Bank less Global Entrepreneurship

In such a monopolistic market, as governance and monetary policy-making is, money is a public good, just like water. Banks can create money as they wish, gamble with it as they wish. And some governments might push for deregulation because, well, they believe in the free market. It would be all well and good if money wasn’t a public good. In 2008 financial crisis monopoly failed. No not the free market.
One might say all banking activities should be clear and available for public and decisions on how to use this public good should be made by voting. While clarity is fine, you might say, democracy is not a tool for such a complex issue. Voting is not the counter for monopoly, competition is. What if money wasn’t a public good? What if private companies and individuals could issue their own currencies? What if there was competition in the market of money and currency? Welcome to the age of cryptocurrency, the end of state monetary policy.
In the world of competing currencies where there is no commodity like gold or a central currency like the US dollar, the market of currencies is very much like the stock market. They constantly fail and grow. Savings will be replaced by investments. Banks will go away.
So here is the picture: A marketplace of currencies where the high velocity of money rules the market. In the current system governments and banks create more money every year because when there are more trades but the quantity of money is constant we will run out of money. There is simply not enough money for trades. Besides that due to monetary policy related issues the quantity of money in the future is highly unpredictable. Milton Friedman in Capitalism and Freedom suggested rules should replace monetary policy and central banks. A kind of algorithmic money with no human input. So it is known to everyone that the quantity of money grows say 6% every year. In the market of currencies, high velocity of money will replace growth in the quantity of money. Currencies are governed by algorithms available to buyers. So the quantity of money is predictable. And currencies will compete with each other to win a share in the market which size is now known. Anyone can issue any amount of a newly created currency. But it will be worthless unless it wins the market share of a failed currency.
And it all leads to regularity instead of regulations. Besides that, there will be no single point of failure in the system. If US dollar fails today we all go down with it. Some might suggest if such a thing ever happens a new central currency, issued by IMF for instance, can simply replace US dollar. An even simpler solution is to abolish central banks and their currencies altogether.
At the moment only a few major cryptocurrencies are being actively used in the market. But the most probable scenario in the world of decentralized economy is that successful companies issue their own currencies and their values, besides the rule of the supply and demand, will be affected by company’s performance and products. Therefore there will be tens of active currencies.
This is the familiar equation of quantity theory of money: M * V = P * Y.
M, V, P and Y respectively stand for the quantity of money, velocity of money, prices and goods and services. The aim is to minimize external factors in the market such as politicians’ overnight brilliant plans. And therefore Y and V will be as stable as possible. So now if the value of a currency falls due to a failing product of the issuing company, for instance, the company loses a portion of its share in the money market because prices go up against that currency but the quantity of that currency is constant. There is no magic button on CEO’s desk which doubles the amount of the currency since the governing algorithm of the currency, in the form of a smart contract, is in the blockchain and therefore immutable. The company has simply lost a portion of its share in the market and it’s now available for new currencies to grab.
A healthy money market is where currencies constantly fail due to real competition and new currencies emerge. So there is no mogul in the money market. But that, as you have probably guessed, is not possible in a world where mega companies rule. So let’s see how we can get rid of them.
Marx believed when an employee and an employer shake hands to cooperate, they both think about one thing: the value of employee’s work is more than his/her salary because otherwise there would be no deal in the first place. Employer buys the service of the employee and sells it and gives a portion of that to the employee himself. One argues that the employee’s service would have no buyer (and therefore would be practically worthless) unless an employer (read middleman) hires them alongside a number of other employees, combines their services and sell it as one product. Each of those services employees provide would have no buyer alone. That is the root of what we know today as the company. But if employees could sell their services directly to buyers then there would be no need for the middleman anymore.
In a world where automation and technology remove cumbersome tasks, not only workforce will be pushed toward more and more skilled works but also tasks that previously would need a large team will be doable by a single person or a small team. In other words division of labour evolves into the separation and independence of tasks. A careful reader should still be concerned, what about monopoly which leads to exponential expansion of a firm? Let’s say, in a hypothetical example, a person creates a very popular social network, which mechanism ensures they will not buy Instagram and all other rivals and stop others to expand it and build something on top of that? One might say wait a minute, we believe in the right of ownership why should such a mechanism exist in the free market at all? Well first of all because monopoly is against the very nature of the free market and competition. But secondly, the right of ownership is not about information and ideas. Newton couldn’t say, look this is my formula no one should touch it.
