This is not a polished article!! (Penda take note) It is a work in progress and is an expresion of a world view. If you object to a line of reasoning then please make the counter point.
The name MagicBeans references the fairy tale of Jack and the Beanstalk in which worldly goods (the family cow) are exchanged for a dream, a dream whose value is unknowable to those who do not, and indeed cannot, believe in it until it grows before their eyes. Like Jack’s mother, many give way to the fear that we have exchanged our worldly riches for a hollow promise that amounts to no more than mundane beans; it seems in this light that our reward will forever be the mere semblance of that which we have lost. But as with any fairy tale a dream can lead to, and in itself create a (vision) quest, the trick with dream is to remain lucid and learn how to guide and react to them as they develop . If blindly followed, without heed to direction, a given dream may transform as ours seems to have done into a nightmare of unmet needs and distant/forgotten desires. It is as if we have descended beneath the obscuring clouds and come to our senses only to find ourselves a lumbering giant chasing franticly after our lost wealth. Having been so long enthralled to a world of giant corporations and magical financial meaning, it remains to be seen how we will react at such a height to the steady shuddering of the beanstalk as an axe, wielded by an ‘invisible hand’ strikes at its trunk. The structure of magic is such that words do not only describe our story and the world but actively bring them into being. No story can have any meaning without an audience to resolve the narrative and interpret its relevance. Thus it is the responsibility of the audience to participate in the listening for it is the active imagination which brings magic into any story.
This essay is the description of a monetary system based on the decentralized minting of money ‘collateralised’ by the creative force that drew it into the world rather than by a debt. The objective of this system will be to facilitate what Adam Smith called the human tendency to “truck and barter” and to bring that basic ‘social’ instinct back from the abstracted and alienated debt=money system we use today. This redesign of money towards the personal, social, and in some sense ‘magical’, is important because under the current desanctified and generalised money system we have sold more than we realised for the love of money. Though humanity is questing for the best of all possible worlds, we find ourselves desperately lost in the labyrinth, by quantifying everything in our world as one of many and then further generalising the many into the one ‘economy’ we have (unintentionally) defined our very selves as fungible market commodities and so we have created our own Minotaur. That is to say we have come to placidly (if anxiously) accept, that in an economic sense we are all, generic, interchangeable and replaceable units of, and subject to, the fickle market economy. It seems we have no way out, no hope of rescue from the beast.
There are so many people who know that there is a more beautiful world in our imaginations and yet to their continued astonishment they find themselves in this one. The ‘realist’ attitude that is so prevalent around us leads many to expect the inexorable tide to come in to its high mark and thus justify their refusal to sit on the beach demanding that the moon relent its pull, but even the realist may still permit us to build a boat to carry the hopeful should the sea threaten to rise and drown us all.
What is proposed here is a currency underpinned by the gift. A ‘Gift Standard’ rather than a Gold Standard, where gifts are represented by tokens of a known number which are valued, as any other commodity, by their relative exchange value. With no central banking administration or national mint to bend it to their will the MagicBean envisioned here will be a talisman of social commerce rather than of personal wealth, and a totem of the gift rather than a manacle of liability. But without central institutions charged with the stewardship of our currency how will honour and good faith in the money be maintained? No man is an island in and of himself and we all sail on a sea of social capital, interacting with others and forming relationships that depend on our social activity. In this way personal trust is earned and we may draw on our social bonds to ‘bail us out’ when we are in need and in turn offer support to those we trust when they need us. This natural social capital is approximated in modern anonymous banking by the credit rating. In the case of the MagicBean system we might metaphorically describe a credit rating as the soil in which the beans might grow. This soil will be held together by social relationships formed through social networks of accounts (farms); these networks will be both ‘chosen’ by deliberate associations, as between friends and business affiliates, and ‘emergent’ as with associations generated in repeated commercial interactions such as frequent shopping at the same shop, or habitually buying the same product or brand. If the socioeconomic activities of your account are brought into disrepute this will lower the quality of the ‘soil’ within which your MagicBeans are rooted, in this way participants will have an incentive to forge social connections which will increase the commonwealth rather than deplete it. Economic choices which benefit the whole of a community will have the effect of allowing your own beans to thrive, as it were, and grow and so the value of one’s own currency depends on how well one tends ones (metaphorical) garden.
