“Pecunia non olet” ("money does not stink") is ascribed to the Roman emperor Vespasian (09-79 AD). When Vespasian’s son, Titus, ridiculed a urine tax that supported the family’s fortunes his father held up a coin and asked if Titus was offended by the odour. Karl Marx extended the discussion, observing, "since every commodity disappears when it becomes money it is impossible to tell from the money itself how it got into the hands of its possessor, or what article has been changed into it. 'Non olet', from whatever source it may come."

Some major technological evolutions for money have included moving from social monies to commodity monies, to city-state monies, to gold, to fractional reserves, to central banks, to contemporary fiat currency. Fiat, ‘let there be’, currency is an artefact created by national or federal governments. Fiat currency consists of tokens that allow us to extinguish tax debts. We trade those tokens freely in a geographic region where we are likely to meet people under the same tax system. Fiat currency’s value lies in its ability to cancel tax debts. Governments ‘back’ their currencies through their monopoly of force on tax payments, creating a semi-coerced community of taxpayers who confidently trade these tax debt cancellation bills of exchange with each other.

Evolving A Sense Of Smell

At the moment the dominant monetary technologies are quite visible paper & coins (about 3% to 8% of global fiat currency) and electronic deposits in bank accounts (most of the rest). The much-touted next evolutionary stage is paper-less or electronic money. Current interest in cryptocurrencies such as Bitcoin, has people pondering why governments don’t use them too. Numerous central banks have declared their sincere, though careful, interest in moving forward with digital fiat currencies (DFCs) acceptable for taxation. DFCs are emphatically not cryptocurrencies. The underlying distributed ledgers might be similar, but the validation of transactions will be done by the central bank and not through a ‘mining’ process. Further, the technology will be firmly controlled by the government who issues the currency, not left to an autonomous collective.

DFCs raise a unique opportunity. Unlike contemporary fiat currency, each individual tax credit can be tracked. It’s as if the serial numbers that already exist on paper money were being recorded in transactions so you could examine the entire history of the banknote you received in exchange for a newspaper a second ago back to its issuance by the mint. Long Finance 2011 research by Gill Ringland, “In Safe Hands? The Future of Financial Services”, set out some scenarios that might broadly be classed as “Visible Hands” - a ‘top down’ structured control of finance by governments versus “Many Hands” - a ‘bottom up’ set of communities sharing “trade and honest commerce for all”. For speculative futurists sniffing the future, here are two futures from StarFinanceDate 2057…

Visible Hands

These days virtually all states adhere to the Beijing-Brussels-Washington Consensus of 2021, i.e., like Star Trek’s Federation, governments control a ‘minimal’ fiscal policy within protectionist control of investment, though there are floating currencies. Much of this began with the intensification of economic nationalisation sparked by Brexit and the US Trump administration in supporting moves to ‘take control back’ ranging from Colombia to Italy.

For ages central banks claimed to be moving towards DFCs. The Bank of England had been studying their use since at least 2014, followed by the Fed and most other central banks. In 2020, the World Bank and the IMF forced Somalia to use a DFC. The Soma-Tick transformed that war-torn nation’s prospects.

Suddenly, it was difficult for OECD central banks to keep dragging their glacial feet. DFCs whipped across the globe. There were some initial howls, not least from civil libertarians, but also from financial services firms used to taking their cut. Still, the Somalian and Indonesian BOOMs (bit organisation of monies) convinced consumers of DFC robustness and they willingly ceded their data rights for convenience, lower transaction costs, and economic prosperity. There were some high-profile arrests of entire criminal networks, bound together in court by their e-cash transactions. If you don’t have something to hide, why would you object to a DFC?

Macroeconomists were thrown into turmoil. The quantity theory of Money, MV = PQ, i.e,. the total amount of money (M) times the velocity of money (V) equals the average price level (P) times the level of output (Q), had virtually no empirical basis. This was not surprising as the quantity and velocity had never been known with any accuracy. DFCs provided M and V to a high degree of accuracy. It turned out there was almost no correlation of fact to theory. All that central bank navel-gazing and monetary prognostication had been so much augury and astrology.

Some of the other implications took a while to emerge. Tax authorities began to take accuracy to the penny, resulting in thousands of tax evasion convictions before the 2022 Tax Accuracy Reasonableness Movement gained “+/-5%” riders on most DFCs. Taxation over-precision attracted thousands if not hundreds of thousands of proposals to tweak the DFC systems to support various initiatives. There were local town taxes, child taxes, land-value taxes, let alone distasteful ethnic and foreign visitor expenditure taxes. DFCs could target complex algorithms to vary taxation on any transaction in real time. One popular tax, only possible because of DFCs, was the geographic redistribution tax whereby the tax on transactions rose in wealthy districts.

