Banking on Energy (Rather than Currency or Gold)
In the approach to the G20 meeting we saw two distinct threads of global policy emerging: one by the global debtor nations, led by the US, and another by global creditor nations, led by China.
In the US, we have seen Treasury Secretary Geithner's trillion dollar quantitative easing of the rich, which cannot work for two reasons.
Firstly, the problem is not a shortage of credit, but a shortage of the creditworthy. As asset prices and incomes continue to collapse, only the top few % are now in a position to borrow, based upon the wealth which has become increasingly concentrated in their hands in the last 20 years of debt-disguised recession. The only solutions for the US are therefore fiscal.
Secondly, this initiative is based upon the premise that the creditors of the US will support these measures by continuing to buy assets denominated in an increasingly debased currency.
China's increasing impatience with the dollar as a global reserve currency is now quite overt and specific. Zhou Xiaochuan – the Chinese Central Bank governor – has published a thoughtful essay proposing that the IMF should take on the role envisaged by Keynes at Bretton Woods in 1944 as the issuer of a global reserve currency, Keynes' “Bancor”.
Russia's proposal for the G20 meeting is set out on the President's website and says, among other things
....Introduction of a supra-national reserve currency to be issued by international financial institutions. It seems appropriate to consider the role of IMF in this process and to review the feasibility of and the need for measures to ensure the recognition of SDRs as a "supra-reserve" currency by the whole world community.
Alongside these proposals for multilateral solutions, energy market observers like myself noted with interest in mid February that China and Russia have already taken bilateral “Peer to Peer” action. This took the form of a 20 year $25 billion loan by China to Russia secured against crude oil supplies of some 15 million tonnes per year. It was not just the cynics who considered that this transaction will almost inevitably be tested to destruction by the dollar's decline relative to energy, and sooner rather than later.
At a high-level conference in Tehran in January I made a proposal in respect of an “Energy Standard” for international trade which was very well received, to the extent that it has been suggested that a presentation be made to the Economic Cooperation Organisation (ECO) states concentrated around the Caspian Sea, but extending to Pakistan and Turkey.
The concept is extremely simple, and it is that international trade should be denominated not in dollars, but in energy. Producers of energy, such as Russia and Iran may then – in exchange for value received - would issue Units redeemable either in electricity, or in “energy vector” fuels such as gasoline, heating oil, fuel oil and above all natural gas, which all have a fixed value denominated in energy.
Global transactions will then take place within the framework of an International Energy Clearing Union subject to the collective guarantees of energy producer and consumer nations generally. Both energy creditor nations – such as Russia, Iran, the GCC and Norway – and energy debtor nations, such as the US, UK and EU would all pay an amount into a global “energy pool” in support of the guarantee. The resulting balances would be deployed in massive investment in new renewable energy infrastructure and energy efficiency savings.
The US, which is the biggest energy debtor by far, could therefore be funded by the Pool in redeploying much of its increasingly baroque military expenditure not just into the “Green New Deal” proposed in the US, but also globally, in partnership with the immense UK and EU intellectual capital at the cutting edge of research and development.
The use of an “energy dollar” or “Petro” energy unit, as it was referred to in Iran, addresses one of the most pressing issues. This is the catastrophic waste of carbon-based energy in those countries blessed or cursed with large oil and gas reserves. Anyone who wishes to see the negative effects of gasoline available at 30 cents per gallon on the environment and on the quality of life, need only travel to Tehran.
President Ahmadinejad recently proposed to massively raise gasoline prices and to compensate the population with cash subsidies, and the Majlis threw out the proposal. The unitisation of gasoline, on the other hand, allows the price of gasoline to be raised to global levels, and for the population to be compensated with Units redeemable for gasoline but priced in Petros. While some will continue profligate use of gasoline, most will cut back on gasoline use and exchange their Units for something else of value, again by reference to, rather than in exchange for, the Petro.
Perhaps the most interesting potential lies in the global market in natural gas, where Iran, Qatar and Russia own two thirds of global reserves and recently instituted a Gas OPEC based in Doha. I believe the unitisation and clearing of natural gas offers the potential basis for an International Energy Clearing Union. The massive loans which financed Qatar's LNG infrastructure may be refinanced interest-free simply by selling Units redeemable in natural gas to major consumers such as China, who thereby both lock in a price, and may found a new global energy-based reserve currency.
I believe that it is only through the use of an energy standard – rather than a fiat currency or gold - that the transition from carbon-based fuels to renewable energy may be painlessly made, and in so doing, allow the US, and other nations to repay their energy, and other resource debts.
President Obama, for his part, may dispense with the deficit-based “Cap and Trade” mechanism which, like emissions trading, attempts to monetise by political fiat something with no intrinsic value – which of course brings us back to Treasury Secretary Geithner's proposal also to do just that.
So I will conclude by saying, not for the first time, that oil is not priced in dollars: dollars are priced in oil , and recommending that the G20 turn their attention to leading a sustainable International Energy Clearing Union alternative to our current demonstrably unsustainable global monetary system.
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Comments (15)
something and if we can sell it for more money than we spent you have
a profit. Thats basic and everyone know it is so.But as you know money is a virtual commodity without any value except
what people believes its worth so what is the real cost? What is used
and spent?If we brake it down to the components if we make something simple like
a chair. You have normally some metal, wood, cloth and paint invested
in the object. To make it you also use tools, machines and manual
labor. If you think about it there are 2 different things used. What
is invested in the object and what is consumed and gone forever. The
time in manual labor is most obvious something that never comes back.
