Utopian Financial Infrastructure

Money Transfer

In current times, we frequently transfer money. This is a one-way transfer of money without anything obtained in return in the same transaction. The classic examples are that of parents giving their children some "pocket money" or "allowance". Yet another classic example is that of grandparents giving their grandchildren some money as birthday gifts.

There will be a need for money transfer even in a Utopian society and even across boundaries of such societies. This is discussed in the section called "Purpose of Money Transfer".

The exact nature of a transaction of a money transfer is described in the "Money Transfer within Society" section. The section "Intuition of International Money Transfer" provides the intuition for implementing money transfer across boundaries. Based on this intuition, the following section "Money Transfer across Society Boundaries" presents the details involved in an international money transfer transaction. It also highlights the safety, from societies' perspective, in conducting such a transaction.

The next 4 sections discuss restrictions and limitations related to money transfer. Specifically they deal with who can send, who can receive, the lower limit on what can be transferred and the upper limit on what can be transferred within the society and across society boundaries.

The next 3 sections make explicit some of the implications of money transfer in relationship with taxes, monetary policy and borrowing.

The mechanism of money transfer is very important. The discussion in all prior sections sheds light on ideas like "fiat currency", "currency not backed by gold", "digital record-keeping", and "monetary sovereignty". These same ideas and this same mechanism comes into play in the implementation of physical gifts and International Investments.

The section "International Transfer of Physical Assets" broaches the subject of the accounting mechanism of handling physical gifts. A separate chapter deals with International Investments.

Finally, in the last section, we will discuss the need for "Soliciting Monetary Help" and an outline of the mechanism that satisfies this need.

Purpose of Money Transfer

In Utopian societies, for survival and basic quality of life, there should be no need for anyone to depend on the charity of others. At the very least, everyone can take up some social employment to earn some money. When a person needs financial help in dealing with essentials the Utopian Payment Model will help.

But there could be some people who may still be unable to satisfy their wants. These people may desire help from others and those others may be willing to give such help. In current times, there are mechanisms for people to ask for "donations" or "funding support". Similarly, in current times, we give gifts in the form of physical objects or in the form of cash or in the form of "gift cards".

We are setting up the society for the benefit of citizens. In general, the ideas of "giving gifts" and "giving help" are considered good. In fact, "giving what we own to someone else" is a freedom. Money Transfer is the mechanism and service provided by Utopian Financial Infrastructure that enables this freedom. With money transfer, the present day ideas of "donations" and "cash gifts" can be implemented. Note that, just like "physical cash", the present day idea of a "gift card" is also obsolete and not implemented in Utopian societies.

With this freedom and mechanism, individuals can make their own decisions regarding whom to help and in how much quantity. When they make such decisions, they are also willing to give up some of their money so that the other person can have it.

Sometimes, for various reasons, citizens may want to or may need to send some money to some citizen in another society; perhaps the recipient is a family member or a friend in need of such help. This happens today and can happen in Utopian societies. This is a one-way money transfer across society boundaries. We will refer to this as International Money Transfer. The financial infrastructures of societies will cooperate and coordinate to enable this as well.

Money Transfer within Society

Let us examine the exact record changes that happen when someone transfers money to someone else in the same society.

Let us consider that Citizen-1 wants to transfer 100 dollars to Citizen-2 and both of these citizens are citizens of the same society. We will conduct a conceptual discussion. In such a conceptual discussion, we are thinking about only the major steps and skipping the steps required by the actual implementation (like unlocking the phone, authenticating, entering data, confirming data, authorizing, etc.)

Once Citizen-1 realizes that he needs to transfer 100 dollars to Citizen-2, he contacts the financial infrastructure, mentions the ID of Citizen-2, and the amount that needs to be transferred to Citizen-2. The financial infrastructure knows about both citizens and has access to the account books of both citizens. Thus it can complete the transaction if authorized to do so. For this, it asks both citizens to confirm the proposed transaction. Once both citizens confirm the money transfer transaction, the financial infrastructure does the following:

  • It subtracts 100 dollars from the account book of Citizen-1.
  • It adds 100 dollars to the account book of Citizen-2.

