From Best Mode
When you own 30% of a global financial services company, like you and I now do, it’s a good idea to take a look under the hood, kick the tires and check-out what’s in the trunk. And look what Citigroup has here, a patent on a “synthetic currency transaction network“, US Patent 7,020,626 Inside Money.
“Synthetic currency is created by pooling and dividing into shares a portfolio of highly liquid assets and frequent evaluation and disbursements of dividends on those assets so as to hold the value of the synthetic currency share at unity with the underlying currency….The IM (Inside Money) transaction agent system in conjunction with the IM synthetic currency act like a “super” virtual central bank to allow users around the world to make near real-time final transactions.”
“Super Virtual Central Bank?“ I guess my Second Life alter ego will also take a hit in a “Virtual Recession“, grovel before a “Virtual Senate Committee” and be criticized for traveling by private “Hyper Shuttle” instead of commercial.
The system described in Citigroup’s ‘626 patent acts like a private secondary economy, where, according to The Federal Reserve’s Ricardo Lagos, ”Inside money is an asset representing, or backed by, any form of private credit that circulates as a medium of exchange. Since it is one private agent’s liability and at the same time some other agent’s asset, inside money is in zero net supply within the private sector.”
In March of 1995, Esther Dyson’s Release 1.0 featured the article “A Long-term Perspective on Electronic Commerce” by Eric Hughes, author of A Cypherpunk’s Manifesto. In laying out some general principles for designing net-based commerce systems of the future, Hughes believed…
“The ideal synthetic currency’s goal is not speculation but value maintenance. It should seek to minimize price fluctuation by targeting a broad market average. No single enterprise will be able to pull this off. The issuer of a broad synthetic currency will doubtless rely upon many other issuers. Derivative assets may derive from other derivative assets, and so on….Synthetic currencies truly thrive with small value transactions. The cost of negotiating and processing a foreign exchange trade for each small transaction would be overwhelming.”
The ‘626 patent, and our recent experience with credit default swaps and the like, are great examples of technology making all things possible, all things immediate and all things connected. What happens on Wall Street has always had an effect on what happens on Main Street, only now it happens in near real-time.
Source: gilmanresearch.com
