The difficulty lies, not in the new ideas, but in escaping the old ones, which ramify, for those of us brought up as most of us have been, into every corner of our minds.
As noted earlier, we technologists are aware that we overestimate the timescales for adoption of new technologies but underestimate their long-term impact. In other words, it may take longer than people like me think it will for technology to remove cash from our everyday lives, but when it does so the impact on society will be far greater than mass redundancies in the ATM business.
The impending shift will be to a different economy. Mobile phones, shared ledgers and smart money will support multiple identities, use multiple monies (but not cash) through services provided by different entities, and be able to manage our identities (and affinities), our networks and our reputations. There will be social and political implications that are impossible to foresee clearly. What is to be done? Predictions are hard – especially, as the old saying goes, about the future – but it is important to begin developing some ideas for these scenarios now. Next time our banks collapse, or if sterling becomes worthless, we will get a chance to try some of these ideas out.
In chapter 14 I suggested that in the future all money will be local, belonging to the community in which it is used; it’s just that ‘community’ will mean something different in the connected world. Whether the community is Totnes or the Chinese diaspora or World of Warcraft won’t matter, but the shared desire to minimize transaction costs for ‘us’ at the possible expense of transactions costs with ‘them’ will. Since the overwhelming majority of retail transactions are local, most people’s transactions most of the time will be in their local currency, with minimal transaction costs. A small number of transactions will be in ‘foreign’ currencies (i.e. someone else’s local currency).
From this perspective, the widespread view that ‘alternative’ money can work in isolated local environments but not at scale is wrong, because both locality and globalization will mean something different in the networked world and there’s no reason why interconnection between local money of one form or another (via markets) cannot operate globally. Local currencies right now might well be a form of electronic voucher rather than money (Naqvi and Southgate 2013), but in this community-centric vision of the future one can easily imagine London e-shillings, Islamic e-gold or IBM dollars could interconnect through Ripple to provide a seamless global means of exchange. The shared ledger brings a transparency to alternative forms of money.
This is more of a reconnection with the past than it may at first seem. If we look at the history of money management by ordinary people, the relative use of the available money instruments is fascinating. In Britain, for example, right up to the nineteenth century, there were usually several currencies in circulation in addition to sterling. This situation, having been temporarily banished by state capitalism in the post-Bretton Woods world, is likely to be restored (Hart 1999), and I see no reason why people (aided and abetted by their mobile phones and smart watches) could not adjust. This ‘new local’ version of money must sound as odd to you as the idea of a central bank and cheques did to the inhabitants of Stuart England, but it isn’t. Trying to imagine a wallet with a hundred currencies in it and a Coke machine with a hundred slots for those currencies is nuts, of course, but your phone and the Coke machine can negotiate and agree on currencies (or, more importantly, currency markets) in a fraction of a second: the time it takes to ‘tap and go’ with your iPhone, Samsung MST or Microsoft HCE wallet.
Communities and potential currencies
Let us now try to integrate the economic, technological and artistic perspectives and look at three examples of the different kinds of community that we might imagine creating money and the different kinds of money that they might create to reflect their own values. I’ve chosen economic, cultural and geographic examples.
Economic communities: the hard e-euro
I remember hearing Alistair Darling, then UK Chancellor of the Exchequer, talking on the radio during the global financial crisis. He referred to the difficulties of currency union and spoke about the problems in Ireland, Greece, Portugal and Cyprus. He spoke about the problems of maintaining monetary policy across currency unions between economies with different fundamentals. All true. But he didn’t explain why this is different for the United Kingdom. How is the insanity of trying to maintain a currency union between Germany, Luxembourg and Greece any different to the insanity of trying to maintain a currency union between England, Wales and Scotland? The fact that they are in a political union does not alter the facts on the ground: they have fundamentally different economies. The Chancellor was arguing that if Scotland opted for independence, it would be impossible to maintain a currency union between England and Scotland. But surely if that is true, it is true now! The best monetary policy for England is not necessarily the best monetary policy for Scotland, and technology means that what was optimal for commerce at the time of the Napoleonic Wars may no longer best for the modern economy.
