This post proposes a thought experiment and a system design. I am explicitly looking for failure modes, impossibility proofs, and overlooked constraints.
1. The Core Question
Most modern economies rely on money issuance and credit expansion. This produces three persistent properties:
Hidden redistribution via inflation
Risk externalization, where individual failures propagate system-wide
Opacity, where debt chains are difficult to observe or audit
Rather than asking how to optimize these mechanisms, I want to ask a more basic question:
Is it possible to design an economy where responsibility, risk, and resource usage are perfectly aligned—without money issuance at all?
2. A Constraint-First Approach
Instead of starting from incentives, utility, or equilibrium assumptions, I start from hard invariants.
The system is built around a single non-negotiable rule:
The total amount of credit in the system must always sum to zero.
Formally:
∑i=1NCi=0\sum_{i=1}^{N} C_i = 0i=1∑NCi=0
Where:
Ci>0C_i > 0Ci>0 represents a net contribution to society
Ci<0C_i < 0Ci<0 represents a net liability to society
No actor—human or institutional—can create or destroy credit.
3. Replacing Money with Public Credit
Instead of money, the system uses Public Credit Points.
Every transaction is a credit transfer, not a payment
Credit is not issued, printed, or mined
All credits are ultimately cleared against the system itself
There is no concept of “money supply.” There is only who owes society and who is owed by society.
4. Central Clearing Without Discretion
The system relies on a Central Public Clearing Engine (CPCE) with strict limitations.
The CPCE:
Records all credit changes
Enforces predefined rules
Provides full auditability of all state transitions
The CPCE cannot:
Create credit
Forgive debt
Modify individual balances
Change rules in real time
It is a clearing machine, not a monetary authority.
5. Debt Limits as a Function, Not a Policy
Negative credit (debt) is allowed, but bounded.
Each participant has a Debt Red Line, computed by a transparent function of observable parameters, such as:
Historical repayment behavior
Stable productive capacity
Dependency obligations
Sector-level systemic risk
This is not discretionary lending. It is capacity-based liability accounting.
All parameters, weights, and formulas are public.
6. Failure Is Allowed — Externalization Is Not
The system allows:
Business failure
Personal failure
Innovation with downside risk
What it forbids is risk spillover.
If an agent crosses their debt red line:
Their future economic actions are constrained
Recovery mechanisms are triggered
Costs are internalized to the agent, not socialized
This is closer to conservation laws in physics than to financial regulation.
7. Recovery Instead of Bailouts
Debt failure triggers recovery protocols, not punishment.
Possible measures include:
Consumption limits
Restrictions on high-risk activities
Bounded compulsory labor if necessary
Constraints on recovery:
Time-limited
Proportional
Non-competitive with market labor
Solely aimed at restoring balance above the red line
There is no debt forgiveness and no systemic bailout.
8. Relation to Bitcoin and Blockchains
This system borrows from blockchains:
Immutability
Full auditability
Traceable state transitions
It rejects:
Mining
Token issuance
Decentralized consensus for core clearing
The ledger is public; the clearing logic is centralized but rule-bound.
9. What This System Optimizes For (and What It Doesn’t)
Optimizes for:
Accountability
Transparency
Risk containment
Long-term stability
Sacrifices:
Rapid growth
High-leverage innovation
Speculative acceleration
This system does not promise prosperity. It promises honest accounting.
10. Open Questions (Where I Expect This to Break)
I am particularly interested in critiques around:
Does enforcing Σ Credit = 0 overly constrain economic dynamics?
Does bounded debt inevitably suppress socially valuable innovation?
Are recovery mechanisms ethically or practically infeasible at scale?
Can central clearing remain non-discretionary in practice?
What failure modes am I missing?
11. Why I’m Posting This Here
I believe LessWrong is one of the few places where:
Hard constraints matter
Systemic risk is taken seriously
“This cannot work” is considered a useful answer
If this system is flawed, I want to understand exactly where and why.
Thanks for reading. I welcome rigorous criticism more than agreement.
