[p2p-research] Re Energy Standard

Sun Mar 15 01:54:34 CET 2009

Dear Chris,
I thought we understood each other better but we keep stumbling over the same point.

You say,
"A Currency is a Value Unit which people regard as acceptable in exchange..."

That is a de facto reality ONLY because legal tender laws have been imposed that make political currencies self-referential. Such laws have obliterated the distinction between the measure of value and the political currency as a means of payment. 

As I've said before, a currency is NOT a value unit. A currency is a means of payment that is DENOMINATED in a value unit. Just as cloth is measured in yards or meters, a currency is measured in dollars, euros, yen, etc. 

To understand this one needs to think back to the time when the dollar, for example, was defined as a specified weight of silver. Any banknote denominated in dollars could then be evaluated in terms of that definition. If a currency issuer were to abuse their note issuance, their notes might pass in the market at a discount from face value, or be refused as payment entirely. Political currencies have been protected from that natural consequence by the imposition of laws that prevent discounting or refusal. Thus the objective standard is obliterated and the currency itself becomes the standard. But this is not the natural state of affairs. 

We need to define and use (despite legal prohibitions) a value unit that is based on an objective standard. An energy standard is fine with me but you will need to define it in such a way as to make it operational. A market value is what we're talking about, so what energetic commodity is actively traded that can be used as a value benchmark?

I dealt with this entire topic in part III and appendices of my book Money and Debt, which is available on my website. 
Also, Riegel made some clear statements about valuation.

regards,
Tom

  ----- Original Message ----- 
  From: Michel Bauwens 
  To: chris cook ; Peer-To-Peer Research List 
  Cc: Tom Greco ; Margrit Kennedy ; Ludwig Schuster ; Bernard Lietaer 
  Sent: Friday, March 13, 2009 05:15 PM
  Subject: Re: Re Energy Standard

  Great explanation Chris,

  I will publish on the 17th in the p2p blog,

  Michel

  On Fri, Mar 13, 2009 at 5:03 PM, chris cook <cojock at hotmail.com> wrote:

    Dear Michel

    Value Standards
    First, there is a requirement for a Unit of Measure or "Value Standard", as I prefer to call it.

    This is purely an abtract Unit (ie "One"), but in my opinion it must necessarily be something to which people can relate. ie the question is, One What? A metre is a Unit of measure of length: a kilogram is a Unit of measure of weight, and we need a Unit of measure of Value in order to enter into exchange transactions at a price measured in that Unit.

    Value, like Beauty, is in the eye of the beholder, of course, but I think there are three universal sources of Value. 

    (a) Location (space) - which has a Value in use, and in fact over two thirds of money in existence is backed by the use value of land, since it was created as interest-bearing  loans secured over land/location and the buildings built on it.

    (b) Knowledge - also has a value in use, whether the inherent intellectual capital we accumulate over time (ie experience, training, knowledge) and which dies with us,or the timeless objectified Intellectual Property which we may leave behind us;

    (c) Energy - has a value in use, and on the one hand, is routinely invested in Location/Land (often in very profligate ways eg cement/concrete) and is also the "Unqualified Labour" which an individual may bring to bear, and which he uses his "Intellectual Capital" to deploy to best advantage.

    I believe that Energy is the Value Standard to which most people will be able to relate and by reference to which they will exchange Value objects aka "Currencies".

    But of course, it's not  a matter of "either/or": people always have used, and always will use, the Standard that makes most sense to them, and the evolution of a Standard will be an "emergent" process, I think. ie it's about "What Works".

    Value Units
    The Value Standard involves the relationship between Subject (me) and the Object - the Value or "Money's Worth" which I exchange by reference to the Value Standard.

    A Currency is a Value Unit which people regard as acceptable in exchange ie it is "fungible". The question then is what is the extent of that fungibility. 

    I believe that the "Global Reserve Currency" will be a Unit redeemable in energy value - lets call it an "Energy Dollar".

    Energy Dollars will be exchanged by reference to an Energy Standard I call the "Petro".

    The platform on which this exchange takes place will the "International Energy Clearing Union", and transactions will take place on credit terms subject to a mutual guarantee.

