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Money today, tomorrow and utility tokens


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Hi everyone, I'm Radu and I'm an XRP holder :)

I see that we keep on using interchangeably words like coins, assets, currency or crypto as it is the same thing. I feel that we need to have a talk about what money is, and that this talk should turn into a chapter of Bob's book because in the end it's all about money. My thoughts here came after a long consideration of this space, and made me turn my attention to XRP and transform it from just another token I held into my main focus. 

I never really understood what money is and with this whole blockchain thing, I realized that the answer to that question is way out of my league because no one knows where money comes from, and probably never will, and within my reach is only the answer to the correct question, what is money today. Another realization was that the various monetary theories are not policies, but ways to describe behaviors. That was mind bending, because all of a sudden mad alien concepts like debt that won't be paid off, free money (as in giveaways) or non-sovereign currencies made sense if there was enough evidence for it.

As it goes, the classic monetary theory is built around people exchanging goods; Alice grows tomatoes, Bob farms cattle and Cole manufactures shoes. The alphabet is long enough to make up for the scarcity of the double coincidence of needs - Alice needing shoes and having tomatoes, and Cole having shoes and needing tomatoes, as they would have to barter with other people like Diane who harvests natural rubber or Ethan growing grain. That is utterly inefficient so they create money, a thing, means of exchange; they also create the state to regulate, enforce and protect the market. Being responsible, the state ends up as the sole issuer of the thing money, to which it ensures trust by soundness. So the thing money becomes a commodity with some value of its own, being it a gold coin (what most of us have in mind when it comes to money with intrinsic value) or paper money backed by something.  With everything in place, the market grows in size and sophistication so here we are, today with too big to fail banks and a derivatives market. People who profit in the markets pay their fair share to support the expenses incurred by the common good and the greater good and everything else. As the imbalances in the barter policy economy became harder and harder to fight with barter policy instruments, scholars paid more attention to the fact the no one was able to produce direct or indirect evidence of a barter society, and that in fact, everything barter starts with "imagine a village" or something similar. Naturally, the state theory of money got more traction, as it was the one supported by the empirical evidence economic historians managed to produce.

The state theory of money says that the state creates the money which in turn creates the markets as a side effect. The state makes its money work by taxation: if the state declares the state's money as the only legal tender, then the citizens need to get it somehow so that they can pay their taxes, fines or fees. This theory came with many examples, from the Roman Empire to Madagascar; some even argue that the European Union is the embodiment of Knapp's chartalism. One of the examples is the American colony of Virginia. This colony was not allowed to mint money and had to use the British pounds, but it was always short on pounds. So they passed a law and printed the Virginia pound (on paper, not minting "real" money). At the same time, they created new taxes, equal to the amount of their printouts, and payable in British pounds or Virginia pounds. Everything went great, they had the money to pay for the army, and as the paper money came back as taxes, they burned it. Even the guy credited with the classical theory of money was writing back in England about those crazy people in the colonies, how they are using paper for money and how it inexplicably seems to keep its value. In the end the colonists paid their taxes 75% in Virginia pounds and 25% in British pounds, with the remaining paper money circulating a long time after and actually being preferred by the locals to the British pounds. And Adam Smith started advocating paper money.

Along comes the credit theory and in this theory money is not a thing, it is a way. More specifically, it is a way to settle debt. With money being a way, there is an interesting implication: the more ways, the better. And the Virginia colony experience proves that non-sovereign currencies need not be in conflict with sovereign currencies.

The notion of debt in general is very powerful and it's tricky to wrap your head around it. After all, everyone needs to pay their debt, it is a moral obligation. It turns out debt is probably as old as mankind, since the earliest writing is all about recording debt. From Mesopotamia to Europe and India, for most of history, it was morally right to take a failed debtor's family into slavery and subject them to any kind of abuse imaginable, exactly because debt is a moral obligation. At times things got so bad that the state had to declare a Jubilee, a write-off of all private debt, and what most of us have today is a strong reaction to debt. It was only last week that I've heard about a guy in the US sent to jail until he pays a $300 credit card debt. Outrageous indeed, but it does feel like the moral failure is more on the debtor's side than in the state's excessive reaction.

