I've been thinking a lot lately about the rise of crypto-currencies and if they could be applied to the Esperanto community. I think it would be useful to have an international currency to compliment the international language. It could be used to pay for the international congresses and magazines, possibly even for micro-payments.

There have been similar systems in the past like Stelo and UEA runs something similar to its own banking system. My proposal is to convert these ideas into a modern internet currency. It's essential that it avoid the flaws of Bitcoin and be a real usable currency, not just a get-rich-quick scheme.

Give the article a read, if you are interested in reading the full details of my proposal.

Imagine if Esperantists had our own currency

Roberto, you are quite right, I think, in supposing that the Zeitgeist is favourable to the resuscitation of the idea of Esperanto money.

But we don't need to re-invent the wheel. The Spesmilo was sound in its principle of linking its value to gold.

If you know your history you will know that most leading countries before World War One had their currencies linked to gold (ie the value of the currency was defined as a certain weight of pure gold) and that there were mechanisms in place to maintain the defined gold parity.

Here's a link to a pdf file of a classic text on how the gold standard operated .

Also, if you know your history you will know that there wasn't always a single issuing authority.

You said it’s preferable that the price is fixed or at least very rigid, probably linked to some large currency like the Euro or Dollar. No, that's a very bad idea. Most fiat currencies have appalling records when it come to loss of value.

Did you know that the price of a pint of beer pre-WW1 (3d), when calculated in Spesmiloj, is very similar to the price of a pint of beer today (£3), calculated in Spesmiloj? In terms of beer the modern pound is only worth 1/240 its value pre-WW1.

It shouldn't be considered that holding one's money in a currency that keeps its value is the same as speculation.

By the way the 22 carat sovereign still in production today at the Royal mint at the original weight, width and thickness, is exactly 10 Spesmiloj (and always will be).

Although it was a British pound, it was never thought necessary to indicate the value on it in the way that our modern coins do.

So buy yourself a sovereign,here's the Royal Mint link, Overstrike or hallmark it with 10 Sm and you have yourself some historic Esperanto-mono

sudanglo:But we don't need to re-invent the wheel. The Spesmilo was sound in its principle of linking its value to gold.

The problem is that gold isn't a stable value. It doubled in value between 2008 and 2011 and over the past century there have been huge fluctuations.

sudanglo:If you know your history you will know that most leading countries before World War One had their currencies linked to gold

As a matter of fact, I know economics history very well. So I know that a gold standard was very common, but I also know that all countries ditched it due to its unworkable flaws. Bitcoin is in a sense an attempt to recreate the gold standard by creating a currency with a fixed supply. Unfortunately, this means the price fluctuates wildly with demand.

sudanglo:You said it’s preferable that the price is fixed or at least very rigid, probably linked to some large currency like the Euro or Dollar. No, that's a very bad idea. Most fiat currencies have appalling records when it come to loss of value.

Since it's creation, the Euro has had very low inflation, only once going above 3% and in the last few years it has been below 1%.

I agree that a cryptocurrency should be used as currency, and as of right now, that's one of the main flaws of Bitcoin, and pretty much every other crypto - no one uses it like money.

And, of course, the issue is its stability. Pegging the price of an EC (Esperanto coin) to an existing currency is called "Tethering," and means that you need to hold an equal amount of Euros (or whatever) as "backing." You can't just de facto say, "1 EC = €1 because I said so," the market will quickly disagree and create its own value. So, if you're going to create 1 million EC, you need 1 million euros on hand at all times.

Not being able to "cash out" the currency doesn't seem like a good idea - imagine if that were true of any other currency? If I couldn't turn dollars into euros before I went to Europe or vice versa? Tipping a YouTuber in EC suddenly doesn't really mean much because... what are they going to do with it? They've paid their magazine subscription (if they want one), paid for their conference (if they can afford the plane ticket), and then? In this case, I imagine a "grey market" exchange would pop up where people would start trading out of the currency ("I've got a surplus of EC. I'll pay for your conference in EC if you give me dollars."). This introduces inefficiency into the system.

In the end, there's really no problems that a proprietary cryptocurrency solves that accepting credit cards can't solve better. Is there a fee for the merchant in credit card processing? Of course! But that's because a service is being provided - namely, exchanging disparate currencies on behalf of the merchant, and then paying the merchant in their currency of choice.

Roberto, you will have no argument from me as to the stability of the price of gold over short periods. The question that is more interesting to me is whether gold (or the Spesmilo) is a conserver of wealth over long periods.

