Following macro-economic news is no picnic. You can follow Gordon T Long on Youtube for instance, if you want to get a glimpse at what we are facing. If you take an interest at what’s happening behind the perfectly neat smoke screen of “jobs, growth, this time it’s different and we’ve solved the problems trust us” acting as a psychological manipulation tool keeping the masses (consumers, entrepreneurs) confident in the solidity of the global financial system, the picture is far from pretty. The jobs created are mostly shit jobs: temporary jobs, part-time jobs, precarious jobs… The reforms in the labour markets are actually acknowledging this fact by introducing “flexibility” in labour laws allowing companies to fire/hire as they please (good luck for those workers getting a long term loan). Also, the labour statistics are manipulated as hell. When measuring the “official” unemployment rate in the US for instance, if the polled people answer they are not looking for a job (aka, they have given up trying to find one and live in precarious conditions), they are not considered as unemployed! The level of non-performing loans is still weighing on banks all over the world, the amount of money injected into the system by central banks has inflated everything (stock market, prices of assets…) and many macro-economists are calling this “new” situation as an everything-bubble (as opposed to the dot-com bubble and the subprime mortgage). Of course, that’s not even mentioning the derivatives market or many other horrible financial instruments that have not been cleaned up since the 2008 crisis. Add on top of that political and geopolitical tensions, and you have the perfect cocktail for a major economic and financial shit storm the likes of which we have not yet seen.
So let’s expect the worse case scenario of all: a global meltdown of the global financial system with a collapse of all or nearly all national currencies, with political extremism mounting, martial law in place following riots and pillaging in the streets ushering in a military controlled authoritarian and centralized State, with countries managing more or less well given their ability for autarky or providing for the basic necessities of their citizens and having to “fight off” (probably even kill) migrants from other countries (and not only the poorer ones) who live in States with low food production/supply, water, electricity etc.
Now that I’ve got you running for guns, batteries and food/water supplies to barricade yourself inside your home, let’s calmly try to think of a solution to all of these problems that are simple and realistic. Yes, you read that correctly: simple and realistic. The reason: because of the second law of thermodynamics and entropy, as inescapable rules which apply to all things in the Universe. As time goes by, complexity increases along with chaos, and so does the energy to try to "maintain" it in a functional state. The current financial system is probably at it's most chaotic point and about to collapse. Think about it as a "living organism" which has generalized cancer. The "energy" (understand human intervention) to keep it from collapsing is immense and unsustainable. But out of this process of degradation, you have the opportunity to create something even more complex yet seemingly simple. Example: the sun's entropy grows over time as it consumes it's energy, resulting in it's unavoidable death. But from it's process of degradation and the energy released, life could emerge on earth (plants...) By the same token, the collapse of the global financial system will "release" a huge amount of energy (human labour) which has the potential to "feed" or "create" another system.
First, let’s rule out a “solution from above”. Politicians, economists, bankers, basically the “people in power” cannot think outside of the box they are in. “If you are a hammer, then everything looks like a nail”. They will not be able to envisage solutions which are outside of the realm of tools they have at their disposal: martial law, make demonstrations illegal (both are already being smoothly ushered in via law, following the “fight against terrorism” and the ban of certain protests for “security” reasons as in France for instance), print the money, nationalize banks, take control of the economy, distribute “vouchers”, send the military in the streets to protect major stores (the big corporate giants, Carrefour, Walmart, Amazon… of course, not your local small entrepreneur) which will only exacerbate the centralization of power, and before you know it, we are effectively in a form of “semi communist-monopoly capitalist” dictature where the State in alliance with a select few economic elites decide everything (central planning): who gets what, and who should work where. Maybe we’ll even see the resurgence of work camps (aka Gulags), who knows… “Desperate times call for desperate measures” as the saying goes… If you want a glimpse of what might await us, look no farther then Venezuela.
And of course, the “flavour” and shape of this trend will vary according to the country. Countries like China are already there arguably so for them, not much will change, except perhaps an even stronger State control over the country. In the US, it will probably be pretty messy, given the right to bear arms… I would definitely not like to be living in the US.
That being said, I don’t mean that politicians and public authorities in general have no role to play in the solution I envisage. On the contrary. I foresee a keyrole for the politicians that really do work for the general interest and not serve their own personal hunger for power or money. What role would they have? The role to encourage people to take up this solution by themselves! Giving the “power” back to the people!
