Could an alternative currency stimulate the greater use of space transportation, enabling new space development opportunities? (credit: SpaceX) A new way of financing spaceflight

Spaceflight and money. There is no obvious close connection between these concepts like there is, for example, between gold and money. Nobody thinks of space travel as a medium of exchange or as an activity that might back a currency in the way gold once did. Space travel, though, is an especially suitable activity for the generation of a new kind of money, because right now there is an exceptionally favorable confluence of geopolitical, economic and technological conditions for its creation. What if, though, spaceflight could be linked to money? If it is possible to create trusted money through space travel in a similar way to how money is created by mining gold, the cost of space travel could be considered a cost brought about by the creation of such money, similar to the cost of mining gold. Space transportation could then become an asset-creating activity that generates profit. These activities do not generally suffer from lack of investment, nor do they need political or scientific justification to make them a reality. I will try to show that this wishful thinking does not necessarily have to be as ridiculous as one might think. If it were possible to print money (dollars, euros, etc.) to finance space travel, the issue of the lack of investment in space exploration would certainly be resolved. Of course, the law prevents the US government from doing that and even if the US, or any other government, had the right to print money to finance state expenditure, space exploration would most likely not be all that high on its list of priorities. But what if some private organization issued a completely new type of currency to finance space travel? What if individuals and businesses accepted this and what if some governments allowed it to circulate together with its own currency resulting in the creation of a parallel currency? Undoubtedly, these are big ifs. Why should any type of money be issued to finance space travel? Why should any government permit a scheme that creates competition for its own currency? And why should the public accept and trust such money? Space travel, though, is an especially suitable activity for the generation of a new kind of money, because right now there is an exceptionally favorable confluence of geopolitical, economic and technological conditions for its creation. Creating “intrinsic currency” Let’s call this new kind of money “intrinsic currency” (Ĩ). Its essential characteristic is that it has an intrinsic value, which means that it is useful in another way than solely as a medium of exchange. 1Ĩ is defined as a tradable record that a fraction of some load is delivered from Earth to any place in our solar system, the transportation of which should be as inexpensive as possible, but not subsidized. It would cost one dollar in constant prices and the whole load would primarily contribute to the creation of an in-space economy. This record would be written in physical form, like a banknote, or it could be stored as an electronic record in a computer’s memory. The term “in-space economy” refers to production, trade, and consumption of goods and services that takes place in space. In the initial phase of the project, a load might consist mainly of items useful for space exploration. Who gets Ĩ? Simply, people who pay for the space transportation of the load needed for its creation. The Moon is the most obvious example of a space travel destination, but it need not necessarily be the only possibility; it could more than likely be somewhere in Earth orbit. So, in other words, Ĩs are tradable records that are created against the transportation of an economically useful load from the Earth to the Moon. This transportation would need to be the cheapest possible, the records (Ĩs) of which would be created against every constant dollar of its price. That means that Ĩ cannot be created at will, as there is a real cost involved in the creation of money, which equals one dollar in constant prices, i.e. in prices which do not undergo the effects of inflation. There is one additional crucial condition: these records (Ĩs) are created only if their market price (i.e. their exchange rate) is above one constant dollar. For instance, if there is a cumulative inflation of 30% from the beginning of the project to the launch of a given space flight, the creation of 1Ĩ incurs a cost of $1.30 at that time. If the market price for this flight is $130 million and the Ĩ/$ exchange rate is higher than 1.3 dollars for one Ĩ, 100 million new Ĩ are then created for that flight. If the exchange rate is under (or equals) one dollar and thirty cents for one Ĩ, no new Ĩ is created for that flight. Who gets Ĩ? Simply, people who pay for the space transportation of the load needed for its creation. They do not pay directly but through a special organization, called here simply “the fund.” It pools money (dollars, euros, yen, etc.) from people who wish to obtain new Ĩ, and it then buys the corresponding amount of space transport, if available, from the space transportation market. When a load successfully lands on the Moon, an exact number of records are created, equal to the price of the flight divided by cumulative inflation. The fund is owned by all owners of Ĩ who have personal, material interest in observing all rules that define Ĩ as a precondition for holding people’s trust in Ĩ. It is important to note that if investors are able to buy goods and services for this kind of money, or if they are able to exchange Ĩ for dollars at a price higher than one constant dollar, then transportation of the load occurs free of charge from their point of view. The transportation cost is hidden in the cost of creating Ĩ so that nobody bears it. One might say that the creation of Ĩ is an attempt to fulfill a part of the total value of the money supply by the cost of some space flights. This is made possible because current money, i.e. fiat money, is not fully backed. One can claim