Swap Dollar

SwapDollars are a non-monetary financial system whose standard of value is simply the goods and services it represents.

What good is that?

Well, the benefit of cash is generalized barter. I want something, you want something else, we trade in cash and eventually a network of goods/services transfer occurs to enable our mutual satisfaction - along with the satisfaction of the intermediate participants.

Well, that's the idea - but in practice cash as an information system is horrible at achieving mutual satisfaction. The main problem is that people who have a lot of cash no longer need to trade in good faith - they can be horrible bastards to everyone they "serve" and trash every resource they get their hands on, but their interest and monopolies just keep the cash piling up in their back pockets like magic.

So the idea here is, let's keep the generalized barter but ditch units of exchange. Imagine a search engine instead; people make their services and wants available, priced in SwapDollars - and the engine searches for networks of barter that satisfy the most people at a time.

Now no one can accumulate or hold these SwapDollars - they're purely a pricing mechanism. They don't exist. No one can owe them because they don't exist. And no one can collect interest on 'em or tax them because - they don't exist. They're a standard for prices, not a medium of exchange.

If SwapDollars become prevalent, the primary way to become wealthy will be to maintain goods and offer services. And the primary way to maintain wealth would be to maintain goods and offer services. In other words, the only repository of wealth would be ownership of socially accessible goods and services.

A simple idea, you'll agree, but what a difference such a thing would make! Everyone caring for their possessions, and the natural resources they obtain - no one sitting on a pile of imaginary wealth and letting real things go to pot. All people valuing each other not by magic numbers in some computer somewhere, but by the services and resources they make available to one another ...

Key is that people are agnostic about provision. A feedback network would be required to ensure that good faith was maintained. Like ebay. Specify the feedback level you're willing to accept and you only get hooked up with suppliers of adequate quality/locality. But you don't get to choose your supplier - well, outside this system you can of course, but you don't use SwapDollars for that.

Which means ... marketing isn't enabled. You're free to ignore the SwapDollars and fall back on your cash/barter-based suppliers - but there'd be a whole world of quality-validated supply you'd be ignoring. Plus your ability to collaborate in a swap-group isn't limited by your cash supply - so you could participate in mutually beneficial swaps that cash-based transactions would prevent.

Collaboration, not consumption. Just another wacky idea ... -- PeterMerel

How to tax SwapDollars? Simple - let governments offer their services on the SwapDollar network along with everyone else. Then "taxes" will be market regulated and government can get back into the business of civil service, rather than incivil feudalism.

So if I understand correctly, this would mean dollars (euros, yen and so on)would still be used for pricing, but instead of trading cash for service, you'd have to trade service for service? If that's what you mean, can you explain to me how to obtain a bread? Let's say I'm a carpenter, my services are evaluated at $10/h. I need a bread, the baker thinks that's worth $1. Now do I do 6 minutes of carpenting for the baker? Do I do 6 minutes everyday, every time I need a bread? What if the baker needs half a day of carpenting done now, but after that none for the next month - do I get 40 breads and trade them along? What if the baker doesn't need any carpenting done, but the butcher does, but I happen to be a vegetarian - do I get 2 pounds of beef and trade with the baker? Several local service trading systems do exist (here in the Netherlands, I suppose they do elsewhere as well), but most if not all introduced some sort of credit points because often the service and counter service don't coincide, not in value, not in want or not in time. And more often than not, it turns out that some people accumulate credit points while other have a deficit. Imperfect as it may seem, I'm afraid it's the best we can do. While your system sounds wonderful, I'm afraid it has too many practical problems. I'd love to be proven wrong, though. -- AalbertTorsius

One of the mechanisms of the magic SD search engine would be to aggregate and distribute services. Someone needs a carpentry job done, not 6 minutes of one, so the network of mutual service would have to provide sufficient equivalent value to you the carpenter for your work. Which is easy because you don't just need one bread, but milk, eggs, and a daily supply of same. And so on. Use, say, shares in commonses to make up any shortfall. The problem of matching up supply and demand opportunistically is not computationally trivial, and in the general case sounds a lot like the KnapsackProblem ... but there are good approximations of solutions for this, and there'd always be SwapDollars available for devising more efficient ones ... -- Pete

There are good reasons why one of the definitions of money is "a medium of exchange, a store of value, and a unit of account"!

What are they?

How do you invest swap dollars?

You buy shares of land or other productive resources with 'em. And to get a return you arrange to improve the resources. The extent to which you achieve this, or fund a manager who does, is the extent to which you reap a return.

That's not investing, that's farming. I can do that without swap dollars.

