Apply HN: Gresham Dollar – Viral Currency for Basic Income

That's the idea. I'd like to set it up so that everyone can see that we couldn't abuse the system even if we wanted to.

As I understand it, this is about social justice, ie, leveling the playing field.

It's primarily about economic stability. Social justice is a side effect.

Post-transition for GD would mean that all accounts are activated to receive basic income, and they would do so on an equal basis.

Yes. In fact, the plan is for all accounts owned by individuals to be receiving a basic income well before the transition date. Obviously, businesses do not receive a basic income.

Initially, the currency is seeded in communities that need BI the most, and then becomes contagious to the world at large.

Yes, but only because those who need it the most have the highest marginal propensity to consume. This maximizes the initial circulation of GD. If you give it to a rich person, they're far less likely to spend it.

Ultimately, the system also prevents hoarding of currency and incentivizes exchanges.

Hmm. I'm not sure what you mean. For Gresham Dollar to work, it assumes some level of "monetary entropy," (I just made that term up). In other words, money starts at a higher velocity but ends up accumulating in hoards. Basic income provides a steady supply of fresh money to counterbalance monetary entropy.

That's an interesting thought. Money can circulate more in smaller local economies where everyone contributes.

PayPal broke into the scene by going onto eBay, creating a bunch of auctions and saying, "We accept PayPal." Then people asked what PayPal was. We could do something similar.

Another commenter, Kinnard, suggested that poor communities whose members all have Gresham Accounts might naturally exchange GD amongst themselves. We'd have to figure out a way to make that easy to do. Not every low-income person is going to have access to phone apps, etc.

We're targeting lower-income people because they may not often have a choice about whether to spend USD or GD. They spend whatever money they happen to have. They need no incentive to spend GD over USD when GD is their only choice.

Convenience and lack of transaction fees could be an incentive to spend. Sending USD to friends and family typically involve waiting periods, transaction fees and inconvenient processes (cheques, email money transfers). Of course, Venmo and Paypal have improved this in recent years.

Yes. We would want to provide the basic functionality of PayPal/Venmo, but for both USD and GD.

Combining the above two ideas, you can launch in communities outside the U.S. where financial inclusion is limited. There are many places where the majority of people don't have bank accounts. They already lack the advantages of credit/debit cards, paypal, etc. They may not have enough assets to make opening a bank account worthwhile. Granting people there basic income and GD accounts could solve both these problems. Plus, by choosing a location with a smaller economy and lower cost of living, you could have a more pronounced effect with the same amount of investment. You could team up with a charity that already gives money to these communities.

Once GD is accepted at some big online retailers, we can provide poor international communities with GD basic incomes that they can spend at e.g. Amazon or trade among themselves. That's basically my plan for international expansion. Before the GD arrives in the U.S., it's unclear whether we'd want or need it to have the ability to automatically convert to USD. And if we don't, perhaps we could issue paper GD internationally, which would be useful for communities who don't have as much access to digital technology. It's illegal to print any kind of currency in the U.S., so we wouldn't do anything similar here.

Maybe create a service for merchants where they could spend their GD. Some kind of customer loyalty program that pays out rewards in GD, or an advertising service that lets merchants advertise to people with GD accounts.

Anyone can use their GD to buy FGD, but I'm not sure it would make sense for merchants to want to do that. I like your idea of selling advertising. The ads will give users ideas about where they can spend their GD (and their USD).

Honestly, getting a new currency into regular circulation seems like a really hard problem.

Yeah. And it would probably be near impossible if the U.S. government were already paying its citizens a basic income. There needs to be something fundamentally broken about the way a currency is being managed in order for it to be susceptible to disruption. I believe USD fits the bill.

Good luck!

Thanks for your thoughts!

The USD reserves are crowd funded through the selling of Future Gresham Dollars. I've described FGD in other comments.

Our USD reserves also increase any time someone converts USD to GD in their account.

How is this renewed?

If we desire more USD reserves, we can sell more FGD to the open market.

The FGD debt doesn't renew. We just issue more of it as needed. And after the transition date, there's no longer any such thing as FGD.

How are loans and/or investors paid back? What risks do they face?

On the transition date, all FGD becomes GD. The risk is that, if Gresham Dollar fails, GD may not be worth as much as the investors were hoping.

The investors are left holding most of the bag. In the end it will look like what we did amounted to the equivalent of taking money from investors and handing it out to people.

We have a provision for what happens when our USD reserves fall to the level at which we can only meet our present obligations. It's called the Disruption event (see other comments).

If Disruption hits, merchants are still guaranteed to get a certain percentage of their GD converted into USD, as specified by the reserve requirements stipulated in the contract they signed. We also have a single required USD reserve level to back the non-merchant accounts. Initially, our reserve requirements for everyone will be 100%, then we'll gradually lower them.

At any given time, users will be able to see how much of their GD balance is guaranteed to convert to USD. The GD balance is divided into three parts denoted in three different colors:

GREEN: GD that is guaranteed to convert to USD even if Disruption occurs at the soonest possible date given current USD reserve levels.

YELLOW: GD that is guaranteed to convert to USD even if everyone stops spending their money immediately and allows their GD to sit idle.

RED: GD that would be suspended (not convert to USD) if everyone stops spending their GD immediately.

Users will be encouraged by seeing their red and yellow balances shrink with time as the potential Disruption date moves further into the future.

"What's the point of basic income then if eventually tens of thousands of GD is required to buy bread and basic income is only several thousand (point is, not enough to make a difference)?

This happens in a sort of way in real life already... Because govt meddle in education loans and subsidies for college, the result isn't just that there are more availability of education only, there's also an ever increasing climb , almost unhooked from reality, of tuition costs. And some people simply stop paying back, which in a way results in a kind of wealth transfer effect like your GD.

But the lethal point is that no force stops the inertia from becoming ridiculous. We already see that colleges no longer have incentive to adhere to reality and prices go to the moon. To remain effective, GD BI have to climb, and off we go to the races.

Applied to entire economy, you get hyper inflation. Your GD can't distribute fast enough when mass psychology sets in."

Another effect is that not only would GD be viral, BI inside this system itself would become viral.

Like the college tuition example, over time, this will disintegrate to the point that people who really make a living and earn USD (or any other way to measure real money, not the BI allocation) will be eclipsed. Everything will become like college. There will be nobody left will be able to afford it in full without some kind of help.

Either that, or the BI effect and influence Will diminish and we're back to square one.

In this sense, I'm back to what I said above. The BI powered by GD is going to become viral on viral. It will destroy the real economy completely, until nothing is left. The structure it's such that they cannot both coexist.