Thinking again about the peculiar self-liquidating scrip. A city issued the scrip with a series of boxes or punch locations. Each time the scrip changed hands, a new hole was punched and a small tax was paid to the issuer. When all the holes were punched, the scrip was simply discarded. It had served its purpose as an ephemeral carrier of trust.
In theory an ordinary check can be endorsed and re-used as many times as you want. I doubt that anyone does this now in the digital era, and it was rarely endorsed more than once before digitalism. Unlike the self-liquidator, the usual check wasn’t designed for multiple transfers and didn’t pay the issuer at each transfer.
Last year I separated out the idea of TRUST, but left some questions unanswered.
= = = = = START REPRINT:
I’ve never been able to grasp the idea of creating money. Textbook economics is completely useless. “Banks create money by making loans, up to the specified multiple of their reserves.” This tells us the legal limits but it doesn’t go anywhere near telling us WHAT HAPPENS.
When I start from a foundation of TRUST, the answer gets a bit clearer.
The CR side of a ledger means creditur, it is believed or it is trusted.
To pull out of the steady-state loop, let’s consider a general store that opens just after a new town is established. Everyone in town is also starting fresh. The store owner wants to have farmers selling him wheat and hogs and tomatoes, but the farmers are just now plowing and building barns. They won’t have a crop until next August. He needs to contribute to their success by selling them plows and harnesses and hog feed. He has brought several loads of supplies down from his previous store in Kansas.
What happens when the storeowner LENDS supplies to a farmer, running a TAB to record the loan? He isn’t creating money at all. He’s TRUSTING that the farmer will be able to pay for the supplies with wheat and pork next year. What moves in this transaction is an enforceable BELIEF or TRUST.
The same thing happens when the new bank lends silver circles to the storeowner to keep his operation running until the first harvest. In this case the object that moves is silver circles, not steel plows. The silver circles are SUPPLIES for the storeowner in the same way that the hog feed is SUPPLIES for the farmer.
Both moving objects, the steel plow and the silver coin, are physical tokens exchanged for TRUST. In each case the TRUST SIGNAL ultimately disappears, because it was not material in the first place.
= = = = = END REPRINT.
When the concepts of value and currency are properly separated, self-liquidatng scrip is the best form of currency. It acts as pure information, transferring a trust signal from one purchaser to the next. It also pays for the ‘trust expense’ of its own issuance, yielding a profit to the issuer. Like hog feed it is eventually consumed. It’s not meant to last forever.
I always ask about Nature’s version of human inventions. Most of our inventions are millions of years late. Until now I couldn’t see the organic equivalent of currency because I was stuck on permanence.. I could see courtship tokens in the world of birds and bees, but those aren’t regularly flowing like currency. Each is a one-time bet.
Thinking of self-liquidating supplies answers the nature question. Nature’s supplies are neurotransmitters.
For example: At the back of the tongue, the taste buds called vallate papillae are specialized fat sensors.
When they detect a load of fat being chewed, they send a purchase order to the stomach for a dose of hydrochloric acid to process the fat.
The order is accompanied by a self-liquidating draft of neurotransmitter at each stage, from the glossopharyngeal nerve to the brainstem to the vagus nerve to the stomach’s acid factory. Mitochondria in the sending neurons synthesize the currency from scratch, like making a loan. The currency crosses the synapse into the receiving neuron, which consumes the molecules, interprets their information, and performs services in accordance with the order.
Gold and paper can’t be consumed for nutrition by the receiver. Bitcoin is even farther from nature because it’s EXTREMELY permanent and intentionally trustless.
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