MyCHIPs Digital Money
.jpg "Source: Wikimedia Commons; Carol Pyles")
Clipping Coupons
At first, it can seem difficult to understand how a totally new and different money system might work. Mostly this is because we have all grown up thinking of money as a thing, rather than what most of it is, a promise.
A thing can be owned. And that ownership can be passed from one person to another. For example, a gold coin is a kind of money we call commodity money.
But most modern money doesn’t work that way. Rather, it is what we call credit money. Essentially, it is just like an IOU or a loan—a promise.
In this context, a promise is an agreement between two parties, where one pledges to do something for the other, at some point in the future. This promise of goods or services is what gives sound, credit-based money its value.
To illustrate how MyCHIPs works, we will imagine an economy that doesn’t use traditional bank money, but rather uses only money based on private credit, or promises. In our example, the money is something you are already familiar with, coupons.
Have you ever gone to the trouble of clipping a coupon out of a newspaper? Or, for those who don’t know what a newspaper is: have you ever saved a digital promotional code so you could use it to save money on an online purchase?
These coupons, or discount codes represent a promise from a merchant to you. Present the coupon at the time of sale and you get something in return.
Some coupons may just give you a discount on your purchase. But other coupons can work more like a gift certificate. For example, a voucher worth $100 off your next purchase.
These are the most valuable kind of coupon. Rather than just a form of advertising, they are actually as good as money—at least if you want to shop with that particular merchant.
Issuing Money in a Coupon Economy
In a central banking economy, money comes into existence by the act of someone borrowing from a bank. That new money can then be spent by the borrower to get the things he needs. This puts the new money into circulation. And it can continue to circulate until someone along the chain uses it to pay down a debt with their bank.
In a coupon economy, things work much the same way, but we can eliminate the banker middle-man.
Imagine someone wants to grow fruit and vegetables to sell and earn a profit. This aspiring farmer already has some land and water, but he doesn’t yet have seeds or fertilizer. Also, he is going to need some help harvesting the amount of food he will produce.
In a market based on private credit, he could simply issue coupons, or promises, for some of the food that is to be produced later. Imagine a coupon entitling the holder to 10 bushels of wheat, or 10 pounds of corn from the expected harvest. As long as people had confidence he could produce the food, the coupons would be valuable.
The farmer could then trade these coupons for the seeds he will need. He could also find people willing to work harvesting the crop, in exchange for some of the coupons.
The holders of these coupons could wait for the crops to be produced. Or they might even trade the coupons to others, who are willing to wait, in exchange for other goods and services available immediately.
It is easy to see how these coupons could work much like money. They are a promise of future value, so they can be used to trade for the things we want and need right now.
Private Credit as Corporate Debt
In our example, the farm coupons serve two important functions. As mentioned, they are a form of compensation for the people providing the materials and labor necessary to produce the food. But less obvious, they provide the capital necessary for the business to do its work.
In a central banking economy, a farmer must go to a bank and borrow money to pay his vendors and his workers. This exposes him to greater risk. If he fails to pay the money back, with its accrued interest, the banker may foreclose on his land and water rights. He could lose everything.
But in a market based on private credit, the producers and consumers work directly together without the banker in the middle. The consumers take on some risk, betting whether the farmer will succeed with his crop. In return, the farmer can provide food for them at a lower cost, without the additional overhead due to the cost of central-bank money.
Private Credit in a Modern Economy
This all sounds great. But it also sounds pretty complicated. How are we to be expected to keep track of multiple different coupons from thousands of different providers?
Central banks provide us the service of standardizing all our credit so we don’t have to worry about all that. We just deal in dollars or euros, and the banks take care of managing most of the risks in the system.
But technology is beginning to eliminate the need for middle-men all across the economic spectrum. The Internet is a powerful tool for putting producers in direct contact with their customers. So today, we no longer need as many retailers getting in the middle of our transactions. And banking is no exception.
Today we can use computers to track privately issued credit and effectively manage its associated risks and complexity. We can make private money just as convenient as central bank money, perhaps even more so. And we can realize the savings of cutting out the middle man, making everything we buy a little less expensive.
Life in a Coupon Economy
If you couldn’t use traditional money, but had access only to coupons, how would you live? How would you go about buying all the things you need?
