Discussion Paper: Denarius (Ӿ) as real currency

[Gaius Florius Lupus]

C. Florius Lupus omnibus in foro salutes plurimas dicit.

I would like to present to you a suggestion regarding our currency, the denarius (Ӿ).

Vision:
- Establishing the denarius as a fully valid and accepted currency.
- Bringing our currency from the virtual world of the Internet into the real world and hereby making it more authentic and real. At the same time we would also make our Republic more real.
- Increasing the importance of the denarius and reaching out to other Romans who might not yet be cives of our Republic.

Approach:
- Making the denarius fully convertible to any currency
- Turning the Quaestors into the magistrates of a Central Bank of the Roman Republic.
- Having the Central Bank of the Roman Republic holding reserves either in hard currency or precious metals.

Consideration:
Trust in a currency depends on being fully convertible in other currencies as well as its reserves, be it in foreign currency or precious metals. If we want to establish the denarius as a real and fully accepted currency, we have to fix an exchange rate to either the US Dollar or a precious metal like gold or silver. The denarius must be convertible both ways for exchange rates that differ not more than 5% for buying and selling. The Central Bank of the Republic must also hold at any time the same amount in reserves as denarii in circulation.

Type of Reserves:
The Central Bank could have its reserves either in US Dollar, which would be the easier way, or in precious metals, which would be more difficult but create more independence for the denarius.

A] US Dollar Reserves
In this case the Quaestors would only need to maintain a US Dollar account in an offshore bank with the non-profit corporation as account holder.
Our current system of denarii transfers would simply work as a form of online banking, where one citizen would transfer money to the account of another citizen.
Physical coins issued by the Central Bank of the Republic would be of a cheap metal alloy without intrinsic value, just as the coins of any other fiat currency.
The coins in circulation would have the equivalent of their nominal value in a corresponding denarii account of the Central Bank for all the physical coins in circulation.

If a citizen wants to exchange US Dollar into denarii, he would do a transfer from his bank or his PayPal account (or whatever) to the offshore account of the Central Bank. He would then be credited the corresponding value in denarii to his denarius account.
If he wishes to withdraw denarii from his account as physical coins, the Quaestor would ship the coins to him and transfer the amount in denarius from the personal account of the citizen to the »coins in circulation« account of the Central Bank.
In the reverse case, when a citizen wants to deposit physical coins to his denarius account, he sends them to the Quaestor who then transfers the equivalent amount from the »coins in circulation« account of the Central Bank to his personal account.
If the citizen wants to exchange his denarii back into US Dollar, the Quaestor would transfer it from the offshore account of the Central Bank to the PayPal account or US Dollar bank account of the citizen. The same amount would be deducted from the online denarii account of the citizen.


B] Reserves in Precious Metal
This system works similar to the system based on US Dollar, but has the denarius fixed against a precious metal. Traditionally this was silver. The value of a denarius would be identical to the intrinsic value of a denarius coin. (1 Ӿ = 4.5g silver = today: US$ 2.39). This is the same currency system as it is currently used by the Caliphate (Islamic State) and its »Islamic Dinar«.

Instead of an offshore US Dollar account, the Central Bank of the Republic would store the physical amount of precious metal, which is equivalent to the denarius online account of the citizen. The silver could either be stored in a bank safe or better through a third party like Bullion Vault (http://www.bullionvault.com). This company offers to store physical silver or gold in different locations (London, New York, Zurich, Singapore). The silver can then be sold or purchased online without the hassle of handling physical silver. But if we want so, we could have the silver be shipped to the Central Bank of the Republic at any time. There are also other companies operating according to a similar concept.

If a citizen wants to exchange US Dollar into denarii, the exchange rate would be calculated based on the price of silver on that particular day. He would transfer the amount to the bank account of the Central Bank, which would immediately buy physical silver, which can be done online as explained above. The denarii can then be transferred online through our already existing denarii transfer system. If a citizen wants to withdraw denarii from his online account as physical coins, the amount would be deducted from his personal account and the silver coins would be shipped to him. At the same time the equivalent amount of silver held by the Central Bank as reserve would be sold in order to purchase the silver coins from whatever company is in charge of minting them. Therefore the total amount of silver held as reserves would only be equivalent to the total amount of denarii in the online system. Once the denarii are issued as physical coins, they are taken out of the reserves, since the citizen would have the intrinsic value of the coins in his hand.
In the reverse case, when a citizen wants to exchange his denarius coins into another currency, he could do so probably at any jewelry shop. Or he could change them into online denarii by sending the coins back to the Quaestor. The Central Bank of the Republic could hold them physically in a bank safe or if it becomes too much, sell the silver and transfer the amount to Bullion Vault for online storage and management.

