Stable Currency IP

This IP should affordably safeguard against future economic catastrophe. It will use off-the-shelf technology. I need your help to finalize the patent.
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Paul Gibson
Technology
Lake Ridge, Virginia
United States
1 Team Member

 

A currency whose use or possession is paid for by the currency holder as a service provided by the currency issuer.

Sections:

  • What Is It?
  • Can This IP Be Patented?
  • How Likely Is This To Be Worthwhile?
  • How Is This Going To Work?
  • Additional Thoughts To Motivate You
  • What Will The Funds Be Used For?
  • Goals

What Is It?

This would be a currency privately issued by a bank.  Currency holders would pay for it from electronic accounts much as they would with regular bank fees.  More importantly this would be an independent currency, not linked to currencies such as the Dollar or the Euro.  This means that the currency would not go up and down with another currency.

Why?  This is intended as a way for private interests from 9 to 5 working slobs to vast mega-corporations to preserve their savings in a stable currency, in the event of a hyper-inflation crisis, so groceries can be purchased and factories can be built.

Can This IP Be Patented?

It's a good question.  Much of the point of this fundraiser is to raise funds for the patent process.  If this isn't even something that can be patented under U.S. law, then one might suppose your money to have been wasted on me.

I know some of you are saying, "Wait he wants to patent an electronic currency that people pay for the use of?  Those already exist.  You can't patent something if it's not original!"  As it happens, even if widgets and sprockets have existed for years, if those two things have never before been put together, and that is a useful and non-obvious refinement on the two, then that can be patented.

There are electronic currencies that charge people for their use; but they are linked to real world currencies, or commodities.  They're really electronic tokens, or electronic checks.  Indeed since wildcat currency laws abolish currencies linked to the Dollar adding to the money in circulation, these currencies must function exactly like checks in the U.S, with the movement of the currency representing the promise that Dollars will follow that movement.

There are also electronic currencies that are not linked to other currencies, usually as shady monetary instruments of black markets; but currency holders do not pay for their use.

The non-obvious patentability requirement is really the most serious challenge to this IP's being patented.  "In a nutshell, an invention would be obvious when someone knowledgable about the area would look at your invention and consider it to be already known; not exactly but rather known if one were to combine several references."  As an IP that combines elements from other IPs, and as it would seem, to most, to already exist in parts, this would seem to be an obvious IP.

However, simply reducing an IP to its component parts, and showing that they are not novel is not the minimum standard of obviousness.  Most patentable, and patented, inventions can be reduced to non-novel concepts in this way.  Non-obviousness depends on what is called "an inventive step".

What that means is the invention has to solve a problem that prior art did not.  There also must not have been anything in the prior art that suggested the desirability of the invention.  Challengers of an invention may not benefit from "hindsight bias".  That is, they may not say, after the fact, "I would have thought of that too".

Both of the enabling elements are necessary to the function of the IP.  The currency not being linked to other currencies is necessary to maintain its stability.  The currency having a revenue stream attached is necessary to create an incentive for banks to exchange the currency even in the midst of a hyper-inflation crisis, since historically currency exchange banks have been known to close their doors during hyper-inflation crises.  This means that the invention can be said to have solved a problem that was not solved by the prior art.

Also, one of the tests of the non-obviousness of an invention is does it resolve "long-felt unresolved needs; and did others fail" to address those needs?  While there has not been an urgent need to address hyper-inflation in the western world, it has been on the minds of a few.  Most have resorted to the hoarding of commodities, or supplies for an apocalyptic scenario.  Others have created currencies backed by gold.

It might be noted that commodities, or currencies linked to commodities, can be used to build up a reserve of savings if one is fortunate enough to anticipate a hyper-inflation crisis.  But, unless one thinks that every government currency on Earth is going to hyper-inflate simultaneously, which is pretty much impossible, there is really no advantage for doing that over exchanging one's money for stable currencies, such as the Chinese Renminbi, or the South Korean Won.

It is my hope that my invention may be used for regular business, both before, and during a hyper-inflation crisis.  That is, if you tried to make a purchase in a store with gold, that would not be accepted.  (To find out how my invention may be used to do regular business please see the "How Is This Going To Work?" section of this page.)  Also, once one has run out of their commodity savings what would they do?  How would they replenish those savings?  One can bet that the gold-sellers are going to have closed their doors just as the exchange banks will have.

