Gloria - Even Utopia Needs Maintenance

[sparkletwist]

Forgive my ignorance, but why does fiat money mean that the government *must* interact with the economy?  Can't we imagine a government which prints notes and declares them legal tender but doesn't tax its populace or plan its economy to any significant extent?

If the government doesn't pay its debts with its own notes, doesn't loan money from its central bank to other banks using its notes, doesn't collect taxes in its own notes, doesn't try to get foreign countries to accept its notes, and so on, why would it even bother printing them? It costs resources and labor to design a currency, institute anti-counterfeiting, etc., so if the government isn't going to get some use out of it, it has no advantage to creating its own currency when there are probably perfectly good commodity currencies (like gold) floating around.

(As an aside, due to fractional reserve banking, it might be pretending to be using gold and creating a sort of fiat currency anyway, just like large banks do)

[LD]

This may be getting too far into speculative economic theory...

Commodity Currencies
The commodity currencies don't make sense to Glorians- the commodities don't represent any intrinsic value. Gold is worthless-it's not an efficient thing in Glorians' eyes since it's just pretty. Glorians are more practical. Something more useful in Gloria would be Shimmer, but Shimmer is a recent phenomenon. Potentially iron ore could be used, since that's used in construction, but consumption and exhaustion of the resource presents the same problems I explained in my post above with my analogy to biofuels.

I could see this being a topic of contention in Gloria. Some would argue your side. Others would argue that it requires work to mine the gold, so a flood is unlikely, and the labor that is being performed and the gold being extracted is enriching the economy, so it is a valuable service that should allow one's personal wealth to grow.

I could see that argument, but it's better to directly value the work that everyone does. Mining Gold doesn't benefit the community. Someone who is just mining gold isn't helping Gloria- they're hurting it by causing inflation and enriching themselves.

Fiat Money
Fiat money is how every economy in the world today operates. It seems that your concern is that fiat money can be inflated by central banks that control the money supply. With the currency being based on GNP that could potentially happen, but I don't see it as a practical problem that Gloria has had to face (see below).

What's to stop them from forming into a sort of cabal and manipulating the market, instead of keeping each other honest? Maybe this is what's happened-- who has the real power in Gloria?

Well they don't manipulate the market. Having a proliferation of rating agencies acts as an effective check on each other. Think about real life- the government might regulate things, but that's really just essentially adding +1 rating agency into the mix- except one that can "regulate" the others and post rules for their governance. Some Glorians like monopolies and laissez faire; others are like Theodore Roosevelt and are about smashing monopolies and good governance. In the end it all works out. Doesn't mean that people don't try to corner the market; but they don't last long given the honor system of Gloria's laws--once corruption is found out and proved by one muckraker, then the entire structure falls down and the agency and its members would be bankrupted.

No, fiat money relies on the government to give it value.

Sparkle, you are right, but I think that is only half of the truth and I may have said the other half when I said that the market gives it value. A government has both fiscal policy (I'm lumping in Trade Policy with fiscal policy when I discuss it) and the government also has monetary policy. Currencies are traded and valued at the international level. Monetary policy arguably has a larger effect on currencies, but recall all the consternation about China allegedly "pegging" the Yuan to the Dollar and the US' attempts to make it "float" and be "freely convertible." If it is freely convertible, then its price will be determined based on its strength vis-a-vis other economies. It's more complicated than that and I agree with you that monetary policy, determined by interest rates, plays a large role (e.g. Japan devaluing the Yuan to encourage its exports), but the market also plays a role- and in Gloria, the market's role is much larger than the government's role.

I see that Hayek supported the concept of Free Banking. Thank you for the link Steerpike.  It's a good option though and I could see Gloria potentially using it, but I would posit that the GNP-based system I propose is similar and it doesn't have Free Banking's problem of a myriad of confusing proliferating currencies that need to be verified. I'm not against changing to that idea, since it avoids a monopoly of currency, but I think I'll stick with the GNP-idea at least for now unless Sparkle is also going to jump on the Free Banking bandwagon and I become convinced by further thought...since my proposed system below may be ridiculous (I am uncertain if it's been done in the real world).

