Making your own money. Literally.

[Kotze]

I thought ancaps, mutualists, and some other crazy mofos on here might find this concept interesting, some may already have heard about it: Making a decentralized credit system by scaling up simple IOUs through webs of trust.

You can read the PDF about the concept (http://ripple.sourceforge.net/decentralizedcurrency.pdf) or watch this ugly flash-movie explanation (http://www.screenr.com/c5K). There's also a FAQ (http://ripple-project.org/Main/FAQ).
Ripple currency is fundamentally different from national currency. It is based on debt with anyone you want, not solely on debt with large financial institutions. Ripple payments are not encumbered by the inefficiencies inherent in institutionalizing trust relationships. Ripple is not an institution, it is a tool. Ripple is to regular money what email is to regular mail: free.What do you think?

[Thug Lessons]

I have no idea why anyone would want to do that, would think it would work, and why they couldn't find anything more potentially productive to spend their time on. I'm reading over this and it honestly sounds like one of those weird libertarian gimmicks a la bitcoin. All of the serious objections are hand-waved away in the least convincing manner possible. It's an absurd non-starter that should be taken seriously by absolutely no one, end of story.

[Kotze]

I'm reading over this and it honestly sounds like one of those weird libertarian gimmicks a la bitcoin.I take that as a roundabout way of saying you didn't have the time to read it and want me to give you a brief description, because I don't believe you are that stupid.

The Bitcoin philosophy is similar to the perceived need for having a gold standard. That is, they are said to be worth something because of the computing power and electricity that is needed for creating one; and even more so than with gold, the receiver of Bitcoins gets the result of a lot of time and effort without having much use for it. There's a website that gives you a fair impression what the Bitcoin community is like (http://buttcoin.org/).

The Ripple concept is similar to the informal transfer system Hawala, transfers can be denominated in $ or € or ¥ (or Bitcoins, for that matter), and you can also "create" any of these currencies within the system.

*cue spooky music*

This pseudo creation of money is nothing new, many people are already doing that, even some kids. Example: Alice cuts Bob's hair and they agree that Bob owes Alice $10 for that. Some time later, Alice has to mow the lawn or whatever, and Bob, who hasn't paid yet, offers to do that for her at the cost of $10. Suppose they agree to that. What does that mean? There was no cash involved. This "creation of money out of thin air" is based on subjective evaluations and guessing how others evaluate stuff, and in the end these evaluations tend to be not so crazy, I will just say something crazy now to clarify an aspect. The kids could also have agreed that a haircut by Alice and Bob mowing the lawn is each worth $1000000. Other people see this differently, but for what happens between Alice and Bob, that doesn't matter, and it isn't inflationary.

When this is scaled up, the evaluations of how credit-worthy person X is still don't have to be made by a central institution, but there has to be some agreement between neighbours in a transfer chain. See the film for an explanation. Ripple is informal, that means it doesn't automatically give you a way to punish any person you personally trusted and who abused your trust. If there is some regularity in who you trade with this gives people some incentive to behave because tit for tat is possible.

[Rowan Duffy]

Well, one thing it might be used for is as a middle-finger to VAT which is a regressive tax that is very hard to get out of paying. I think it's better than most local currency concepts since it's growable without a central printing authority. Seems like it would be hard to get started unless things really go to shit.

[hatzel]

I'm...aware of Ripple, and find it somewhat interesting. I think it could be an improvement on the current monetary system, but I don't know if I can go as far as to call it ideal. Predominantly because it remains linked to existing physical currencies, with all their fluctuations with the market; that is to say, the buying power of 'money' on Ripple is dependent on the buying power of the equivalent 'real' currency, which is outside of the control of the Ripple system. Obviously, if the system were to be widely adopted, to the extent that we may be paid wages through Ripple, and could then go into a shop and pay by Ripple, a dedicated currency unit could be introduced, which may overcome some of those problems. I still question, however, whether Ripple would do anything to tackle interest or inflation, and, if so, how? Would a dedicated Ripple currency unit operate according to the same economic laws as the present day pound, dollar or euro, fluctuating in value with market conditions? Would inflation and deflation operate in the same way as today? Would its nature as an explicitly IOU-based exchange system mean that interest would not be charged? This I question, and it probably depends on the safeguards put in, and the exact nature of the currency unit and, perhaps more importantly, the economic state of society itself.