    Both holders of positive energy balances (energy creditors)  and negative energy balances (energy debtors) will pay an amount into an "Energy Pool", and this Pool will constitute a fund available to make the necessary investment in energy savings and renewable energy production to rectify the imbalances. This is of course exactly parallel to Keynes' International Clearing Union, and his Gesellian approach to the (centrally issued "fiat" currency) Bancor.

    The "Global Reserve" I am referring to will be an "Energy Pool", constituting the Pool of future global energy production, both renewable and non-renewable. 

    My strategy for Iran, and indeed other countries who are (temporarily) rich in non-renewables and are profligate in their use, is to monetise this energy and issue it as an Energy Dividend to the population.  In this way they will have to pay the "Global market price" (in a new global market not dominated and manipulated by middlemen) but will be compensated with the issue of units redeemable for energy (denominated in Petros) which they will be able to exchange for something of value - from anywhere in the world. 

    Note that these fungible Energy units cover only a part of the value in circulation.  

    There is then a question of "National Reserve Currencies".

    As I have outlined  here

    http://www.slideshare.net/ChrisJCook/equity-shares-a-solution-to-the-credit-crash-presentation

    I believe that the only viable solution to the Credit Crunch is to "unitise" the rental value of property. The effect of this will be to create Currencies redeemable in land rental value and the creation of a "Land Rental Pool" which may be monetised in order to develop and maintain economies. These, of course, have "exchange control" built in, since while they may be acceptable in other countries because they may wish to use them to acquire godds and services form the issuing country in due course, they are redeemable only in the country of issue.

    Finally, there is the individual as source of Value, and he (individually) or they (collectively within "enterprises" defined by a protocol) may also issue Units redeemable in Value, being a combination of unqualified Labour value (energy again), Intellectual Capital, and Intellectual Property.

    So the future as I see it is of a network of  networks of communities within which Units of Value are exchanged by reference to a Value Standard on a generic International Clearing Union platform (incorporating a "transaction engine" -an Apache Money messaging server if you will) and decentralised  "shared transaction and title repositories" - Riegel's "Ledger of Ledgers" wherein is accounted who has what obligations to whom, and who has rights of use in what.

    I believe that it is the Energy Standard to which most people will be able to relate.  Moreover, I believe that the Energy Accounting implicit in the clearing of transactions using an Energy Standard will give us a simple route to transition from a carbon energy economy to an economy based on renewable energy.

    Key to it all is the "Not for Loss"  consensual partnership-based framework - the cross-border legal XML tying together semantically the disparate jurisdictions and enterprises instead of hardware and software - within which the platform and the participants will operate. There is no "profit" and no "loss" within a partnership -merely creation and exchange of value in all its forms. 

    Sorry to have answered your question (if I did!) at such length, but it stimulated something of a "brain-dump"!

    Best Regards

    Chris

----------------------------------------------------------------------------
    Date: Thu, 12 Mar 2009 09:11:16 +0700
    Subject: Re: FW: Re Energy Standard
    From: michelsub2004 at gmail.com
    To: cojock at hotmail.com
    CC: circ2 at mindspring.com

    Dear Chris,

    I would like to publish your letter here, but it would need some contextualization.

    As I understand it from Tom, there is a difference between backing up a currency with something objective, and merely expressing it as a value standard? But I would still be at a loss to explain this myself.

    So I wonder if you could introduce this for laypeople, with an extra paragraph or two?

    Michel

    On Thu, Mar 12, 2009 at 12:47 AM, chris cook <cojock at hotmail.com> wrote:

      Hi Michel, Tom

      This FYI 

      Chris

--------------------------------------------------------------------------
      From: cojock at hotmail.com
      To: frank_churchill at mac.com
      Subject: RE: P2P
      Date: Wed, 11 Mar 2009 17:37:41 +0000

      Dear Frank

      Indeed there is a need for a global reserve currency and the presentation I made in Iran envisages a Unit of energy as what I call a "Value Standard".  I call it a "Petro" as a working name, and in terms of specification I use the energy released from the combustion of 1 litre of n-Octane at 20 degrees celsius. 

      It could as easily be the energy released by the decay of x gms of y isotope, or the energy output of the average bloke in an hour when shovelling sand. The point is that it needs to be something that people can relate to in their everyday experience.