Here, Gloria has one currency. Alexander Hamilton, one of the inspirations for my setting, realized it was important for the US to have a national bank and to have monetary policy, so I can see the Bank as a creation of Gloria. I don't foresee it as having problems of inflating ad infinitum though because the money supply always needs to be expressed in terms of GNP--if people stop working then the market crashes--if people keep working, then GNP functions like a commodity. It also becomes a matter of national pride to work and to produce- the more you produce, the more that each unit of currency is worth. If Glorians stopped working, then the economy would collapse.

If anything, Gloria may have to confront deflation, like the US saw under Carter. I'm also not certain how debt can be handled in this situation--if banks issue debt then that would weigh down the GNP as they essentially cause inflation by themselves.

This might be the issue of the disconnect- I wasn't talking about Gloria having a central bank that causes inflation- the central bank mints X number of GNP-representative units each year based on the rating agencies' analyses, then the banks bid for the units and part of that bidding price pays for the minting.

Maybe I made a mistake in putting an actual value on the currency. If the banks are bidding for the units and issue their own debt and notes, then they are already creating a sort of "shadow economy." The debt notes would by necessity exceed the actual issued coin units... which would mean that Gloria has 1000 units in circulation and there are 2000 in loans out on any one day. So the 1000 units are worth twice as much, effectively. And then a new bank opens that makes 1000 more in loans, so the units become worth three times as much because the "Free Banks" are essentially "creating" more money but instead of creating it on their own currency, they're creating it on the state's currency. Potentially, they would lack any restraints on issuing debt. Bank A could issue 10,000 debt and only collect 1,000 from the debtor and it could call it even because the intervening 9,000 never existed? I think I really need to sit down and work out the mathematics and the economics of this. My system appears to work up until the point where Banks issue debts--all workarounds that I see would require the Banks to interact closely with the Central Bank in keeping the money supply limited- which could lead to deflation. The simple solution, as you state above, is to go with commodity currencies, but for reasons outlined here I just don't think those suit. I may indeed end up going with Hayek and Steerpike's suggestion of Free Banking.

Thank you for your feedback!

Currency Trading

Again, this could be a divided issue. Some people think it's bad, others think it's a service and worth the profit that people who do it make.

I think I'll use your comments on currency as a philosophical debate in Gloria. If the cities actually are trading currencies, then the act of trading would be a moot issue. It could be a proposed idea.

[LD]

SabrWolf

On a constructive note: I don't think I realized just how important the Virtues/Vices were in Gloria until you posted this. I'll have to keep that in mind while we're playing because I definitely want to immerse myself in this system (as it's striking me more and more like it's going to promote a very intensive rp style from everyone playing).

Thanks for noting that. Out of curiosity... I was going to ask this in IRC, but I'll ask it here- how did you come to find this site and already figure out how to use IRC so quickly and jump right into things? You are to be applauded for that. :) Did another CBGer introduce you here? Regardless, I do appreciate your arrival!

And you are wholly correct about your other comment. :)

[SabrWolf]

I was actually forced into coming to the CBG by Xathan. He's been up in arms for me to participate on the boards shortly after he decided I was "cool" (which wasn't that long after we met ... god 5 years ago?). Anyway, I owe him a debt of gratitude since I've been loving reading the active threads as they develop and perusing the Homebrews section.

Random Introspection Moment
I'm not sure if I've been particularly inspired by the boards tho. I definitely don't feel a need to pull up a fresh Notepad and Word file and start working on a new setting. However, I find most of the settings intriguing and I like seeing how the authors here go about using different systems to achieve the kinds of effects they want within the settings they've developed. I've always been more of a "Constructive Criticism" person than an author to be sure, but I realize that more now that I've been reading the threads/settings here. I just don't have the same kinds of deep, setting oriented ideas that most of the authors here tend to have.

Point in case: the currency discussion in this thread is WAY over my head. I'd have said the currency had a relatively set value (determined by an unspoken understanding on part of the Glorians) that might fluctuate with the bust/boom cycle of import/export trade and have expected that to be the end of it. But you guys have gone and totally blown the economy circuitry in my brain. IT'S A MADHOUSE!!!

... But I digress.

At the very least, I think I'll keep looking at the stuff you guys have here and I'll likely keep posting little things (like the comment you quoted) as they occur to me. Glad to be here and I'm glad that my commentary is (at times) somewhat helpful.

(NOTE: Apologies in Advance (AiA) if this derails the thread. I always hate it when that happens.)