At the dawn of mankind, as various attempts to explain things were aggregated, systematizated and instrumentalized, religion came be as the form of government of the world's first urban developments, in Mesopotamia. It provided the rulers with divine legitimacy through the initial debt of creation, to own their realm and their subjects, as either godly creatures in their own right or as the intermediary between humans and gods. Babylon's name is actually Bab-ilani, which means the gate of gods. Every major theological system today can be traced back to Mesopotamia; Messiah comes from mesa'ch, the crocodile fat used by Sumerians to prepare the king for the journey to the gods; among many variations during history, the king was sometimes killed to get there and relay a message. Passed on to the next great civilization, the process of anointing became KRST in Egypt which became Khristos in Greek and hence Christianity. In the other side of the world, the religion was spread by Persians to India and from India to Asia so we now have anything between Zoroastrianism and Buddhism, and even less theological systems such as Confucianism, all related to each other, all promising a way to deal with a debt - being it the initial debt of creation directly to God, the same debt transferred to the father as creator, paying for common daily sins or a vague debt to the vague notion of society. My point here is not to support the validity or invalidity of any theory, but observe and understand debt, as it is clearly of paramount importance. It's common knowledge we can't really fight evolutionary build-ups; as it turns out, evolutionary features (or bugs) are hard-wired inside us and the room for rationality is much smaller than we think or we'd like. 

The credit theorists argue, among other things, with the appearance of the Bank of England - the world's first central bank. In 1694 a group of money lenders gave 1.2M pounds to king William. What they got for it was monopoly on the issuance of banknotes, meaning they had the right to advance a portion of the king's debt at an interest. It was a very good deal, they got to charge the king 8% interest and to lend out the king's debt at the same time for the same rate. The thing is that the initial debt was never paid back; if it would, the entire monetary system of Great Britain would cease to exist. The same paradox applies to religion: if the original debt to the gods would be paid back, then there would be no more religion. Redemption is key but it's literally a dead end since it only applies to the soul, not to the person.

Today's system is called neoclassicism and inside it money is both a thing and a way. Neoclassicism works in credit cycles; say I make 50K/year. My expense of 50K is someone else’s income. I borrow against my 50K and now I spend 60K; as my expense is someone else’s income, that someone else has now an income of 60K and can borrow more and spend 70K. And it goes on and on; it amplifies on the chain and generally returns to me as an increased income, with the ability to borrow more, because the added value on the chain helped my productivity to slightly improve. Now, debt apparently has an inherent property: it needs to be paid off. As I pay my loan back, I spend less; as my spending is someone else’s income, that someone else will earn less, will have a reduced capacity of borrowing so will spend less. This is a regular economic cycle, with growth and recession, and the Central Banks prevents it from spilling over and smooths out the edges but it does so with care, because if the spending rises up more than the GDP, it creates inflation. Countries need to run at least balanced budgets, ideally surplus. The cycles are 5-7 years long (funny how this behavior relates to the time frame in Nehemiah's law of Jubilee) and it created titans of finance and commerce through the ranks of people who understood and applied it. But another funny thing is that it also generated a Jubilee in reverse in 2008, when commercial debt had to be written off while private debt was pursued to the full extent of the law. And with the all the knowledge available, no one can explain how money gets into the economy other than the continuous loop of businesses getting money from households and households getting paid by businesses, all being born from something, somewhere, once upon the time.

So today money is both a thing and a way. It's not straight forward to get an estimation of the proportions because the M3 component of the money supply published by the ECB does not record agreements with maturity of more than 2 years. For the sake of argument, in January the Euro was 60% a way and 40% a thing, excluding financial aggregates with medium to long maturity - usually the big to huge loans. In a sense, the Euro is 99% a way and 1% a thing because the reserve requirement for creating credit is 1% and with small variations this rule is valid all over the world.

Enter the Modern Monetary Theory, where the state spends money into existence, controls it through taxation and does not fund the budget through taxes. Too much private debt means too little state spending, as all deficits must balance. Only exporting nations can run a balanced budget, so Germany's surplus is possible despite its discipline, not because of it, and will eventually turn against the economy.  No country which has debt in its own currency can go broke, as it can always print more. And not only that the state can print more, it has to run deficits until it reaches full employment of the means of productions to have its engines revving at max capacity. Only if it prints beyond full employment or makes errors in targeting spending at unemployment can things go wrong and printing turn to inflation. Interestingly, spending targeted at unemployment can take the form of "people's QE" or of the universal income, and non-sovereign currencies are not excluded.