If Ripple merely operates as a contemporary currency, just electronically and in a more decentralised fashion, then it may not be much different from the current situation. Presumably, like today, ordinary people wouldn't be able to / want to hand out IOU's willy-nilly, running up an endlessly high credit debt(?); there would then probably be individuals or organisations with higher credit ratings who would act as ad hoc banks or private lenders, who may charge interest. In such case, whilst it's an interesting suggestion for decentralisation, it would probably have many of the same weaknesses as the current monetary system.

It does not seem at present that the Ripple idea is actually based on any explicit economic or, particularly, monetary theory, and it is unclear whether it is intent on any remarkable monetary reform, or whether it's merely rearranging straws or whatever that saying it. Though this is not necessarily sufficient grounds to instantly dismiss it as a concept...

[Thug Lessons]

I take that as a roundabout way of saying you didn't have the time to read it and want me to give you a brief description, because I don't believe you are that stupid.

No, I read the thing, and I understand it's different from virtual currencies like bitcoin. It's just not a very good idea. There are more than enough non-trivial objections to this that aren't resolved to prevent it from ever going anywhere. Let's go through a few.

There's essentially no enforcement mechanism on either side, meaning that people can either refuse to pay or refuse to record another's payment. It's essentially dependent on personal trust - which is a horrible basis for a credit system. The entire thing is extremely vulnerable to scammers, and when that happens the whole thing is going to be a nightmare in court.

Secondly, this is never going to even come close to an alternative to the banking system for the very simple reason that banks have lots of money, whereas the average individual, and even large groups of individuals, don't. At best this can serve as a formalization and institutionalization of private debts, but even there it's doubtful because it's based on some convoluted system of individual letters of credit, apparently developed by someone ignorant of the notion that the reason letters of credit work in first place is because the people that issue them are known to be reliable by virtue of having tons of money.

I could go on here but there's really no point. Here's some other things you can do with your money: stuff it in your mattress. Take it to Vegas. Invest in bitcoins. Better yet, send it to me. I'll buy weed with it and get high.

[Kotze]

@Rabbi K
Good questions, skimming the discussion group and wiki it looks these concerns are for the most part still outside the scope of the concept, I guess it's all about believing that banks and services like PayPal are ripping people off (eg. my bank has a monthly fee just for having an account and for any transaction you do if you are low income, for others it's free) and giving people easier access to small amounts of credit. In one of their vids, the ability to individually set interest rates for what you lend was mentioned. They apparantly don't feel the need to address the problem of high interest rates because of how informal it is. You can always pay less than promised, even nothing, the only incentive against that is how that affects other people's willingness to lend to you in the future and personal relationships.

As for theoretical influences: The main developer has some experience with LETS and I'm sure they generally see that money is debt and they have heard of the real bills doctrine (though I don't see it much reflected in the concept, given how small the role of collateral is).

@Thug Lessons
I agree that the lack of enforcement is a weakness, though I believe it's more plausible that this results in limited use (small regular transactions), rather than some big scam. How would a big scam work? You can't get anybody to give away more credit than they are willing to. Not everybody in a transfer chain has to personally know everybody in the chain, so I can end up lending to you indirectly without knowing it, but the people in a chain always personally know their direct neighbours. In a web of trust, you do not get more weight by having multiple accounts when it comes to rating others or yourself, because no aggregate of stated opinions by all accounts is used for rating somebody's trustworthiness.

I also agree that in monetary systems reliability is linked with having much wealth and that a group of people holding the same amount as some rich individual still have less power because of coordination costs, so there is a tendency towards hierarchy that would even exist if everybody had the same abilities and the same initial endowment of points in the system. My credibility as a debtor is not simply a result of my own actions, but also of the wealth and trust I already have, just like celebrities are to a large extent famous for being famous. A widespread belief that I'm particularly trustworthy translates into real power going to me which in turn makes it easier for me to sustain or gain trust; or the other way around, a widespread belief that I'm untrustworthy will also reduce what I can do to gain trust.