Also the were down in tools will never come back. You will also use
some energy to run the tools.When you think about it a person uses a steady flow of energy. 10381
KW per year in the US for 2003 that means we spent 1,2 KW if he spent
an hour making it. If you look at the objects in the chair they also
used up energy to extract. The tools are also objects that used the
same concept to make as the chair. When we brake it down you will
always end up with energy in one form or another being consumed. The
rest is invested in the chair and can if you want be reused if you
have the ENERGY to do it. It will also mean that the person working in
fact uses up a lot more than the 10381 KW per year if you take into
account how much energy the objects he uses cost to make or repair.Even energy uses energy to make when you pump it up or run a nuclear
plant. Energy in and energy out. You also should take into account the
energy the working force and tools use to calculate your energy
profit.People in some countries use a lot less energy and you notice that
production cost in money is a lot lower there because of lower salary.
As workers use less energy making the energy there also cost less (if
you use the same production method).
Fourth Draft Proposal: Several of us started out two years ago thinking about how to create a Renewable Energy Generation Output currency, ‘REGO’ for short. We were looking for a type of currency that would stabilize value and present less opportunity for inflation, deflation and manipulation corruption. Using renewable energy as the basis for value instead of fossil energy was an important choice because renewable energy can become an infinite, decentralized resource that everyone can produce with real free market potential, unlike fossil energy, which is a finite, controlled commodity that only a handful can produce. Shortly it became clear that something was missing from our calculations, when we simply link currency value to renewable energy, because the idea stagnated. Recently, we think we figured out why. We hadn’t gone to the most basic form of renewable energy, human labor/energy, or another way to think about it would be, human ‘born value’ potential. The next step was to have an equation that equates human energy to BTU’s. This would be the universally accepted measure the REGO currency could be pegged to, similar to the way measures of time, horse power, distance, etc are pegged to universally accepted quantities or equations. When currency is linked in this way to something with the capacity to expand with the growth of economies and is accessible to every human on earth, we have made a very powerful democratic shift and moved toward an economy that more fairly distributes wealth.
We want to call this new peg a Human Energy Renewable Measure or ‘HERM’ for short. This measure is based on an equation (where the human is an estimated average worker). The equation is: 6,000 human labor hours = 1,000,000 BTU’s. (to give an idea what this amount of BTU’s can do, it can boil away 1/2 gallon of water). An individuals’ one hour of labor is equivalent to 166 BTU’s. Now the REGO ( which is currency) can be pegged to the HERM (which is a stable measure). So, if one HERM = 30 hours of labor or 5,000 BTU’s, one REGO can be assigned a value of 1/2 HERM which breaks down to 15 hours of labor and can be the equivalent of 100 of whatever currency you choose. Now that we are in the decimal system, any currency can base itself on the REGO.
The elegance of an economic system based on human labor, that has been assigned a fixed base value, is revealed when you realize that all modern civilization springs from the same source, human labor, either physical or mental. It is a basic renewable energy, like solar energy is basic to life. Before there were loaves of bread at the market, people had to understand the advantages of agriculture and then plant seeds, care for crops and harvest them. All this was originally done by hand and even today when modern productive effort is stripped of it’s amplifiers such as, liquid fuel, electricity, machinery, etc., human hands and brains are the beginning. The HERM is the least that human effort can be valued and no one can be denied this whether they are able to work or not. It is guaranteed to each individual in an amount that gives basic dignity and comfort of lifestyle. From that point the amplifying effects of education, energy and individual potential can act as factors that increase individual value. One important aspect of this, though, would be when an individual (like Bill Gates) comes up with an idea that proves to be worth billions (like Micro Soft), the debt owed to the collective human intelligence (based on hundreds of thousands of years of human development), must be taken into account when this phenomenon occurs.
Another important factor when we enhance human labor with fossil fuel or renewable energy, the use of fossil energy must have an added equation that takes into account that it is a finite resource and the externalities that are results of its’ production such as, wars to control oil fields, nuclear contamination, coal mine accidents, natural gas explosions, oil spills, etc. All these contribute to the amount of HERMs needed, which contributes to the cost (although not generally recognized). The negative externalities of renewable energy would be far less than fossil energy. But fossil energy is essential for achieving the high heat necessary to create most renewable energy technologies, so could be used for that purpose.
The HERM measurement helps balance the symbiotic relationship between human civilization and the earth.Note: The Human Labor/BTU equation was developed by Dr David Borton at Rensselear Polytechnic Institute, Troy, NY. Originators and writers of this article are, Susan Caumont, Jeff Beller and John Finnerty.
Everyone is equal then.
But it misses a much bigger issue. Robotics.
If i own 10 robots thenthey are able to do 10 humans work. Maybe orders of magnitude more even if they are efficient and doing a taks that is labourious for humans.How to solve this ?
Sharing. We are in this feedback loop currently in that as large companies automate jobs are shed. This is continuing in the physical ( robots ) and virtual (computers and semiconductors) world. What is needed is a monetary system that is not based on ownership of money itself, but rather resources that are shared.
Then we canautomate much much more and reduce labour and raise the standard of living exponentially.The other problem with basing money on energy is "free energy".
Zero-pooint, LENR and others moving forward. LENR generators are under development in many companies, including NASA.So you cant base money on energy because it assumes a certain set of physics laws relating to the conservation of Energy. The physics laws are being broken now.
Google "PesWiKI"
Google. "FOI NASA LERN"Choose sharing not ownership.
Mpyre: American policy-makers, especially the current crop, are afflicted not so much by myopia as by self-interest and politics.
> jack
