The Next Economic Paradigm

Tag: tax

Black Market Social Capitalism

A Black Market is not so much illegal as it is, extralegal. Extralegal means that a condition exists outside of a legal system. Street vendors in LA, Garage Sales across the US, some family transactions, alternate currencies, and increasingly, social media, are operating in an extralegal sector. It can be argued that most businesses probably started as an extralegal enterprise where extralegal “value” was exchanged in a simple brain-storming session.

This is only a problem depending on what side of the deal you are on. There are few liabilities, high anonymity, no lawyers, contracts, or licenses. You have a certain independence from government currencies, regulations, and oversight … and you don’t pay taxes, etc.

Tax evasion – the scourge of racketeers worldwide

However, if things go wrong, there is no legal recourse. You cannot engage the department of commerce if the garage sale item is defective. You cannot go to a bank to borrow money to finance an extralegal enterprise. You cannot sell an extralegal business in mainstream markets. If your extralegal enterprise infringes on a legal enterprise, you are liable – and vice versa. You also are vulnerable to obscure tax laws that may, or may not, eventually catch up with you anyway.

Modern Black Market

The difference with the modern black market is that social media inherently rewards high integrity and punishes low integrity. This effect makes the need for laws and law enforcement less essential in protecting business interests. If someone does dirty deals in social media, there is a form of community recourse that can take place to punish trolls and crooks. Social media does not always have physical, visible, or involuntary infrastructure to impose on the legal rights of others.

The “Little House on The Prairie” effect

The Last Mile of Social Media is an emerging condition where social media applications act in a community much as they did before all mass media. One example is Craigslist – if you sell me a dodgy lawn mower, well, I know where you live. I can “ask a neighbor” and conduct a social media search on anyone that I encounter. As communities form in close proximity, anonymity goes away and people work with people they know and trust.

Social Engineering

As governments and industries increase their usage of social media applications – this black Market becomes a grey market. Employers check backgrounds. Courts hold employers to public information usage laws in discrimination suits.   Anyone can be financially impacted by TMI on social media networks.

However, as long as it stays in the extra-legal sector Social Media will remain intangible in the eyes of the current financial system. This gives rise to two options: Government should regulate social media OR social media will operate in an alternate financial system.

My bet – and indeed the objective of the Ingenesist Project – is that an alternate financial system will emerge which will fully capitalize and securitize a social currency.   Then, and only then, it will become a relatively simple task to convert social currency to any financial currency much like currency exchanges legally operate around the world.

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What If The Dollar Fails?

I have been hearing a great deal about an inevitable collapse of the dollar.  Not today or tomorrow, but more likely over the course of the next 10 years.  The failure will probably not be a stupendous crash since politicians would avoid this as a means of self-preservation.  Rather, it would simply be a slow and grinding inability to “afford” many important things using cash.  Note that this has little or nothing to do with your human ability to produce important things.

Few people disagree that a 50 Trillion dollar debt obligation cannot be paid back without at least 50 Trillion dollars in increased human productivity.  Traditional productivity usually means taking stuff out of the ground, air, ocean, or the forest and making things that eventually wind up back in the ground, air, ocean, or the forest. Today, we are encountering constraints on the planet’s resources.  Something has got to give.

The ONLY technological change that is happening at anywhere near the rate that can conceivably deliver a substantial amount of “increased productivity” is Social Media. But how do we turn it into dollars?  Maybe we shouldn’t.

Here is the problem; the trends for monetizing social media actually slow it down.  People use social media only because of the prospect for increasing their long term productivity as relationships prosper. Entrepreneurs trying to get paid for their innovations invariably need to introduce “friction” by attempting to convert “short term” user productivity into cash.  There is no business case on short term productivity making their innovation nonviable.  Therefore, the monetization problem introduces a threshold over which most great innovations simply cannot reach.

The purpose of this article is to consider what people will use for trade if the currency becomes ineffective AND their productivity does not.   If the dollar does fail, people will attempt to meet their daily needs until a financial system is corrected.  Many countries that have experienced currency problems and the most common result are the emergence of a black market where Levi’s, Cigarettes, or other commodities serve as a de facto tax-free currency.

While on-line gaming industry is pioneering virtual tax-free currencies with extraordinary results, back in reality, people will begin trading services.  Plumbers will find dentists, farmers will find laborers, and teachers will find landscapers.  Matchmaking will become a financial instrument. People will use Facebook and Twitter, Linkedin and many others in new ways in order to keep the game in play.

In fact, perhaps they already are.

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