After the collapse of the Bretton Woods agreement and there was a free market in gold in relation to fiat currencies there were periods when the world went mad for gold (as there were periods when interests rate were consistently high and savers might have preferred to benefit from the high yields on government bonds).

However the message from your chart is simply be patient. Any speculative froth eventually gets blown off, as any depressed gold price period eventually gets corrected, so that whenever you invested in gold you more than get your purchasing power restored if you wait.

The gold standard wasn't ditched because it was unworkable, by the way. It worked very well for almost 100 years in Britain up to 1914 (as it did in other countries for shorter periods). It was World War 1 that did for the pound, as also for the Spesmilo.

Then later we had the rise in the school of economic thought that you could manage the economy by mucking around with the value of the currency - which you couldn't do under the gold standard.

Any way, there is big philosophical issue in looking at price changes in a particular currency

Are prices going up because that currency is losing value? Are prices going down because of an increase in value of the currency - or because of increased efficiency of production, changes in labour cost or technology, collapses in demand etc.

Keep your money in Spesmiloj, Robert - Viaj nepoj vin benos

sudanglo:Keep your money in Spesmiloj, Robert - Viaj nepoj vin benos

Just because something is a good investment, doesn't mean it's a good currency

briguybenwa: You can't just de facto say, "1 EC = €1 because I said so," the market will quickly disagree and create its own value. So, if you're going to create 1 million EC, you need 1 million euros on hand at all times.

Well if the central bank sells the currency at €1 this sets a ceiling on its value rising above this. It's possible that people could sell it for less, but why would they? Who would buy for €1 but sell for 80 cent? There could be some market for unwanted coins that people don't mind taking a heavy hit on, but this will be minor.

briguybenwa:Not being able to "cash out" the currency doesn't seem like a good idea - imagine if that were true of any other currency? If I couldn't turn dollars into euros before I went to Europe or vice versa? Tipping a YouTuber in EC suddenly doesn't really mean much because... what are they going to do with it? They've paid their magazine subscription (if they want one), paid for their conference (if they can afford the plane ticket), and then? In this case, I imagine a "grey market" exchange would pop up where people would start trading out of the currency ("I've got a surplus of EC. I'll pay for your conference in EC if you give me dollars."). This introduces inefficiency into the system.

The idea is to encourage people to spend it within the community. If someone has 10 coins left over, they might as well spend it on a book or a CD etc. Or just wait for next year when there will be new congresses and subscriptions. A grey market could form, but what would be the point? Why go to all that hassle just because you have $5 in spare coins? For example, I have 3 plastic Steloj left over from JES, but what would be the point of tracking down someone who wants to buy some and going to the trouble of making the trade? I'll just wait until the next event and even if I forget or lose them, I've only lost the price of a cheap beer.

rapn21:
Well if the central bank sells the currency at €1 this sets a ceiling on its value rising above this. It's possible that people could sell it for less, but why would they? Who would buy for €1 but sell for 80 cent? There could be some market for unwanted coins that people don't mind taking a heavy hit on, but this will be minor.

I think you mean, it sets a floor on its value going below €1. To a certain extent, this is true I suppose, but if I have 1,000 EC because I sold a bunch of books at a conference, and I would rather have euros, how would that work?
-If the answer is, "You can't," well, then I don't like this system, because I'd rather have €1,000 to pay my bills, and printing costs, etc. My printer won't take EC, and I need to print more books for the next conference.
-If the answer is, "The central bank will do the exchange for you," we're back to, "Then the central bank needs an equal amount of euros on hand at all times."
-If the answer is, "Go to the grey market," well, then the value is back to fluctuating wildly, based on market conditions. After a conference, I'd imagine the "market" would be flooded by people trying to get rid of their leftover EC to turn it into a more widely accepted currency, and I'd be able to buy 1 EC for far less than €1.

rapn21:
The idea is to encourage people to spend it within the community. If someone has 10 coins left over, they might as well spend it on a book or a CD etc. Or just wait for next year when there will be new congresses and subscriptions. A grey market could form, but what would be the point? Why go to all that hassle just because you have $5 in spare coins? For example, I have 3 plastic Steloj left over from JES, but what would be the point of tracking down someone who wants to buy some and going to the trouble of making the trade? I'll just wait until the next event and even if I forget or lose them, I've only lost the price of a cheap beer.

I get that, and for 3 plastic steloj (or EC, or whatever), it's not a big deal to hang onto them, or lose them, or whatever. But what is the book seller (or beer seller) supposed to do with the huge pile of currency from sales after the JES every year? She can't print more books, or buy more beer for the next conference with steloj. Literally NO other currency in the world prevents currency exchanges. Think about why that is.