A Practical Implementation For John Nash’s ICPI

Ideal Money is a vector of stability we don’t typically consider as being important. Consider the different observation points between micro and macro economics:

The difference between micro and macro economics is simple. Microeconomicsis the study of economics at an individual, group or company level.Macroeconomics, on the other hand, is the study of a national economy as a whole. … Macroeconomics focuses on issues that affect the economy as a whole.

Wiki suggests there is a global observation point as well but goes on to point out national framed considerations:

Macroeconomics (from the Greek prefix makro- meaning “large” + economics) is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies.[1][2]

Macroeconomists study aggregated indicators such as GDP, unemployment rates, national income, price indices, and the interrelations among the different sectors of the economy to better understand how the whole economy functions. They also develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade, and international finance.

While macroeconomics is a broad field of study, there are two areas of research that are emblematic of the discipline: the attempt to understand the causes and consequences of short-run fluctuations in national income (the business cycle), and the attempt to understand the determinants of long-run economic growth (increases in national income). Macroeconomic models and their forecasts are used by governments to assist in the development and evaluation of economic policy.

Global Macro Economics

If the world can’t coordinate then what would be the point?

I think this kind of economics does exist and I have certainly watched lectures in which a global observation point is discussed, however, I think that a more defined field might arise as Bitcoin matures.

A Maturing Global Bitcoin Price

It is not worth $X just because one exchange says so and as these exchanges allow for more and more arbitrage between each other (especially if they truly are rivals) then we can expect a more honest aggregate price to evolve.

At a certain maturity something happens that I wish to elucidate.

On The Usefulness of An Unuseful Commodity

Perhaps this is true (I don’t think it is) but from a nation's standpoint there is a comparable implication for Bitcoin whether the nation itself finds a use case for Bitcoin or not. If much or all of the rest of the world had a strong price for it then that price world hold strong as if there was a foreign demand for Bitcoin as a commodity.

This would take away a nation’s ability to exert tyranistic control over the local exchange price (or over a subservient country etc.).

On George Selgin’s Definition of a Mature Free Banking Market

As the public holds only inside money, with commodity money used only in bank reserves to settle clearing balances, these conditions are as follows: First, the demand for reserves and the available stock of commodity money must be equal. Second, the real supply of inside money must be equal to the real demand for it.

And with this he outlines a definition is of maturity:

On the other hand, if the reserve-equilibrium condition is not satisfied, the system is still immature.

The maturity described becomes a banking system that is born out of competition and has no players that can change the laws of the game such as a central bank does at a national level disrupting the national trust of the citizenry (who are like co-players).

As such a system reaches high levels of settlement with highly connected capital flows the credit issued by banks becomes equal to the demand for it.

If all banks are doing this then there is a certain equilibrium achieved or a certain vector of stability.

Re-Membering Coppola

The Problem of Measuring Inflation

But there is a third distinction that is important to understand.

I notice a professor on twitter I call him “Old Man Hanke” and joke that he is always yelling at clouds.

He sometimes posts a calculated inflation rate for a nation such as the Venezuelan Bolivar and then he gives his own calculated rate and it is many orders larger!

From wiki:

Hanke employs a unique methodology, based on the principle of purchasing power parity, which allows him to accurately estimate inflation in countries with very high inflation rates. Using this methodology, Hanke and his collaborators discovered several cases of hyperinflation that had previously gone unreported in the academic literature and popular press.

How can he announce his own calculation? Because inflation calculations can have different frameworks (ie local or global) and include different prices being considered. Hanke’s is a more international and less subjective view.

On Bitcoin As a Global Measure For National Currency Inflation

Re-Turn of The ICPI

There is an obvious political difficulty here and it didn’t go unnoticed by Nash:

We can see that times could change, especially if a “miracle energy source” were found, and thus if a good ICPI is constructed, it should not be expected to be valid as initially defined for all eternity. It would instead be appropriate for it to be regularly readjusted depending on how the patterns of international trade would actually evolve.

Here, evidently, politicians in control of the authority behind standards could corrupt the continuity of a good standard, but depending on how things were fundamentally arranged, the probabilities of serious damage through political corruption might becomes as small as the probabilities that the values of the standard meter and kilogram will be corrupted through the actions of politicians.

On The Comparability Between Nash’s ICPI and Prof Hanke’s Purchasing Power Parity

We can note though that the claim of Hanke’s PPP is that it is a more accurate measure than other more subjectively measured inflation rates.

On A Different Use Case For John Nash’s ICPI

The theoretical ICPI, if somehow constructed, from the point of view of an already impending Bitcoin would be an even better observation point than a PPP of the true inflation rate of the different currencies around the world.

Then it might be multiple nations are quite interested in having this composed basket as it would more accurately tell them when the exchange prices for Bitcoin in certain domestic currencies are reflecting the inflation rate of those same respective currencies.