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The IBM Dollar continued
Usage
Would it be possible to choose a discount rate which made the IBM dollar attractive to IBM, to intending IBM purchasers and to third party investors?
The answer to this would depend on IBM's need for money, prevailing market conditions (interest rates etc.) and IBM's profit margins. IBM could always control the issue of its currency and also the amount outstanding in the market. IBM would also set the discount rate and could repurchase the currency if necessary.
The discounted price (or the discount rate) would have to match market conditions in terms of both the value for IBM in issuing the currency and the value to potential investors. Because IBM would be locking in future purchasers and because it might be able to raise its prices slightly in order to diminish the effective discount, it should be possible to offer buyers attractive rates. The tax treatment of the target currency would also affect the comparative advantages for investors.
It is easy to envision that broking houses would establish specialised markets in IBM dollars, and that the market price for IBM currency would fluctuate according to supply and demand on a daily basis.
Target currencies
The IBM dollar is only one example of possible target currencies. The scheme could be of value to any large organisation selling quasi-commodity products. Motor cars might fall into this bracket. Indeed the GM credit card, with its cumulative discount feature, is a step in this direction.
Companies like British Airways or Sainsburys could issue their own currencies, and could benefit from the float until these currencies were used. This could be done in a number of innovative ways. Where an identifiable and easily comparable item is sold, like a first class trans-Atlantic air passage, the currency could be valued against that product. For instance, a hundred units could purchase such a flight at any future date. This would provide a hedge against inflation.
On a much larger scale, it might even be possible to think about a I "housing currency" which could be used to finance building projects.
Of equal interest is the possibility, albeit less clearly defined at present, of using target currencies in smaller communities to finance the start up of local businesses which would be selling into that community.
A kind of target currency already exists in the form of the US Food Stamp programme which caters very successfully for 26m Americans. There is now even a food stamps credit card.
The Central Provident Fund in Singapore is a further example, The Singapore government takes a percentage of wages, matched by employers, which is put into a fund which will be paid out to the employee at a certain date or upon retirement. Meanwhile the employee can borrow against this fund for certain specific purposes: housing, health, education and the stock market. (The inclusion of the last item is one explanation for the boom in the Singapore stock market.)
Historically target currencies acquired a bad reputation when they were used to force employees to spend their wages back in the company store. But that particular experience should not prejudice our willingness to explore the potential of this concept. After all capital itself is only a time-shift phenomenon whereby predicted sales are used to finance the production of the product with profit as the reward for assessing the risk.
Computers now make it possible to run a system with multiple target currencies. In such a system, an employee might be rich in "housing currency" but poor in "luxury currency". Wages might be split between different currencies - though the consumer would be able to trade between different types of currency, exercising his or her choice.
The consumer is already able to exercise choice in many ways. For instance, in spite of the recent GATT agreement on agriculture there is a looming trans-Atlantic trade battle because Europe is reluctant to admit US steroid-fed beef. The matter will probably be resolved by eventually allowing in the beef- but insisting that it be labelled as "steroid-fed beef". The consumer, aided by proper health information, may then prefer to avoid buying such beef. Unless governments insist on fooling the consumer, this kind of non-tariff barrier is bound to multiply.
The target currencies that people select would be merely another manifestation of consumer choice. The only difference is that the choice can be time-shifted backwards from the moment of purchase. For example, bulk negotiations may mean that workers are partly paid in a target currency which has a much higher value at Sainsbury's than normal currency. That is a free choice on the part of the consumer. It now becomes possible to distribute the benefits of competitive bulk buying in a personal manner.
The notion of multiple target currencies opens up anew way of thinking in economics. Volatility and fluctuation could be much reduced. It could become considerably easier to stimulate individual sectors of the economy without immediately running into inflation. The present obsession with free markets and deregulation sometimes obscures the inherent dangers in fungible "soup" systems where everything can flow in any direction. Multiple parallel systems, with permeable membranes between them, give very stable systems - as in the human body. This is a whole field which needs, and will get, attention.
Republished with permission from