Full disclosure: I can't implement an academic type of citation as I've accumulated this knowledge during a very long time and from many sources - I remember reading the history of religious ideas back in high school, Adam Smith's work for my master's thesis, Debt: the first 5000 years back in December and in between countless articles, conferences, YouTube videos, other books.

This is the big picture and probably many scholars and business dismiss MMT as a fairy tale with disastrous consequences. But when I look at the big picture and at the small picture, I believe one has to be blind not to see that we are many years past the point of no return and that acknowledgement of MMT and implementation of its tools is only a matter of time. In the small picture, we have a general trade war in the world, with the US making apparently illogical decisions such as deepening trade deficits in an attempt to move production on its shores. Or even suicidal ones, such as retreating from the Paris agreement to boost industrial production, or running a huge budget deficit in the eve of the next recession, while the FED can't possibly cope with the debt it already has. There is also the US trying to settle scores around the world in a rush that suggests a time pressure. On the Democrat's side, most if not all the potential presidential candidates trumpet (couldn't help it) job guarantees. That is only apparently incomprehensible for the liberal US, but it actually makes sense when you look at the New Green Deal. It builds on Roosevelt's New Deal implemented in the aftermath the Great Depression. It offers guarantees for "a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States" in an effort to save the planet, and promises to solve climate change and inequality in one fell swoop. Though only a broad framework, it cannot be implemented in a neoclassical paradigm, it marks the acknowledgement of MMT and implementation of its tools. In the rest of the world, we can see the ECB slowing down rate increases and balance sheet normalization. You don't need to run a correlation analysis to realize that member states are leveling out the gold reserves proportionally to the GDP (on the low side), it's obvious it is a coordinated European measure. China, Russia, Brazil and others are bulking up gold reserves and other economies pegged to the US dollar (think Saudi Arabia) are going through transformations as if momentum for an inescapable change is building up.

It is only in the light of the big picture that the small picture makes sense to me, that the american administration is not crazy nor suicidal; it seems to trade short term disadvantages, or fears, for long term advantages, as the country's idle work force is the only real cap to government spending. The immediate consequence of leaving behind the remaining neoclassical anchors is that it will print more, as economists estimate that the unemployment rate is much bigger than the official numbers - more than 10% including the ones who don't look for work and those in jail. The countries pegged to the dollar seem to be hedging with gold against this printing turning into inflation, as described by the current theory. However, if transition to MMT is successful, gold will be one of the biggest losers on the long run. On the private scene we can see Berkshire Hathaway splashing cash at the banking system in an accelerated manner, with more than $13BN invested in banks in the last quarter of 2018, totaling a whopping $85BN or 40% of its assets in the financial sector. No matter how I turn the numbers around, BASEL III alone cannot account for it and Warren Buffet is known for not speculating, but it does make sense when I factor in the way the government spending happens.

The other consequence brings me to our time frame, and it is the dawn of non-sovereign currencies.

It is now obvious to me that in the "crypto" space all the hype is about the value of the utility tokens, but the point is the arrival of the world's first non-sovereign currency. In MMT all money is debt and the issuer of the debt promises to take back their own debt in payment. The only relevant thing I found out there that ticks the boxes is XRP. Starting with the name, it follows the ISO 4217 (think EUR, USD, XAU, XDR). Transacting on the Ripple net costs fees, payable only in XRP. So Ripple is an issuer of debt denominated in XRP and takes back its own debt in payment as fees for using the network; the XRP collected as fees are irrevocably destroyed, following the definition of money as debt, and the example of the Virginia pounds. It acts as a bridge between countries so it doesn't pose a threat to any country and thus to itself. Ripple rubbing shoulders with the White House, the IMF, or the world's biggest central banks makes me believe that XRP is proof of concept done by the book and in the race for the first non-sovereign currency not only does it run alone but it is encouraged by everyone who matters.  

