The Ultimate – Alternate Payment System (APS) Pt.2

Today, we continue building our “The Ultimate – Alternate Payment System (APS)“.

I’m looking for a global common denominator of value which may be used as the financial base or backing for our digital currency. If you’re not sure what I’m talking about – try to picture this….when you log in and fund your PayPal account, or any other online payment system, you will be adding dollars of local national currency and receiving digital dollars into your online account. More accurately, you will be receiving ‘digital dollar units’. For each one dollar you add, you will receive one ‘digital unit’ labeled a dollar.

After funding your account, that dollar of local money received by PayPal is now being held on deposit while you make use of their digital dollar. If you were to add $1000 USD to a PayPal account, they might then be holding your $1000 in a money market account along with the other millions which change hands daily in their system. Remember, if a million digital dollars are issued, one million USD are held in that reserve account. Thus you can say that the US dollar are being used as the base of the system. US Dollars back the digital dollars.

If our new digital money is to be used in every country and by every household around the world, what national currency would we want to back our ‘digital dollar units’? What money would be in our ‘reserve’ account on deposit against all of the issued ‘digital dollars’?

The US dollar is accepted around the globe. The Euro is now also widely accepted. However, both of these currencies and in fact all government issued currencies are subject to major risk factors and consequently the value of that money can change over time. Governments fall or go bankrupt, countries participate in expensive wars and lately there is no shortage of natural disasters like hurricanes and tsunamis. All of these events can change a country’s economy and the value of its money.

After much consideration and thinking about what ’store of value’ would be universally accepted by everyone on the planet, I’m asking myself what money cannot be devalued by government decree, is not dependent upon anyone’s promise to pay and cannot be destroyed?

I take a closer look at what Dave Birch is saying over at the the Digital Money Forum Blog in his post of March 22.

“…once an e-payments infrastructure is in place so that the currency of the transaction becomes immaterial, then consumers might want to transact in Manchester United pounds (they already use credit cards and savings accounts) or Microsoft dollars or Islamic gold e-dinars…nothing to do with the drivers for the use of traditional means of exchange (eg, liquidity, stability and so on). Once brand arrives in the world of currency, who knows where it might go.”

Dave points out what I think is an absolute requirement for our universal digital currency. We need a common denominator ‘unit of value’ coupled with the ability to easily, instantly and at no cost to convert it into local currency. Once that base of value has been declared and we have a universally accepted ‘backing’ for our digital money, then the local currency you convert into digital currency could be any one of a multitude of various government or private currencies.

If German users deposit Euros, Nigerian users deposit Naira, Americans or Mexicans deposit USD and finally from Malaysia we get some Ringgits –> how can we keep track of all those currencies as the daily exchange rate changes, if users move funds in and out of our new system?

In fact, it would be impossible to accurately manage such an operation without charging a huge fee on each transaction. That is not possible with our ‘Ultimate’ APS.

Our e-payment system must have as its unit of value an accepted common denominator recognized and priced in every country around the globe. Our new currency seems to require a commodity not a national one dimensional, inflation riddled paper currency.

For our ‘Ultimate’ system, we must find a common denominator of value which is universally recognized, always liquid and accurately priced on a global scale 24/7. What store of value crosses all financial, religious and cultural lines in every country around the world?

Gold

Gold is money and has been for thousands of years.

Gold is recognized around the globe as a common store of value and its worth can be recognized and measured in every jurisdiction. If the value behind our ‘ultimate digital currency’ is based on actual gold bullion, then our digital money could easily be converted directly into any local currency. Transactions in online accounts would all be measured by weight and no expensive or complicated currency conversions would be required. Excellent! Gold it is!

Gold is our common denominator between every person in the world. Pure Gold is an element, you cannot create it in a lab and you cannot destroy it. The value of gold can be easily measured by its weight. The value of a person’s account can be instantly calculated for any world currency at any time day or night from the price of gold on world markets.

We will back our digital dollars with the value of pure gold bullion.

continued…