First, think about how it works right now. Most people only have one or two primary sources of income. We go to our jobs each day. Then every couple of weeks, we get a paycheck, issued in central bank money.
Next, we spend that money. We make a payment on our home mortgage or rent for an apartment. We probably pay some utility bills like gas and electricity. We might also have a car payment or two, and some bills from a few credit cards.
At this point, most of our money has been spent, and on just a few familiar providers—most often the same, month after month.
The rest of our expenses are often relatively minor, but more spread out. We might pay cash for a meal at a restaurant, or a tank full of gas. But even these kinds of things are more often charged to a credit card.
The fact is, there really aren’t that many different providers we have to make payments to.
So imagine you still go to work each day. But instead of giving you a paycheck in dollars, your employer had a way to collect all the right coupons you need to pay your bills. Wouldn’t that be just as valuable to you as money?
Each month you would be accumulating coupons that work just like a gift card. You would have all the credits you need with your home mortgage company or your landlord. Other credits would accumulate in just the right amounts to cover your utility bills. The rest would be available to cover your credit card bill, or drop into a paypal or venmo account so you could spend it on the other little things you buy each month.
Finally, imagine this is all is managed automatically on your cellular phone. And because there is no official money system in the middle, everything you buy costs 10 percent less than you are currently paying!
The point is, if you can buy all the things you need, does it matter whether you use central bank money or privately issued credit money? Wouldn’t you rather use whatever system is the most cost-effective and convenient?
Savings in a Coupon Economy
If you are a responsible consumer, you may have already spotted a potential problem. If there is no money, but only coupons, how do you save for the future? Are you willing to store up 10 years worth of coupons with a provider who might go out of business? That seems too risky.
This underlies one of the fallacies of our current thinking of money as a thing, rather than what it really is: a promise.
If money were really a thing, it would make some sense to save it up for the future. But when we properly understand money as a promise, we understand there are two people associated with each unit of money: a promisor and a promisee, or debtor and creditor.
The practical result of this reality is: not everyone can save money—at least not as a net result. Money is credit, and credit is debt. For every person who has it, someone else owes it. Half the people can accumulate money, but that will put the other half in debt.
As a promise, money is not really the best place to put your savings—at least not for the long term. Just as companies can go out of business, people may get disabled, die or renege on their promises. We need a safer way to store our value, if we expect it to be around later when we will really need it.
So a coupon economy teaches us an important truth, not quite so evident to those still under the illusion of central bank money. While money is not itself a thing, still the world is full of lots of things. And there can be enough for everyone.
While not everyone can save money, everyone can have things. We can build more houses and cars. Everyone can have refrigerators and washing machines. We can even build good memories by traveling, reading books and watching movies.
Life is full of many wonderful things we can have and enjoy. We just need to shed the illusion that money is one of them.
In short, a coupon economy helps us understand that we are better off to accrue value in things and experiences—not in the mere promise of money. In practical terms, this might mean applying any extra credits you have each month to pay down the principal on your home loan.
If you choose to rent, maybe you should be making payments on a commercial property that provides rental income each month. You might gradually buy gold or silver or other collectables—whatever you can have and hold, that will retain its value over time.
This is how you save in a private credit market. Use credit money for normal transactions and then convert that value to commodities for most long-term savings.
During your working years, you can produce more than you consume, rolling the excess into savings stored as equity, or ownership in physical things. Then when you are ready to retire, the reverse happens. You begin to withdraw value from your savings, to support yourself for the remainder of your life.
This could take the form of a reverse mortgage. Or you might just leverage your assets to create credits which you lend to younger people who are just coming into their working years.
MyCHIPs Manages Private Credit Relationships
In our example, we glossed over the real power of MyCHIPs. We simply asked: “What if it were possible to exchange credits for your own work for all the coupons you need to pay your bills each month.” Well, it is. This is exactly what MyCHIPs does—through an innovative, new mechanism called a “credit lift.”
In exchange for your work, your employer will give you credits, or coupons, good for the services he can provide in the market place. But chances are you don’t really need those kind of coupons. Rather, you need to buy other kinds of things.
MyCHIPs securely tracks the credits you have as well as the ones you need. Then through credit lifts, it quietly makes the necessary trades with other MyCHIPs users on the network in a way that benefits everyone.
You just worry about doing your job.
MyCHIPs will worry about clipping the coupons you need to pay the bills each month.