Ideal Money and Asymptotically Ideal Money
 
     After writing and speaking on a concept of "ideal money" I later 
also thought of a parallel concept which can be called "asymptotically ideal
money". The former concept was finally described in a paper published in
July 2002 and it essentially involves the concept of some sort of an
international convention which would define a good basis for standardizing
the value of currencies. The concept presented in "Ideal Money" was there 
described as not suited to the conceivable situation where a world empire
would exist and provide a global currency. 
     (For example, if the Byzantine Empire had been able to expand so as
to cover all of the world (or the "known world") then the currency of that
empire would be the world currency, whether good or bad, but the imperial
government would be influenced by different incentives than those which
influence separate and differentiable states which, to some extent, compete
with regard to seeking to appear advanced and well-governed.)
     If there is not a world empire there may yet be a considerable degree
of international cooperation of states and enterprises based in various
locations. So some rational cooperation in relation to money is quite
possible. We see now the illustration of the European bloc of countries
which now use the "euro" currency. And in the past the fact that many
countries sought to standardize the values of their currencies in relation
to gold definitely involved an effective sort of international cooperation
even though some of the countries could find the resulting circumstances
unpleasant.

                            Ideal Money
 
     The concept I developed of "Ideal Money" became, in my view of it, 
sufficiently advanced when I conceived of a practical basis for a standardization of the comparison of the value of a currency with an 
appropriate standard or ideal. And the key to that was the idea of an ICPI 
or (international) "Industrial Consumption Price Index". (That is thus like 
the U.S. CPI which controls Social Security payouts but would be adapted to relate to industrial producers rather than to individuals and it is 
envisioned as being essentially dependent, by choice of its definition, on 
costs that are very global in nature, like, for example, the cost of oil 
from OPEC and other producers or the cost of platinum, tungsten, palladium,
or nickel.)
     Thus the suggested solution for an "ideal" money was analogous to the
"classical" concept of "gold standard" money but evolved beyond a dependence
one any one specific commodity or the presumption of any need to keep 
reserve amounts of any particular commodity in storage (like gold in storage
at Fort Knox). (Of course it would be wise, strategically and defensively,
for any large state facing the possibility of involvements in wars or other
international conflicts to have SOME sorts of stored resources including also
things of general value, like gold or silver.)

    But one cannot logically feel confident of the adoption internationally
of an ideal system of currency or currencies in an achievement analogous
to the achievement of the metric system or of "the euro". Such a result
would necessarily have a political content since it is the states that
control and supply the various currencies that are in use at the present
time. And projects requiring political support may be difficult to achieve
or comparatively easy to achieve depending on elements of "political 
reality" which may differ considerably from the actual merits or lack of
merits of the projects (as evaluated from, say, a scientific or economic 
or medical viewpoint).
     So it occurs to me to think that that which is not achieved by a grand
action of establishment by "fiat" may alternatively tend to come into 
existence as a consequence of a process of evolution. And of course, after
a certain degree of progress by "evolution" the rest of the progress could
possibly be realized by a convention or a process of "fiat".
     For example, if we defined as "bolshevik communism" 

                Currencies of Improving Quality
 
    From the viewpoint of parties domiciled outside of the territory 
of where a specific currency (such as, e.g. the currency of Brazil) is
established the "quality" of that currency is evaluated according to the
reasonable appraisals of the probabilities of loss in value of the unit
of that currency, particularly in comparison with other currencies and
also in comparison with alternatives available for use for "storage of
value", like gold or commodities in general. 
    The more that the probabilities of loss seem to be large the more
that currency will be evaluated as of "low quality".
    On the other hand, "Keynesian" central bankers or associated and
advising economists, WITHIN the state responsible for the currency 
in question (such as, e.g. Brazil), may be arguing that they should
have and use methods of operation that will tend to act in varying
degrees at various times to increase the supply of the currency and
thus cause, ultimately, declines in its value. They may argue that these
actions, in which they have some discretionary options, are beneficial
for the general welfare within the territory of the state (e.g., Brazil).
    Whether or not the options exploited by "Keynesian" central bankers
and advisors are beneficial to the general welfare in the corresponding
territories (e.g., Brazil) it is very clear, game theoretically, that
they give those who can act on these options ADDITIONAL STRATEGIES that
they otherwise would not be likely to have available. So it is also
plausible that psychologically the having of these options would seem
to be very desirable in contrast to their renunciation.
    So I want to suggest now the possibility that, within the context
of varieties of currencies which are of the type typically found nowadays
and since the time of the influence of "the Keynesians" (and after the
time of the formerly used "gold standard" or other forms of currency
linked to a value standard), there is some real possibility that the
typical "rate of depreciation" of currencies may tend to decrease. Thus
there may evolve more disillusionment with the "Keynesian" methods that
tend to cause to exist a continual (sometimes intermittent) deterioration
in the internationally observable value of a specific national currency.
(This would apply to "the euro" also, as if that were effectively the
currency of an "United States of Europe".)
    The actors on the stage of the drama formed by the actions that
determine the trends in the value of a national currency are themselves
players in a game and they can be rationally viewed as such. The theme
of "rational expectations" naturally enters. Those who ARE NOT in
control but who ARE naturally concerned with the expectations for the
value trend of a national currency cannot be wisely assumed to be
entirely naive and unable to form "rational expectations" regarding
the currency. So the (possibly) "Keynesian" players in this game have
natural opponents (or co-players, beyond zero-sum perspectives) who
are interested in not being themselves "outsmarted" by those who
control the options that determine, say, the quantity supplied of
the national currency.

