A People’s Crypto
to eliminate poverty
There have been numerous reports in the last year or so of nations studying the possibility of issuing a national crypto currency. That raises a couple of questions regarding what is/is not a cryptocurrency.
For starters, to this point in time all cryptos have been issued by private entities. Can a crypto issued as a national currency actually be a crypto?
That would make such cryptos actual currency. As things stand, cryptos are virtual assets, like gold, not currency. So having a national crypto would make it a currency: it could (presumably) be attained, for instance, as payment for labor; it would not, as at present, have to be purchased using one or another national currency.
The essence of a crypto is the use of blockchain technology to keep track of it. Blockchain allows that to be accomplished accurately while keeping transactions anonymous. Much is made of the latter, but cash has provided such anonymity for millennia. Blockchain allows what are in effect cash transactions without the need for physical proximity or the involvement of a (physical) third party. Presumably, anonymity would not be a problem for a national cryptocurrency. (Speed of transactions is an issue we can ignore for present purposes).
One of the early ‘selling points’ for Bitcoin, the first crypto, was its limited supply. That was supposed to make it immune to inflation. Since it turned out to be an virtual asset, not a currency, it has been affected by inflation: its price is influenced by the rate of inflation. (That same problem applies to having gold — or any physical asset —as money or the backing for a supply of money.)
Anything with a price will be affected by inflation. All national currencies in existence do have a price: the rate of interest. Money comes into existence in the form of debt, either public or private, and all debt obliges the borrower to pay interest.
Cryptos do come into existence without involving debt. They have a price because they are assets, but their creation does not involve debt. So the idea of a national crypto does present the possibility of a currency that comes into existence without debt.
Since money has a price in the form of interest paid on it, that does have one limiting effect on the amount of money created. Money is created when banks make loans. With higher rates of interest fewer loans will be sought (and fewer allowed), so less money will be created.
On the other hand, when (central) governments borrow money by issuing new debt, money can be printed for purposes of purchasing that debt. Higher rates of interest will not necessarily deter such borrowing. In fact, inflation can encourage the creation of more money in that way.
Creating additional national currency without involving debt has already been done. It was done in ‘quantitative easing’ when money was created for central banks to use to purchase assets of various kinds (as opposed to newly issued debt of the central government). It was also done in response to the effects of Covid, to provide money for people.
In a sense, all nations’ currencies are already crypto-esque. Most of it exists as ones and zeros in computers. One question that arises with the establishment of a national crypto would be how much of it to create. Within that question is another: what should be used to determine how much would be created?
Why not have a permanently ongoing creation of currency for people? That would be the national cryptocurrency. It would come into existence without debt. The number of people being paid it would determine — and limit — how much of it would be created.
One possibility would be to use the crypto to create a ‘universal basic income’ (UBI), an income paid to all citizens (or at least all adult citizens). Personally, I favor a GMI: guaranteed minimum income. Elon Musk would not be paid it, but I would (as a retiree).
One reason — the biggest, I think — for advocating for a UBI has been that paying it to everyone would mean it would not be welfare, which any kind of means testing for eligibility would make it. That does two things. It keeps the income from being morally and politically stigmatized, and it obscures the redistributive nature of the income. Keep in mind, heretofore all proposed UBI’s were to be funded by taxes. Some people pay more taxes than others, but all would get the same amount of money. That is a (relatively) subtle form of redistribution. Creating the money for an income to be paid directly to people, as opposed to having it come from taxes, eliminates the political motivations for making that income universal.
A guaranteed minimum income would mean that any adult citizen — one at least old enough to work full-time — could become eligible for it. How could that be accomplished?
Two categories of eligibility are obvious and straightforward: it would be paid to retirees and adults who were unable to work. In the U.S., that would mean that it would take the place of Social Security. (Actually, that organization could remain as the administrator of this income, though it would no longer be funded by taxes; that would emphasize the independence of this income from both the central government and the central bank.)
To make the income available to any adult, it could become the minimum income for any employed person. A UBI would be paid to unemployed people, but those proposals are always only supplemental incomes. This approach would provide an income on which a person could live a full life (below).
So the income of people employed in minimum-pay positions would come from this new Monetary Agency, not their employers. People employed in all other positions would continue to be remunerated as at present.
Employers would be allowed to designate any position to be a minimum-pay position. People would be free to work in that position for that amount of pay (to which we’ll get shortly) or not.
That labor would not, however, be free. Think about it. Every employer would be anxious to designate as many positions as possible to be minimum-pay positions. With so many positions available that all received the same pay, why would a person choose to fill such a position here rather than there? There could be purely personal reasons, such a proximity to home or convenience for transportation. The pleasantness of the work environment could also be a factor. One factor that would definitely arise would be material benefits.
Employers would find themselves, due to the nature of a free market for labor, offering material benefits to supplement that common pay. Individuals could negotiate for more — or different kinds, at least. The only restriction on benefits is that they would have to be ’in kind’, not in the form of a monetary allowance.
To ensure a totally free labor market (one not controlled by employers acting in collusion), government could be an employer that people could always turn to, with jobs that would pay the minimum income but no benefits. Those would be menial jobs that required no investment by government, but that would make them free, from the point of view of government. That would ensure that other employers would have to pay benefits to attract workers.
So how much would the minimum pay be? It would have to be enough that a person could live on, even without any benefits. I would say, in the U.S., at present, $18/hr.; $720/wk. (This income could be increased in response to inflation because raising it would not affect the costs of employers.)
There is one last issue that must be addressed in this introduction to this idea. This income would create a continuous flow of money into the economy. For that reason, some way for returning money to the Monetary Agency would be needed.
That could be accomplished by creating a limit on hoarding money. People and businesses would be able to retain plenty of money, based on income, but there would be some limit on it. No money would be collected from any person or business before it could be used for purchases/investment. That way, no person, however rich or not, would have any money collected unless that individual were paying no attention or simply did not care.
If there were a ban on monetary bonuses paid to employees, when businesses disbursed money to avoid having it collected it would have to go into the account of some business, somewhere. Some businesses would collect so much money so close to the deadline that they would be over the amount they could retain, which excess would be returned to the Monetary Agency.
That, in a nutshell, is one way a national crypto could be implemented. I would add that the same process could be used to fund all government, from central to local, at current rates, thus eliminating the need for taxes/public debt (so long as all government stayed within that budget constraint — but at least any new taxes/borrowing would start at zero). At any rate, it is an idea.
I actually came to this idea a long time ago, thinking about making the economy more just. I have already written more about it. “Permanent ‘Quantitative Easing’” is a “4 min read” here in Medium (but not behind the paywall) that has links to yet more reading (also on this side of the paywall) for anyone who might get seriously interested in this idea.