How the problem of the French public debt will be solved by new moneys

French version (page 1 page 2)

March 2007

 

The French public debt, around 1200 billion euros at the beginning of 2007, will be passed onto future generations. The problem is: how will they repay it? It is all the more worrisome since this debt does not correspond to investments which will benefit them, but to recurring budget deficits to help the action (and the election) of political leaders since 1980. In the past, the problem was solved by inflation. Examples abound in History, hyperinflations of Germany in 1923, of Hungary in 1945, or the soft and long term inflations which upset the social order like the Price Revolution in Europe in the XVIth and the first half of the XVIIth centuries which prepared the ground for the French Revolution. The present severe imbalance of the French public debt will be solved by new moneys. This evolution will be seen in all the important indebted western countries and will be part of a larger movement toward the loss of power by nation-states and their sovereign currencies. The phenomenon is due to the diffusion of the power of computers.

Computers disrupt our lives; this is no scoop. The more spectacular aspects for the public are the increase in personal productivity brought about by microcomputers, the email, the Web, or cellular phones, digital TV broadcasts, instant access to knowledge, etc. Computers, however, did modify other fields less familiar to the public, like the financial sector. The profound transformation of the banking industry and finance, during the last 25 years, is the result of the application of the power of computers to banking activities and to financial markets. It resulted in a much greater freedom to choose how to borrow money, to undertake financial operations and to create new financial products. Another illustration is the increase one hundred fold of exchanges of portfolio securities in the French balance of payments during the same period.

Yet, computers will achieve much more. The various new services, undreamt of a few years ago, and which, in want of better name, we call the "Web 2”, eBay, Google, Wikipedia, MySpace, etc. are only starters. Computers will facilitate the advent of new moneys which will make obsolete the sovereign moneys we have been used to employing for the past 2500 years. These new moneys will be fought against by public powers, officially because they shirk taxes, just like Local Exchange Trading Systems (LETS) have always done, and which are tolerated as long as they remain marginal. But unlike LETS, new moneys will benefit from the power of computers and telecommunications to upset and eventually probably topple official moneys.

In truth, the phenomenon is already under way. Public authorities launched the war which will end with their demise, and also with the solution to the problem of the public debt that political leaders intend to pass onto our children. When eBay acquired the independent banking service Paypal, national authorities succeeded in imposing regulations to eBay which brought Paypal back to the status of a simple electronic bank.

Nonetheless forces pushing toward the emergence of new moneys, the means at their disposal, and the problems they will solve, are such that the advent of these is inescapable. Second Life offers another illustration. One can consider this recent Web 2 product as a mere gadget. After all, large computer firms, in the seventies, thought the same of microcomputers. However, without them, Internet would never have become what it is today.

On Second Life one can already find "subsidiaries” of IBM or Dell ; the Swedish embassy opened a "consulate”. There is a currency, the Linden. For the time being, it is specified that the Linden must not be used outside Second Life (see for instance, Second_life_and_the_virtual_buck). But like any regulation that cannot be enforced, it is doomed to fail. Who will prevent two people from carrying out a transaction paid in Linden? If it concerns exchanges via the Net, it is impossible. And even if it is to pay for a living room sofa with rights on Second Life, it is very difficult. The son of a friend of mine sold for 200 (quite real) euros the codes to use a virtual character in an Internet game. See also "QQ: China’s New Coin of the Realm?”, Wall Street Journal, 30 March 2007. (See also : http://www.infos-du-net.com/actualite/12253-voleurs-virtuels-habbo.html )

The diffusion of computer means and power in the public at large will allow the creation of new systems of recording and managing credits. Credit, the ultimate form of which today is the sovereign currencies of States, with legal tender status within their borders, is only a set of signs. And computers are by nature the perfect tool to record and manage signs.

We mentioned eBay, one of the first firms which can be classified into the Web 2. On eBay, buyers and sellers accumulate points measuring their reliability. It is, by definition, credits. Nothing can prevent, except a severe control over eBay, the transfer one way or another of these points: there again, new money.

The hallmark of new moneys appearing in various areas of the Web is that they escape the control by public authorities. It is computers which make this possible.

And the crazy management of the French public debt, which we plan to pass onto our children for them to untangle, will only speed up the loss of importance of classical moneys and the emergence of new ones. Then, debts in euros will have the same importance as, in 1924, debts in marks of 1922.

André Cabannes