that it is based on debt. Certainly, there is no market for space transportation to the Moon right now. So, in the near future the fund would organize an open competition among spacecraft manufacturers and other firms in the space industry in order to choose contractors that offer the best prices. Creating long-term launch demand It is important to understand that the creation of Ĩ would create a long-term, growing demand for space transportation, which would consequently lead to the establishment of a large competitive market. Therefore, Ĩ represents a wonderful and unique opportunity to finance, almost without any risk, the development of new technologies that greatly reduce the cost of space transportation. Firms in the space industry simply include the cost of their development in the price of their bids. The fund then places orders for more firms in order to promote future competition. Ĩ could even finance the development of the technologies that are not strictly linked with space transportation but would be useful in space. Which ones? That depends on the investors’ decisions and on the size of the collected funds, but the basic rule should be that such research must increase the general support for the project. Correspondingly, the creation of Ĩ in the range of tens of billions of dollars annually would enlarge the market for space transportation many times over and thus create much needed demand. One can argue that the main reason that companies have not yet developed substantially cheaper means of space transportation is the size of the commercial space launch market, which has a relatively small size of $2–3 billion per year[[1]]. This sum is simply not big enough to justify the enormous expenditure needed for the development of new technologies, such as reusable rockets, not to mention the huge risk of unpredictable results. Compare this with technological progress in the smartphone market, with annual revenues of $270 billion[[2]]. Undoubtedly, things have started to change recently, mainly thanks to SpaceX, but there is still a very long journey ahead. Correspondingly, the creation of Ĩ in the range of tens of billions of dollars annually would enlarge the market for space transportation many times over and thus create much needed demand. This large and increasing market would then justify vast sums being spent on the research and development of existing firms and precipitate the inflow of private capital into new and promising startups. This substantially cheaper space transportation, along with the availability of new technologies, would then enable the construction of a basic economic infrastructure on the Moon and elsewhere. Transportation of some parts of the infrastructure could also be paid for by the creation of new Ĩ. This infrastructure, in the form of fuel depots and other structures, would greatly facilitate the formation of new profitable space industries, such as asteroid or lunar mining, space tourism and the construction of human habitations in places like the Lagrange points. All of this would lead to an increasing number of space flights and further incentivize investment in space transportation, ideally resulting in reduced costs. Of course, Ĩ cannot be created indefinitely. With that in mind, it is worth comparing the value of its possible annual production with the value of the global stock of money, or with the value of the total investments in gold. Consequently, we could compare tens of billions of dollars with tens of thousands of billions of dollars, respectively. It is evident then that there is the possibility of creating Ĩ for many decades to come. Other benefits As discussed above, there are many clear benefits of Ĩ. These include financing the development of economically feasible methods of space transportation, free transportation of useful loads to the Moon or elsewhere, helping build the space infrastructure to facilitate exploration and exploitation of resources outside our planet—benefits that would sate the appetite of any space exploration fan. But what would the average Joe or Jane gain from the creation of Ĩ? Firstly, this would contribute to economic growth here on Earth. It would create jobs for many highly skilled space industry workers. Granted, this is a standard justification of government space programs. However, there is also a fundamental difference. In this case, we are talking about private money and about the creation of completely new taxable industries, which could provide much-needed new jobs in the future and whose new products and services could, in turn, contribute to the better quality of life on Earth. This leads us to another question: What boosts the economy more over the long term? An extra pair of jeans? A family dinner in a fine restaurant? A new item of jewelry? Or the employment of a scientist whose work facilitates the exploitation of resources outside our planet and helps to develop new sources of energy? Of course, this may be too optimistic. The technological progress that dramatically reduces the cost of space transportation as a necessary condition for a profitable space economy might not happen in the foreseeable future. However, the very essence of the proposal is that the economic usage of space is not the only benefit of the project. The point is that the creation of an independent and trustworthy global currency, which also serves as an anti-inflationary investment that is immune to default or nationalization, is sufficient reason alone. If we look at the project more generally, we can say that Ĩ implicitly promotes individual freedom, science, economic growth, free enterprise, a vision of an expanding frontier civilization, and so on. We have looked at the benefits of Ĩ for society. But what benefits would Ĩ bring to its owner if it did not serve as a monetary tool? Many would welcome Ĩ solely for the benefits it would bring to society as a whole. It is undeniable that many people care about the society in which they live and about its future development. Some take active part in green movements or engage in various political and religious