How Likely Is This To Be Worthwhile?

In other words, how likely is a hyper-inflation crisis to happen?  Can a market be found for this IP?  Short answer, while there are no countries in the world quite in a hyper-inflation crisis right now, there are countries with rather high rates of inflation such as Iran, the Sudan, and Syria.  And, it may be that there will always be hyper-inflation crises in the course of human events for as long as man is fallible.

Beyond that, such things may not be limited to poorly managed states.  Know the main take-away we learned from hyper-inflation crises like the Weimar Republik, and the post-communist Eastern European states, was that hyper-inflation crises were usually preceded by debt crises.  Canada, Europe, Japan, and the U.S. all have severe debt crises right now.

Even many people who are the most optimistic about the economy must admit that hyper-inflation is at least possible, if only according to obscure economic theories.  Having an insurance against such an eventuality, for a minimal cost, should not be overlooked.

Now, this is the part where I was going to write about the U.S. debt, and its complexities.  When writing it out in earlier drafts, its complexities got complex.  And, I won’t deny that some points suggest that the doom-sayers don’t know what they are talking about.  For example, the low interest rate of around 2% for U.S. government securities, among other things, suggests that creditor confidence in those securities, at least up until the time of the securities’ maturity, is high.  Also, with the combined state and federal annual interest at around $400 billion, the U.S. is far from that special kind of screwed that happens when, even if the U.S. eliminated all spending, and somehow magically kept revenue at current levels, the U.S. couldn’t pay down the debt.

Let me just give you the statistics.  Some estimates for the total public debt, federal, state, and local, put it at about $20.5 trillion, with the U.S. per capita public debt around $70,000 (debt/population).  Total annual government spending is a little over $6 trillion; and tax revenue is around $5 trillion, along with the interest on the debt, differencing the deficit to about $1.6 trillion.  With the recession of ’08-’09 passed, the GDP is growing at a rate of about 2%, while the debt is growing at a rate of about 8%, with the total debt about 130% (debt/GDP) of the GDP.

Those numbers are shocking.  But, the key question is how much is too much debt?  There is no obvious predictable limit, where you just put some numbers into a formula; and it comes back with an amount that you should stay away from.   The problem is that government debts are so large in scale they depend a lot on the availability of capital for buying government securities, and on the motivation of the creditors themselves.  And, that’s getting more into psychology than rational economics.

Bond markets lack the bipolar ups and downs of stock markets.  But, even bond markets can crash.

A measure of creditor confidence is the interest rates placed on bonds.  But, as was mentioned, this confidence is only for the term of the security.  It is not predictive of the long term prospects of a debtor.

Moreover, while increased demand in stocks tend to drive their prices up, because buyers are bidding with share-holders, bond type securities tend to see their coupons decrease with increased demand, because the bond issuers are selling to the lowest bidders.   That is important because, as the economies of the developing world have been growing, more capital has become available for use by people and governments in those countries, and pursuit of government debt securities in wealthy nations has increased.

At the same time it most likely has not been lost on the leaders of these creditor nations that they have a stake in propping up the debtor governments.  The wealthiest nations are important markets, and trade partners.  As well, an economic catastrophe could ripple around the world creating a downturn for the developing world.

Right now most U.S. municipal bonds have an interest rate between 2.75% and 3.75%.  This is since a steady decline in interest rates, starting from a peak in the early ‘80s, roughly around the time the developing world, especially India and China, began developing in earnest.  Most interest rates for the debt securities of the wealthiest nations are between 1% and 3%.  Notable exceptions are Greece at nearly 8%, and distant runners up Portugal at nearly 5% and Spain at nearly 4%.

Those numbers may be understatements of creditor anxiety regarding these countries for a couple of reasons.  One being, again, that the interest rates only indicate creditor confidence for the term of the bond.  And the second being, with the countries of Europe linked by regional commerce and the Euro, the E.U. is certain to continue bailing out the Mediterranean countries.

Nonetheless, the E.U. bailing out the Med’ is exactly why many would put the safe money on an economic implosion in the region being delayed years, if not decades, more.