The question is not whether it would ever go anywhere, informal credit exists in the real world, the question is how much this can scale without reinventing the hierarchy you have in mainstream banking systems. I think if something like Ripple was integrated with a network of pawn shops, if there was something more tangible than social standing as collateral, it could be a success — success in the sense of widespread use, but not in the sense of keeping things totally decentralized.

In general, I believe that a system for remuneration and credit that avoids reinforcing hierarchy needs core decision mechanisms where people have say regardless of how their contributions to society are evaluated by that system itself.

[hatzel]

The question is not whether it would ever go anywhere, informal credit exists in the real world, the question is how much this can scale without reinventing the hierarchy you have in mainstream banking systems. I think if something like Ripple was integrated with a network of pawn shops, if there was something more tangible than social standing as collateral, it could be a success — success in the sense of widespread use, but not in the sense of keeping things totally decentralized.

I could definitely see Ripple working amongst acquaintances...for instance, if I want to sell some of my old stuff, you might give me ¤10 for a pair of shoes. I'd accept this if I knew that Thug Lessons would then accept that ¤10 for me to buy something second-hand. This I don't doubt for a second. A kind of 'Ripple eBay' could also perhaps work pretty well, if we could buy and sell things with virtual credit (perhaps 'topped up' with 'real' money). The pawn shop idea would also work well, and, if the network were sufficiently large (and that's very important), there would be little problem even abandoning national currency entirely. That is to say, businesses could be set up that buy and sell through Ripple, and the workers' income could also be paid through Ripple. This would rely, though, on there being housing associations which will somehow accept rent and bills paid through Ripple, and a sufficient range of (pawn) shops to ensure that everybody's needs can be met within the Ripple economic network.

Of course, the above is highly unlikely (to the extent that it can be ignored as a possibility), and conventional money would remain necessary. Still, a 'hybrid' economy is definitely viable! Trading goods and services - through pawn shops, websites or on an interpersonal level - could function through Ripple, if the network of Ripple users were sufficiently large to make it a worthwhile venture. I still think that a distinct Ripple currency would be best in this case, though, to create a parallel, largely independent market, rather than one in which the value of goods and services (and, perhaps more importantly, the buying power of a unit of currency / credit / whatever) is determined by the capitalist market...it would be interesting to see how the Ripple market would function in this situation...

[Kotze]

Since Bitcoin came up and it seems to be quite popular right now, here's an article about its technical aspects (http://www.pds.ewi.tudelft.nl/%7Evictor/bitcoin.html).

[Robespierre Richard]

What's with all the "communists" on revleft believing in this kooky Austrian nonsense? You guys do realize that the reason why gold was used for currency is because the ancient and modern ruling classes saw it as a form of prestige and warehousing it therefore made sense, right?

This isn't sustainable in a socialist society, in fact the main motivation for abolishing the gold standard in the 70s was because the USSR used gold as hard currency to even out the balance of payments because they simply didn't have any other use for it. And in the USSR itself the 1961 monetary reform that made all paper money backed by gold was generally reactionary because it meant that the money supply was no longer created to facilitate the distribution of goods, but rather keep track of cash flows that allowed for the Kosygin reforms of 1965.

[Kotze]

What's with all the "communists" on revleft believing in this kooky Austrian nonsense?Who are you talking about, bub? Read the thread, try to get a better mental model of people's positions, and stop babbling about gold, so far nobody who has posted in it is advocating a gold standard.

I want to see what mutualists and others say about these payment systems in order to get a better mental model of their position, so I can better argue with them.

[hatzel]

What's with all the "communists" on revleft believing in this kooky Austrian nonsense?

I don't know who exactly you're calling a communist, but yeah, whatever, that's not important :)


Totally unrelated ramblings about the gold standard
I do not believe anybody here is advocating a return to the gold standard. In fact, the entire point of Ripple (and Bitcoin, as that has also been mentioned) is the understanding that money doesn't have to be backed by gold (or, in fact, any other commodity) to have value in society, as long as society accepts the currency unit to have a value of exchange. That is to say, money has buying power through its mere status as an accepted means of exchange, as outlined by Silvio Gesell over here (http://www.silvio-gesell.de/en/neo/part3/4.htm). Ripple and Bitcoin both totally abandon the gold standard, as well as any other 'backing' by any physical commodity. As such, it is money which is - to use your own words - "created to facilitate the distribution of goods", and for no other purpose. Not to track who has what claim to what gold, or anything like that, but merely to facilitate exchange. The site itself even says:


Ripple places control of monetary scorekeeping in the hands of the people around us, in our social circles and in your communities. It takes away the excuse, "we didn't have any money in our community," and lets us focus on more fundamental economic and social problems.