In this transaction, the two citizens are the only two parties to the transaction. Financial infrastructure is not a party to the transaction; it is merely implementing the transaction.

Notice that such a money transfer transaction does not change the total amount of wealth in the society.

Intuition of International Money Transfer

The idea of money transfer is that a citizen wants to send some money to some other citizen. The giver gives up some money and loses access to it. The receiver receives money that has the same value as the money given by the giver.

When the giver and receiver are across society boundaries, obviously their money is in different currencies. But the intent of the giver and receiver is exactly the same. The giver is intending to give away some local dollars. The receiver would want to receive the local dollar equivalent of whatever the giver gives.

Thus, in making this kind of money transfer, we need to use the currency exchange rate between the two societies. Using this rate, we can compute the local dollar equivalent in the receiver's society for the money given by the giver in the giver's local dollars.

To actually make the money transfer, we need to reduce the giver's money account by the amount of money that the giver intends to give and we need to increase the receiver's money account by "the equivalent of money given" in receiver's local dollars.

This is the digital transfer of money across society boundaries. There is no gold transferred from the giver's society to the receiver's society.

The reasons that this digital transfer is valid are:

  • Both societies are monetary sovereigns (that is they both can create and destroy their own money).
  • and they have fiat currencies (that is: a currency not backed by anything).
  • and the equivalences between the two currencies can be computed using the currency exchange rate.
  • and the giver's intent is satisfied.
  • and the receiver's intent is satisfied.
  • and there was never any intent to transfer something physical like gold.

When we import goods, because we are importing physical things, the payment for such physical things has to be in something physical and valuable and hence we use gold. When we are transferring money and there is nothing physical being exchanged in return, there is no need to invoke gold.

Money Transfer across Society Boundaries

Let us examine the exact record changes that happen when someone transfers money to someone else in some other society.

Let us consider that Citizen-1 in Society-A wishes to transfer 100 local dollars to Citizen-2 in Society-B. Let us assume that the currency exchange rate from Society-A to Society-B is 1.5. That means that 100 Society-A dollars are equivalent to 150 Society-B dollars.

Once Citizen-1 realizes that he needs to transfer 100 dollars to Citizen-2, he contacts his society's financial infrastructure (we will call it FinInfra1), mentions the ID of Citizen-2 and the amount that needs to be transferred to Citizen-2. Citizen-1 confirms and authorizes his side of the transaction with FinInfra1.

FinInfra1 knows from the ID that Citizen-2 belongs to Society-B and contacts FinInfra2 and submits the proposed transaction to FinInfra2.

FinInfra2 contacts Citizen-2 and asks for the confirmation and authorization.

When all identification, authentication, confirmation and authorizations are complete, the two financial infrastructures proceed to complete this transaction. Here are the record changes:

  • FinInfra1 subtracts 100 dollars from the account book of Citizen-1.
  • FinInfra2 adds 150 dollars to the account book of Citizen-2.

In effect, FinInfra1 has removed 100 Society-A dollars from Society-A and FinInfra2 has added 150 Society-B dollars in Society-B.

In the context of international money transfer, the following points are true:

  • One society destroys some money and the other society creates an equivalent amount of money.
  • The combined total wealth of both societies does not change.
  • The gold within the boundaries of each of the societies remains unchanged.
  • All other physical resources of each of the two societies remain unchanged.
  • There is no promise to give or receive gold or any other physical resource in the future.

All the above facts are sufficient to consider such transactions as "safe" from the perspective of the two societies. Additional safety measures are mentioned in various restrictions and limits on international money transfers in subsequent sections.

The financial infrastructures may record facts about international money transfer transactions somewhere else too and publish the aggregated statistics about such money transfer transactions.

Who can Give? Who can Receive?

Within a society, any kind of entity can be a party to a one-way money transfer.

An individual can donate (that is, initiate a one-way transfer of money to someone else) as long as they have money in their money account. The donation amount can be only up to the amount of money available in their money account. In other words, collective credit cannot be used for one-way transfer of money.

