The proposal addresses how to discourage consumer withdrawals. But at some point currency traders will get involved and find ways to short the new currency. In the past, traders have created runs on the treasuries of large countries who were propping up their currency.
That's more dollars than are in existence, by the narrower money supply definitions.
> I was surprised how little reserves seemed to be needed to make Tethers work.
An ordinary bank has maybe 10% reserves. Tether had a whopping 70%, if you assume that this money actually exists.
Of course it could all be make-belief. You can fool some of the people, all of the time.
> But at some point currency traders will get involved and find ways to short the new currency.
That's not necessarily a problem. You can do that with Tethers and wait for some big dump to lower the price. As long as the currency is backed by withdraw-able US-dollars, there's little opportunity for profit, it just doesn't make sense to sell low.
It would be possible to attract investment into the money well by paying interest, funding the basic income. That interest could then be paid out by inflating the money supply. This is basically a simplified version of the system that is already in place in the US.
Wouldn't exactly the same thing as the above proposal occur?
ie. Everyone in the country is suddenly paid the new currency, exclusive usage is mandated so by law and taxes require payment in the new currency. There would be fewer Euros needed for internal Fiat so those Euros could be invested and thus the switch should make everyone in those nations that little bit richer right?
Here there is a video with a good explanation by Warren Mosler. It mentions the appreciation effect that you comment about:
Cool that it is still ongoing. I think the way to implement this is with blockchain / crypto considering how easy it is to mint new money. But as another commenter said - the challenge is getting merchants on board.
Also, I have my doubts on any currency system that is not connected to real wealth or real value in anyway. I think history has shown that these currencies end in hyperinflation.
Let’s hope merchants don’t buy in, because the cattle don’t know the difference between “basic income” and “basically a Ponzi scheme.”