So not surprisingly the answer is to open source information. The above guy, in the decentralized world, would search online, download bunch of open source software and packages, build something on top of that and publish their newly built social network platform (Due to share-alike license the code of the platform should be open source too). The platform forms a community. Another person likes the platform. Downloads the code and builds something on top of it and publish it as their own website. As the code base for both platforms is the same users from one platform can add users from the other platform and share contents, etc. Another person likes the idea too. Downloads it and so on. Those who download and expand the software are no longer rivals. Every fork of the project enriches the network.
Let’s go back to money, this could be the argument of the chairman of a recently abolished central bank:
When the risk of keeping money is high, people will not spend it on even riskier investments such as funding startups but instead, all capitals will be moved toward safer markets such as real states (As if the majority of people’s money is not invested on real state right now). This would be true if people think the functionality of an economic system is not reliable so at any time something might go wrong followed by a crash and all their savings will be gone (One would point at current situation). So people rush to buy houses for instance so at least they will have a house in the time of a crash. But in a regular predictable economic system, currencies might fail and grow but based on the rule of diversification they will earn a profit at the end. So the central point in this argument is people’s trust in the system.
Economically the safest bet is to transfer your capitals to potential mines of demand, that is the poorest regions in the world. You invest in entrepreneurs around the world where the scarce resources can be used to provide basic needs. You bring more profit home to invest both on abroad and local startups and businesses. Local businesses thrive in a sustainable global economy.
But there is a problem, you might think: People living in mines of demand can’t afford to pay for products and services entrepreneurs provide. They are doomed to fail. Yes unless charity becomes profitable. You invest in an entrepreneur and give away money to people living there in absolute poverty to be able to buy those products. That’s where the internet becomes handy. A network of investors. One invests on a farmer for instance and someone else on a local truck driver. You win when they win. That is micro-investment. Anyone with any amount of money can be an investor and when they win larger amounts they can invest in innovative larger scale projects.
So Banks will go away, but not alone. There is one more thing to discard: Let’s assume you are sitting on a chair and for the good of the society decide to replace it with a new one, because more consumption means economic growth. You are in fact paying tax to the chair maker. You get no real value in return of your purchase but you are told to do so in order to be a good citizen. That is against the competitive spirit of the free market. You are surrounded by useless products which, based on the rule of the free market, should fail. But the invisible tax system of the “consumption is good for economy” attitude prevents that. The resources should have been allocated to produce something society actually needs and value. But you take resources away from where it could be used to serve the global society. You are a party to waste scarce resources. You are responsible for the damage to the environment.
However, there are known issues regarding the new system described in this article. For instance, one might rightly point out the possibility of hacking and security issues. This article tried to address the economic and social aspects of the usage of blockchain in the decentralized world. Blockchain has a long way to go in all aspects including technology.
The other argument is that for instance if a currency loses a portion of its share in the market, a dominant currency will win its share and not a new currency which leads to a market with only a handful of huge players. Psychological aspects indeed play the main role here and not real competition and merit. One can’t solve psychological and social issues by merely pen and paper and philosophizing but instead, real-world experimentation is needed. For example, when your friends buy a currency you might be tempted to buy as well. Your other friends might feel the same. So do your friends of friends and so on. Facebook might not be the best social network in the world with all those ads and privacy issues. But you join because your friends have joined and they joined because their friends had joined before that and so on. That is a dangerous trend in the money market. But the solution is not theoretical.
The author of this article is aware of all concerns regarding ideas which were discussed here. All of these ideas should be tested and retested and improved in practice before being used in the real world. The most foolish thing a critic can do is to prevent these ideas to be tested. If one believes they will fail then open the door of laboratories let it fail and let the whole world to watch. The author of this article, as a programmer, is not responsible for unpredictable results these ideas might have in the real world but those who prevent them to be tested are. It’s simply not imaginable for a programmer to write a code and publish it without testing. A huge responsibility will be on the shoulders of those who prevented these ideas to be examined.
In short, there is no single point of failure in the new system. It’s regular, predictable and sustainable. But none of these things will happen if people don’t trust it. The task of testing and examining the system starts from today. Let’s trust be our inheritance to next generations.

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