Some of the economic AssumptionsOfMagicBeans are covered here.
Two of the great virtues of any money system are that they permit divisibility and the coincidence of want. Thanks to money one need not buy a cow’s worth of salt when one only has a cow to spend and can in fact obtain salt from a vegetarian saltier. This oft noted convenience comes at a perhaps less obvious cost; the anonymity of coinage renders every level of a supply chain invisible to the other levels. When a cow is exchanged for currency it is alchemically transformed into ‘gold’ leaving no trace of its former incarnation on the coin which are then divided and distributed throughout the economy. The same is true with any product, money allows the production process to be obscured from the consumer, from the pollution caused in the extraction of raw materials, to the pay of the workers and profits of the investors, all is rendered opaque to the consumer in the absence of other social means to discover the practises of the producers. As things are today one never knows if, or how, through commercial interactions we have funded war and exploitation as expressions of our economic ‘interest’. The best we can do, we are told, is to boycott those who we see as (or are caught in the act of) abusing their economic power. This at best gives the wealthy more ‘votes’ to decide what shall be done, and at worst generates an entire tear of the economy dedicate to obscuring and justifying the ‘dark side’ of the economic influence on the world.
It is important to state from the outset that this ‘MagicBeans’ system is not envisioned as ‘monopoly money’ (Pun intended) but would rather exist beside conventional currencies like the Dollar or the Pound and local currencies like lets schemes.
The MagicBean would be a hybrid fiat/barter/gift system in which symmetrical exchange would be promoted without a demand for instant reciprocity. This will be achieved by permitting anyone to mint money. (If the idea of printing your own money seems like a bad one to you at this stage, please bear in mind that under the current system individuals effectively print money when they take out loans from banks; in fact even governments ‘create’ money in this way. Today we live under a “debt as money” system, more politely known as ‘Credit Money’ which is limited by fractional reserve.)
All fiat money systems are founded on good faith in the currency (Money Commodity) rather than in the commodity value of the token itself, Even in the case of the gold standard (Commodity Money) the gold in itself is fiat unless there is a market for it other than as an anti-counterfeit measure; Gold is after all, just a shiny metal.
MagicBeans would have no explicit single commodity backing but would be drawn from a finite supply. I will illustrate the principle with a more or less arbitrary upper limit of 1Trilion MagicBeans in the system (which could of course be infinitely subdivided.)
To issue 1 trillion MagicBeans all at once in the initial public offering and they would be both worthless (in supply and demand terms) and easily monopolized (Monopoly being a major reason that gold is not my commodity of choice to under pin money.) I propose therefore that a number of mechanisms be employed to distribute the initial (pump priming) beans.
1. Credits, awarded as commission to barter traders.
2. Interest paid to lenders but generated out of ‘nowhere’.
3. Gifts of x beans to new accounts.
The MagicBeans themselves would be carried on a distributed peer to peer network application (like a hybrid of “Emule” “seti” and “ebay”) that would facilitate the coincidence of wants and validation of transactions. People would make offers of, and requests for, goods just as in any market but rather than buyers competing with one another to offer the highest price and sellers competing to sell at the lowest, participants would benefit from creating the most useful and beautiful contribution to the economy so that the wealth they create may persist in the interest of all.
On creation most accounts would need to offer items and services out before being able to trade using MagicBeans alone. The only other way for a new account to consume without first producing would be through loans from other users with beans but new users would obviously lack online reputations and would therefore have to rely on their real world reputations. Ideally this would forge social ties between referring members who would have by default invested interpersonal capital within the magic bean system. Perhaps new members could also be gifted some beans for joining, though anti cheating systems would need to be built in to prevent spamming etc.