The entire system has some losses involved, since physical coins have to be minted, stored, sold and bought. Therefore there would probably be a certain difference in the exchange rate between buying and selling denarii to cover the expenses of handling physical silver.
Buy establishing this system, our currency would be universally accepted due to its intrinsic value, we would be safe against any financial crises and we would continue the tradition of ancient Rome minting its own denarii coins.

Precautions:
- In order to avoid charges of money laundering, the maximum amount for denarii transfer would have to be limited to less than US$ 10,000.
- The office of Quaestor would have some additional requirements in order for him to be technically able to handle all the transactions.

Consequences:
- We would bring our Republic closer to the idea of a real-life entity.
- The denarii system would reflect actually wealth in real-life, not so much status within our online community.
- Everybody could participate in our internal financial system, not just citizens. We would gain a reach beyond our organization.

This is an idea I would like to present to all citizens. If a senator likes this concept, he can suggest it to the Senate. I would be happy to elaborate further details, if there is any interest.

Valete!
C. Florius Lupus

[Lucius Vitellius Triarius]

I really, really think this is a concept that should be explored more. This could be a great alternative to bitcoin and the likes.

[Lucius Curtius Philo]

Salvete,

One issue we need to be mindful of is the requirements of a non-profit entity. Right now denarii serves as a reward for service and donations. Therefore, denarii is similar to the tokens of thanks given by other charities in return for donations and volunteering. When we think about converting denarii into other currencies a very real profit element in introduced.

I believe Lupus' idea is sound as a long-term vision.

In the mean time, once we have the centuries realigned to reflect denarii balance and have magistrates utilizing denarii budgets to drive projects we will see this system flourish. As a community we have not even started to use denarii in a significant way. We will see interesting things develop over the summer with our internal economy. I understand magisterial cohorts will have their budgets approved soon. The senate just passed a lex on this. Also the census will occur in the late summer. So this should provide a very nice climate for getting the gears of the economy turning.

We have grown so much in 13 weeks. Sometimes I forget how immature we are. The denarii economy is a good example of such a feature. Hold on to your togas, exciting times are ahead!

valete.

Philo

[Gaius Maecilius Ahenobarbus]

Salvete,
I have read the idea of G.F. Lupus and I found it interesting, it sounds as a plan and also it is pretty intriguing. Personally, I think we may attract even more member ( and make the ones inside more active maybe) if connected to a denarius there are dollars or euros. It is nice the idea to receive tokens but on the other end to receive a token "convertible" in euros will be a stronger push to work hard and better! Anyway, being a non profit organisation this would go way further than our ideals...!

To have a developed economy and plan anyway requires to have a developed economy with a bigger and stronger structure which, I believe, we do not have yet. To manage a currency ( because that would be ) requires also some sort of control and planification which is kind of far away right now. Anyway, I think we can study the idea, just for practice our macroeconomics skills acquired at the university and maybe we can make our plan and have it ready for when (and if) the time comes !

Valete,
Ahenobarbus.

[Gaius Florius Lupus]

We can implement this idea in several steps.
1. The first step is already implemented. Denarii can already be purchased with other currency and be transferred between the citizens.
2. The second step would be making them reconvertible into other currencies. This requires keeping sufficient reserves for all online denarii.
3. Offer coins for sale in the market place.
4. Switching from US Dollar to silver standard

All this can be done slowly step by step over ten years or so.

[Gaius Curtius Philo]

Salve Lupe,

I agree with what everyone said regarding this not being the time. It is a great idea but as of now we don't have the capacity for it. But I also think, as others stated, that it is good to debate this sort of thing and see how it could work in a long term future.

One issue I see with your proposal (and that you mentioned briefly in your text) is that the cost of production and transportation of this coin would not be inside the inherent worth of the coin (in case of it being silver) nor could it be backed up entirely in this bank account even if we used dollars. The production of coins would be a problem for this reason, but also the transportation, which has its own costs. There would also need to be a method to prevent forgery. All in all, it being a physical currency seems finantially impossible unless we have a surplus in the bank account over the amount of Denarii transferable in accordance to the extra cost and have it in a way that it can be consistently multiplied (either by real Capital or by some other form of investment). None of that is even slightly possible today and probably wouldnt be in a generation. But it is something Im curious to know what you think.

[Gaius Florius Lupus]

Salve Praetor!

You are right. The price for minting, handling and shipping actual coins might be significant. I have not calculated it in detail.
But it is a problem that companies like BullionVault also face. It is usually solved by adding a certain fee to the actual value of precious metals that one wants to be shipped.
So if you buy 1 oz of gold from one of these companies, which would be worth currently US$ 1250, you usually need to pay a fee on top of it, if you want it shipped to your home address. Otherwise you would just pay the US$ 1250, if you want to have it stored at their company to sell or buy online.