One could argue that the apparent Ripple/XRP copycat, IBM WW/XLM, is running in the same race so XRP is not alone. But the key difference is that the issuer of XLM does not promise to take its debt back in payment, and the entity taking back XLM in payment is not the issuer. Actually for me IBM WW is the one taking on SWIFT as an end, not as a mean, trying to fulfill the Ripple's declared objective. And it seems to me equal to the implementation of SMTP in a digital assets environment, generating the JPM coin and others that are in the works right now, and by no means measuring its success in the price of XLM. In addition to that, the creator of the XLM has encoded an "inflation of 1%", which is a strong statement for him not understanding key concepts like inflation as an effect of misallocation of capital. To me it's obvious that IBM was very happy to get Ripple insights but uninterested in creating a non-sovereign currency, while the XLM creator doesn't have the stature to build one so XLM, though ISO 4217 compliant, is just one of the millions of utility tokens we will end up with. 

Following the 2008 bailouts, G20 agreed that no firm should be too big to fail. After working on solutions, in 2013 the Laiki Bank in Cyprus was hastily used as proof of concept for bail ins, without any preexisting legislation in place. The proof of concept was successful so European legislation for bail ins was immediately implemented under the 2014/59/EU Directive. The take here is not about the banks shaving off uninsured deposits - that is their last bullet - but how fast things can happen after the regulator feels the need to test the theory with a proof of concept and testing goes as it should.

By all analyses, this year's G20 summit will have on the agenda a discussion about the "crypto-assets". The general opinion is that "crypto-assets" lack the key attributes of sovereign currencies and central bank support. While "crypto-assets" do not pose a global financial stability risk, vigilance is warranted and the G20 leaders are encouraged to monitor the potential risks and assess international responses as needed. While this is true, utility tokens lack the attributes and XRP lacks central bank support, I do expect that regulation guidance will spark a bull market in the field, possibly as soon as the beginning of June after the Ministerial Meeting on Trade and Digital Economy, or even before that. The infrastructure now exists, as opposed to 2017 when there were only a handful of tiny exchanges and many of them crashed or were hacked. 

I have the acute feeling that the bull market will morph into a huge bubble. I've called it MoaB, not after the bomb but could be that too :)

I've modeled it after the dot com bubble using the GDP impact of the industry 10 years after burst, in different scenarios. The results were eye watering, it would place it in the history books right there next to the Tulip Mania. There is enormous value in the utility tokens, because at some point in the not so distant future Airbnb won't be a corporation amassing huge profits anymore, but a collection of smart contracts distributing value through tokens to everyone involved. But this was last year when I didn't realize that we are witnessing the advent of non-sovereign currencies, and now I think that my initial estimations could be rather conservative. The biggest problem distributed ledger thinks it has right now is actually a non-issue; large scale adoption is not required to be a successful utility token for distributing value. For non-sovereign currencies adoption is instant, as it is a matter of regulation. There is still some mileage ahead for XRP to be recognized as a currency and Ripple needs to put up with building a market for now, but the deck seems to me to be stacked. It could happen this year, next year, it could happen in the aftermath of the next bubble or recession, or 10 years after that, but moon is when regulation for non-sovereign currency will be announced, and it will be announced after the critical mass of the global economy has transitioned to an MMT logic. One observation here, it would make sense for the US to take the leap after the re-evaluation of the SDR's composition and currency weight, as this takes place every 5 years and the next scheduled one is in 2020.

Who is to say what the XRP price could be? When the world realizes that XRP will be the first non-sovereign currency, all bets are off. It can be $0.000...3 in a matter of days. It can also be $3 or $3,000 or $300,000 - no one can tell because no one witnessed those kind of demand buttons being pushed before. One could argue that $300/XRP is insane, it would give XRP a market cap larger than the US GDP, but that one forgets that the market cap is a theoretical notion with very limited real use and that the estimated derivatives' market cap is $1.2QN, which is more than the whole world's GDP. Nothing can stop XRP from reaching a market cap of $30 Quintillion if the world feels it is right. And after non-sovereign currency regulation, taking on SWIFT will look like child play.

Because I can't see XRP taking off to my target price right from the start I am also buying a utility token, but only one so that I don't spread too thin. Right now my choice is IOTA, but I definitely didn't even remotely give utility tokens as much thought as I gave to non-sovereign currencies, I am only starting my analysis on it. Though I'm tech savvy and I can write a line or two of code myself, it's not like I can go to GitHub and understand how blockchains do what they do, so my analysis is limited to the concept and to what others think about the code. Anyways I don't give too much thought to technical imperfections as those are imminent and most of them will be dealt with. 