An individual can donate as long as the donor (the giver) does not have any balance on their own social credit. The idea behind this restriction on donations is as follows: One can donate as long as one is not taking social credit help from the society. One can help others, but if one is taking help from the entire society, then while taking such help, forwarding part of the help is not the true intent of such donations.

Donors can have unpaid collective credit because such collective credit has the standard investments as its collateral.

Citizens are permitted to send and receive money across society boundaries. At an individual level, individuals can ask for monetary help from other individuals and those other individuals can choose to give money as that help. Asking for help and giving help are freedoms. They are not unrestricted freedoms. We have already seen two such restrictions just a few paragraphs earlier. There are others mentioned in subsequent sections.

Here is the reason why an organization is not permitted to receive money as a one-way transfer across society boundaries: For illustration purposes, let us assume that there is a charitable organization who wants to just receive money (presumably as donations) from someone in another society. This organization, being an organization, represents a social cause. A society is also a monetary sovereign. If a society deems that some social cause is important enough and that cause needs some money, then the society being a monetary sovereign can create the money and fund the social cause. Thus, a Utopian society does not need a charitable organization to deprive citizens of some other society for the work that the organization deems as a social cause in that organization's society.

Here is the reason why an organization is not permitted to send money as one-way transfer across society boundaries: An organization has owners. Directly or indirectly all such owners are citizens. If a citizen wants to help someone, the citizen will do it. An organization cannot do it across society boundaries on behalf of their owners. If we were to allow organizations to help across society boundaries, then we would still only allow such donations for social causes (never for individual favors) and if it were to be allowed for a social cause in some other society, then that society is in a better position to take up that social cause in their society; and that rules out organizations from making donations across society boundaries.

Self-owning entities are not permitted to receive money across society boundaries. That is because a self-owning entity is an organization-like construct; it has a purpose; it has a cause and perhaps the cause is a social cause. Thus the line of thought that applies to why organizations cannot receive money by way of money transfer across society boundaries applies to self-owning entities. Foundations are typically set up as self-owning entities. These are either fully funded by some large amount of money or they are funded through donations. This rule essentially makes it impossible for self-owning entities (and hence such foundations) to run on international donations.

Self-owning entities are permitted to give money across society boundaries. In their role as self-owning entities, they are somewhat like citizens. They pay wealth-based taxes and taxes for wealth redistribution; but they never avail social credit. At the time that they wish to give money, they can do so if they have paid all taxes that are due. Of course this can be automatically done by designating an account from which to pay those taxes; so this should never be a hindrance to a well-managed self-owning entity. This rule essentially means that self-owning entities can give money only to individuals as every other kind of entity cannot receive money transfer across society boundaries. This rule enables foundations to give "prize money" to individuals anywhere in the world.

Utopian societies will be open to receiving physical help when they need such physical help; usually this happens when the society encounters some physical hardship - like a natural or man-made disaster. But, at a social level, money from some other society is never required, never expected and hence not implemented.

No Upper Limits for Money Transfer within a Society

Within a society there are no upper limits to the amount of money that can be transferred one-way. This is very similar to the situation in which a person earns a lot of money and spends it all on availing various kinds of services and hence not accumulating any wealth.

Within a society, who possesses the wealth is not a material consideration.

If some wealthy person were to give away their wealth and later need the use of Utopian Payment Model for essentials, then that is perfectly alright as the money that supports the costs associated with Utopian Payment Model is still within the society.

Consider the case when the giver and receiver of the money are in the same society. In this case, there is no change in the total wealth of the society. Before the giver gives help to the receiver, if the society had to help the receiver, as a consequence of the help given to the receiver by the giver, the society may need to give less help to the receiver; but the giver may need more help than earlier. So, on the whole, society's responsibility towards their citizens does not change and the wealth required to fulfill those responsibilities does not change. This makes one-way transfer of money within a society's boundaries unobjectionable even when the helpful givers give away all their money.

