[liberationtech] Bitcoin and The Public Function of Money

[Pavol Luptak]

May be a bit different and interesting Bitcoin and government presentation:

http://shadowlife.cc/files/btcotc.pdf

It was one of the most shocking presentation I saw at the Bitcoin conference
2012 in London.

Pavol

On Tue, Oct 30, 2012 at 10:10:22PM +0100, Dmytri Kleiner wrote:
> 
> I want to write a bit about the public function of money, especially
> as compared to the market function of money, in light of some of the
> recent discussion about Bitcoin.
> 
> Bitcoin is already a very useful technology due to the fact that it
> allows transactions to take place without any central authority.
> This alone is significant. The technology behind it is also perhaps
> applicable in other areas, such as the Namecoin project to replace
> the centralized Domain Name system.
> 
> Does Bitcoin have the potential to replace Government fiat money?
> No. It doesn't. It only has the potential to be one commodity form
> within the money economy.
> 
> Countless books and papers have described money, money is a very
> complex thing which serves many functions. Keith Hart has written
> about the "Two Sides of the Coin," heads on one side, tails on the
> other. One way to interpret this might be to contrast between the
> public function and the market function of money.
> 
> The origin of money is tribute. The source of money is the public,
> in whatever form, whether empire or democracy or something else,
> money is spent on public expenditure and demanded back as tribute.
> Whatever its commodity value, whether minted on gold, printed on
> paper or electrified as bits in a database, this sort of money has
> value because it can be used to fulfill tributary obligations, for
> example, it can be used to pay taxes. As the entire source of this
> money is government spending, the amount of this money is determined
> by the amount we want to provide on behalf of all as a society. This
> is the "Heads" side.
> 
> Not all economic activity is done for money. Much of it takes, and
> has historically taken, gift and kin-communal forms, where work and
> wealth is shared without specific prices for specific commodities,
> but rather on a basis of social trust and reciprocation. Markets
> emerge as economic activity extends beyond communal and neighbourly
> forms, markets extends the social to beyond the kin-communal, and
> along with such social distance come more transient relationships
> that can not rest on trust and reciprocation, and thus must be
> encompassed by spot transactions, and as a result specific prices
> for specific commodities and specific price relationships between
> commodities. With these transient relationships comes money. But
> this sort of money is different.
> 
> Commodities can also be traded directly, even if their relative
> worth is counted in "Heads" money, and trade can also be done
> on-account, by credit. The amount of which is not limited to the
> physical amount of "Heads" money in circulation. In the wider
> economy, money is endogenous, the amount of money circulating in the
> economy is not a function of any monetary base, but rather is a
> function of the amount of things we want to make and do for each
> other. More specifically, the amount we want to make and do for each
> other for money. This is the "Tails" side.
> 
> This is vertical money and horizontal money. Vertical money is
> created and destroyed by the public, horizontal money expands and
> contracts as a result of the economic activity of private
> individuals and their incorporated forms.
> 
> Money that has a commodity base, i.e. Gold, is not completely rooted
> in a particular public form, since it's value can cross
> international borders.
> 
> This is where Bitcoin, a digital specie essentially, emerges as a
> new and rather unique form of money. It's built-in cryptographic
> limits on supply make it essentially a virtual commodity form of
> money, fixed and "hard", like Gold, yet digital and transferable
> electronically across global telecommunications networks. As such,
> it has attractive features as both means of exchange and store of
> value. Yet, while it certainly is useful on the "Tails" side of
> money, as one of the various kinds of assets circulating in the
> global market economy, it does not serve public function well.
> There is a reason that modern public forms of money are not
> commodities, why modern economies use "fiat" money, money that is
> not based in or guaranteed by conversion to any sort of commodity.
> 
> If the public restricts itself to commodity-money for public
> expenditure, this means that what it spends must be limited to what
> it taxes plus what it borrows, since commodities have a fixed
> available supply. And though many ignorant or simply disingenuous
> commentators, such as promoters of austerity, present this to be the
> case even now, in a modern monetary economy based upon fiat money
> issued by the public for public purpose, this is factually not the
> case.
> 
> The thing about public money is that we can have as much of it as we
> want to have. How much we spend relative to how much we tax is a
> public policy choice, and the right-wing dogma that the appropriate
> choice is for the budget to be balanced, for taxes to be equal to
> spending, is universally understood to be false, even among the most
> celebrated right-wing economists. In his 1948 article "A Monetary
> and Fiscal Framework for Economic Stability", "Chicago Boys"
> patriarch Milton Friedman proposed a counter-cyclical policy, where
> government spending would be increased beyond taxation during
> economic downturns, similar to Abba Lerner's "Functional Finance"
> which is often referred to as "Keynesian" economic policy. Whatever
> their ideological stripes, there is little disagreement among
> economists that to the degree that public budgets need to be
> balanced, they must be balanced relative to economic cycles and
> sectoral balances and not merely between annual public spending and
> taxation.
> 
> The balance between spending and taxes is simply the balance of the
> public "Heads" side of the coin, always in counter-balance with the
> private "Tails" side of the coin, as expressed by the activity of
> private interests in the global market.
> 
> It is no secret that the national State form is unsatisfactory. Not
> only is it burdened by its aristocratic roots, and not only is it
> corrupted by the fact that its modern form is largely captured by
> the international corporate elite, but the State is clearly
> unsatisfactory for modern publics as a result of the fact that
> static territorial forms are increasingly ineffective and
> inappropriate structures to serve global, distributed communities.
> 
> The public form has to evolve from the state form to the networked
> form, but for that to happen, new, networked public forms will need
> to emerge that are able to take over the socially necessary public
> functions. Including the management of forms of public money.
> 
> The critical feature required of public money is that we can
> socially determine how much of it there is, and how much of we want
> to apply to public purpose. We need ways to create and destroy
> public money so that we can can have a counter-balance to private
> activity, to manage cycles, to counter-balance economic sectors, and
> to socially pursue public objectives, such as health, education, and
> justice.
> 
> Thus, Bitcoin's innovation in terms of creating a networked form of
> commodity money is not useful in creating networked forms of public
> money, and as a result it does not create a way for networked public
> forms to replace the current State forms.
> 
> 
> I'll be at Stammtisch this evening at 9pm, please come if you're in
> Berlin, if not, R15N continues at Mal au Pixel in Paris, you can
> join the network by calling +33 181 97 97 11
> 
> 
> online version is here:
> http://www.dmytri.info/bitcoin-and-public-money/
> 
> 
> -- 
> Dmytri Kleiner
> Venture Communist
> --
> Unsubscribe, change to digest, or change password at: https://mailman.stanford.edu/mailman/listinfo/liberationtech

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[Pavol Luptak, Nethemba s.r.o.] [http://www.nethemba.com] [tel: +421905400542]