As foreseen by 20th century commentators such as Ian O Angell, the ‘New Barbarians’ and the ‘Golden Geese’, i.e. the mobile wealthy, took flight to welcoming jurisdictions and offshore centres. Gold and Bitcoin 7.0 values soared outside the reach of populist governments and their capricious taxes. The paradox was that taxation over-control directly led to the vertical rise in cryptocurrency popularity. The very consensus around control led to most global wealth ceding monetary control to algorithms rather than governments. With the wealthy leaving, the remaining, non-mobile, fulminated, but too late. A fundamental technology of social relations, money, had moved largely outside the hands of humans. Human beings just couldn’t control themselves.

Many Hands

Many quickly forgot Occupy, the 2011 movement to reduce social and economic inequality worldwide. No one forgot Seize, the 2020 movement to grab money from ‘the rich’ and give to ‘the poor’ with its slogan, “Carpe Pecuniam!”. Back in 2016, ‘The DAO’ (decentralised autonomous organisation) was an investment fund project implemented on Ethereum blockchain smart contracts. The DAO defined all its relationships with investors through embedded code in the Ethereum ledgers. Due to a coding mistake, one party was able to extract funds then worth tens of millions of dollars to their own account. The Ethereum community acted to overturn the mistake, but this emphasised ‘tyranny of the majority’ superseding ‘tyranny of the code’.

Autonomous collectives inspired Seize. It’s well-known that Seize started as a peculiar combination of comedians impersonating bailiffs at rich people’s homes supported by populist politicians egging the comedians. Money laundering and tax evasion allegations, some false and some true, provided more fuel to the seizures as things spiralled out of control. ‘Grasp & Snatch’ is today about as welcome a term as ‘Nazi’, but in its day was enough to have a mob tearing a rich house apart. In association with The New Diggers and The New Levellers, Seize led inexorably to civil unrest and then to violence.

And what a wild ride it’s been. A bit like the Irish bank strikes in the 1960s and 1970s, communities have soldiered on. Popular frustration with perceived inequality and tax avoidance led the move from fiat currency to community monies. Communities adapted and formed around new monies. Community monies soldiered on, convincing everyone they had ‘taken back control’ from the central banks. There have been some severe problems, for example the ‘infinite taxation’ some New Levellers imposed in north-eastern China, or the ‘audit your neighbour’ movement of eastern Indonesia that led to lynchings. And some inappropriate starting parameters have resulted in some mini-Weimars. Yet, these problems have been ‘local’ rather than ‘global’ thanks to the proliferation of central-bank-in-a-box blockchains that come with standard settings and safety controls for sensible communities.

What’s less well-known is that Seize’s ‘in a box’ technology relies on the same technology that failed The DAO. However, the intense fragmentation into local communities and their monies has created strength in diversity rather than a single point of failure. They may be less efficient, and some have certainly had their problems, but the proliferation of community monies have all been underpinned by one new advantage. Every unit of ‘money’ is tracked. Ethical banks can assure people of the source and destination of the monies on deposit. Solar credits and social good credits are transparent. The provenance and chain-of-custody of goods matches the provenance and chain-of-custody of money.

Follow The Stench; It’s Lovely, Clean Money

Some say there is no money in Star Trek. That’s strange. Money is a technology communities use to trade debts across space and time. Doesn’t Star Trek’s mission, “to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no one has gone before”, bring the series into direct contact with communities exchanging debts? Captain Jean-Luc Picard crows, “The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of humanity.” Yet dedicated Trekkies well know there are Federation credits, just perhaps not Federation cash. The future still holds an innumerable number of communities, not least the trekkie community, using “technology to exchange debts across space and time”, i.e. money.

Money has long been the way communities trade debts across space and time. Whether new DFCs or community monies, the technology of money is changing, again. The Sumerians based it on clay, the Egyptians on papyrus, the Lydians on gold, the Chinese on paper, the Romans and others on tally sticks. Yesterday’s dominant technology, fractional reserve banking underpinned by central banks, is over. Our new technology allows us to track money from source to sink, precisely. Jerry Maguire accosted everyone with “where is the money?”. Today we accost everyone with “how does it smell?”. And where might this lead? Well, I for one am very concerned about the relative rates at which people create and secrete wealth and have been considering an on-the-spot punitive criminal tax that...

^{Professor Michael Mainelli is Executive Chairman of Z/Yen Group and Principal Advisor to Long Finance. His latest book, The Price of Fish: A New Approach to Wicked Economics and Better Decisions, written with Ian Harris, won the 2012 Independent Publisher Book Awards Finance, Investment & Economics Gold Prize.}