Or perhaps not, the world market in government securities is a pool of securities, and the capital of creditors.  Obvious stress in one part may be a sign of less obvious stress on the whole.  And, “stress” would be the word here.

You may have noticed that in recent years the debt crisis is more in the news.  It has always been a part of the news cycles, a piece of background noise.  But in the past, the tone was more of almost comic outrage at government mismanagement and wasted taxpayer money.  Now there is an implication that if governments don’t fix things they will regret it.  That could be put to the modern practice of talking heads playing things up to make things sound more dramatic.

There are also the austerity reform riots in Greece.  For what it’s worth the riots are not really an indicator of any larger economics, for the simple reason that they are an immediate kneejerk response to the austerity reforms themselves.

But, all of these are things that creditors are aware of.  And, they have them spooked, maybe even spooked enough to decide that they need to cut their losses.  For that matter, the news media making dire portents on the debt may be the news outlets responding to creditor anxiety.

So, what happens when creditors stop buying debt securities?  Historically governments with large debts have resorted to printing money in order to cover spending, once they ran out of credit.  Putting a little more money into circulation lowers the value of the currency, causing inflation.  When this happens the government needs to print more money, in larger denominations, to keep paying government workers to match the rising costs of living, compounding the problem.  This is how hyper-inflation crises happen.

So, why couldn't they have just stopped over-spending?  Reversing institutional over-spending is not something governments can do over-night; and unfortunately once a bond market crashes that's about how fast governments need to react.

And, aside for some brief heroic examples such as the Clinton administration's creating a U.S. federal budget surplus from 1998-2001, the world's debtor governments have been over-spending for years.  Bear in mind that budget surplus was something Clinton had been working for from the start of his tenure as PotUS in 1993, some five years earlier.  That should give you an idea how slow the wheels of government grind when it comes to cutting spending.

The post-communist Eastern European states overcame these economic disasters simply by growing their economies quickly enough to generate new tax revenue, and then pay down their debts.  Economists talk of the possibility of growing the economy faster than the debt today.

Unfortunately that’s not really possible.  The post-communist states could do it because, being at rock bottom, rapid economic growth was easy.  The wealthiest nations on Earth, on the other hand, are working to grow already large economies.  Certainly these economies do grow, by large amounts even, but not by percentage, and not compared to the percentage growth of their national debts.

So, haven’t we learned anything from the past?  After the hyper-inflation crisis in the Weimar Republik didn’t anyone say, “from now on we’ll do this, so this will never happen again”?  Of course, the thing we learned was to not get into that kind of debt again.  You may have noticed that hasn’t worked as planned.

Even with that, there is a way for a nation state in heavy debt to avoid a hyper-inflation crisis.  That way is to default on a debt, partially or completely.  It happens when a government says, “hey, we just remembered we’re a sovereign country.  We’re not going to pay back our debt.”  This is not an ideal solution.  There are serious consequences to defaulting on a debt.  Historically more nations have lapsed into a hyper-inflation crisis than have defaulted on their debt.

Then there is the risk that defaulting on a debt could provoke a military intervention by creditor nations.  It has happened before.  Supposed examples include Britain’s invasion of Egypt in 1882, the U.S.’s gunboat diplomacy against Venezuela in the mid-1890s, and the U.S. occupation of Haiti beginning in 1915.  (These historical examples are complicated by other causes for these wars, and a chaotic historical record.)

This at least suggests that the likelihood that a nation may default on their debt is, in part, determined by their confidence in their security.  To my thinking then, the U.S. seems the most likely to default of the modern debtor nations.

Japan is a special case.  Most of their debt is owned domestically, which means that Japan is unlikely to have a securities crash, a sovereign default, or a military intervention, at least from abroad.

Regardless, the odds are good that there is going to be at least one major hyper-inflation crisis somewhere; with the United States, Europe, and Japan each representing very large potential markets for this IP; and Canada representing a smaller potential market.  That is four different chances for a hyper-inflation crisis to occur.  You know how chance works.  If you multiply the chance that something won’t happen (i.e. 60% x 60% x 60%...), those odds diminish rather quickly, increasing the chances that it will happen somewhere.

How Is This Going To Work?