If the argument for currency union is only about transaction costs within economic zones********, then former Chancellor of the Exchequer John Major set out a potential way forward in 1990 (although the idea dates from 1983) with his alternative to the euro, which at the time was labelled the ‘hard ECU’. The ECU was the ‘European Currency Unit’, a unit of account set using a basket of currencies that was intended to help international business by minimizing foreign exchange fluctuations. Major’s idea for the hard ECU was a fully-fledged currency with a ‘no devaluation’ guarantee (Hasse and Koch 1991). Whereas the ECU reflected the weighted average of inflation rates in the countries concerned, the hard ECU would be linked to the strongest currency (which would have been the Deutschmark, of course). This guarantee would be backed by a commitment from participating central banks to buy back their own currency or make good exchange losses in the event of devaluations.
Imagine what that kind of parallel currency might look like today. It would be an electronic currency that would never exist in physical form but still be legal tender (put to one side what that means in practice) in all EU member states. Businesses could therefore keep accounts in hard ECUs, even in a post-EU Britain, and trade them cross-border with minimal transaction costs. Tourists could have hard ECU payment cards that they could use throughout the EU without penalty. And so on. But each state would continue with its own national currency (you would still be able to use sterling notes and coins in British shops) and the cost of replacing them would have been saved.
This sort of parallel currency does not expect (or indeed ensure) economic convergence. Instead it is about facilitating trade with a community, and I envisage it evolving in parallel with the necessary community reputation system that will serve to facilitate the demand for trade.
Cultural communities: Islamic e-gold
I have long thought that there might be opportunities here. Let us go back to Manchester United Pounds, Cornish e-tin and Islamic e-gold to consider the impact of branding on money. It could be huge! Islamic e-gold could have a billion users and, given the desire to transact with the convenience of a card but in a non-interest-bearing currency, it would seem to be a straightforward proposition to offer a gold card that is denominated in gold. A gold fan tenders their chip and PIN gold card in a shop on Oxford Street to buy a pair of shoes: to the system it’s just another foreign currency transaction that is translated into grammes of gold on the statement. If, at the end of the month, the person has used more gold than they have in their account, then they can use some of the bank’s gold for a time, at a fee. Hey presto, no interest. And if a gold user wants their gold, then they can, in principle, go to the relevant depository and draw it out (minus a handling fee, naturally). Would interested credit card issuers please form an orderly queue?
Geographic communities: the London e-shilling
Consider a scenario in which cities, not countries, might become the source of money and identity (two of the things that interest me most!). I am sure that many people would see these ideas as being somewhat speculative, and perhaps I did too until I read in the Financial Times that ‘to make wise decisions, investors and policy makers need to view the world not so much as a collection of countries but a network of cities’ (Naqvi 2014). Indeed.
I made a podcast (available at http://bit.ly/2nYWWFu) with Felix Martin (the author of Money: An Unauthorised Biography (Martin 2013)) in which he talks about the ‘bargain’ around technology and money and the bargain between the sovereign and the markets: the bargain that the late Glyn Davies said (at the very first Consult Hyperion Forum) had always served to weaken the power of the sovereign. In passing, Felix talks about the Bank of England using something like Bitcoin to issue an electronic currency: Bank-of-England-coins or something like that.
Suppose we combine these two sets of ideas and argue for electronic money issued not by countries but by cities or regions? In the podcast, Felix sensibly attempts to refute some of my crackpot theories about London having its own money and Scotland launching the first wholly virtual fiat currency, but I feel that the tectonic plates underlying currency have shifted in my direction. Once again, let’s pop over to the Financial Times to see what the great and good have said about this, as distinct from wide-eyed techno-determinists like me. What about Martin Wolf? He said that London is far richer than Scotland, and could easily be fiscally self-sufficient (Wolf 2013). If we are recognizing the age of cities, recognizing that there are no national economies, then ‘it is high time that London became a true city state’.
How true this is. And the right place to start would be to stop London from distorting the UK economy further by making it have its own money. We already have two economies in the UK – London and everywhere else – so we should recognize that and take London out of the ‘Sterling Zone’ as soon as possible! I don’t see the slightest problem with a ‘hard e-shilling’ (or whatever a future mayor might select as the currency unit) that would exist in electronic form only. Make the e-shilling legal tender and the only way to pay taxes in Singapore-on-Thames and the whole thing could be up and running in a year.
Art school
A final diversion to help with imagination before we settle on a narrative for post-industrial money is to consider the future of money from a wholly different perspective. For two decades Consult Hyperion has held a forum – the Tomorrow’s Transactions Forum – in London every spring to look at the future of transactions. As part of this series, in recent years we have organized a Future of Money Design Award for art students.
