Wednesday, February 6, 2013

Note on quasi-commodity money

Fiat money: monopolistic provision is a necessary condition, or everyone would be constantly printing money & devaluing the currency. (Cf. how different fixed costs / unit costs would alter the situation, or quasi-monopolistic provision with a since license-issuing body, or a cartel). Seigniorage: difference between the cost of producing the money and its value. In the case of fiat money, it's the difference between interest earned on securities acquired in exchange for the currency and the costs of producing and distributing that currency. To what extent would a private monopolist supplier of fiat currency still be incentivised to expand & devalue the nominal money supply? Cf. commodity money (gold specie standard) and representative money (gold bullion standard). Cf. one version of quasi-commodity money: rule-bound fiat money, which somehow effectively self-manages. Or, a fixed supply of currency (without negligible intrinsic use value). Or, a supply of currency whose minting is associated with rising marginal cost. Cf. Bitcoin.

Genealogical quasi-commodity money. The "intrinsic use value" of a §cryptlet is its reputation profile, usually as determined by ratings agencies. But this is multi-dimensional. Also highly relational: principals can trigger appreciations in the §crypt they hold, for instance, by careful adjustments of their demand profiles. How on earth to model that? * §cryptlets are unique but involved with one another's attributes via family resemblance. Every principal (a citizen of Ambershadow) sports a pair of unique, mathematically-linked keys. An economic transaction involves combining a private key, a public key, and independently audited information about the nature of the transaction, including audiovisual documentation. Contracts can also be embedded? The result of that operation is sent out across §cryptnet (perhaps) and independent verifiers rush it from all angles. "There's sometimes some hash lottery mining slash cryptographic minting up for grabs too, which is how the supply of cash grows. Forget that for now. In fact forget it for always. That's small hash browns."

 * Value of x's §cryptlet to y based on aggregate demand of y for each of the qualities embedded in that §cryptlet? Which in turn depends on what y intends on buying with it, which in turn depends on what z, y's vendor, intends on buying with it, etc. But it is probably not really "intends on buying" but rather deliberate choice to seek a certain mix of qualities for speculative purposes.

Maybe start simple. Imagine two commodities, holy books and petri dishes of embryonic stem cells. Imagine three communities: fundamentalists, neutrals and scientists. Soon the fundamentalists hold lots of holy§crypt (earned through the sale of holy books) and the scientists hold lots of petri§crypt. Then what?

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