QUESTION Y: How can an alternative money system replace the traditional system?
OPTION 1: By voluntary acceptance
Whether or not market participants use MONEY 2.0 on a voluntary basis ultimately depends on the alternatives available. For MONEY 2.0 to be used voluntarily, it has to be more attractive than traditional bank money as it competes against it.
OPTION 2: By law
The alternative to voluntariness is force – for instance, by declaring an alternative currency legal tender. As long as no alternative currency is used on an overall basis, however, such an initiative on the legislator’s part is hardly to be expected – and if an alternative currency were ever to be used on such a large scale, such an initiative would hardly be necessary anymore.
QUESTION Z: How must an alternative money system be designed to be more attractive than bank-issued money?
OPTION 1: The alternative money must be new and different
It seems fairly logical that traditional bank money cannot be replaced as long as it holds the monopoly on functions that are essential for our society. New alternative currencies ignoring this fact sooner or later face the problem that they depend on traditional money for one of these functions – for instance, by using an already existing currency as a unit of account. That, however, just cements the idea that traditional currencies are irreplaceable.
OPTION 2: The alternative must perform better than traditional money
In the current system, traditional bank money has clearly defined functions. The classic money functions are as (a) a medium of exchange, (b) a unit of account, and (c) a store of value.
Nearly all alternative currencies center on their availability as a medium of exchange – the emphasis typically being on those areas of society where traditional money is scarce or not available at all. Even if this strategy may seem commonsensical to bring market participants into initial contact with the new alternative, it ignores the fact that competition with traditional money is explicitly necessary to replace it. To that end, however, alternative currencies have to score particularly in those areas where traditional bank money is already available.
OPTION 3: The alternative must fulfill other functions than traditional bank money
As worthwhile as alternative money functions – like that of social redistribution – may seem, they are rather counterproductive if their implementation comes at the expense of the core functions of money. Bank-issued money can never be replaced by optional alternatives if those alternatives don’t even perform the basic functions that make up a medium of exchange.
Above all, it is doubtful whether the additional functions that are considered in many alternative concepts are actually necessary. As long as a currency alternative allows for interest-free money creation, for instance, greater distributive justice is already an integral part of the new system. Other mechanisms which grant additional privileges to a specific group of market participants must be viewed critically, as they contradict the idea of a neutral and impartial medium of exchange and basically just reintroduce the same flaws of the traditional money system elsewhere.
– To create a digital money system in which all market participants can issue money under a collective brand, and which doesn’t require a higher authority for implementation.
– To limit money creation with each participant’s ability to render equivalent service in the near future.
– To make the currency freely convertible.
– To establish a sufficiently funded central administration which monitors the rules and, if necessary, enforces them by law.
– To see to it that currency administration and money-lending are separate entities.
– To render traditional money obsolete by outperforming it as a medium of exchange, unit of account and store of value.
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