Within the MagicBean system new members would have no “Liquidity” or “Credit History” and would there for need to trade with others to improve their standing and acrue ‘credit starus’. As they accrued reputation they would be able to solicit credit from others who would lend their own MagicBeans at their own terms. Whether secured against assets or not the loan would still stand against the borrowers reputation (just like any bank in today’s system). These loans would be on a 100% reserve basis (numerous historical examples have shown fractional reserve banking to be a bad model,) lenders could only lend what they actually have in their accounts)
The money supply, though notionally fixed in the case of the MagicBean?, has a profound effect on the rate of inflation/deflation in an economy. Inflationary and deflationary cycles are related to the velocity of money and in turn the velocity of money, in the MagicBean system as much as any other economy, is highly dependent on the availability of credit. For services to flow freely against the countervailing greed of some members of the system, who may otherwise tend to manipulate and monopolise economic structures in their own interests, and natural dissipation (through death or disinterest) of others, there will need to be a mechanism for stimulating and impeding currency flow.
Each MagicBean transaction will leave a footprint or shadow on the money itself, recording not so much who used it but, more usefully, what it was used for. When you have MagicBeans in your account you will be able to examine their history, where in the world they have been and what they helped to create in any give incarnation. This history will permit the barer the ability to approve of or regret any transaction in the chain, thereby affecting the ‘soil’ in which that transaction took place. If I receive money previously used to by medical services or to decontaminate industrial land I may choose to approve of those transactions or alternatively I may find that the money was used to pay for guns or clear cutting in which case I may disapprove of that transaction. As this review process unfolds across millions of transactions a day the long term value of a transaction will ebb and flow with the common perception of its social value. In this way Money turns out not to be, after all, just a shiny metal, but in fact a tribute of gratitude from me to you, in thanks for that which you have given to all of us. People thus commenting from ‘outside’ a transaction do not so much owe the participants a debt as much as a wish that they too may benefit from the generosity and gifts of others. When I create more than I require it can then flow from me to others in the world, and in return I can trust the money to remind others to give their gifts so that in time they may flow back to me.
To trade in this age of separation no longer requires that we forge any social bonds and so the farming of cattle need never concern or even occur to the salt merchant. The MagicBeans money system, the seed of which is described here, has embedded within the tokens of the money themselves, a history of each transaction and the social bonds it facilitated. The money would thus be a representation of its action in the economic world, each MagicBean expressing the story of one transactional thread in the collective tapestry, which we are in the midst of weaving.
- I do not so much owe you a debt as a wish that you too may benefit from the generosity of the gifts of others. When I create more than I require it can then flow from me to others in the world, and in return I can trust the money to remind others to give their gifts so that in time they may flow back to me.****
Money, as all things, has at its heart an ephemeral nature. It is a constant process of becoming and decaying. Even our modern debt system would ideally exemplify this by creating money as a debt and then evaporating the money again when that debt is replayed, but usury has debased this cycle demanding that more must be replayed than was withdrawn. To account for the Vigorish (the interest) demanded by the lender, money must be drawn from somewhere. As things stand, that additional money is extracted from other parts of the economy through bankruptcies and repossessions or is simply created out of nothing as more ‘debt=money’, which itself must be repaid at interest; and so the inflation cycle begins. MagicBeans will be phoenix like, designed to naturally dissipate back into a potential background wealth from which can be drawn the motive power to create goods and services in the world, goods which themselves like the ruins of lost civilisations will inevitably decay into history.
The reason for embedding the history of money within the coinage is to make it deliberately possible for people who are outside a given transaction may make modifications to that transaction. Though this at first may seem strange it is in fact a feature of today’s money system; it is what drives speculation. Inflation and deflation of relative commodity and monetary values, in effect, renegotiate contracts on a daily basis; a speculator endeavours to profit from this by buying low and selling high. But this does not only affect speculators, for example. If I sell my house before a housing crash and invest the money in gold before a gold boom then I am rewarded by the fluctuations of the market despite having produced or contributed nothing to the common wealth but my title to those assets. Conversely, if you convert your life savings of gold into a house which then becomes worth less as the value of the gold you sold escalates then you are penalised no matter how vital your social contribution.
I do not so much owe you a debt as a wish that you too may benefit from the generosity of the gifts of others. When I create more than I require it can then flow from me to others in the world, and in return I can trust the money to remind others to give their gifts so that in time they may flow back to me.