Now to the solution. Drum roll…
And the winner is: a Universal Basic Income in the form of a crypto-currency implemented via a decentralized, permissionless blockchain, applying the principle of the Relative Theory of Money.
Say what? Bear with me.
Let’s start with examining the Relative Theory of Money. This is the only monetary system/theory that can rekindle a loss of trust following a major global financial meltdown. Keep in mind that in the event of hyperinflation the likes of which Venezuela has seen, then no matter how much money you print, it’s useless. Once people lost trust in the “store of value” component of a currency, it’s game over. The Relative Theory of Money is a monetary system which could be described, in simple terms as a mathematically adjusted “quantitative easing for the people” in the form of a permanent “Universal Dividend” being paid out to each and every individual. So it’s a form of Universal Basic Income that each and every person receives unconditionally.
But there is a “twist”. It is the term “relative”. Instead of displaying prices and “counting” in individual units of money (for instance, 300€), you count in terms of units of Universal Dividend (UD). What does this mean? That you decide, by convention, that a month’s worth of Universal Dividend (UD), regardless of the amount, is equivalent to 1. It’s like counting in “salaries”. If everyone has the same salary, then you can display the prices and evaluate the costs of goods and services in “units of salary”. For instance, a car would cost 12,3 UD. A bread would cost 0,05 UD.
“What’s the point” might you ask? It has to do with the way the Relative Theory of Money envisages monetary creation. Periodically, the amount of individual units of money is increased. And so after say 2 years, you would receive 400 units instead of 300 units. So in individual units of money the prices have gone up, but in Universal Dividend the prices have remained the same. So basically, it’s “baked in inflation”.
Why would this be a good system? Because it is a system where no one can get extremely rich or extremely poor. It is the perfect social security net which redistributes wealth without the need for taxation. As time goes by, if someone managed to monopolize all the money, his “share” will shrink in proportion to the share of what others have. As an example, imagine that 10 people receive each 10 units on day 1 and one of those people is a very famous pop singer and organizes a concert which he charges 9 units for. At the end of the day, that one person has 91 units and the rest have 1. He has nearly 100 times more money then they do. But on day 2, since each person again, receives 10 units, now the famous pop singer has 101 and all the rest have 11, which is only a ration of about 1 to 10.
Could prices vary? Yes, as a function of supply and demand (if for instance there is a shortage of cars, bread…) but not as a function of the supply of money (inflation) since a price displayed in UD has the cost of inflation baked in.
Why would anyone in their right mind opt for such a system? It has to do with the political philosophy of John Rawls and the concept of the Veil of Ignorance. Say you were a person about to be born into the world but not knowing if you were going to be born in a rich family, or poor family, with a high IQ or low IQ, with a disability or without a disability… Which kind of system would you “choose”? The one where there is an implicit assumption that 100% of the merits and proceeds go to a single person, the one that has done “the work”, a “winner takes it all” system in short, or a system where there is some form of redistribution to account for chance or luck in life. Arguably, most people would chose the latter, especially if you look at what has happened over the last 40 years: an absurdly disproportionate concentration of wealth in the hands of a few, which, by the way, is also what brought the current system to the brink of collapse.
Let’s move on to the “crypto-currency” part of the equation. The reason is simple: to break out from the centralized control over money and money supply that brought us here. First, let me reassure you: this is not an anarchic project that seeks to overthrow governments and do away with centralized authority. It is merely a logical next step of separation of powers which took us from dictatorial, authoritarian states to democracy. In order to avoid concentration of power and arbitrary use of force, political thinkers such as Montesquieu came up with the principle of the separation of powers or the “checks and balances” in the US: breaking up governments in the executive, legislative and judiciary branch. This arrangement is currently experiencing severe strain. In the US, the Republicans and Trump are clearly attacking the system by trying to appoint politically skewed judges and obstructing justice in a variety of ways. In Europe, several governments have “amended” (fucked) their Constitutions to give disproportionate powers to the executive branch. Even the electoral process, with the help of mass media, has skewed the voting process so important for democracy by scare tactics, discrediting certain political candidates with political ideas (mostly left wing) which were not in line with “the establishment” (among which the rich billionaires owning the mass media).
And so we have a choice: a “recentralization” of political/economic power where most of us will become mere work slaves, or a new “decentralization” of political/economic power which will reinvigorate democracy and usher in a new era adding monetary policy to the list of separation of powers.
