supply were able to do so relatively inexpensively and in larger quantities. Those who joined later on had to expend much more effort to get their coins. If the Bitcoin supply would truly appreciate in value enough to serve as a world currency, this inequity would become greatly magnified.

Early miners could become multi-billionaires, controlling vast amounts of wealth solely based on the value of their early speculation. While those who mine, or purchase Bitcoins later on, when the values are much higher, would be the ultimate donors of value to the wealth of the early miners.

The CHIPs concept is much different. It does not view the universe of possible money as finite. Rather, there can be as much money as people choose to create. But with that creation comes an obligation to back it with a valid promise of something of true value—a commodity. Otherwise, few will value the money enough to accept it as payment.

The CHIPs model truly understands, and even embraces the concept that money is debt, or a promise. Debt itself is not judged as inherently good or bad. Rather, its legitimacy is determined by whether the debt was consensually incurred and honorably discharged.

Make a promise and document it, and you have just created a kind of private money. Create as much money as you want, as long as you have the ability, and the intention, to honor it.

MyCHIPs proposes to formalize this process in an Internet protocol so people can make promises to, or exchange credit, with others of their choosing, and in amounts that are reasonable, given their individual levels of productivity. This medium of privately issued money can be used in addition to, or instead of, the central bank issued money we currently use.

MyCHIPs does involve the creation of digital tokens, in some ways similar to Bitcoins. But these tokens, or CHIPs don’t derive their value from their scarcity. Rather, they get it from the nature of the thing being promised—future delivery of value.

When new promises are made, new money comes into circulation. As those promises are fulfilled, the associated CHIP is extinguished, and the money supply naturally contracts, just as it needs to.

Value is not a function of speculation or foreknowledge. It just is what it is—value. Trades occur not as proxy for value, but truly as value for value.

Why Base a New Money on Time?

In order to be robust, a currency should be backed by, and measured according to, a standard, known commodity. This provides the best assurance against the kind programmed inflation and exponential growth inherent in central bank, fractional reserve currencies. Not quite as obvious, it also protects against the kind of programmed deflation inherent in the Bitcoin model. In short, a properly backed currency will retain its intended value much better than an unbacked one.

But there is a potential pitfall to this approach. Once we tie a currency to one particular commodity, people will be tempted to try to corner the market on that commodity. In other words, people will want to monopolize the supply of that commodity so they can manipulate the value of the currency. With that control, they can assure a flow of wealth and power to themselves, even if they haven’t earned it.

Of all the commodities we might choose, human work potential is the only one nearly all people have their own, private supply of. If money is backed by gold, only the people who own gold can issue money. And they can set their price for providing the liquidity people need to conduct their business.

But when money is issued against our own work, we have much more control over our own futures. We can decide if we want to save up for a purchase, or if we want to use credit to buy something now, and then do the work to earn it in the future. This kind of liquidity can not easily be monopolized—at least as long as we resist the urge to reinstate slavery!

So CHIPs are not based simply on time, but rather the work we do using our time. This means individuals can be in control of their own money. They can decide if and when to issue it.

Let us now address a benefit of time-based, or work-based money that is a bit more ideological, but still of great value. Historically our money has been measured against other kinds of commodities, most commonly some standard amount of a precious metal, such as gold or silver. More recently, the US Dollar has been allowed to float, being tied only to the general economic condition of the country.

When currency is measured in such an abstract way, it is easy for us to lose track of what it really is—an obligation, ultimately to be redeemed by human labor. It is also easy to lose track of just how valuable our own labor is, in relation to each unit of money.

Consider the minimum wage debate. Most people who advocate such regulation, or an increase to an existing minimum wage requirement, do so mostly on the basis of demagoguery, whether they realize it or not. For example, one might assert that a person or a family “can’t survive on just ten dollars an hour.” And when using an abstract currency such as dollars, this argument seems very reasonable.