The goal of Ripple is to help lessen the gap between what we feel we must do to make money and what we wish we could do to make the world a better place.
This seems to be the opposite of what you're talking about, in that it's clearly not intended to "keep track of cash flows," but to "facilitate the distribution of goods"...

How exactly you could think that virtual IOU's passed around over the internet could have anything to do with the gold standard I have literally no idea :confused:

[Robespierre Richard]

Who are you talking about, bub? Read the thread, try to get a better mental model of people's positions, and stop babbling about gold, so far nobody who has posted in it is advocating a gold standard.

I want to see what mutualists and others say about these payment systems in order to get a better mental model of their position, so I can better argue with them.

You want to have a monetary model based on "the perceived need for a gold standard," in your own words, where there is a more or less central authority that values the "currency" based on how much it needs it. It's also pretty clear that this "ripple" is not any sort of monetary system, just a weird way to track a gift economy that relies on subjective currency values rather than actual trust. It might be nice if you want to experiment with primitive communism via the Internet but otherwise pretty useless unless there are accumulators who have enough of a need for these transactions that they value bitcoins/ripples in terms of the almighty dollar. Otherwise you can't really use these games to pay rent, buy food, etc.

[Kotze]

You want to have a monetary model based on "the perceived need for a gold standard,"My original intent was to engage people like that ZombieRothbard guy, seriously engaging entails being able to paraphrase positions you don't necessarily agree with, and I'm not really that cryptic here when it comes to what I think about Ripple and Bitcoin (look again at what I wrote, look at eg. the first sentence, look at all the links).

My actual stance on gold-backed currency is here (http://www.revleft.com/vb/showpost.php?p=1973928&postcount=7), and you can read about my stance on payment under socialism here (http://www.revleft.com/vb/showpost.php?p=1793883&postcount=16) and here (http://www.revleft.com/vb/showpost.php?p=2115791&postcount=51).

[ZombieRothbard]

It is important to mention for those that don't know: when ancap Austrians refer to the gold standard, they are using it as a synonym for whatever the free market decides to use as a currency. Most Austrians believe that gold and silver would be the universal units of exchange, as they have been historically, but their views on money don't require it to be that way, and they don't close themselves off to alternatives.

I am not sure what Ripple is, I thought it was just an abhorrent faux-wine that you brown paper bag on the bleachers at local children's sporting events.

Bitcoin is interesting. Austrians seemed to be mixed about its usefulness, and whether it is actually a currency or not. Personally I think it is useful, but I don't think it is a stable money, as it is worth less than fiat money since it does not have utility beyond sticking it to the state, and does not have the "benefit" of being backed by state coercion like legal tender is. It is largely being floated by speculators right now, so I think it is actually over-valued and will likely collapse sometime in the future. The best thing to come out of Bitcoin so far is Silkroad, which is an underground drug trading website whose founder is an Agorist (a revolutionary sect of anarcho-capitalism). I actually plan on interviewing the founder for Students for a Stateless Society soon.

[ZombieRothbard]

My original intent was to engage people like that ZombieRothbard guy, seriously engaging entails being able to paraphrase positions you don't necessarily agree with, and I'm not really that cryptic here when it comes to what I think about Ripple and Bitcoin (look again at what I wrote, look at eg. the first sentence, look at all the links).

My actual stance on gold-backed currency is here (http://www.revleft.com/vb/showpost.php?p=1973928&postcount=7), and you can read about my stance on payment under socialism here (http://www.revleft.com/vb/showpost.php?p=1793883&postcount=16) and here (http://www.revleft.com/vb/showpost.php?p=2115791&postcount=51).