MagicBeans are not to act as records of debt but are instead ‘crystallised’ credit. One function of the MagicBean system will be to facilitate a coincidence of wants, and to this end the processing element of the network would consist of routing algorithms that would calculate sale/exchange webs, connecting “man with cow” to “man with salt” via multiple barter exchanges and supplemental fiat payments. This will mean that you won’t have to cut up your cow to purchase a pinch of salt. But also that you can have salt even if you do not have a cow to offer in exchange. Because the primary foundation of the currency is the gift there will be times when things flow to you even though you have no Beans to return. This is because others will have beans that they do not need at this moment. None of these ideas are new, this is what money was born to do but just as we were born into an expectation of a different world than that upon which we now find ourselves so money finds itself alienated from its sacred place in the world. Over generations money forgot what it represented and as though with a mind of its own clung to the belief that it was equivalent to gold or silver. Just as we forgot out distinction from our technological world view so the money became bonded to its material/bodily incarnation as gold and coin.
Before the MagicBean can have any meaning and be drawn (so to speak) from the void by the intention of people, those same people must first offer their goods and services to others in exchange for nothing. That is to say that I cannot spend what I do not have and the MagicBean can have no value until it is imbued with the value of my creative gifts. A gift offered without DEMAND for immediate parity exchange but rather the knowledge that the act of giving can be known and that that knowledge will produce a gradient down which the gifts of others will role. Participants will never know whether the system will provide them with a barter exchange or if they will have to wait for some time to be recompensed, they will only know that an approximation of parity is embedded in the system and that the more they give the more will flow and the more that flows the greater the wealth of all. With MagicBeans more for you does not imply less for me in this world of abundance; abundance being a product of my gifts not of my acquisitions. The first ‘transactions’ of anyone trading in MagicBeans would need to be of gifts as they embody the money they will later use with the meaning of their creativity. As they offer these gifts into the economy there is always the ‘risk’ that they will never be remunerated and so it will be most ‘rational’ for them to ‘invest’ their gifts locally, with those they know or are geographically close to in the physical rather than the virtual world. These ‘gifts’ would allow the participants to generate a credit rating as expressed in a feedback system. Not explicitly accruing MagicBeans themselves but rather acknowledgements that they have contributed whatever it may have been to the general fund of commerce. Those receiving goods and services can place a MagicBean value on the good/service received and a report of the social experience. As these transactions disseminate across geographical space the use of abstract money in the form of beans becomes more important as distant social groups rely on the exchange of tokens to maintain a balance of trade, the system would probably benefit therefore from an algorithm that biased to resolving intercommunal payments first.
Each user would have a ‘social network’ within the MagicBean system. This is intended to be part of the credit rating scheme and those in your social group will infer upon you a credit score far in excess of the feedback received through everyday transactional feedback. Members of a social network would have a direct interest in one another’s credit rating and association between accounts should not be trivially formed or broken. I don’t know how this would best be built but my thinking is that individuals could affiliate with one another to community bodies, business groups or corporate entities of whatever sort. The financial behaviour of these groups would be reflected in the conduct of the trading block and of its constituent members.
It is impractical and undesirable for every transaction to be limited by the use of a computer so if a user wishes to trade in paper money they would be able to withdraw magic beans from their account and print it out for use as conventional money. The printed money would consist of a time limited hash code upon expiry of which its value would revert back to the originator account unless already paid in to another account. In this way all self issued notes (cheques) would be instantly redeemable with no clearing time just like any other cash. The only complication this adds over conventional money is that the hash would need to be verified using bar code or other input system. But mobile phones with cameras are already ubiquitous so this should be an easy thing to achieve.
Requests and offers are mediated by the system to connect man with cow to man with salt without the need for either of them to interact ************ prices would not be set by the seller but would instead for through emergent money, underpinned by the reputations and social interactions of its participants.
Each participant would list goods and services for “sale” and also list services currently wanted. Each listing would be shared across the network within categories distributed as tag clouds in the system. Upon completion of each transaction feedback would be exchanged via an escrow system (feedback would remain hidden till left by both parties) a buyer / seller giving bad feedback would damage the credit rating of the other party but also to a lesser extent themselves. The inclusion of ‘feedbacl’ or ‘reputation’ creates two value tiers “liquidity” and “credit rating”. The credit rating (feedback) element would then be used to by lenders to calculate the risk associated with extending credit to a given trader.