And this is precisely the reason why the Relative Theory of Money cannot be implemented by governments but has to take the form of a permissionless decentralized blockchain/crypto-currency controlled by the people directly (direct democracy). This is also extremely important to break from the “monopoly” and “unique legal tender” system that we currently know, which basically means: “if shit hits the fan, you’re going down with the shi(t)p”. For all those that my arguments do not convince, and believe that such a Universal Basic Income system will not work, they are free to chose any other system they like, be it Bitcoin, a resurrected Euro from the dead, Gold, a sock, their watch, their kidney… I (and society at large) could care less. The whole point and advantage of crypto-currencies is that since they operate directly via the Internet without any intermediary, decentralized exchanges can instantly convert one crypto-currency into any other for nearly no cost. So people will remain free to chose the crypto-currency or legal tender of their preferred choice. If they are greedy and arrogant (the people that thought of buying Bitcoin when it was at 0,01 cents and are now billionaires) then they will “push” others to adopt Bitcoin so they can become their Overlords, the “new rich” with their “serfs” at their service (the ones adopting Bitcoin last). If they are sensible and believe in a society where there should be a bare minimum for all and yet a way to get rich (but not too rich) for the talented and dedicated, then they will adopt a crypto-currency derived from the Relative Theory of Money. And the “cherry on the cake” is that these systems are NOT mutually exclusive! You can have a “mix” of both! A Universal Basic Income crypto-currency should basically be like a foundation or solid safety net which allows for experimentation and innovation without “breaking” the system, without a brutal interruption of all economic transactions and the freeze of the entire financial system (as would/will be the case if the current monetary system collapses).
Such a cryptocurrency already exists. It is called G1 (pronounced “June”) and can be downloaded/explored further here: www.duniter.org
In order to “create” or open an account which is entitled to receive a daily UD, the person needs to be “certified” as being a “real” person by at least 5 existing members, via a physical “in person” meeting (the technology relies on the open source “web of trust” system). This certificate needs to be renewed every 2 years so if that person cheats and opens several accounts in order to get more UD, there is always a risk that his accounts will not be renewed if he/she cheats and is discovered.
The code is open source and other G1 currencies are encouraged to be developed in various parts of the world, in order to avoid a monopoly setting in again, and also in order to adapt to “local” conditions, productivity, prices, demographics etc.
What about taxation and public money? No need within this system. Since anyone can open an account, the State (government) will generate as much G1 as the number of their civil servants! They will “automatically” get paid the exact same amount as anyone else. This UBI will be “tax free” and taxes will focus on any other legal tender.
What about the problem of laziness? Won’t people stop working? There are two responses to this problem.
First, one must stop to assume that everyone works ONLY for money. If you look at both children and retired people, they work to quench their thirst to learn (in the case of children) and to keep them busy (in case of retired people). As for adults, think about it. If you were given the exact same amount of money that you had: if you hated your job, you would probably quit. But would you sit in a couch doing “nothing”? Perhaps… If the current “values” of our spoiled materialist capitalist system has rotten your values to the core and you “buy in” to the “ultimate” dream: winning the lottery and drinking cocktails on a sublime beach front. But for many adults, especially those that like what they do, they would continue doing it regardless.
Second, don’t forget that this UBI system is only meant as a minimumstabilizer. On top of that, I would imagine a system where the labour market would finally function as it is supposed to! People would get paid as a function of supply/demand in another legal tender that would sit on top of the UBI. What does that translate to? The jobs no one wants to do will be paid most and the jobs everyone wants to do will be paid least. So being a garbage collector will be paid a lot, since I doubt it’s anyone’s dream job. And if you want to do your dream job and many other people want to do the same, then you’ll be paid very little money. But what do you care? You’re “doing what you like”! For those that want “money” instead of doing what they like, then they will always be free to look at the jobs that no one wants to do or no one can do. The “elasticity” or speed at which salaries adapt to ensure that we have the right “balance” in the labour market still needs to be figured out (for instance, how quickly should salaries rise if there is a shortage of doctors, or fall if there is an “over supply” of doctors). In the end, I think people will become pluri-disciplinary breaking the “specialization” at all costs trend, picking up garbage one or two days a month to rake in cash and doing something else the rest of the time.
A nice “side effect” of such a system is that Artificial Intelligence and Automation will be focused on the jobs humans hate or don’t want to do.
Finally, I would like to address what to do with the “ashes” of the “old” system. What to do with all the debt, the loans, the contracts etc?