Your critique of the gold standard might be accurate for the "statist" gold standard, where the international community sets a fixed parity of dollars to gold. But that isn't what ancap Austrians would advocate. Not only would they not want to fix the parity, they would also allow for other forms of currency to be developed by the free market. I believe the Native Americans in the America's traded with shells.

And warfare is not caused by gold standards, on the contrary, central banking and the decline of the gold standard were developed to actually fight wars. When you can more efficiently plunder the wealth of a society by printing dollars, you can over expand your credit and fund empire building like the U.S. has done now.

The Bank of England is what the Western central banking system is designed after, and it was set up by the English to print up money to rebuild its navy after a defeat to France.

[RGacky3]

when ancap Austrians refer to the gold standard, they are using it as a synonym for whatever the free market decides to use as a currency. Most Austrians believe that gold and silver would be the universal units of exchange, as they have been historically, but their views on money don't require it to be that way, and they don't close themselves off to alternatives.


Historically, the gold and silver currency was as free market based as the government backed currency.


and does not have the "benefit" of being backed by state coercion like legal tender is.

No one Coerces you to use currency.


I believe the Native Americans in the America's traded with shells.


Sure, for the extermely limited market that existed on the pacific (most of the economy was cooperative), shells could be used, but for an advanced market economy those sort of things are impossible, as is the gold standard.

[Kotze]

Most Austrians believe that gold and silver would be the universal units of exchange, as they have been historicallyI don't believe that gold and silver have had a role as big as usually claimed. Different payment systems than those using metal tokens leave traces that disappear more easily (think leather, for instance), and even when these traces are found, they aren't necessarily recognized.

Imagine we live in a simple society without computers and I owe you something. We can use a stick to document this. Scratch some symbols on it, and snap it in two. Now you have a piece that documents the claim, and the cool thing is you can transfer it to others as a gift or payment for something else, and when they bring the piece back and the two pieces fit together, I know it's legit. I don't have much incentive to keep the other piece though, so we use a trusted third party for that. This has the "cryptographic" feature that there's no need to track how your piece travels back to the third party.

I also think of gold as something related to cryptography. Once upon an time, gold was used as an anti-counterfeiting measure. Today, cryptography can do this. Gold is cryptography for people who are bad at math.
No one Coerces you to use currency.I think ZombieRothbard was referring to governments giving a privileged role to their own currencies through the legal system and taxation. You have to pay taxes.

This reminds me of something: If gold fans can understand that a fiat currency has value because of tax obligations, why don't they seem to understand what this means for gold? Taxes weren't invented on the day the world got rid of the gold standard. The gold-money advocates see something in gold that gold cannot do. For a currency to work, there need to be the right institutional settings. A payment system is a social system.

And this brings me to another point. When the quality of something largely depends on its pervasiveness, as is the case with many things related to communication, you can't rely on the market to pick the best. So I find talk about precious metal as a sensible basis for payments unconvincing to put it mildly, and I think a "free market" of currencies makes even less sense than people being free to choose to drive on the left or right side.

[ZombieRothbard]

Historically, the gold and silver currency was as free market based as the government backed currency.

The free market didn't create fiat currency, the state did.


No one Coerces you to use currency.

If it is legal tender, yeah they do.


Sure, for the extermely limited market that existed on the pacific (most of the economy was cooperative), shells could be used, but for an advanced market economy those sort of things are impossible, as is the gold standard.

How so?

[ZombieRothbard]

This reminds me of something: If gold fans can understand that a fiat currency has value because of tax obligations, why don't they seem to understand what this means for gold? Taxes weren't invented on the day the world got rid of the gold standard. The gold-money advocates see something in gold that gold cannot do. For a currency to work, there need to be the right institutional settings. A payment system is a social system.

And this brings me to another point. When the quality of something largely depends on its pervasiveness, as is the case with many things related to communication, you can't rely on the market to pick the best. So I find talk about precious metal as a sensible basis for payments unconvincing to put it mildly, and I think a "free market" of currencies makes even less sense than people being free to choose to drive on the left or right side.