Credit card companies have already shown the way.  The IP in practice would function much the same as a business traveler’s check card.  The client currency holder would make purchases just as they would with an ordinary credit card.  Money would be deducted from an electronic account, along with a surcharge, and then, exchanged for the merchant’s currency, and paid.  The merchant need not even know that another currency was involved.  To them they would just be taking a credit card.

This suggests to me that the ideal companies to implement this IP are the major credit card companies.  They already have established relations with merchants around the world.

The technology necessary to realize this is existing off-the-shelf tech’.  These companies’ R&D sections could make working models of the IP in a matter of days, on the cheap even.  After that, the hard part would be naming their currency, and framing a marketing campaign.

Additional Thoughts To Motivate You

It should please you to consider that a hyper-inflation crisis can be an absolute nightmare for millions of ordinary people; and to preempt even the chance of that happening is to be on the side of the angels.  And, the potential scale of these economic disasters today dwarfs such historical events as the hyper-inflation in the Weimar Republik.

However, it should be noted that this IP would not prevent a hyper-inflation crisis altogether.  It is more like it would isolate the worst of it to the public sector, thereby sparing the private sector.

This is worth considering when one thinks of that other product of the Weimar Republik, the brown shirts, and Adolf Hitler.  Economic distress tends to produce extremist political movements led by strongmen.

This IP has the potential to significantly mitigate this in the future, by alleviating misery, and occupying people with gainful employment.  Even government workers who have lost their jobs should be happy to find private sector companies hiring, unlike what the employment market would be like during a more typical hyperinflation crisis.

If this IP is used successfully, there may still be oddball political movements led by demagogues.  But, they may find themselves having to moderate their politics to appeal to a contented populace; or they will gain much less ground in government.

There is something else.  The Weimar Republik hyper-inflation was followed by the American Great Depression.  The Depression was not a hyper-inflation.  It was a deflationary cycle crisis.

While they both lead to hardship and misery, in terms of the value of a currency they are exactly the opposite.  Hyper-inflation crises devalue a currency, making people want to spend money as soon as possible.  Deflationary crises increase the value of a currency, making people want to hoard it.

Looking at the example of the Weimar Republik and the Depression, it’s my hunch that hyper-inflation crises can lead to deflationary cycle crises in other countries.  There are a few different mechanisms that may cause this, such as unbalanced exchange rates, large contributions of foreign aid, or citizens in hyper-inflation afflicted countries making a run on whatever stable currency they can.

This would mean that those of you reading this in non-debtor countries have as much to fear hyper-inflation crises in debtor countries as the people living in them.  This IP could potentially safeguard against such an outcome, by providing stable currency alternatives within the affected countries.

What Will Your Funds Be Used For?

I have already filed a provisional patent application myself.  I need to file a patent.  While it is not a patent, a provisional patent application is like calling dibs on a patent.  When you file a provisional, you must file a patent within the year.  Once that is done the file date for the patent is retroactively set for the filing date of the provisional.  This is what the people in the infomercials mean when they say “patent pending”.

Once I have filed a patent, it will be necessary to market the IP to the major credit card companies.  It is my hope that this crowd-funding effort will generate word-of-mouth to grab the attention of at least one of the big credit card companies, with the goal of licensing the patent for royalties.  So, by all means, tell everyone you know about this.

I may also need a war-chest, God forbid, for any unforeseen legal battles.  Though in such an eventuality it might be just as well that I just do another fund-raising, or get a bank on board.

I can file a patent myself.  I have basically already done it with the provisional patent application.  Given what is at stake it would probably be best to hire a proper patent law firm.

There are cut-rate inventor assistance firms that will file a patent for $5,000-$6,000.  But, for the quality of service you get from the bargain basement, you might as well file yourself.  Considering how strenuously the experts advise against filing on your own, that’s saying something.

Then there is patenting in other countries.  It would only really be necessary to get patents in the countries this IP is likely to be used in.  Though, I would feel better, if I could patent in as many countries as possible.

Goals:

$1,000:  File the patent on my own.

$10,000:  Hire a good quality patent firm to file the patent for me.

$30,000:  I get a haircut.  (No, it won’t be that expensive.  It’s just a personal resolution of mine.)

$100,000:  File for patents worldwide.

And, hopefully some money for a marketing blitz of the credit card companies!

 

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