The Lifecycle of the Substitute and Its Purchasing Power, 2

To highlight the differences through these three stages of the lifecycle, I chose as terms for comparison three different types of media of exchange: the first is the certificate of ownership, the second is any kind of debt/credit, such as a bond issued by a company or a promissory note issued by an individual, the third is fiat debt money, currency without intrinsic value issued at face value plus interest.

The certificates of ownership are part of a system whereby the government does not dictate any monopoly on media of payment and runs at a fee public depositories where anyone can freely store any storable and durable commodity, the commodity is verified as complying with minimum quality requisites, and if so it is accepted and transferable certificates of ownership are issued as a receipt that can then be used as medium of payment, until their current holder presents them to the depository, which consigns the commodity and destroys the certificates.

Beginning: The purchasing power of the certificate of ownership is born when it is issued, and it is owned by the owner of the corresponding verified and stored commodity, thus no new purchasing power is created out of nothing and therefore nobody can appropriate it.

Continuation: The certificate circulates while the corresponding commodity does not, so its purchasing power circulates instead of that of the commodity, thus the amount of the existing and circulating purchasing power is not altered. Individuals can freely trade the certificate, including loaning it at interest, but the mere existence of the certificate in itself does not involve any interest owed to anyone whatsoever.

End: When the holder of the certificate redeems it, it is exchanged with the corresponding commodity and destroyed, thus, again, the amount of the existing and circulating purchasing power is not altered, and that’s all.