Currency Exchange

[Kennendras]

Quote: In a value unit currency exchange, the value unit is fixed. For example, a million value units are allowed to each nation. A nation can then print any amount of money it wants. The one million value units would be distributed equally among the money. If a nation prints one million dollars, each dollar is worth one value unit. If a nation prints two million dollars, each dollar is worth half a value unit. The amount of value units that a currency is worth determines how much it is worth compared to other currencies. A higher number of a currency would mean more inflation for that currency. This is very similar to the ICEO way, except for the million value units. In a value unit currency exchange, the number of value units is fixed. In the ICEO currency exchange, the number of units of the currency of a nation is fixed. In fewer words: 1 million of its currency, not 1 million currency value units. The ICEO system could easily be changed to a currency value unit system; instead of one million of the nation's currency, each nation would receive one million CU.

That quote was taken from dstryker in the How the ICEO worked.



We really havent aggreed on how currency exchange is going to work.  And we HAVE to figure this out, or else all the other work taken place is for nothing.  I don't believe we ever came to a decision on this (although if we have, please tell me.  i probably forgot).  I propose each nation gets a lump sum of Currency Units, which they print out to whatever they want.  This means each country is equal.  But to increase their countries wealth, the country trades over the Intermicronational Market.  If you gain more money from exporting than you lose from importing, you gain money.  This will help relieve us all from the taxes that are imposed by the government to keep itself afloat.



But before this happens, we need to distribute the CU to each country for them to get started.  And we need some sort of seperate entity to govern and oversee all of this.  Lets call it the IMCC (InterMicronational Economic Council).  The IMCC is composed of all the participating micronations, and list the going prices, settle disputes, audit micronations (before the database system is running, much of the system will have to be honor based), allow a forum for Intermicronational transactions, and allow forums for both the IMCC currency exchange (with a fixed price) and private companies that offer the same service, but with prices fluxing as they see fit.  A list can be posted showing all participating micronations currency (and corresponding CU value), as well as all resources the micronation exports.



I'd be willing to put up an Invision Board forum on a new server just for this purpose.



What do ya think?

Emperor Kennendras

Foreign Minister

Webmaster

The Realm of Tallandor




"Talk softly and carry a big stick"

"Facts are chains that bind and fetter truth, for a man can remake the world if he has no facts to cloud his mind"

[Trevon Andarosel]

Export to cover the lack of government income. That's an interesting idea.

I have some doubts, though, that it can fully cover the "gap". I don't think you can't do without taxes, especially not without things like the idle capital tax, to prevent money from being idle.



In real economies, trade works because the value of a good in one country is not the same as the value of the same good in another country. Does this also apply for the system you proposed? (I know, I am talking to myself now) Probably, but only if a certain service or whatever is in one country available in excessive amounts and in another country scarce, and the other way around.



How are you going to divide the currency units? By number of citizens? And what happens when a country gets "richer"? Does it get more currency units, or does the value of its valuta increase?



Trevon.

The storyteller of Ex, Umbagollah


Ilotim ilo arelisin il parduvile arelis te arelisin
The truth is just too true to be true for everyone

[Kennendras]

Well, there would still be taxes.  This would just help ease the pains of taxes.



I was justing thinking about that.  On the map, each country has a few resources.  These could be listed as the "major exports", the only resource the country has enough of to export.  Each country though has all, or most of, the resources, but they are at a much higher price and are scare, not suitable for exporting.  This is much like the real world.  Countries usualy have many of the needed resources, just not enough to go around.  So they are forced to import resources.



I bet, with some work, we can compile a list of resources each country has, along with the major resources that can be exported.  For example, say tallandor has a small amount of silk.  As it is one of our major resources, it is expensive to buy in Tallandor.  Tallandor would rather buy large amounts of Silk from outside traders (countries that export silk in quantity) for a better price.



Would this work?  I'm still trying to figure it out as i'm typing.



As for the CU's, i was planning on giving each nation an equal number, which they divide up.  Wealth is attained by gaining more money from exports.  The CU's are only used for (A) dividing money to each micronation and (B) currency exchange.



