Etlase2,
How am I supposed to follow your logic of it being fixed when you set up an example where it floats. LOL.
I don't understand your objection at all. My example showed that an attempt to deviate from the exchange rate will force it back, as long as some people treat TEM and EUR as having the same value. You contradict yourself, on one hand you claim that people do treat them as same value, on the other hand you deny that they are exchanged at a predefined exchange rate. It's an illogical construct. The referenced articles clearly explain that these people still use Euros for quoting prices and accounting, and merely use TEM as an
alternative payment method.
Furthermore, you fail to address the economic issue: if person A does treat TEM and EUR at a particular exchange rate, and person B at another one, that creates an arbitrage opportunity.
How then has the world currency market not collapsed since the removal of the gold standard? No major world currency is backed or pegged, yet amazingly commerce still occurs.
The main reason is, in my opinion, that the amount of new money created by the credit system is still restricted, i.e. there are still certain limits to expansion of credit, be it through regulation or the fact that only banks rather than anyone, can create new money. Someone might claim that legal tender laws are also a factor, but I think that the credit restriction is a more important factor.
LETS systems are essentially a different way of how money enters the economy. It's a mix of being planned centrally (which has the obvious disadvantages of central planning) and allowing anyone to create new money. It only works because there is a peg to another currency, which prevents the expansion from occurring too quickly (again, arbitrage). If there is no peg, then either the economy will convert into a closed, increasingly centrally planned one, or the money supply will increase arbitrarily until it reaches hyperinflation and collapses. If the peg suffers from hyperinflation, the LETS is also affected by the problem. Theoretically, they can react by re-pegging it at a different exchange rate, essentially creating a new central bank.
It may be possible that LETS have a way of restricting the supply that I'm missing, i.e. that their supply cannot increase arbitrarily. If this is the case, then I consider it possible that something else than centralisation or collapse would follow a decoupling (i.e. I cannot logically exclude that).
You quite clearly expressed that you believe TEM is a bad idea. Bandied about terms like "misallocation of resources" even, all the while the majority of the "resources" are going to the banks as interest payments. Good spot for them to be.
"bad" is a normative term. I try to avoid making normative statements as much as I can. You on the other hand are obsessed by ideological baggage which I'm completely indifferent to. My main point is not that TEM is bad. I merely attempt to analyse the consequences thereof. The main consequence that I deduced is a decrease in the size of the economy (even though there could be, but not necessarily, an inflationary boom at the beginning). If that's what people want, let them have it. I'm the last person who would object to that.
In any case, once the EUR and USD collapse, we'll see how it affects the LETS systems on one hand, and gold/bitcoin on the other.