Designing an Economy Without Money Issuance: A Public Credit Clearing System
This post proposes a thought experiment and a system design. I am explicitly looking for failure modes, impossibility proofs, and overlooked constraints.
1. The Core Question
Most modern economies rely on money issuance and credit expansion.
This produces three persistent properties:
Hidden redistribution via inflation
Risk externalization, where individual failures propagate system-wide
Opacity, where debt chains are difficult to observe or audit
Rather than asking how to optimize these mechanisms, I want to ask a more basic question:
Is it possible to design an economy where responsibility, risk, and resource usage are perfectly aligned—without money issuance at all?
2. A Constraint-First Approach
Instead of starting from incentives, utility, or equilibrium assumptions, I start from hard invariants.
The system is built around a single non-negotiable rule:
The total amount of credit in the system must always sum to zero.
Formally:
∑i=1NCi=0\sum_{i=1}^{N} C_i = 0i=1∑NCi=0
Where:
Ci>0C_i > 0Ci>0 represents a net contribution to society
Ci<0C_i < 0Ci<0 represents a net liability to society
No actor—human or institutional—can create or destroy credit.
3. Replacing Money with Public Credit
Instead of money, the system uses Public Credit Points.
Every transaction is a credit transfer, not a payment
Credit is not issued, printed, or mined
All credits are ultimately cleared against the system itself
There is no concept of “money supply.”
There is only who owes society and who is owed by society.
4. Central Clearing Without Discretion
The system relies on a Central Public Clearing Engine (CPCE) with strict limitations.
The CPCE:
Records all credit changes
Enforces predefined rules
Provides full auditability of all state transitions
The CPCE cannot:
Create credit
Forgive debt
Modify individual balances
Change rules in real time
It is a clearing machine, not a monetary authority.
5. Debt Limits as a Function, Not a Policy
Negative credit (debt) is allowed, but bounded.
Each participant has a Debt Red Line, computed by a transparent function of observable parameters, such as:
Historical repayment behavior
Stable productive capacity
Dependency obligations
Sector-level systemic risk
This is not discretionary lending.
It is capacity-based liability accounting.
All parameters, weights, and formulas are public.
6. Failure Is Allowed — Externalization Is Not
The system allows:
Business failure
Personal failure
Innovation with downside risk
What it forbids is risk spillover.
If an agent crosses their debt red line:
Their future economic actions are constrained
Recovery mechanisms are triggered
Costs are internalized to the agent, not socialized
This is closer to conservation laws in physics than to financial regulation.
7. Recovery Instead of Bailouts
Debt failure triggers recovery protocols, not punishment.
Possible measures include:
Consumption limits
Restrictions on high-risk activities
Bounded compulsory labor if necessary
Constraints on recovery:
Time-limited
Proportional
Non-competitive with market labor
Solely aimed at restoring balance above the red line
There is no debt forgiveness and no systemic bailout.
8. Relation to Bitcoin and Blockchains
This system borrows from blockchains:
Immutability
Full auditability
Traceable state transitions
It rejects:
Mining
Token issuance
Decentralized consensus for core clearing
The ledger is public; the clearing logic is centralized but rule-bound.
9. What This System Optimizes For (and What It Doesn’t)
Optimizes for:
Accountability
Transparency
Risk containment
Long-term stability
Sacrifices:
Rapid growth
High-leverage innovation
Speculative acceleration
This system does not promise prosperity.
It promises honest accounting.
10. Open Questions (Where I Expect This to Break)
I am particularly interested in critiques around:
Does enforcing Σ Credit = 0 overly constrain economic dynamics?
Does bounded debt inevitably suppress socially valuable innovation?
Are recovery mechanisms ethically or practically infeasible at scale?
Can central clearing remain non-discretionary in practice?
What failure modes am I missing?
11. Why I’m Posting This Here
I believe LessWrong is one of the few places where:
Hard constraints matter
Systemic risk is taken seriously
“This cannot work” is considered a useful answer
If this system is flawed, I want to understand exactly where and why.
Thanks for reading. I welcome rigorous criticism more than agreement.