Although if this causes problems in the Economy (everyone being the same wealth to begin) it could be changed to population or some other measure.

Emperor Kennendras

Foreign Minister

Webmaster

The Realm of Tallandor




"Talk softly and carry a big stick"

"Facts are chains that bind and fetter truth, for a man can remake the world if he has no facts to cloud his mind"

[Kennendras]

Actually, I'd like to amend what I said.  Each country only has a limited number of exports and such.



Scott emailed me this document.  Check it out...I think this is exactly what we need.



www.geocities.com/giantsq...p/econ.doc

Emperor Kennendras

Foreign Minister

Webmaster

The Realm of Tallandor




"Talk softly and carry a big stick"

"Facts are chains that bind and fetter truth, for a man can remake the world if he has no facts to cloud his mind"

[Brendig45]

The contents of that document are excellent. I'm not sure whether it was shown earlier in the virtual goods trading post, but that might just be what we're looking for.



HOwever, I'm not quite sure how we will tie that in with currency exchange. If there is only one central bank for all countries, it would be possible to keep track of how many currency units each nation has, otherwise it might get confusing, especially if one foreigner holds a certain amount of your country's currency when he traded it at another nation's bank, or something.



oh, with the international trade, I hate to bring in proper economic terms, but I believe that one of the key reasons that nations trade is due to the principle of cost advantage and specialisation. Basically, if a nation can produce a good (or service) cheaper than all the other nations, or produces it relatively cheaper, they should specialise in the production of that good or service. Each nation would then specialise in a certain area, and they would make most 'efficient' use of those resources available..... I think what I just said even went over *my* head. It may not be exactly right though, because we just discussed it in economics class.  

Jeffrey Leong


Vizier of The Ministry of Trade and
Economics

Satrap of Kelestan

Sartip of the Imperial Babkhan Army

Ambassador to the LoSS


Kingdom of Babkha

[Kennendras]

Actualy, i think i maybe, kind sorta got what you were sayin.  A country only exports because it has enough of that item to be able to export at a good price and still make money.  This represents the major resources on the MCS map.  Each country has a few resources that they have enough in to specialize in.



Yesterday, i was talking to Scott and DStryker online.  We decided that a CU system would be bad.  Its a "zaero sum" situation.  If one person gets really rich, that means another person is really poor, because there is only so much money in a closed circuit.  So we will either have alot of people who are the same wealth, or a few that arich , and a few that are poor.  The problem is that the poor never have a chance to get rich, they keep declining and declining.



We starting discussing using a formula much like the old ICEO, but with fixes, but i had to leave and didn't find out how that turned out.

Emperor Kennendras

Foreign Minister

Webmaster

The Realm of Tallandor




"Talk softly and carry a big stick"

"Facts are chains that bind and fetter truth, for a man can remake the world if he has no facts to cloud his mind"

[Brendig45]

I see what you mean about problems with the CU system... I wonder if there is any other way of currency exchange than currency units or formulae (like then ICEO)?

Jeffrey Leong


Vizier of The Ministry of Trade and
Economics

Satrap of Kelestan

Sartip of the Imperial Babkhan Army

Ambassador to the LoSS


Kingdom of Babkha

[Kennendras]

To tell you the truth, there are only three ways i can think of that would be work, to an extent.  The first is the CU system, and we ahve already listed the problems with that.  The Second is a formula, but there is alot of math and paperwork, plus easy ways to cheat the system with that.  Third, there is the gold measure.  having each micronation have a supply of gold or other valuable metal to back their money, which is out of the question.  I cant think of anymore.  Maybe there is, let me know if you think of one...

Emperor Kennendras

Foreign Minister

Webmaster

The Realm of Tallandor




"Talk softly and carry a big stick"

"Facts are chains that bind and fetter truth, for a man can remake the world if he has no facts to cloud his mind"

[Brendig45]

So, what action can be taken to remedy this issue of currency exchange?

Jeffrey Leong


Vizier of The Ministry of Trade and
Economics

Satrap of Kelestan

Sartip of the Imperial Babkhan Army

Ambassador to the LoSS


Kingdom of Babkha