[Xathan]

I was actually forced into coming to the CBG by Xathan. He's been up in arms for me to participate on the boards shortly after he decided I was "cool" (which wasn't that long after we met ... god 5 years ago?). Anyway, I owe him a debt of gratitude since I've been loving reading the active threads as they develop and perusing the Homebrews section.

Just to go with the derailment for only a moment, that's why I wanted you on these boards - because you do Constructive Criticism so well, and it felt selfish to not let other people benefit.

On a related note, I'm having a hugely difficult time following the currency thing myself - but it's interesting to read. However...

Sort of?  Here private banks, not governments, are the ones issuing money.  Maybe I'm not understanding this correctly, but can't the money issued by said banks (i.e. banknotes) still be representative rather than intrinsic?

I actually think this (which might have gotten lost in the discussion) would be a great middle ground - private banks issuing the money, perhaps as lines of credit - would create a stable economic marker in a Capitalist Utopia like Gloria (though it'd likely fall apart IRL). Any thoughts on this?

[sparkletwist]

This may be getting too far into speculative economic theory...

You're probably right. I've thought/written too much about this kind of stuff for my own settings, so it probably bleeds over in me talking about it too much.

Gold is worthless-it's not an efficient thing in Glorians' eyes since it's just pretty. Glorians are more practical.

All sorts of very pragmatic real human societies throughout history have used a precious metal currency, so this isn't really an obstacle in some ways, but it's your setting, so of course you can and should do whatever you want. The issue of gold-as-currency is a completely different issue, probably something to do with anthropology, and would probably make this already complex discussion even more so. I doubt I'm informed enough to contribute much on that topic.

Think about real life- the government might regulate things, but that's really just essentially adding +1 rating agency into the mix- except one that can "regulate" the others and post rules for their governance.

I was trying to think about real life. Sometimes the rating agencies stay independent, but sometimes they form a sort of cartel. The government getting involved might just lead to regulatory capture, like, quite arguably, the FAA and the SEC (among others) in real life. Then the government agency is essentially part of the problem as opposed to part of the solution.

once corruption is found out and proved by one muckraker, then the entire structure falls down and the agency and its members would be bankrupted

That seems pretty optimistic. It seems entirely possible they'd dig in their heels, wage a counter-PR campaign, try to discredit the muckraker, etc. Again, what happens in real life to whistle-blowers. :)

A government has both fiscal policy (I'm lumping in Trade Policy with fiscal policy when I discuss it) and the government also has monetary policy.

Your post was interesting, and quite a deep analysis, but I think it read a lot more into what I said than I meant. All I meant by "fiat money relies on the government to give it value" is that the fiat money is only money because the government says so. In the free market, it is worthless, or only worth the value of its components, or whatever. It only has any greater value because the government is there saying that it does, and has the power to back up that decree through legal tender laws and the like.

[LD]

Xathan-

I actually think this (which might have gotten lost in the discussion) would be a great middle ground - private banks issuing the money, perhaps as lines of credit - would create a stable economic marker in a Capitalist Utopia like Gloria (though it'd likely fall apart IRL). Any thoughts on this?

As you stated, The more I mull Steerpike's Free Banking solution over, the more it seems to make more sense than what I am currently using (which would tend to turn into a banking tragedy of the commons). I still need to give the matter some more thought though (as I discussed buried somewhere in my long above-post- I am considering it :)).

SabrWolf: Thanks for your history- I had been wondering about that!

Thanks also for your reply Sparkletwist-- I'm going to digest it for a bit. I really appreciate the level of thought you put into your questions and your replies.

[LD]

After some more thinking about the situation; Steerpike's Free Banking suggestion might be the best solution. I think I'll go for it as the basis of the monetary system. Therefore, things are going to get a bit 'cyberpunkish' in the sense that corporations and businesses and companies are all issuing money and the assessors are valuing the value of their notes and there are going to be currency exchanges, etc. But it's still an optimistic world; banks that don't issue proper money collapse and their assets are bought and then the notes can be redeemed for quarters on the dollar. So people are careful to watch the financial statements of their banks and from places where their currencies originate. There may also be a Currency Creator (of an over-currency) who promises a very standard currency and who buys and tries to arbitrage some of the other myriad currencies.

Gold is worthless-it's not an efficient thing in Glorians' eyes since it's just pretty. Glorians are more practical.

