How about the Lectro?
People doing some independent thinking on currency often at some point come up with the idea of using energy as backing. It is easy to see why: energy is probably our most important resource and intuitively it seems attractive to use it as currency. But does it serve the goals of Monetary Reform?
As a monetary architect I’ve spent many hours discussing monetary innovations with hundreds of people. The notion of energy backed currency pops up often and it is easy to see why: energy is probably our most important resource and intuitively it seems attractive to use it as currency.
Mike Rivero’s Lectro is a case in point, so let’s have a look at it and analyze its pro’s and con’s.
It’s a simple idea. One Lectro is redeemable for 1kWh of energy. Everybody supplying the grid with 1kWh will get a note worth 1 Lectro.
Rivero states the following:
1. There is no central issuing authority. Every home can have solar panels generating power to the grid, which is redeemable in Lectro notes.
2. Because power is now the actual monetary system, this approach encourages efficient (and with the proper tax penalties for pollution) clean power generation as well as conservation at the consumer and factory levels.
3. Nobody can short the money supply because everyone can create their own power and monetize it through the treasury. Runaway inflation is impossible because all the coins and certificates in circulation are tied to the available power grid. As power is created, coins and certificates flow into circulation. As power is used, the coins and certificates are taken out of circulation.
4. In the long term, creation of an energy-based money system will smooth the transition from a human-labor to machine-labor society. At present, human labor precedes all capital, payable in a monetary system that pays primarily for human labor. In switching to a monetary system that pays for machine based power production, we evolve towards a society where machines become the primary creators of capital, and all humans shift towards the demand side of the economy. Instead of creating poverty, the push towards automation creates more wealth.
To evaluate the Lectro, let’s first recap the Goals of Monetary Reform:
1. To end the control of the Money Supply by the Money Power and bring it back to where it belongs: the individuals forming the Commonwealth.
2. To decimate cost for capital. We are Interest Slaves. Interest is per definition a wealth transfer from poor to rich, so our Money Supply must be interest-free.
3. To allow equitable access to all. As opposed to the current situation, where the Money Power only finances those it owns or wants to own and starves the rest from credit.
4. To have a stable money supply. It should never deflate faster than the economy and if it inflates, it at least should be clear that the means of exchange is not hoarded (‘saved’).
So does the Lectro help us achieve these goals? It transpires it does not. At this point energy is produced by strongly centralized Transnationals. Big Oil and the Nuclear Industry. These industries are tightly controlled by the Money Power, so the Lectro would not end control of the Money Supply by the Money Power. Big Oil and its sisters would become the new banks.
As a result, with the Lectro we can forget about interest free credit: the Money Power will continue to use its control of the Money Supply to rape us with extortionist interest rates.
However, it most probably would allow an attack on the Money Power’s control, because it would be very lucrative for individuals and corporations to start generating energy. It would create a massive innovation boom, although this innovation would also be fiercely combated by the Money Power and of course Government, which is controlled by the Money Power.
This is where a serious weakness in the Lectro comes to the fore. Mike states: “Because power is now the actual monetary system, this approach encourages efficient (and with the proper tax penalties for pollution) clean power generation as well as conservation at the consumer and factory levels. “
The catch is: ‘with the proper tax penalties for pollution’. This will be used by the Money Power to have its scientists ‘prove’ that her energy is very clean, while decentralized energy is very bad for the environment. The Money Power will make the Government distort the market with these taxes.
Also it does not provide a stable volume of the money supply. It would be very easy to manipulate. The main threat is runaway inflation as a massive boom in energy production takes off. When production goes up, prices go down. So the currency would be depreciating and asset prices would start to rise.
Also, if the Money Power would maintain control of the volume by managing to keep Big Oil and Nuclear Energy in charge and preventing large scale decentralized production, it could easily create a boom/bust cycle.
After all, they have no problems creating a ‘Peak Oil’ phenomenon. This would mean deflation when the Lectro is our money.
We need to keep the eye on the ball: who is in control of the money supply? The Lectro does not provide a satisfactory answer to that question. In its early stages the Money Power would firmly control it and although the Lectro would allow a reaction through decentralized production of energy, it is far from certain that this would lead to free energy. After all: there is every incentive today to create ample energy, but it is not forthcoming.
However, the main issue is that there are better solutions already available: Mutual Credit can provide interest free money, completely free from control from the Money Power or even Government. Social Credit and Public Banking are two other systems serving the goals of monetary reform.