organizations. They voluntarily contribute to their causes because they value the principles on which these organizations are based. Similarly, there are also a significant number of people who hold values that are implicitly linked to this project. What are these values? If we look at the project more generally, we can say that Ĩ implicitly promotes individual freedom, science, economic growth, free enterprise, a vision of an expanding frontier civilization, and so on. Certainly, such values may not be a part of everybody’s worldview, but it can be argued that it is beneficial for everyone that at least someone defends and supports them. Why use Ĩ? We can look at the intrinsic value of Ĩ as a mixture of these benefits, both social and individual. These also give a partial answer to the question: Why should anyone accept Ĩ? But its intrinsic value alone would probably not be sufficient reason to compel individuals and businesses to voluntarily accept Ĩ. It is different from fiat currencies that possess a distinct advantage within their states’ territories, since citizens must accept them by law. In contrast, Ĩ must firstly win the trust of citizens in order to circulate as a medium of exchange or to serve as an investment, and this cannot happen in the wider context unless it retains a stable value. That is why the rule that Ĩ is created only if its market price—its exchange rate—is higher than its production cost is very important. It keeps together with the intrinsic value of Ĩ a stable purchasing power at the level of one constant dollar. A market price of 1Ĩ higher than one constant dollar leads to the creation of new Ĩs, which increases the total supply of this money. The larger supply of Ĩ then pushes its price back to its equilibrium level according to the law of supply and demand, that is, to the rate of one constant dollar where no new Ĩ is created. By contrast, a drop in demand for Ĩ as a medium of exchange or as an investment does not necessarily have to lead to a decrease in its price under one constant dollar. If the price of 1Ĩ approaches one constant dollar, there will be a dramatic increase in the quantity demanded simply because of the intrinsic value of Ĩ, since many people have an interest in the continuation of the production of new Ĩ. They include, for example, stakeholders in space industries, people who want to transport loads on the Moon for free, or future space colonits. This demand thus compensates for a possible decrease in the transactional and speculative demand for Ĩ and keeps the price of Ĩ near one constant dollar. Many people may approve of Ĩ due to its fixed real production cost as a standard of value. They have the option of selling at a higher price than one constant dollar, but on the other hand, they might be extremely reluctant to sell Ĩ under that limit. This is another mechanism that could likely prevent the price of Ĩ from sliding under one constant dollar. That Ĩ keeps a stable purchasing power even if it is not fiat money is a crucial quality of Ĩ. It helps to gain and maintain trust in Ĩ and it holds a major advantage over all other commodity money, digital currencies or indeed any entity that harbors an ambition to compete with fiat money. The benefit of Ĩ is manifold. Not only does it safeguard as an investment against inflation and government defaults and serve as a monetary unit that is hard to confiscate, but it also contributes to long-term economic growth. But even if Ĩ were to retain its value, why should one switch from such a well-established currency as the dollar to the unknown quantity that is the Ĩ? Well, first of all, not all currencies are as reliable as the US dollar; similarly, not every consumer is compelled to use Ĩ as a medium of exchange in order for Ĩ to become a parallel currency. And then there is the usual answer: governments cannot be trusted to maintain stable values of their currencies since it is not in their interest, simply because many states have accumulated enormous amounts of debt and as a consequence, some governments may be tempted to reduce this debt burden by a higher rate of inflation as the most efficient and politically expedient method. One may say that this is nothing new, since these have become the repeated arguments of gold or bitcoin enthusiasts, notwithstanding trust in fiat money is still high except for countries experiencing high inflation, such as Argentina. That is undoubtedly true but it might not be so in the future. The fact of the matter is simply that if economies do not grow sufficiently, which is quite likely, all debts that have been accumulated by developed and developing countries alike will not be paid in full. We hear from many quarters that the main threat today is deflation, not inflation. But let us not be mistaken in assuming that deflation diminishes the problem of public debt. The benefit of Ĩ is manifold. Not only does it safeguard as an investment against inflation and government defaults and serve as a monetary unit that is hard to confiscate, but it also contributes to long-term economic growth, which reduces the probability of these dire predictions. That certainly cannot be said about the problem with some governments bonds, an issue that may worsen in the future. Therefore, it is reasonable to assume that a lot of people might consider Ĩ as a kind of insurance against this unfavorable development, as a repository into which wealth from endangered asset classes can be quickly transferred, as a currency that makes sense to support in the current normal economic climate. And there is, of course, for many people, the unparalleled intrinsic value of Ĩ. No fiat money, digital currency or commodity money can rival that. Let me be clear. This is a project like no other and that should itself boost confidence in Ĩ. Its sheer size, its importance, its familiarity and its influence will significantly help to build and establish trust in Ĩ. Why accept Ĩ? Now let us look at the following question: Why should the US government, or any other, allow Ĩ to be used? As noted above, the project would contribute both to short-term and