Upper Limit for Money Transfer across Society Boundary

There is an upper limit on one-way transfer of money across society boundaries. When citizens engage in one-way transfer of money across society boundaries, they can transfer at most 10% of their typical wealth in a calendar year.

We want members of the society to be independent and hence self-sufficient. That means we do not want them to have a reliance on the Utopian Payment Model. If we allow citizens to give away all their wealth to someone outside the society, then such "helpful and generous" citizens will have to take help from other members of their own society in paying for their own essentials (that is use the Utopian Payment Model for essentials).

The giver of such excessive help appears generous to those who get the help, but in fact all that generosity is based on the apparently generous person taking help from others. This is contradictory to the spirit of asking, giving and receiving help.

Further, giving help to someone outside one's own society and then taking help from others from one's own society is indirectly forcing others in one's own society to help people outside our own society. That makes it unacceptable. Hence there need to be limits on such help giving activity.

In general, the ideas of "giving gifts" and "giving help" are considered good. But when such help is given to someone outside the society and it is given in excess and to the detriment of the giver, then the act of giving such help (or gifts) becomes objectionable for the rest of the society and hence the upper limit.

This upper limit is set to be proportional to the citizen's wealth; specifically it is not an absolute number. Making it proportional to the citizen's typical wealth enables the more wealthy citizens to help more people outside their society. After all, "giving help" is noble and hence we should not limit it to an absolute number, but a limit relative to the giver's wealth is fine.

The percentage mentioned above is for illustration purposes. In fact, it is a policy parameter. Its initial value can be 10%. Its value can be changed by citizens if they desire to do so.

Minimum for Each Money Transfer

The minimum amount acceptable for each money transfer, regardless of whether it is local or international, is one-hundred-thousandth (that is, \(1/100000\)) of the average wealth of all citizens in the society of the giver.

This minimum is to eliminate the possibility that citizens engage in conducting an excessive number of one-way money transfer transactions each with an extremely small amount of money.

Thus, if the average wealth of all citizens in a society is 100,000 dollars, then the minimum that can be donated (one-way transferred) by someone in this society is 1 dollar. A giver in such a society cannot donate just half a dollar.

Thus, if the average wealth of all citizens in a society is 300,000 dollars, then the minimum that can be donated (one-way transferred) by someone in this society is 3 dollars. A giver in such a society cannot donate just a single dollar.

Thus, if the average wealth of all citizens in a society is 1,000,000 dollars, then the minimum that can be donated (one-way transferred) by someone in this society is 10 dollars. A giver in such a society cannot donate just 3 dollars.

Money Transfer and Taxes

There are no specific service charges associated with the transaction of one-way money transfer. This is true even when it is an international money transfer. The costs associated with conducting such transactions are borne by the financial infrastructures of both societies.

While there are no specific service charges for one-way money transfer, in fact, all citizens are collectively bearing the costs associated with it when they pay taxes.

After a one-way transfer of money (or physical assets), the wealth belongs to the receiver and not to the giver. Hence the possessor of the wealth is subject to wealth-based taxes and taxes for wealth redistribution in their society.

Money Transfer and Monetary Policy

When money is transferred within a society, the total amount of money in that society does not change. Thus it has no effect on what the monetary policy will do.

When money is transferred from one society to another, the total amount of money in both societies changes. It decreases in the giver's society and increases in the receiver's society.

In the giver's society, since the wealth has decreased, the monetary policy of that society will rectify that situation in Return to Normal Period number of years as discussed in the Monetary Policy chapter in Building Utopia.

In the receiver's society, since the wealth has increased, the monetary policy of that society will rectify that situation in its Return to Normal Period number of years.

The Return to Normal Period policy parameter does not have to be the same in both societies.

Money Transfer is Not Borrowing

It is possible to think that international money transfer could be used as a mechanism to borrow internationally. However, that is not the case.

Since only citizens can send and receive money across society boundaries, organizations cannot be borrowers or lenders by informally using "one-way transfer of money across society boundaries" as loans.

Since there are upper limits on money transfer, the amount of money that a person can send to someone else is limited by their typical wealth. There is no such restriction on receiving. So, while one can receive unlimited amounts, there are restrictions on what one can send.

