What is Points Banking?July 5, 2020
In previous posts, we explained two alternative subsystems for a financial or monetary crisis:
- Basic Universal Revenue (BUR) for creating basic value as food
- Resource Credits (RC) for keeping companies afloat and avoiding bankruptcy
Both BUR and RC have a common denominator which is their values are pegged to rice so that BUR is in ultimately in grams of rice just as RC is in kilos of rice or wheat.
Rice or wheat is the base because we all need eat grains to survive*.
In countries that have no grains, such as Greenland, the system can use fish through an exchange-rate conversion system
Combining BUR and RC as Points banking
We then unify both system as Points Banking wherein a kilo of rice is 1 point, as an implementation of our Effort Theory of Value derived entirely from Adam Smith’s Wealth of Nations Book 1 Chapter 5.
Since BUR is for basics, it can be implemented by the following:
- the private sector as their office pantries,
- NGOS as a community pantry, and
- local governments as their town pantry
The key difference between points and currency is that the points are not tradeable with everyone, and therefore not legal tender. Instead, they are tradable only to the people that a person likes.
Let’s say you babysit as part-time work. In a normal banking systen, you would offer your services to a family who would then pay you in currency. You could then exchange this currency with anyone for goods and services. They would never decline it since it’s legal tender. Before you receive that currency, it passes through the bank.
But in the points system, the family will pay you in points which you can only exchange back for the goods and services offered by that family. Why would you want ponts instead of cash?
This is because that family might have a core competency not available in the market. For example, one parent might work for Apple and get free devices or have discounts on devices. The deal might be for you to babysit in exchange for an iPhone at a cheaper rate than that offered in the market.
Aside from the benefits of personal exchanges, it has other macro benefits:
- Everything that is exchanged has real value. In the example, the babysitting and the iPhone have real value and utility at all times. This is different from the financial system where the fiat money has no use if it is lying idle.
- The points themselves do not suffer inflation nor bear interest cost or revenue. This makes this system much cheaper than the financial system
- The points represent something subjective, such as an iPhone or babysitting. There less temptation to steal the points. If someone steals my points for the iPhone, then the family can merely report it at their leisure. This is different from the financial system where frauds must be reported immediately before the thieves spend the stolen money