long-term economic growth without increasing public and private indebtedness. It has other indirect economic impacts as well. Since long-term economic growth is not possible without scientific breakthrough, it is crucial that a maximum number of students, who are capable of becoming top scientists, opt for this career. Such an exciting project, one in which science plays a pivotal role, should increase its social status and consequently its appeal for students. In the near future, the project could help to increase consumer confidence in future prosperity, thus exerting a positive effect on both private consumption and commercial investments. That might register as quite an inviting prospect given current economic conditions. The optimism should be increased by long-term visions like unlimited raw material and energy resources, new and exciting discoveries, and more. Moreover, Ĩ is a safe store of value that cannot be devalued, privatized, or fall under outright expropriation. Of course, Ĩ is not a miracle cure that will solve all our economic problems. However, its total benefit can be much greater than the sum spent on its creation. It is also important to note that American firms would probably win the construction contracts for new spacecraft to the Moon and thus benefit the most from the completion of the project. There would have to be convincing arguments for its approval by the US government, since Ĩ could potentially jeopardize the position of the US dollar as the main global reserve currency. Fortunately, from a US point of view, it will not be an issue in the foreseeable future. After all, Ĩ cannot be created out of thin air. There is also quite a strong libertarian movement in the US, which should popularize a currency that implicitly supports freedom. On the other hand, many countries do not appreciate the hegemony of the dollar in the global monetary order. So Ĩ could be acceptable for some other countries, even if they are not the nations who profit most from its production. Actually, this dislike is so intense in some parts of the world (and not just in Russia) that the dollar is likely to be replaced anyway in the not so distant future, regardless of Ĩ’s creation. Therefore, the creation of Ĩ makes good sense from a US perspective as well. Therefore, although no US government would even think about replacing the dollar with Ĩ, its role as a store of value or even as a parallel currency might be a different matter. In the case of probable substantial foreign demand, the US would be in a similar position just as if today almost all of the world’s gold mines were located in the US. I fully understand why this proposal seems so outlandish. Images of habitable stations on the Moon or elsewhere, of space mining and space tourists, all remind one more of the limitless optimism of the technology of the 1960s than of a sober analysis of the future, albeit very distant. There would certainly be many political and ideological objections to Ĩ, often masquerading as economic criticism. For example, if Ĩ were to circulate at the expense of legal tender, e.g. the dollar, it would in a sense diminish the supply of state money. But this is a common misconception about what modern money really is.[[3]] The majority of the money supply in today’s economy is actually commercial banks’ credit, i.e. demand deposits. This so-called bank money is mainly created and dissolved by bank loans and their subsequent repayments, which means that private institutions already create most of money in the US and everywhere else. There is another interesting argument to this equation. The rationale behind the present monetary system is that new bank credit should be used mainly for financing new productive investments. This actually does not happen; instead, it is used mostly for the purchase of existing assets (including 80% of loans in the UK),[[4]] which results only in inflating prices of things like housing and equities. Every Ĩ, on the contrary, creates new assets (economically useful items are not on the Earth, but on a different place), and its production process contributes to economic growth and knowledge, from which everybody benefits. One could say that it is possible to invent another type of monetary unit based on the same economic idea as Ĩ. However, space transportation is an exceptionally suitable activity for such a purpose. It would enlarge the economy in a territorial sense where some kind of currency must be used anyway. It is also not created against an activity that will happen or is likely to happen in the near future. Some other intrinsic values of Ĩ are unrivaled as well. It could help to insure humankind against a global cataclysmic catastrophe. The settlement of space would create a unique stimulus for initial investors, helping to launch the project. Some parts of the payment system could be located outside the Earth and thus stay out of reach of governments. The possible creation of future space colonies, i.e. territories with their own authority, would hold great appeal for many people. I fully understand why this proposal seems so outlandish. Images of habitable stations on the Moon or elsewhere, of space mining and space tourists, all remind one more of the limitless optimism of the technology of the 1960s than of a sober analysis of the future, albeit very distant. And if one factors in the lack of finance available from public budgets, even the idea that it could be constructed partly for free, then one has a perfect right to be incredulous. Yet, no other project is able to generate so much worldwide enthusiasm, provide such unlimited inspiration, and deliver benefits of this magnitude to the entire population of the Earth. In this context, the creation of Ĩ is about the future: what kind of future we wish for and what kind of future we wish to avoid. All the good reasons for creating Ĩ are to be found on Earth and not in outer space. Notes OECD: The Space Economy at a Glance 2014 Statista: Statistics and facts about Smartphones Bank of England: Quarterly Bulletin 2014 Q1 Adair Turner: Escaping the debt addiction Home









