Tuesday, February 10, 2009

Currency, Competition and Inflation.
Thoughts on Flaws of Carbon Credit continued

Ok, I hear you. You say currency is about competition too, not just what is scarce today. It is who can own more of that scarce stuff.

So here is another thought. And don't hold against me that I'm an engineer who only accomplished cursory reading of a couple of books on finance and the market. For a while Samuelson's hefty tome of Economics was traveling with me even on summer holidays. That's how highly esteemed those thoughts were.

What follows, however, are the words of one who also tries to follow things with open eyes and verify things empirically.

Because you will be hard pressed to find stuff more empirical these days, than over-polluted air and over-consumed earth. You can almost touch those stuff.

So if currency is about competition too, than we would all want to see folks competing in who can MAKE MORE clean air, clean water, etc. Now, one can do that by bidding to save them for tomorrow, not overuse them and if possible clean them.

And at heart of it, clearly, that is the positive idea behind the carbon credit system. More recently, that's the idea behind 'cap and auction', instead of 'cap and trade'.

But to trade or bid for who can pollute air and who can't - like it is inevitably done with the currency called carbon credit - makes no difference in one important aspect. It already makes fresh air for people scarce here, and in abundance there. And you can bet that this makes a lot of folks happy and comfortable here, and a lot of folks very uncomfortable there. All in the while the ecosystem ties their interest strongly together.

They should out-compete each other to make more fresh air overall. We should have an unprecedented and exponential growth in goodeys. Surely, nature is not a zero sum game that should or can be controlled with artificial and forced scarcity. Nature is an open sum game not amenable to our will: it controls us.


Let's look at it this way: - What kind of currency is that we should be interested in inflating to the max? Money has a high price when it is scarce. And inflated money becomes worthless when available in abundance for everyone. It is called super or hyper inflation and it is the stuff of nightmares.

When your entire salary can worth just an egg in a matter of hours, no one cares about money anymore. Everyone barters. Stuff that is scarce for someone exchanges hands for stuff that is scarce for someone else. People throw away money - it's free then. And it also is worthless.

Yet it is exactly valuing more fresh air AS WELL AS the hyper inflation of fresh air that we are interested in right now. We are interested in not making fresh air worthless, we want that to be available to everyone and in abundance.

And so the exchanges of wealth - the free currency market - to make the value system work towards that goal should not aimed at what is worthless, it should be aimed at what is free.

Liberty, Egality, Fraternity? Read it this way:
Free will, free market and free air.

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