Iceland and Auroracoin

As someone who has followed the various debates over money for most of my life, I find this new effort to introduce a new currency into Iceland's battered economy to be a very interesting story.  Coming as it does following an economic catastrophe triggered by banks playing crooked games with money, any attempt to introduce a new currency that is democratically controlled (as opposed to controlled by banksters) is bound to attract interest.  The alternative money schemes proposed in the areas of USA most devastated by the "Crime of 1873" were based on two principles:

1. The value of money is determined by the hard work and ingenuity of the people who issue it,
2. Any money that you can use to pay your taxes is by definition valuable—this was a primary teaching of the Greenback Party.

Whether the Icelandic Auroacoin will succeed is probably a function of how closely it adheres to these principles.  It will also be restricted to the local economy—it is almost impossible to imagine the Aurocoins ever trading on the Forex exchanges.  An Icelander might be able to buy a used car from a neighbor with Auroacoins but he won't be able to buy a new car imported from Germany with them.

Money from the gods: Iceland's auroracoin & a new kind of independence

Patrick L Young March 28, 2014

Norse money-god Niord was famed for being able to give riches to anybody he wanted. In modern Iceland newly-minted money is falling from the digital heavens.

Once upon a time during the financial crisis, there was talk of distributing Quantitative Easing as ‘helicopter money’. A scattergun drop of cash would result in delighted citizens catching falling notes. The economy would recover as citizens rushed to spend their windfall.

Banks suggested that people couldn’t be trusted to actually spend the money, demanding they become the monopoly channel of money. Their corporate socialist government blood brothers readily complied. Crazed QE has expanded governments’ debt piles and enabled banks to lavish vast bonuses on traders who profited from free money while the real economy, at best, festered.

However this week a genuine helicopter money experiment has finally trusted the people. Led by the pseudonymous ‘Baldur Friggjar Odinsson’, bitcoin’s Nordic cousin auroracoin is raining digitally from the Icelandic sky. Similar to Bitcoin with a total circulation of 21 million coins, Auroracoin has two key differences. Half the coins were pre-mined (i.e. produced in private without the public being permitted to join the mining process) while Auroracoin distribution is initially restricted to Icelandic citizens.

When the pre-mining phase was completed, every Icelandic citizen became eligible to join ‘the airdrop’and claim an equal share of auroracoins, worth around $360 per person.

Now auroracoin can be mined by anybody - although one might argue Iceland is ideally placed to keep mining most efficiently via its highly efficient data centers powered by geothermal energy. A fascinating experiment has been unleashed - a ‘national’ crypto currency on an island beset by significant economic problems.

When Iceland’s bubble burst in 2008, the country’s enlarged banking sector fell apart and the government uniquely (sensibly) let banks fail. This defining capitalist act was anathema to Western politicians who wouldn’t let their banking cronies down. Indeed British socialist Prime Minister Gordon Brown blackmailed Iceland into reparations while ‘masterminding’ the ill-conceived wave of bailouts amongst banks which needed to be left to die.

Offered an EU deal which would enshrine feudal penury, the Icelandic government bravely opted for an independent solution. A recovery of sorts has led to the political status quo being almost restored. However, it came at a colossal cost to Iceland’s currency: the krone has depreciated by 99.99 percent compared to gold since 1960.

Auroracoin has a finite supply, so no nasty socialist depreciation tricks like printing money can be effected. Likewise, it creates a fascinating experiment in mercantile life. Every Icelander can have 31.8 free coins to begin the process, thus creating a ready pool for trade to take place. The idea is to remove the failed corporatist socialist banker-government nexus from the food chain of money. Move beyond banking and you reach the peer to peer world powering new age finance.

Naturally this is anathema to central and retail bankers alike, while politicians are appalled at the idea of people being sovereign in their decisions. However, that’s the core lesson to be learnt in the digital age: if you don’t have a valid position in the food chain then you will be dis-intermediated. Socialist interventionism is redundant when people are free to choose how they spend their independent currency. As the auroraCoin manifesto notes:

“Crypto currencies are a very important milestone in this fight for liberty. They bring the hope of a new era of free currencies, immune to the meddling of politicians and their cronies.”

Chalk up one for freedom and a mercantile future. Or of course you can prefer to endorse the failed socialist mantra of plenty through intervention and enjoy another 50 years of 99.9 percent erosion in the value of your krone.

Iceland has 96 percent internet penetration, the world’s highest. With 330,000 citizens, the entire nation is as populous as a small city elsewhere. Thus the numbers are highly manageable, while the fact that auroracoin is fully tradable overseas will come as an exciting development for Icelanders, who have been restricted in holding foreign currency since foreign exchange restrictions were imposed. Such capital controls crush trade – q.v. the stagnant British socialist state before Margaret Thatcher reversed the decline of Britain in 1979.

Already there has been an overwhelming rush of Icelanders clamoring for their free auroracoins. They are at the forefront of the new era of money, a new era of freedom to choose. more