      Note that the Petro is not a redeemable Value Unit (ie a fungible quasi - currency) . It is the Energy Standard by which exchange transactions -whether in goods and services generally, or of "Value Units" redeemable in energy or land rental values - are priced. The outcome of using an Energy Standard is essentially of energy accounting, with which I am sure you are familiar

      http://en.wikipedia.org/wiki/Energy_Accounting

      My strategy in Iran (who with Qatar and Russia are the key founder members of the Gas OPEC) is to work towards implementation of a global market in Natural Gas - using the "Clearing Union" approach - and to "unitise" Natural Gas through the simple expedient of introducing Units redeemable in natural gas. These will not actually be Petros, but they will have a constant value expressed in Petros, as will other carbon-based fuels eg gasoline, kerosene, diesel, heating oil. 

      Equally, electricity will have a constant value expressed in Petros.

      Now, using the "Energy Pool" approach I advocate, and will touch upon tomorrow, it is possible to monetise the energy value of renewable energy (by selling production forward) and even energy savings (NegaWatts) by selling energy savings forward. Energy economics using energy accounting turns conventional assumptions on their heads, because we may obtain value now for something which will cost us nothing to redeem in the future.

      It also opens the way to a viable policy of a carbon levy (as opposed to a carbon tax) into a "Carbon Pool" which is used to invest in renewables and energy efficiency at nil cost to the carbon user (who receives an "energy dividend in "Units" from the Pool), but incentivising reduced energy use.

      Where the Technocrats went wrong IMHO is that they ignored the value of the exclusive use of location/land  (which underpins some two thirds of the money in existence) and of course the use value of the individual's "Intellectual Capital" (as opposed to his calorific labour value).

      Because there is a great deal of energy value actually invested/embedded in location/land, and also because many jobs are underpinned by actual energy/work, then I believe an energy standard is in fact the logical candidate for the necessary clearing utility.

      In particular, I believe that it is only through monetising the energy value of carbon - as opposed to the complete fatuity of monetising by fiat something with no intrinsic value, such as CO2 emissions or carbon credits - that we will successfully make the transition from non-renewable energy to renewables (and this informed an energy startegy document I prepared for Iran's Majlis Energy Commission).

      Indeed, nowhere is this more necessary in Iran, where there is monstrous waste of carbon-based fuels (and horrendous environmental problems) because of the current massive subsidies. The solution I propose solves the subsidy problem through the issue of Units redeemable in gasoline/ natural gas (and priced against the Petro) which will be generally and equitably issued, but will incentivise energy conservation because this literally saves money.

      Worthy though Bernard's Terra is, I see it as inherently complex, difficult for individuals to relate to, and very much more difficult to use to address the climate change issue.

      Finally, the architecture you have in mind is, would, as far as I can see, lead to an intermediated architecture with a Credit Object (eg the Terra, or Keynes' Bancor) issued by an issuing authority, which would be all too likely to end up as a bureaucracy, or as part of a bureaucracy. The approach I am taking entails framework agreements governing bilateral issue, rather than centralised issuing organisations.

      I look forward to meeting you tomorrow.

      Best Regards

      Chris Cook

--------------------------------------------------------------------------
      From: frank_churchill at mac.com
      To: cojock at hotmail.com
      Subject: P2P
      Date: Wed, 11 Mar 2009 15:55:18 +0000

      Dear Chris,

      Looking forward to meeting you tomorrow.

      I've had a chance to look at your slideshows. What you propose is not dissimilar to my own ideas, which in turn adopt the WIR/Bartercard model of multilateral barter mediated by an alternative medium of exchange (the WIR, and Trade Pound respectively), in which the exchange medium acts as a catalyst to trade within a mutual credit-structured network. 

      One quick question though. Both the WIR and Trade Pound use their host currencies as the unit of account. While this approach has the advantage of simplicity and transparency for participants, it's main problem is that it makes the medium vulnerable to the vicissitudes of the host currency. 

      The alternative is to use an different unit of account, such as basket of commodities, or a 'reserve' currency such as the Terra proposed by Bernard Lietaer (http://www.terratrc.org/).

      I'd be interested to hear your thoughts on this issue. 

      Regards,
      Frank

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