The MagicBean would be to all intents and purposes be a commodity of a known quantity. I propose as much for example as anything that the system be limited to containing a maximum of one trillion (1,000,000,000,000) MagicBeans. This upper limit once reached would be fixed and maintained and no one would be able to increase or decrease the overall number of beans in the system. Theoretically this would create a supply stability to the commodity unknown with other commodities, which can be brought into and out of use by physical means (mining ship wreck etc), I would hope that this money supply predictability would reduce price volatility to a negligible level, thought some volatility could be regulated as described below.
On the one hand the velocity of money may decelerate as people hold on to savings in the anticipation of some future need or the absence of a present one. The increase of the velocity of MagicBeans may be achieved by the charging of a penalty in the form of negative interest on MagicBeans that are left dormant in personal savings. (In our present money system this regulation is achieved by inflation, which has the effect of devaluing static money against rising prices which in turn feeds back to stimulate rising interest demands from lenders who wish to offset future capital depreciation. It is clear to me that an ever escalating money supply does not address the problem but rather generates artefact which themselves demand remedies.) The stimulation of the velocity ofMagicBeans would be drawn into and out of use in response to the circulation rate of the MagicBean in the economy acting as a regulator to the rate of transaction. At times of high economic activity there would be no erosion of horded ‘savings’ where as in times of ‘recession’ there may be a high percentage penalty rate. The MagicBeans removed by this erosive interest charge would evaporate out of the money supply but would instead be redistributed within the system as a positive interest rate or flat rate gift to account operating at ‘optimum’ activity or as seed capital to new accounts or perhaps administered as a fund operated rather like a state lottery, supporting community projects and the like.
All loans and lines of credit would be extended on a 100% reserve basis (no fractional reserve banking would be tolerated.) This precaution would limit the Magic Bean supply to commodity parity and prevent uncontrolled dilution of the money supply. Credit would be loaned by peers to peers with loan terms (period and charges) to be agreed between the parties. Because the charging of interest, as an artefact of fractional reserve banking and a scarcity mentality (both of which lead to the acquisition and accumulation of ‘wealth’, what is mine is not yours therefore more for me is better for me even if it means less for you) it is likely to persist in the expectations of those coming to the MagicBean from conventional money. I would advocate therefore that there be no structural prohibition on the charging of interest by lenders but that the interest demanded from the borrower should come at a reputational cost to the lender. Alternativly in the early stages of the system while money was being brought into circulation, lenders may still ‘earn’ (without demanding) interest but this interest would be generated out of nowhere by the network until the entire money supply came into circulation. The reason for the inclusion of this provision is that if the money supply should need to be increased at any stage (as agreed by the users) then the decentralization of distribution would reduce the incentive of special interests in calling for unnecessary measures purely for their own profit.
The money would be carried on a peer2peer information distribution system like “emule” or “torrent” with a processing capacity like “seti” or “electric sheep.” (Though the architecture of the network would need to be designed with fraud detection/prevention in mind; One attractive fraud prevention measure may be for transactions to take place in an account neutral way, but which I mean that neither seller nor buyer would know more than the other parties credit rating or reputation. This would make it more difficult for people to agree to overvalue goods and services during the ‘pump priming’ stage. However it is the anonymity of other money systems that has contributed to the alienation of the participants from their social economy and has, in no small part, led to the dissolution of the communal and interpersonal nature of social exchange. I would argue that making magic beans anonymous and impersonal would be to miss the opportunity to regain the social value of the gift economy within the monetised economy.) “Face to Face” trading in the really “real world” (using photo barcodes read by mobile phones to acknowledge receipt of goods and the authenticity of paper money) could also be limited to the use of existing credit, this measure would help to guard against fraud and also instigate intercommunal trade across geographical boundaries which would maintain open economies rather than closed communities. It would also allow the MagicBean to act as a conversion / transmission currency between lets (Local Exchange Trading Systems/Schemes)
One of the cornerstones of market economics is the interactive relationship (expressed by price) between supply and demand. When a commodity is abundant, its price is so low as to render it uneconomic. In other words “more is less” or “there is no profit in plenty”. On the contrary, when there is a dearth price rises. In other words “less is more” or “there is profit in poverty”.