The idea of the competition is to help us technologists broaden our perspectives by asking artists to think about the future of money, payments, reputation and so on. Just to illustrate the range of possibilities, I thought it would be interesting to highlight a small number of these entries to feed into the thought processes about the future of money, but I hope you will take some time to browse all of the artists’ super work at www.futuremoneyaward.com.
Electric Money – Austin Houldsworth (2008)
Austin imagines a dystopian future in which electronic money has been hacked and a new system is implemented. The new system of electric money is an alternative monetary system that uses kilowatt-hours as ‘currency’. The benefit of this system is that cryptography isn’t required to protect the system as electricity is a form of power that can’t be created or destroyed, only converted.
One of the money-generating devices aimed at the homeless is based on a simplified sterling engine: by placing a hand over one of the tin cans, the air inside expands due to the rise in temperature. The expanding air pushes a magnet suspended in ferrofluid through the straw, which in turn creates a small current in the wire.
- Electric Money (courtesy of Austin Houldsworth).
I was struck by this idea because it showed technology and art converging so beautifully. It is easy to imagine a future digital currency based on energy but it took an artist to imagine this decentralization, which, in a strange way, resonates with Bitcoin’s electricity-intensive decentralized structure.
Selfie Money – Jonathon Keats (2014)
It’s hard times for dollars and pounds. Banknotes are losing out to Square and PayPal. The whole idea of national currencies may become obsolete in the age of Bitcoin.
The Bank of England is fighting monetary obsolescence by updating the £10 note with a portrait of Jane Austen, presumably more enticing to younger generations than Charles Darwin. But it’s too little, too late. The only way to successfully compete against the discrete convenience of electronic transactions – let alone the anonymity of cryptocurrencies – is by appealing to flagrant narcissism.
National governments must replace old-fashioned portraits of historical figures with pictures of the people who actually use their banknotes. The new face of paper money must be the selfie.
Given the strong connection between celebrity and wealth in modern society, selfie money should have little trouble gaining popular acceptance. Moreover, the system should have a beneficial effect on national economies, preventing recession, since the opportunity for people to have their portraits in others’ wallets will motivate spending. Narcissism will be the new wealth of nations.
- Selfie Money (courtesy of Jonathon Keats).
This idea ends fungibility and makes the smart money of the future something like the assignats whose value was determined by the status of the signatories through whose hands it passed. This concept was developed further by another winning entry.
TRAIL$ – Nitipak Samsen (2011)
Have you ever wondered where the money in your pocket came from? Who was the previous owner? Who was the owner before that? Might it have been a famous celebrity?
TRAIL$ imagines the development of a new monetary payment system: a system specifically designed to replace the easily forged paper banknotes of the twentieth century.
Smart banknotes work by presenting a readable history of ownership on the note itself: an innovation designed to prevent money laundering. Although the system appeared successful, there were loopholes and unexpected instabilities regarding the value of each note, eventually leading to the demise of the story’s main protagonist.
The story is presented from the perspective of a civil servant turned entrepreneur: a professional working within the financial industry who explains his personal experiences of the new ‘smart’ banknote system and its resultant benefits and consequences, from security to intimacy, economic and fanatic perspectives.
(After all, who wouldn’t treasure the rare £50 note with both my face and Sergio Aguero’s face in its history?!)
- A TRAIL$ card (courtesy of Nitipak Samsen).
This combination of Bitcoin and Facebook – a smart money that remembers where it has been and what it has been used for as well as who has been using it – seems to me to be an interesting vision of a future digital currency. If electronic money is anonymous and fungible, then the future looks very different.
Bigshot – Joe Carpita and Craig Stover (2013)
What happens at the convergence of anonymous routing, crypto-anarchy and crowd funding?
Today the individual is capable of wielding more power than ever before. The proliferation of anonymous, web-based technologies will enable them to yield this power exponentially, creating the potential for devious criminal activity on a scale that has never before been possible. Imagine a world where dangerous minds have a public platform to solicit support from anyone with an Internet connection.
- Bigshot mock website (courtesy of Joe Carpita and Craig Stover).
This idea of taking the assassination markets discussed in chapter 10 and opening them up through crowdsourcing encourages us to imagine new sorts of crime (and, in my opinion, new sorts of diplomacy) that we must take into consideration when trying to design the next generation of money just as much as the considerations around technology, economics and banking.
******** It isn’t, I know, but I am making a different point here.