Short answer: destroy them. Reset everything. You may think this is crazy, but it’s absolutely not if you think about it carefully. Why does anyone have torepay their loan? Imagine you borrow 100.000€ to buy a home, why do you have to bother repaying that loan? Because 100.000€ have been created out of thin air to pay for your home and added to the current money supply. If you don’t work hard and create economic value by “recapturing” 110.000€ in order to repay (destroy) that extra money added to the money supply, then everyone else will pay for your loan via inflation (their money will be worth less because there is a growth in the money supply that you didn’t compensate by paying back/destroying the share you injected in it, or in other words, because you didn't "create" an equivalent in economic value of the 100.000€ that you borrowed). But in the case of a global financial meltdown, money is worthless anyways! So what’s more important: that you repay your loans/debt or that people continue to create economic value by going to work and keeping the economy afloat?
All that will be needed is to have a smooth transition from the current system to one with UBI in order to make sure that the supply chain is uninterrupted (that each actor in the supply chain has the “money” to pay for the raw materials and other costs). You don’t even need to worry about people’s salaries in the beginning since they will all receive an unconditional UBI (if they decide to opt for this system). By the way, you could also imagine that all current entreprises reorganize themselves into worker owned cooperatives where workers pool a part of their UBI in order to pay for the raw materials, machines etc to keep the supply chain uninterrupted.
Why have I said that public authorities, politicians will nevertheless have a role to play in communicating about this solution? Because it’s the problem that all good ideas face: how to get it into the ears and minds of the general population. Take Uber, or Facebook. The money spent on the actual app or online platform is nothing compared to the mass marketing and communication budget that makes sure everyone hears about it and launches the network effect or virality which propels those services above all other perfectly valid competitors. I’m specifically thinking about parties like the Labour Party in the UK (Jeremy Corbyn advocating openly for UBI) or the Greens in the European Parliament which are probably the party that is closest to representing the general interest. But it will be a hard step to take. It will mean that they delegate a power that they had back to the people, and let them “test” directly certain policies, principles and values that they could only “test” if they succeeded to win elections. To bust their bubble a bit, it would be wise of them to recognize what actually awaits them if by any “miracle” they manage to convince people via electoral promises and campaigns and reach a ruling majority: mass economic sabotage and mass media propaganda laying the “blame” for the economic downturn on their “suicidal, progressive, communist, economic policies” which will discredit them for the next few decades. That’s how the “establishment” rules. And by the way, they would never win anyways since many voters now suspect that is exactly what would happen if they win so they don’t bother to vote.
Finally, I would like to stress that I am NOT a kind of “social justice warrior”. I actually try to put myself in the shoes of ALL protagonists. This capitalist system acts in such a way that everyone undermines everybody else in an endless inescapable prisoner’s dilemma. If I were one of the richest billionaires, I would have acted EXACTLY as they have acted as well, because it’s a “suckers” game! The one that doesn’t follow the “rules” loses his money, loses face (from the point of view of the rich) and his money is actually sucked up instantly by the remaining rich people via raising interest rates in banks, inflation, paying out extra big dividends to the major shareholders from the boost in consumption that a redistribution of that one “nice guy” rich person’s wealth created… Which is also why I thought about THIS solution and not another. It is the ONLY solution which is bloodless, with no violence, simply a silent and instantaneous boycott and shift to a “new” system with the installation of a (fucking) app… How beautiful, don’t you think? No heads need to roll, no one needs to go to jail, no fingers of “blame” need to be pointed. The people will be given a simple choice: either chose to take your fate into your own hands but accept the responsibility that comes with it, or suffer at the hands of those that took your fate into theirs. What better ways to foster democracy then to actually LIVE IT.
I’ll stop at this point, even if there is much more to be said about this, but I feel that as the likelihood of such a global meltdown approaches, we need to think ahead and prepare. I encourage you to read up on the Relative Theory of Money and take an interest in Duniter and the G1. I have written many other articles which are related to this article. If you’re interested here are the links:
- The System or nothing (aka collective suicide): how the current establishment might try to sabotage any alternatives to this system and have us sink with the boat.
- The petty ambitions and aims behind Universal Basic Income: developing a bit the effects of UBI on freeing the labour market.
- Bitcoin’s early adopters bias is what might kill it: my analysis of the Bitcoin phenomenon and why it will eventually fail.
- Soft Revolution (part 1): worker owned cooperatives: an article which covers the added value and importance of worker owned cooperatives