So? If you couldn't do with SwapDollars what you can with cash, that would be a problem. If you can do the same, what's the problem?

The problem is that farming isn't investing. I can't farm my way to the moon, for instance, or farm a cure for cancer. Those actions require investment.

If the value standard is material goods, farming - at least, sustainable farming - is equivalent with investment. To explain further, let's say you want to fund a moonshot. You're wealthy enough in material resources - say farmland - to feel it's worth contributing to this. So you advertise your wants - engineering work on a list of UserStories, steel and radioactives for the nuclear motor, and so on. And you price shares in your excess farmland - the stuff you don't need to feed you and yours - to pay for it.

Now there are farmers who want your land and who offer, say, accommodation in their spare rooms. And there are tourists who want that accommodation, and some of them are engineers. And so on across a whole bunch of swap lattice. You're likely not the only fellow investing in the moonshot anyway.

Eventually your moonship is built. Most of your excess farmland has been sharecropped away, but you're comfortable. You either have good reason to expect a return on your investment - mooncheese? - or you just felt like the romance was worth the capital cost. And away you go.

How do you raise swap dollar capital?

You offer to develop a resource or service that has value, same as now. Someone provides you with a source of value to drive this development - ownership or shares in some other resource.

How do you insure swap dollar risk?

By spreading it, the same as insurers do now.

Then swap dollars are no different from US dollars. Neither "exist". Both are "pricing mechanisms". A US dollar is a promise from the US government to pay the bearer one US dollar, which is in turn a promise to pay the bearer one US dollar. If I had a lot of swap dollars (goods & services) I could be just a big a bastard as if I had a lot of US dollars.

You can't have even one SwapDollar; they're not units of exchange. You can own resources, advertise needs, offer services, and price same. So do your collaborators in the swap network. The swap search engine puts together groups of swaps. Before you participate in a group swap, you hold no swap dollars. After you participate, you hold no swap dollars. At no time do you hold any swap dollars. You just price your services and access to your resources.

For example, let's say you purchase a house. Under the cash regime the standard of value of the house is primarily determined by market speculation, and pretty dodgy speculation at that. House values boom and bust, geopolitics (Chinese credit flooding US markets with unperformable loans) interferes, etc. If the primary economic mechanism was swaps, however, your house's value would be determined purely by how well you maintained and developed it, according to a reputable assessment service, along with relative human demand for housing. Hence no bubbles, no busts ... and inhibition of speculative bastardry.

I don't buy it. Dollars don't cause housing bubbles. Dollars are just promises to make more promises, a convenient means of delaying swaps. Rich people don't have extra dollars, they turn them into goods and services as soon as possible. Didn't you watch "It's a Good Life"? The money in the bank isn't in the bank, it's invested (swapped) all over town (or the world now). Swap dollars won't get rid of market speculation. Market speculation is swapping.

Money is fundamentally illogical stuff. Dig it: person A, a bank, makes a loan to person B, for a house. Now person B has the cash for the house, and an obligation to repay. And person A has their obligation, which can be traded for cash. Seriously, A sells the mortgage as mortgage backed securities and they get cash in return. Nice work for person A!

But A's cash is just delayed swaps. Calling them swap dollars or US dollars won't stop A from loaning to B. B will still need to borrow to buy a house. B will still have to make some promise to pay. Assuming that risk will still have value and still make A a profit.

Now multiply person A by a billion and call 'em China. A offers B loans at ridiculous rates - things B can't possibly repay and keep his house, but with $0 down and 0% to pay for the first few years of the mortgage. A sells the MBSes back to B in exchange for resources to build a manufacturing base in competition to B. On the strength of this magic subsidy B's manufacturing is hopelessly outcompeted. Then when B defaults on his loans, in the fullness of term, B goes broke, devalues his currency, and jumps out the not so metaphorical window. A laughs all the way to the ... well, to A.

To make certain this is plain: there are no rich people covering A's butt a la Jimmy Stewart. Those movies are just pretty lies. 96% or thereabouts of cash is created by person A by the PonziScheme? above. See also BillAndTedsBogusMarket.

But how will swap dollars prevent that? And how will I buy a house without some obligation? Or if you're imagining that obligations will be funded for free under the swap dollar economy, why?

Fairly obviously there's not much point in ranting further on this - better to build it and see. Gee, where have I heard that before?

Go for it.

Isn't this the same basic argument made by those who think that we need to go back to the gold standard? That money needs to be tied to something "real"? -- PeteHardie

See also AttentionEconomy. SwapStitution, anyone?

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