New (Social) Money Market (Yoni Assia, 2008) , my thesis for a #betterworld

eToro

I wrote the framework below, as a several elements that needs to be proven in order to manifest a new more efficient economic framework, It captures the essense of 3 main points :

  1. A form of non goverment digital currency (such as bitcoin, I wrote this before the formation of bitcoin) is a more efficient for of money, and therefore makes money cheaper by reducing friction costs
  2. Ideally a digital form of currency will be socially connected, to base the trust of the currency on the existing social  connections and infrastructure. i.e – to create Attached Money you simply connect bitcoin to twitter
  3. Once a digital currency is formed, and is socially connected, then monetary policy becomes visible, and there are simple solutions to decrease inequality (social interest), which is the biggest problems of the economy today.

While I don’t think this work is done, I prefer it to be public and potentially inspire someone somewhere to help make the world a better place (and I lost my laptop and had to recover this, never again)

Thesis –  New Money Market (Yoni Assia, 2008)

  • Suggest a new money system that is based on only Money Proper (cashless system), is not governed by state and cannot be printed without addition of underlying commodity  (as opposed to current money which includes Acknowledgement of debt as addition to the money).  The new money system will be fully transparent and all representative money will be attached via electronic means to entity (I.e – individuals, corporations,   academic institutions etc.). This money can be considered Attached Money (or People Money if only connected to individuals).
  •  Suggest an exchange rate model for the currency of the new money system.
  1.  Co-exist with current currencies and money
  2. Define exchange rate mechanism to existing floating currency rates, depending on other currencies as underlying commodity.
  3. i.e  –  In order to buy goods using cash, the new money must be converted via exchange to existing cash money or commodity (gold, oil etc.).
  • Suggest an interest rate model detached from base currency, as a sub set of the base currency. The intrinsic interest rate of the currency would then be 0%.
  • Suggest a banking/lending model that can only lend the new currency based on deposits (reserve rate > 1), thus eliminating the addition of money to the market
  • Prove that under perfect market model, the new currency can be analyzed as a giffen good (Not sure this is the right term/analysis). This giffen goodcauses continuous pricing deflation of commodities, labor and other currencies. This deflation is of an opposite trend to currency.  Characteristics of the giffen good:

 

Thesis –  Good Money Market – The visible Hand (Yoni Assia, 2008)

 

  • Suggest 3 interest rate models to determine interest rate policy of the issuer (State):
  1. Capitalism – positive interest, independent of holding entity, independent of deposit size

Impact – The rich get richer and the poor get poorer

  1. Socialism – Positive interest rate, increased rate for individuals and social entities (culture, Academic), decreasing interest rates on larger deposits
  2. Marxism – Negative interest rate, increased rate for individuals and social entities (culture, Academic), decreasing interest rates on larger deposits

Impact – From each according to his ability, to each according to his need
The more negative interest rates become, all assets value will diminish (hyper deflation).

 

  • Prove that in a democratic, free market (not necessarily perfect market) the only difference between capitalism, socialism and Marxism is the attached interest rate to currency. In addition, since in a perfect market inequality should decrease to increase production, the transition between 3 interest rates models is directly connected to the macro economic growth and production of the market.
  • Prove that the money market and interest rate model together could replace all taxes, tariffs and regulation with a differential  democratic interest rate model where interest rates connect to corresponding entities and the interest rate is determined by an electronic voting system – Thus making the invisible hand Visible
  • Build framework to show that current markets (especially China and the west) are already on the path to convergences:
  1.  Western interest rates reach 0 in developed countries (Japan, US,EU)
  2. China regulates a socialist/communist economy, becoming the largest producer of commodity in the world.

 

About Yoni Assia

Founder and CEO of Etoro.com