All sorts of very pragmatic real human societies throughout history have used a precious metal currency, so this isn't really an obstacle in some ways, but it's your setting, so of course you can and should do whatever you want. The issue of gold-as-currency is a completely different issue, probably something to do with anthropology, and would probably make this already complex discussion even more so. I doubt I'm informed enough to contribute much on that topic.

Final verdict: Glorians only trust the power of the market; to them gold is a questionable basis for a currency.

Thank you again.

[LD]

*Bumping for the game tomorrow. Monday. 7PM EST.

[Steerpike]

Hey LD,

I may be a very short bit late tomorrow.  Not too badly; I will definitely be there.  I'll sign in so that I can catch up on what's happened in the event I miss the beginning.  Feel free to NPC my character for the first little while if I can't be there on the dot.

[LD]

Thank you for the warning!

[Xathan]

Hey, I'm giving you a heads up (wish I could have given Steerpike one too, wasn't sure what was going on until was way over my head), but totally swamped with school so probably won't be able to make it tonight - hopefully will be able to join in later!

[LD]

Question:

-In playing I was having some difficulty in differentiating between Industry, Resolution, and Pluck as far as mechanics goes... can anyone suggest a good way to differentiate them? I can fold some of the Virtes/Vices into each other to move from 12 to 10, but I'd rather not have 11.

-If you think a different Virtue should be added to the list, please also suggest that.

-It is possible also that Tranquility and Tolerance should be folded into each other?

-And should Self-Improvement be split out into its own category (and possibly renamed- ideas?)

Here's what I have:

C H A S T I T Y
- Will be respectful to all others and will not flirt unless its already been initiated. Incorrigible by temptation of the one-night-stand sort. Can sometimes be taken to extremes.
- Opposite: Sexpot.

H U M I L I T Y
- The opposite of prideful. Will give credit when it is due. Will not be boisterous or loud or rude.
- Opposite: Pride.

I N D U S T R Y

- "Lose no time. Be always employed in something useful. Cut off all unnecessary actions. " - Benjamin Franklin
- Always have something to do and is good at getting things done.
- Opposite: Procrastinator. Someone who takes twice as long to do something. Someone who produces worthless crafts.

J U S T I C E

- "Wrong none, by doing injuries or omitting the benefits that are your duty." - Benjamin Franklin
- Has a strong moral compass and will go out of one's way to right a wrong.

L U C K / S U C C E S S

- You have an unnatural knack about having things work out in your favor.

M O D E R A T I O N / T E M P E R A N C E

"Avoid extremes. Forebear resenting injuries so much as you think they deserve."  - Benjamin Franklin

O R D E R / P R A C T I C A L I T Y

"The emotion of beauty is always obscured by the appearance of the object. Therefore the object must be eliminated from the picture."
- Piet Mondrian
-Has all one's thoughts in order. Can easily access notes and ideas.

P L U C K

- Gets back up again and keeps trying again and again.
- Tenacity
- Game effect: Recover any other virtue that has been 'burned'.
- Lack of Pluck: Game Effect- When any two virtues cancel out in a challenge, will give up rather than requiring a separate challenge to be made.

R E S O L U T I O N / S E L F - I M P R O V E M E N T / C L E A N L I N E S S

- Improves oneself and holds strong views that are well supported.
- Opposite: Does not hold strong views, will not self-improve. Lethargic and wishy-washy.

S I N C E R I T Y
- Is very sincere. Says what one means and is known for being forthright.

T O L E R A T I O N
-Is tolerant to others who have different beliefs or who are different from them.

T R A N Q U I L I T Y / A D A P T A B I L I T Y
- Is adaptable to new situations without being worried.
- The Opposite: Is generally annoyed and will be quick to anger when one does not get what one wants.

[LD]

Bump?

Any chance I can get feedback on vices/virtues before the next game (19th probably)

[Steerpike]

On the subject of the game in general, it was pretty awesome, and tense, and challenging.  It's strange to have a game without any violence, but that's not a complaint!  Sometimes the descriptions flowed very fast, but that actually simulated the crowded square very well!

I really enjoyed it.  A little more info on how Xue's shimmer powers work might be cool.  I should reread the thread...

On the subject of Industry/Pluck/Resolution, maybe you can use Pluck to like regain a Virtue early or something?  To represent persistence.  Resolution would be for determination and pressing a point home, and Industry would be to impress someone with hard work of some kind.  That sort of thing.

EDIT: Slightly misread something... but the above comments stand.