Posts tagged ‘fiat’

Le quantitative easing

by David Birch

[Dave Birch] In John Cooley’s book Currency Wars, he says at one point that there is a grey area actual counterfeiting and the deliberate over-issue of fiat currency. The quantitative easing policy of the British government is likely to be reduce (by inflation) the value of the pound Sterling far more effectively than Hitler’s plans to bring Britain to its knee through counterfeiting in the Second World War:

Operation Bernhard was the name of a secret German plan devised during the Second World War to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes. It is the largest counterfeiting operation in history.

[From Operation Bernhard - Wikipedia, the free encyclopedia]

As an aside, one of my sons went on a school trip to Germany earlier in the year and actually visiting the scene of this attempt to sabotage Sterling, the Sachsenhausen concentration camp. If you are at all interested in this story, there’s an excellent film about it, The Counterfeiters.

Now, think what the electronic version of Operation Bernhard might look like in the future. Not creating counterfeits, but creating clones. While it’s fashionable to talk about cyberwar, surely the most effective way to destroy a 21st century society is to destroy its money.

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In reserve

by David Birch

[Dave Birch] As is clear from the agenda for the Digital Money Forum from its earliest days, I’ve been interested in the subject of alternative currencies for a very long time. In fact, since the days of the Mondex project, when we (Consult Hyperion) were approached by people who wanted to store their own currencies on the cards. I always thought this was a really interesting idea, but no-one else did, and nothing much happened. After a while, I began to realise the ‘alternative’ currency spectrum covered a pretty wide range of topics, concepts, ideas and concerns. The recent discussion on my “Good as Gold” post shows that one of the principal categories — local currency — means different things to different people. My concept of a local currency is a currency that is highly valued highly by members of a community but hardly valued by others. The historic example of wampum in the United States illustrates this neatly.

How would you trade local monies between groups, then? Well, presumably some reserve currencies would spring up (to fill the same role in relation to local currencies as the beaver pelts did to the wampum in the “Super Powers” post) and I imagine it would be inevitable that there would be some that would become privileged, in the sense that some would attract an exchange premium for “irrational” reasons (a belief in long-term stability that could not be proven by spreadsheets, that kind of thing). Having a privileged reserve currency is a very powerful position.

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New money

by David Birch

[Dave Birch] National currencies are (like nations) a relatively recent invention. And fiat national currencies are an even more recent invention. We tend to see them as a physical law, much like the speed of light, but in reality current monetary arrangements are of human making. And they are transient: money didn’t use to work this way, and there’s no obvious reason for it work this way in the future. So what are the alternatives?

There are a few people out there beginning to wonder if the Totnes Pound (or, more likely in my opinion, the Tesco Pound) mightn’t be a good alternative for the weekly shop and a better long-term hedge than Sterling (which dropped like a stone after a recent speech by the Governor of the Bank of England — not because of any change in the real economy, but because of a speech). There seem to be proto-alternative currencies popping up all over the place at the moment, so there are a few people out there who are doing more than just moan about the fiat currency:

An East Sussex town is introducing its own currency in an effort to encourage shoppers to support the local economy.

[From BBC NEWS | England | Sussex | Lewes launches its own currency]

Personally, I’m unconvinced about these “think global, act local” currency initiatives, but they do deserve study.

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