In our case we would have a slightly higher price for our coins than their actual intrinsic value to cover the manufacturing process. Furthermore the citizen would have to pay the shipping. So what we would be doing, would be nothing more than selling silver coins in our online shop. Of course they would be slightly more expensive than their intrinsic value. This is the case in all online shops, where you can buy coins.

Let us take the following example:
The citizen wants to buy 100 Ӿ. The intrinsic silver value of the denarii would be US$ 238.50 (today's silver price)
The Central Bank's exchange rate would be:
Sell: 100 Ӿ = US$ 270.00
Buy: 100 Ӿ = US$ 230.00
This exchange rate would also be valid for exchanging US$ and denarii online. The difference would cover any costs for wire transfers, PayPal or credit card charges and manufacturing the coins, if necessary.
If the citizen wants the coins physically shipped to him, he would also have to pay the costs of the courier service, probably US$ 60.00 or something like that.
Therefore the citizen pays US$ 330 to get the coins physically to his address or US$ 270 to have them in his denarii account.
If he wants his US Dollars back, he gets only US$ 230.00
This is significantly less than he paid, but significant differences in the exchange rate for buying and selling are not unusual in many countries. The rates would be adjusted according to actual costs for the Central Bank. And with higher volumes the difference would certainly get smaller in the future.

It is important to be aware that the Republic cannot spend the money it receives by converting US$ into Ӿ online. This money are the reserves of the Central Bank and must be invested in physical silver. If somebody wants to convert his denarii back into US Dollar, this silver has to be sold to pay him. Or if he wants his denarii as physical coins, the silver has to be sold to mint the coins.
Therefore these reserves are not part of the treasury. Only the remaining profit, if there is any, would become part of the treasury.
But this is not the general idea. The idea is that there is no profit and no loss generated at all. After all we are a non-profit corporation. If there is profit generated, then the exchange rate difference between selling and buying needs to be reduced until there is no profit anymore.

If we start with US Dollar reserves and coins without intrinsic value, it is a little bit easier. Coins can be produced cheap. Their price would be the difference between the exchange rate of buying and selling.
Let us say the manufacturing cost of a coin is US$ 0.085 per coin, which is the price a quarter dollar coin costs the Federal Reserve in the US.
In this case our exchange rate would be:
Buy: 1 Ӿ = US$ 2.385 (or whatever we want to fix)
Sell: 1 Ӿ = US$ 2.385 + US$ 0.085 = US$ 2.470
The manufacturing cost of the coin is included in the price we sell the coins.
In this case all the money has to be kept as reserves in a US$ account. Otherwise the Central Bank of the Republic would not be able to pay the citizens if they want to change their denarii back into dollars.
It might be tempting to spend part of the reserves hoping that not all citizens would want to have their money back at the same time, but I would not recommend that. It would diminish the trust in our currency and could be interpreted as fraud.

The whole concept has zero net costs for the Central Bank of the Republic, apart from time and effort, which is invested in the project. It could be done as soon as we have nothing else to do.
But I fully agree with you, this is not the right time for it, because we HAVE other things to do.
But perhaps we can simply keep the idea in mind as a future possibility, when the Senate makes its decisions regarding our internal economy and the market place.

Vale!
C. Florius Lupus

[Gaius Maecilius Ahenobarbus]

Salve Lupe,
OK, this sounds like a plan.
I like the way it is written and it seems well thougt, anyway I think we should be focusing on the virtual currency first, cause that part is easier to manager and to implement.
Starting using this more often (we may also think of some sort of "public salaries" for fonctionnairesfor examples -I actually do not know if functionaries are receiving any kind of wages) we start little by little to be used to the currency to create a virtual economy which then, one day, can be implemented in the real world.
Great job of planning!
Vale,
Ahenobarbus

[Marcus Livius Horatius]

Salve Lupe,
OK, this sounds like a plan.
I like the way it is written and it seems well thougt, anyway I think we should be focusing on the virtual currency first, cause that part is easier to manager and to implement.
Starting using this more often (we may also think of some sort of "public salaries" for fonctionnairesfor examples -I actually do not know if functionaries are receiving any kind of wages) we start little by little to be used to the currency to create a virtual economy which then, one day, can be implemented in the real world.
Great job of planning!
Vale,
Ahenobarbus

Ahenobarbus, I agree. There are laws now in place allowing magistrates to appoint functionaries. There are also laws in place which state a minimum these individuals should be paid in denarii. You might also be interested to know that the Comitia Curiata, in its wisdom, also passed a law which provides denarii awards to magistrates who perform up to a certain standard. So many of these first steps are set in motion!

[Gaius Florius Lupus]

The idea of a salary for magistrates sounds unhistorical to me. In the old Republic the opposite was the case. A magistrate was expected to contribute with his own money to some public expenses like the organization of the ludi for example. Paying politicians for their job is a modern concept.