NationStates Jolt Archive


A Currency is Born [closed, Haven nations only]

Allanea
11-10-2008, 19:43
Preliminary Memo on a Prospective Havenic Private Currency
Sent from the Mulligan Bank to Haven's Key Financial Institutions

Up until fairly recent times, most of the economies of Haven were not capitalist. The UNAPS and its subsection of the Union of Socialist Republics were the dominant economical forces in this region. However, today, things have changed. Free markets, individual liberty, and peace are the order of the day. Even free banking, which was once a controversial experiment limited to Allanea alone, are now spread throughout Haven.

We at the Mulligan Bank would like to suggest that it is, perhaps, the proper time to consider the creation of a trans-national currency in Haven. We do not, of course, mean by this the creation of a trans-national government currency – such a thing would necessarily entail the sacrifice of the sovereignty of every nation involved. Rather, we would like to recommend the creation of a transnational private currency, one that would be used on a voluntary bases by individual citizens and companies involved.

How would this currency operate? We at the Bank considered pegging it to gold, but there are operational limitations involving the use of a precious metal that can not be properly denied, namely the inability to rapidly acquire a large enough M0 base, and then to expand it as fast as the demand for our currency will rise. Conversely of course, fiat money is also a grotesquely bad idea – probably moreso with a private currency than a public one.

As such, we recommend backing the new currency not with gold, but rather with stock. Visualize a trans-Havenic company, with holdings in various corporations throughout Haven – say, ten or twenty trillion dollars as a beginnig. It would begin issuing non-voting stock at the value of, say, $1 per share (and at the price of, say, 1.01 per share) – and it is this stock that would be the new currency, in the same fashion that gold forms the basis for the M0 of many Havenic private currencies.

Further, the holdings company would mint new (and initially unbacked) currency to serve as a lender of last resort to various Havenic banks – in exchange for shares in the banks or financial papers that would otherwise come to back the currency.

This would serve multiple purposes. For one, we would be able to reap vast profits for the banks involved by controlling the holding company and reaping a percentage of the dividends. The Havenic economy would also benefit both from our investments and from the introduction of an easy-to-use, stable transnational currency, not dependent on local politics or politicians. So would the users of this new money. Finally, this would be a great experiment in merging inside and outside money into a single entity.

We believe that, for marketing purposes, it is best to call the new currency the Liberty Mark – and the Holdings Company – the Liberty Bank, in order for us to better engender trust in this new process. Finally, we believe that the Bank should be owned in equal shares by participating banks. The first ten Founding Banks should have representatives on the Board of Directors, with equal shareholder-votes.

Finally, we wish to contribute a modest sum of 5 trillion dollars to this endeavour. We hope you will match us.