Frequently Asked Questions

How do you expect to get people to use this decaying money?

This is a great question and there are lots of answers.  Here is the deal, I understand that unless people have something to gain from this that they won’t use it.  Not only that, but it can’t disrupt all the things that we have going for us now in the economy.  Not only must the gains be positive, but to really gain adoption, the gains must be on an order of magnitude greater than what we have now.

This is like when hotmail offered you 25 megabytes for free and google came out with gmail where you got 1 gigabyte.  25x more.  That is what I’m going for.  The goal is for the economy to be optimized by an order of magnitude from where it is now. It is a very tall order, and I think the models and simulations I’ve done so far bear this out.  More experiments are needed.

So how in the world I propose go get these kinds of gain in light of hundreds of years of existing economic theory?  In two ways:

 Time.  I understand that there is a lot in finance about the Time Value of Money, but much of the undergraduate and graduate level economics I’ve read doesn’t make much of time.  Most of it has to do with needs, desires, and value ‘in the moment’ of decision making.  And there is nothing wrong with that.  

Einstein came up with specific relativity early in his career and it helped make huge strides in physics.  But he slaved over the unknowns that he knew was there and came up with the general theory of relativity that added time in and significantly changed our view of the universe by orders of magnitude over that of specific relativity.  

In theory, decaying currency drives interest to zero and allows for controlling inflation at zero.  If you do these two things and try to envision what money looks like and what it does and where it goes, over time, Some very interesting properties emerge. The first way we deliver an order of magnitude more to the market is the stabilization of the value of money over time so that we can make better decisions about what will happen in the future.

Reduced complexity.  Before the blockchain made tracking the flow of money trivial it would not have made sense to try to pass money back to those that spent it in proportion to how well that money performs in the future.  Complexity theory would have made it an irrational exercise.  The second way we deliver an order of magnitude more to the market is a reduction in complexity in the flow of money.

With all of that being said, here are some specific results for different players in the economy:

For investors:  Risk is shifted to ‘less risky’ because the complexity of where your money is going is less.  We can ‘fold’ the blockchain and connect where the money went with where the money came from in the event of a failure.  This will drastically increase the risks and innovation that investors can undertake.

For manufacturers:  Manufactures will be able to borrow to purchase inputs and significantly reduced rates.  They will also receive dividends on the cash they spend on labor and on product inputs.  The decay rate that they have to pay on held cash will be significantly less than their existing tax rate + inflation and will replace the tax rate and steady inflation.

For employees:  Employers will benefit when employees make much more in the future than in the past.  As a result, employees will receive significantly better career training and opportunity for salary increase.

For citizens:  The system sets up implicit social security so that over a career of working, the citizen will have developed a significant cash flow stream.  This stream will begin accruing immediately and the citizen will not need to wait until old age to increase their optionality in finding their optimum place in the division of labor.

In the real world, I don’t need to convince you to use the system.  If your competitor can borrow cash inside this system for 10% less that you can, when he chooses to participate he will out compete you.  You will adapt or I won’t need to convince you.

This sounds too complicated.  No one will ever use it.

Under the covers it is complicated.  It is a new way of thinking and that is always hard to get one’s mind around.  In practice, it will be very simple.  You will open a bank account, ask your employer to deposit your paycheck in it and you will use a debit card.  Businesses will just set up a checking account and write checks.  Same as it ever was.  Instead of earning interest on deposits you will earn dividends on every dollar you spend, and you will receive them far into the future.

Producers aren’t going to give consumers cash for any reason. This will raise their costs!

They already pay taxes and credit card processing fees.  We’re offering to significantly reduce some of those fees.  The income tax thing is a long term thing but the processing fees in the short term is a real cost savings.

Real World Example:

Someone pays you $100 with a Visa Card.  That will cost you $3 today.

If someone pays from a catallax account to your catallax account, there is no fee.  Say you hold on to the money for a week before paying a supplier for inputs to your next widget.  At a 10% decay rate you would pay $0.027.  That alone seems like a pretty good reason.

Is this a pyramid scheme?

No.  Of course many will argue that the Federal Reserve Note system(dollars) is a pyramid scheme and this is based on USD, so it depends on if you think the US government is running a pyramid scheme or not.  When we take dollars in we will reserve them in a publicly audited checking account to show that we have proper reserves in the system to meet withdrawal demand.  Banks are only required to keep 3-10 percent on reserve currently.  I expect to operate at 100% reserve until well into the future.  This will only change if there is enough of a hypercatallaxian economy to actively start moving the inflation rate in the general economy by issuing unbacked currency and deflation starts occurring.

Doesn’t the buyer get what they pay for when they agree to pay for an item?  Why are you trying to give them more.  You are taking away my profits!

The buyer gets what they pay for at the time of purchase, and in fact more if you consider the consumer surplus.  But if you look into the future and over time, the wealth generated by their dollar is far, far more than even the consumer surplus.  The price that is paid is usually well higher than what the consumer would pay under perfect competition and with perfect information. I’m trying to smooth out that discrepancy by using the perfect information that we obtain as time goes by.  Again, this was not possible before, but is now that we have the blockchain.

The system does not take your profits away immediately.  They decay over time only if you do not use them to generate additional value in the economy.  This system lets you make a profit but marks some of you future cash flows for some of the people who helped you get to where you are going.

Why are you unfairly punishing producers?

I’m not.  Consumers and Labor have to pay the same decay fee, in the same ratio.  If someone wants to reduce their risk by holding cash, this has a cost.  This is not a new concept.  Reducing risk almost always has a cost.  Today that cost is inflation risk.  Since we are going to be controlling inflation, at least with a decay rate you can plan for it.

Why are you unfairly targeting my savings?

If you keep your savings in a bank it is likely being loaned out and you wouldn’t be the one paying the decay.  The bank would take over that responsibility because they think they can make more money with it.

If you keep your savings in the market then the person you bought your securities from would be on the hook for paying the fee, not you.

Doesn’t this just pass the buck?  Who actually pays?

We charge the fee when money moves.  In a $1 billion economy, at a 10% decay rate there will be $100 million in fees paid during the year that flows backwards through the system.