Edited by Radu
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  • 1 month later...

Hi guys,

I've taken the first step towards what I wrote earlier, and I've developed a test for categorizing Digital Assets as potential non-sovereign money when regulation will be in place, or utility tokens.

See it here:


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While "crypto-assets" do not pose a global financial stability risk, vigilance is warranted and the G20 leaders are encouraged to monitor the potential risks and assess international responses as needed. While this is true, utility tokens lack the attributes and XRP lacks central bank support, I do expect that regulation guidance will spark a bull market in the field, possibly as soon as the beginning of June after the Ministerial Meeting on Trade and Digital Economy, or even before that. 

I haven't yet watched your video, but I've been an amateur student of money for 30 years, and I agree on just about everything you're saying. Finally, somebody who gets it.  Can't wait to watch. I'm at work a the moment.

This part I quoted above is the sticky part imho. The part about bank support and especially support from the treasury of the country that has the franchise for the world's reserve currency. I think non-sovereign money is still considered total heresy by a fair number of people who matter, and right now we're watching in real time as the dinosaurs in banking are being persuaded by the younger contingent that it's a good idea.

I don't think it IS clear YET that XRP is NOT a danger to sovereign fiat. So we can assume that part of the hold-up in regulatory clarity is that this "problem" is being dealt with in a way that's guaranteed not to shift power from what is essentially the strongest cartel in human history. As you probably know, we have this positive feedback loop in play in this country whereby the US government and the banking cartel collude. One (the banks) get a license to print the money. The other (the US legislative body) gets to spend unlimited money. It's a sweet deal, if you have access. For us regular citizens, not so much.

The same thing is going on in all the modern Western economies and Japan, but it's very important to the US powers that be that the reserve currency status of the USD has to be protected against attacks, which are already coming from all sides. So we wait.

Looking forward to your video and further insights.


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  • 4 weeks later...

Hi dr_ed, thank you for your consideration and please please excuse my belated reply. For some reason I didn't get a notification email.

It must be my bad English (i'm not a native speaker and I don't live in an English speaking country), but what I wanted to say is that the analysts seemed to have agreed at the time that the G20 leaders' position was that while "crypto-assets" do not pose a global financial stability risk, vigilance is warranted and the G20 leaders are encouraged to monitor the potential risks and assess international responses as needed. To be honest, I don't have a strong opinion on that, but I tend to believe that the future will be CBDCs + supplementary non-sovereign, not competing with each other. At least for the next decades. Regarding commercial bank credit creation, I totally agree. While the point behind it is valid - few clerks in the capital can't possibly know how much money and in what conditions an individual or a small provincial company needs, and that the best measurement can only come from its own commercial bank, it went so horribly wrong that now we can see the world's financial elite fearing the consequences of blatant inequality. That's why I believe CBs are racing for CBDCs, because that would allow targeting inequality and capital allocation ineffciencies, and what I get from the BIS director's conferences on YouTube is a "hold your horses" message to CB governors. He is literally saying don't rush it, please. And when it comes to an American reserve currency and the weakening USD... check out the DXY, it doesn't look like losing breath to me... the world really runs on USD and you can't change that in a few years. Also, might worth something comparing the historical monthly DXY and monthly DA market, in particular the 2017-2018 bull run. However, I do believe that the US government has an extraordinary interest in Ripple taking over SWIFT using XRP, because if it comes to it, it can paralyze a country, while now it has huge problems in kicking Iran out of SWIFT.


I need to study VeChain and Factom in detail, I can't give you an answer right now.

Edited by Radu
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  • 4 months later...

Hey guys, I'm back to share with you some questions I've been asking myself a while ago.

After president Nixon fully floated the dollar, one of his advisors - don't remember the name but he was one of the brains behind the move - came on live tv. The hosts were horrified about the development and asked him how o. Earth would they know how many franks in exchange for a dollar, now that they can't buy gold with the francs and sell the gold for dollars.

So the questions torturing me are the likes of is there a DA that will take over from gold? Of course, which one? What does that say about the broader understanding of the mechanics behind gold in our society of the "drop gold" campaign?

What do you think?


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