Issue Your Own Credit to Survive Economic Downturn

Born out of the Great Depression, the notion of self-issued credit was pioneered by alternative monetary theorist, E.C. Riegel, as a means to insulate one’s self from collective economic downturn. His idea — formed in the decades proceeding the most significant decline of GDP in our nation’s history — was that productive entities (individuals and businesses) should learn to create their own money instead of relying solely on centrally-issued fiat.

“It is a remarkable fact that no constitution of any state, nor any declaration of human rights, has ever proclaimed the right of freedom of money issue.” — E.C. Riegel, The New Approach to Freedom, 1949

Riegel coined the phrase “separation of money and state,” which has become an anthem for the entire cryptocurrency movement. This call-to-action was at the forefront of his theory of self-issued credit.

The theory of self-issued credit, taken to its logical endpoint, effectively argues that any fiat medium-of-exchange is fundamentally socialist in nature and an encumbrance upon free market trade. Even Marx declared centrally issued-credit the Fifth Plank of Communism. In good economic times, fiat benefits those politically aligned with its central-issuers ahead of the masses. While in bad, it harms the masses with an even greater level of exactment.

Riegel’s solution was for there to be competition in money issuance. Today we have cryptocurrencies, like Bitcoin and Ether, which strive to function as monies separate from any state. However, they still face a similar short-coming as fiat: when economic times are tough, everyone suffers together.

While Reigel accurately envisioned that autonomous, non-political money could one day exist (such as cryptocurrency), he believed it would function less as a medium-of-exchange itself, and more as a means for individuals, groups, and businesses to issue their own personal, independent money.

“To issue money… [is] a natural right of all people who are intelligent enough to do so.” — E.C. Riegel

Without diving too deeply into the mechanism by which Riegel believed an autonomous money enabled a vast array of self-issued credit, it was noted in his New Approach to Freedom that the true value of self-issued money would be derived from the issuer’s ability to generate value. That is to say, Riegel believed the best form of money would exist as various credits, issued by independent entities, backed by said entities' ability to be productive:

• If a baker issued their own credit, it could be redeemable for a loaf of bread.
• If a guild of fisherman issued a collective credit, it could be redeemable for a fillet of fish.
• And if a physician’s office issued a business credit, it could be redeemable for one unit of medical treatment.

For whatever skillset an individual, group of individuals, or business possessed, their self-issued credit would be redeemable. A productive entity could, therefore, retain an immense amount of purchasing power through the use of their own self-issued credit regardless of economic conditions. In doing so, they would effectively uproot their dependence upon bank-issued credit.

Introducing meTokens

meTokens are a breakthrough primitive enabling — for the first time ever at a global scale — self-issued credit. Just as other Ethereum-based projects, such as MakerDAO, have successfully synthesized new digital assets, like their DAI Stablecoin, meTokens have emerged to create a comparably novel crypto-economic construction, called Synthetic Labor.

“Labor, as services, is indeed the sole commodity dealt with in exchange” — E.C. Riegel

Synthetic Labor represents the raw material of every good and service in existence: human energy. Because every person is unique, every person is permitted to issue their own supply of Synthetic Labor, or “meToken.” Issuing a meToken is the equivalent of creating your own personal economy and money, which is tethered directly to you and your labor.

When a person has their own personal economy and money (self-issued credit), they create a protective layer around themselves from global volatility. They can use their meToken to discover new opportunities for income and leverage it to issue credit to other individuals and business in exchange for goods and services in lieu of fiat or bank-issued credit.

meTokens are collateralized, so their credibility is always verifiable. The total supply of a person’s meTokens — their self-issued credit — is fixed to the amount of collateral in reserves. Collateral can be provided by either the issuer or external markets. Whenever additional capital is introduced, new meTokens are minted and distributed to the liquidity provider.

As new meTokens are minted, the value per token increases along a predefined, fixed rate (this is called a bonding curve). Bonding curves provide markets with an opportunity to speculate upon the future credit growth of an individual.

When markets purchase an individual’s credit, they can either spend it with the individual for discounted labor or they can sell it back to the market for a profit. As capital flows into a person’s meToken market— regardless if for utility or speculation — the total credit allowance held by the issuer increases. Thus, incentives are aligned so productive individuals become the most secure.

Closing

Riegel believed all productive entities possess the ability to self-issue credit. And although this technically includes businesses, Riegel felt individuals are actually the most atomic unit of value. Businesses are limited to specific commodities, while individuals are able to convert their labor into a variety of commodities. Thus, he believed even in unemployment, individuals who self-issued credit would be able to accrue a vast wealth of personal exchange.

meTokens are a vehicle to fulfill Riegel’s vision of self-issued credit on a global scale. Markets now have the opportunity to store their wealth in the productivity of others so that even in poor economic times, their capital can quickly mobilize to new ventures without significant friction.

For further explanation into the details of how meTokens function as self-issued credit, read this primer on collateralized personal tokens and this game theory document on synthetic labor.

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