        Signs of Attitudes (Among Central Banking Authorities)

    On the web page of the Swedish State Bank there appears a sort of
speedometer measuring the rate of inflation. The fact that this appears
indicates several things about the psychology of the responsible
authorities there. One of these is that they have the concept that 
the government can choose policies to control the rate indicated and 
that varying consequent results (as regards the value of that rate of 
depreciation (of the value of the currency)) may be achieved as a result
of various conceivable choices of policy. (In the case of a poorer
nation it might seem more likely that the authorities would not usually
seem to have any ability to control the rate of inflation, as measured
modulo the domestic currency of that poorer nation.)
    Now the possible area for evolution is that if, say, an inflation
rate of between 1% and 3% is now considered desirable and appropriate
in Sweden, then, if it is really controllable, why shouldn't a rate
between 1/2 % and 3/2 % be even more desirable? (The rate measured by
the Swedish speedometer is determined in relation to a domestic CPI
calculated for Sweden.)

       Signs of the Times (Among National Currency Authorities)

    Comparatively very recently a few countries in South America and
Central America have adopted schemes that put them in positions
analogous to those of Luxembourg and Liechtenstein with regard to the
provisions for their domestic currency. Here Argentina and El Salvador
can be mentioned. They are adopting (at least temporarily) expedients
that put the value of their domestic money on a fixed relation to the
U. S. dollar. And of course Panama has had such a situation for a long
time previously.
    This is not "ideal money" because the U. S. dollar is not an ideal 
standard for money value. But the countries adopting such expedients
thus offer their citizens, at least for as long as they manage to or
choose to continue it, a deliverance from a typical past tradition 
of national currencies of even less stable value than that of the 
(historically observed) U. S. dollar.
    But if, for example, all of the countries of the world would base
the value for their national currencies on the value of the British
currency then this situation would appear singular and unstable, while
it was not so singular for a lot of countries to base their currency
value on gold.
    So the United Nations building can be in New York and the IMF and
the IBRD institutions in Washington, DC, USA, but these historical
facts do not make the U. S. dollar a good standard of value which the
managers of currency systems in other countries could justifiably
exploit to permanently fix the relative values of their national
currencies.
    The metric system does not work because French chefs de cuisine
are constantly cooking up new and delicious culinary creations which
the rest of the world then follows imitatively. Rather, it works 
because it is something invented on a scientific basis and in fact, 
after Waterloo, it was not first accepted in France but rather in 
The Netherlands.

                 Price Indexes in General

     Various states calculate some sort of a CPI or measure of the
"cost of living" for inhabitants of their territory. It is possible
that "globalization" and in general trends leading to more non-local
sources for basic needs like food and clothing will have the effect 
of making CPI indices calculated in different states tend to become
concordant. Of course the effects of taxes can be very complicating
in relation to comparisons of distinct national CPI indices.
    It seems possible and not unlikely, however, that if two states
evolve towards having currencies or more stable value as measured
locally by national CPI indices that then also these distinct
currencies would tend to evolve towards more stable comparative
relations of value.
    Then the limiting or "asymptotic" result of such an evolutionary
trend would be in effect "ideal money" but this as a result achieved
without the adoption of anything like an ICPI index as a basis for
the standard of value.

                   Tax Revenues Complications

    It is very well known among economists who study "macroeconomics"
(or the large scale picture of a national economy) that inflation, of
itself, produces the effect of varieties of taxation.
    On the one hand owners of state obligation securities (bonds, 
notes, etc.) find that the value of their holdings are reduced as the 
"true" value of a unit of the domestic money is reduced by inflation. 
So they are as if taxed on their holdings. And on the other hand, if 
the state has established a form of "capital gains tax" then the effect 
of inflation is to add an amount to whatever would be calculated as 
the "capital gain" on property held for a time and then sold. A nominal
gain can even be created by inflation where a "true value" measure
would have fairly determined a loss.
    Then these considerations make clear, for example, that if, say,
the state finances of Xland operated stably with a capital gains tax
and with stable "targeted inflation" of 2.5 % annually than that there
would be a loss of state revenues if the inflation rate were reduced
to zero. That is, there would be a loss that could be expected in the 
area of the capital gains tax revenues.
    So we can see that for the government of a state, acting on its own
independently of other states, to rationally contemplate the evolution
of the inflation rate for its currency towards zero there are clearly
some very relevant considerations relating to tax revenue expectations.

                     Psychological Considerations

    A truly "Machiavellian" regime can rationally scheme to make the
citizenry of the state FEEL well served (at least for a relatively
short time period) independently of whatever might be most truly best
for them (as seen from an "Olympian" viewpoint). Here it can be noted
that if there is gradual inflation then there should tend to be more
and more "millionaires" as a fraction of the population. If instead 
there were fewer and fewer of these then that might conceivably impact
negatively on the psychology of the citizenry. 
    It is also notable that there has been an overall sense of always 
increasing human per capita wealth, globally, as technological advances
continue to modify the nature of the global economy. But consider the
effect of measuring wealth purely in terms of square miles owned per 
capita of the earth's land surface. If each Hopi tribesman owns x by
this measure and each Navaho tribesman owns y by the measure then, with
global population steadily increasing, should they feel happy or sad?
    Perhaps humanity will REALLY arrive at increased wealth if we can 
successfully colonize lands beyond Terra, like the surfaces of Mars,
the Moon, and some asteroids. (But of course we could not illogically
claim ALREADY to own the whole Solar System at least, so it is clear
that psychological alternatives enter here also with regard to the
issue of the "true" evaluation of per capita wealth.)
    Possibly the full psychological effect of human "ownership" of the
surface of Mars would not be realized until that area had been divided
into plots regarded as the private property of specific corporate or
personal owners!