Gold and silver became the predominant money because of their utility outside of use as a currency, and their ease to break down into smaller units. The market chose these commodities out of a need to fix the problem of an asymmetry of trade inherent in a barter economy. You need to pick a commodity that you know everybody else will accept, and that can be broken down into smaller units, unlike chickens or lanterns or other goods that could be bartered. Fiat currency wasn't born out of the state's ass, fiat currency is essentially the counterfeiting of gold and silver by the state, in order to be able to manipulate the money supply better for funding things like wars. They would set a parity between their dollars and gold and silver, and then begin slowly devaluing the amount of gold these dollars were worth, until they were just paper. Competition of monies is a natural outcome of an asymmetrical barter economy.

[☭The Revolution☭]

Making my own money? Easy. Counterfeit :D Get lots of money to do my job as a revolutionary, while simultaneously fucking the economy of the american empire even further.

[RGacky3]

The free market didn't create fiat currency, the state did.

The 2 are and always have been connected.


How so?

Youd have MASSIAVE deflation if the gold standard was adopted, you would have some countries/companies controlling monitary supply, ultimately with that type of deflation capitalism woul'ndt work.

BTW, a question on bitcoin, do they have actual purchasing power anywhere?

[tracher999]

Making my own money? Easy. Counterfeit :D Get lots of money to do my job as a revolutionary, while simultaneously fucking the economy of the american empire even further.

yeah idd:D

[Lord Testicles]

BTW, a question on bitcoin, do they have actual purchasing power anywhere?

You can use them on the Silk road. (http://en.wikipedia.org/wiki/The_Silk_Road_%28anonymous_marketplace%29)

[RGacky3]

Interesting, thanks, I'll look into it.

[tracher999]

You can use them on the Silk road. (http://en.wikipedia.org/wiki/The_Silk_Road_%28anonymous_marketplace%29)

danm you must have tor to see the site fuck:crying:

[ZombieRothbard]

You can use them on the Silk road. (http://en.wikipedia.org/wiki/The_Silk_Road_%28anonymous_marketplace%29)

I interviewed the administrator of that site, because he is an ancap. Ill post the interview on here when I am done typing the article up.

[RED DAVE]

The free marketThere is no free market under capitalism: never was; never will be.


didn't create fiat currency, the state did.The capitalist state is an integral part of capitalism. Always was; always will be.

RED DAVE

[RED DAVE]

Gold and silver became the predominant money because of their utility outside of use as a currencyactually, until quite recently, gold and silver had no use except as jewelry or money.


and their ease to break down into smaller units.Whatever that means.


The market chose these commodities out of a need to fix the problem of an asymmetry of trade inherent in a barter economy. You need to pick a commodity that you know everybody else will accept, and that can be broken down into smaller units, unlike chickens or lanterns or other goods that could be bartered.Yeah, in a relatively primitive economy.


Fiat currency wasn't born out of the state's ass, fiat currency is essentially the counterfeiting of gold and silver by the state, in order to be able to manipulate the money supply better for funding things like wars.Actually, fiat money was built out of the need of large-scale economies to transfer funds easily for large-scale transactions.


They would set a parity between their dollars and gold and silver, and then begin slowly devaluing the amount of gold these dollars were worth, until they were just paper. Competition of monies is a natural outcome of an asymmetrical barter economy.So? It works for capitalism. What's your complaint?

RED DAVE

[RED DAVE]

Gold and silver became the predominant money because of their utility outside of use as a currencyActually, until quite recently, gold and silver had no use except as adornment or money. the roots of the use of gold and silver as money are ultimately in religion, not because of a rational economy. You could, theoretically, use boar shit.


and their ease to break down into smaller units.Whatever that means.


The market chose these commodities out of a need to fix the problem of an asymmetry of trade inherent in a barter economy. You need to pick a commodity that you know everybody else will accept, and that can be broken down into smaller units, unlike chickens or lanterns or other goods that could be bartered.Yeah, in a relatively primitive economy.


Fiat currency wasn't born out of the state's ass, fiat currency is essentially the counterfeiting of gold and silver by the state, in order to be able to manipulate the money supply better for funding things like wars.Actually, fiat money was built out of the need of large-scale economies to transfer funds easily for large-scale transactions.


They would set a parity between their dollars and gold and silver, and then begin slowly devaluing the amount of gold these dollars were worth, until they were just paper. Competition of monies is a natural outcome of an asymmetrical barter economy.So? It works for capitalism. What's your complaint?

RED DAVE