Monetary Policy Proposal #1 Rationale from Asfi

I submitted a 5% APR lock up for 30 days.
Rationale = Money Market Funds are yielding 4% and one of the most important things for a new currency is people’s willingness to hold it. Offering yield that appears competitive but does not require a prohibitive lock-up period feels doable, hence the 30 day suggestion.

Since this is the first proposal I see no basis for changing supply or any other decision.

Posting an excerpt from Hayek’s Denationalization of Money for reference:

The crucial factor: demand for currency to hold

But, whether directly or indirectly via the price of other cur-
rencies, it would seem clear that, if an institution acts in the
knowledge that the public preparedness to hold its currency,
and therefore its business, depends on maintaining the currency
value, it will be both able and compelled to assure this result
by appropriate continuous adjustments of the quantity in
circulation. The crucial point it must keep in mind will be
that, to keep a large and growing amount of its currency
in circulation, it will be not the demand for borrowing it but the
willingness of the public to hold it that will be decisive. An
incautious increase of the· current issue may therefore make
the flow back to the bank grow faster than the public demand
to hold it.

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@Asfi this is a great point, and something I agree with.

My quesiton, as a fellow trustee, would be for you: do we think the “fair value” backing of the monetary base can sustain the 5% increase? Or should we de facto devalue the monetary system with an inflationary push by applying an interest rate policy of 5%?

Given that the use of $ECO as a payment tool is yet moderate, I personally don’t think that inflationary push would be counterbalanced by the act of limiting circulating supply provided by the high interest rate.

Very curious to hear your view as I am debating with the same point myself. Thanks!

3 Likes

Luca I’m so sorry for such a delayed response. I need to fix my notification settings on discourse. To your question:

  1. That’s a fantastic question and I don’t have a clear answer. My gut says we can sustain a 5% increase given the larger user-base of the Eco app, but also I keep going back to Hayek’s point that the willingness to hold money is a crucial success factor. And personally I feel some yield is needed to hold.

  2. I also think user experience matters for instance. AMPL changes supply by taking tokens out of your wallet. RAI changes supply by inducing others to sell.

Also Luca I’m about to publish a post soon about searching for a monetary constitution for Eco. I will send that you. And I’m also starting a weekly YouTube show to dig this money rabbit hole of ours, would LOVEEE to have you on as a guest.