Comment on Liquidity Networks: local trading systems using a debt-free electronic currency by Geoff Wales

Nov 17, 2011 Comments Off on Comment on Liquidity Networks: local trading systems using a debt-free electronic currency by Geoff Wales by

This electronic money cannot survive and is morally unfair. The money fails on a number of points.
1. The individuals who receive it first have an advantage over those who receive it last. As the first receivers lower their cash holding, and more cash enters circulation, there will be a tendency for prices to rise and the last receivers will pay more for the same product. This is one of the most profound problems with FIAT currency.
2. There is nothing to prevent the administrator from creating more Quid. This is the problem which affects the Euro. The Growth and Stability Pact failed, because governments could create more money than was permitted.
3. The Quid will lose value relative to a more stable currency, such as gold. If confidence in the Quid falls, which is inevitable, then its exchange value against other money will fall and hyper-inflation in the Quid will be inevitable.
4. The version of the Quid does not seem to provide a facility to promote capital accumulation. Tools and investment can only be accumulated with savings and the Quid appears to be unsaveable, and spending is rewarded, whereas saving and investment is not.
5. If someone earns quid and wants to save for a rainy day, it appears that the administration can withdraw this persons Quid. This is theft.
6. Finally, and most important, the Quid raises the power of the Local Authority above free market participants. Staff in the local authority will be able to buy food, when poor people who have to earn money will not be able to do it. The people who first receive the Quid will not have earned it by providing services. This is also a feature of modern FIAT currency.

The Quid will fail and the final holders of Quid will be the greatest losers. The Local Authority will be the greatest winner, because it will have started with the free money and spent most of it. Also, Local Authority services are not normally traded, so there is no reason for Quid to return to the issuer.

Like the King who debases gold coins by adding copper, the Quid suffers from the same flaws, but to a greater extent.

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