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MyCHIPs Digital Money

Content Illustration

Scaling Up

It does require a small leap of faith to go from these imagined micro-economies to the full, real-world economy of a state, a country, or the world. But if you understand the basic principles of how credit is traded, you can begin to imagine it.

There is also the nagging question of how to roll out such a vast program in its full scale. Do we need to pass a law making old money obsolete and replacing it with MyCHIPs?

Actually MyCHIPs shouldn’t need any new laws in order to work—at least if it is done right. It may need a few old laws repealed in order to reach its full potential, but we will discuss that a little later. The point is, we shouldn’t have to force people to use it. And we wouldn’t want to anyway.

New money should get used because people prefer it—because it is better and more useful. And it doesn’t need to replace all the old money either. It only needs to be a viable alternative in order to be useful in an economy. The more it gets used, the greater the competitive forces to keep the central banks more honest.

New money could be phased in very similarly to the way we have presented it in our examples above. Imagine if a few large employers like Wal-Mart, Costco, Kroger and Target began a program for employees where they could bank their work hours with the company. Each employee could be issued a credit/debit card to use for accessing their time credits. In-store purchases would simply be managed as internal transactions. And when employees used their card for outside purchases, the necessary conversion to dollars could be done transparently.

The primary benefit to companies would be an immediate reduction in the amount of capital they must otherwise maintain from other sources, such as equity and debt. Employees would benefit by the convenience of the card. And their employer might even offer to pay some interest on balances they maintain in their time bank account.

Depending on the laws of the country in question, employees might even be able to defer taxes on time accumulated in an account. The theory is simple: Rather than working for money, the employee is lending his time to his employer. The compensation will come later. If the taxable event could be postponed until the lent time is redeemed, this would form a good incentive for increasing personal savings. In some ways, it is not too different from the idea of a 401K account, except it has no upper limits.

Once a handful of companies had functioning time banks, the next logical step would be for them to begin trading time credits among themselves. That way, an employee of Wal-Mart could shop at Costco or Target without converting to dollars first. As more companies chose to join the network, employees would have more opportunities to spend their time credits directly.

The next step would be for other kinds of companies, not in the direct consumer market, to join. It may not be as obvious how this would work, but a company that sells to other businesses, or even to government can also benefit from time banking for their employees.

As an example, consider a refrigeration company that does nothing but service the ice cream freezers in retail stores. No consumer buys anything from them directly, but the retailers themselves regularly pay for their services. Employees for such a service company could also bank their time, just like the Wal-Mart employees. And they could redeem that time, by buying things at Wal-Mart or anywhere else in the network. And ultimately the credit of the service company itself would be redeemed as it performs work to keep all the freezers in good, operating condition.

So we see, a new, digital credit market could emerge very gradually and naturally, slowly taking on much of the load currently managed by the traditional banking system. By the way, don’t expect the big bank lobby to go along with this without a lot of kicking and screaming. Ma Bell didn’t go down without a fight either. But that is not a good reason to avoid better, more innovative new technologies when they come along.
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