But try changing the words we normally use for money, and instead refer to what that money really is: a debt to be fulfilled by someone’s sweat and toil. The first realization is, it is much more difficult to draw such a clear distinction between employer and employee.

True, one trades his actual work, and the other trades only work credits or in other words, other people’s time. But just by changing the language, it is easier to see that time is being traded for time, work for work, and value for value.

Now let’s try making an argument for minimum wage with the new terminology of time money: “No one should be allowed by law, to trade an hour of his work time for anything less than 3 hours of someone else’s work time.” How is it possible for everyone’s time to be more valuable than everyone else’s?

This helps us understand, the matter of whether a person can “survive” on only one CHIP per hour is not a question of social justice. Rather, it is one of simple economics. How much time does a person spend working for his own survival, and how expensive, in comparison to his own productivity, are the things he needs to purchase from other people?

Another way to phrase the question is: “Can a person with no particular skills, working full time, support himself?” So rather than just trying to somehow elevate the value of everyone’s time over everyone else’s, we can begin to contemplate more authentic solutions to poverty. For example, when and how can civil society best assist those who can not reasonably provide for themselves?

So even the language of CHIPs helps reinforce the intuitive idea that laws and government programs alone can’t solve most social problems. People have to.

And people should be free to engage in voluntary relationships as they may choose. As long as the participants are competent, capable and fully informed, governments should not try to meddle so much in how people choose to exchange their work and time with each other. And the ultimate value of one’s time is exactly what someone else is willing to trade for it.

If you have not gone to the effort to develop any particular skills, you may be valued by others at only 1 CHIP per hour—maybe less. But by investing in yourself and developing further abilities, in demand by others, you can raise that multiple to anything the market will support. There are no upper, or lower limits.

Finally, we must admit, this notion of a …standard CHIPÚ is the biggest hurdle that makes implementing time money much more challenging than say, a gold-backed currency. An ounce of pure gold is the same anywhere in the world. But it is much more difficult to define what a standard, unskilled hour of work really is.

Another challenge is how to structure a system so the value of a CHIP will be preserved and honored over time. It is important to protect our money from inflation and the other volatilities we see in traditional monetary platforms.

Why Make New Money Open-Source?

One of the challenges with money of any kind is, it needs to be trusted. Any two parties can trade promises directly with each other as long as they trust each other. But if one of the parties breaks that trust, it is helpful to have an objective third-party to resolve the dispute. In the past, government has typically been that intermediary.

But government is certainly not immune to corruption, nor the power of special interest. And it is not always as objective as we might hope. In fact, government and powerful business interests have a history of working together for their own selfish purposes. Too often, the little guy has been left out, and most of the spoils go to those who maintain power and control over us.

Bitcoin has clearly shown, it is possible to create a peer-to-peer digital trading platform that has no central authority. There is an authority—it just isn’t centralized. The community of users itself becomes the arbiter and maintainer of the system’s integrity. This is a great and valuable lesson—one we should retain when designing any new monetary system.

But MyCHIPs proposes a different model. The supply of money is not mined from a finite store of possible tokens. Rather, it is the product of voluntary agreements made between parties acting within the context of their own best interest. Real people and real companies stand behind its value. And the benefits accrue not only to individuals, but also to the society as a whole.

This points out another key distinction from Bitcoin. Bitcoin users are completely anonymous and can trade value, such as it is, without anyone on the outside being able to track that value. In fact, critics of Bitcoin claim it is only good for criminals and drug dealers. While that bit of hyperbole is a bit extreme, it does make the point. Because MyCHIPs are backed by real people and actual value, those assets need to be known and understood, at least by your trading partners, in order to trust the integrity of the issued money.

There certainly are ways for MyCHIPs users to shield themselves from public view. But those who choose to issue CHIPs, or borrow, will have to endure a reasonable degree of scrutiny—at least with those they trade with directly. Otherwise, they won’t be able to establish the kind of reputation necessary to prove their money is sound.

What Next?

Intrigued? Keep reading to see how it works.