For instance, a poor person can receive a very large amount from a rich person. This amount could be larger than their typical wealth. If the poor person treats the received amount as "loan" and wants to return this money after just a few days, then the person would be limited to only a fraction of their typical wealth and would be unable to return the received amount entirely.

The preceding thoughts are merely practical considerations that indicate the impracticality of treating one-way money transfer as a means of lending and borrowing.

More importantly, a loan is a financial product that involves both assets and liabilities. A one-way transfer of money has "no strings attached". Thus society will not treat a one-way transfer of money as a loan. If citizens, through informal agreements, misuse it as a loan, then its just their own perspective; it is not enforceable as a loan that needs to be repaid.

Thus, one-way money transfer (local or international) is not a mechanism for lending or borrowing.

International Transfer of Physical Assets

What about a person giving a physical gift to someone in some other society?

Consider the case of a person visiting a friend in another society and this person desires to give as a gift to that friend a bottle of expensive perfume. In order to give this gift, first the person must buy the perfume bottle. This makes that bottle appear in that person's inventory (that is list of assets). In order to give the bottle as a gift, this person would have to physically carry that bottle to the other society and upon meeting the friend physically hand it over. In addition the person must also instruct their own Financial Infrastructure to transfer the ownership of that bottle to this friend in the other society. This transfer of ownership is just some changes to the records and the financial infrastructures of the two societies can cooperate to implement this change.

Conceptually, a physical gift is giving away something that one owns. It is a one-way transfer of some asset.

In principle, we allow physical gifts within a society. Should we allow it across society boundaries? If "yes", then to what extent? Think about it.

Soliciting Monetary Help

Some citizens may be so poor or their situation in life could be so difficult that even after utilizing the Utopian Payment Model, they might desire help from other citizens. Such citizens may have a dire need to ask other citizens for assistance and monetary help. Essentially, they are saying "Help me please" or "Fund me please".

When someone needs monetary help and when someone else is aware of it and desiring to help, then the mechanism of one-way money transfer implements the desire. However, how does one express the need for monetary help? How does one solicit help? From whom?

Currently, this situation exists and citizens routinely ask other citizens for help. Sometimes, some citizens, the scammers, trick other citizens into giving them help and money by posing as someone in dire need of help.

Both "helping citizens in assisting other citizens" and "making it difficult to scam other citizens" are social needs. Financial Infrastructure creates a public channel to address both those needs.

Citizens can "switch on" a "fund me please" feature in their digital home. This gives them a link to a personalized "Fund Me Please" webpage hosted by the financial infrastructure. Citizens can place the link to the "fund me please" page on their website for others to see.

On the "fund me please" page the citizen requesting help can explain the reasons for needing help and optionally indicate the amount desired. Other citizens can encounter this page in many ways (like forwarded links or explicit search for such pages), and read the reason for the needed help. There can be settings regarding how long the help page stays up.

On the "fund me please" page, financial infrastructure provides the visitors a "donate button" to donate money to the citizen in need. Citizens can press this button and that takes them to the "donations page".

When other citizens press the "donate button", they get to a donations page. On this page, they see the identity of the person asking for monetary help and they get to see this person's monetary situation. Various metrics about this citizen's wealth are displayed by the financial infrastructure. These metrics include the citizen's typical wealth over the past several years, current total wealth, a monthly chart of amount of money-transfers received for the past several years and a chart of last several years of spending by their top-level category. All this information is provided by the financial infrastructure using the official records. All this information is for potential donors to assess if the one who is asking for help indeed needs such help.

The idea behind providing significant details about the financial situation about the person publicly asking for monetary help is this: If the person wants monetary help from the public, then the person should be willing to publicly share their financial situation so that those who are willing to give help can assess if giving such help is indeed warranted. The other citizens who are the would-be givers need assurance that the financial information that they get about the person in need is indeed true information. So, the one who is asking for the help cannot be the one who provides the information. A trusted party needs to provide the information. From a social perspective, the only party that the entire society can trust to have correct information is the financial infrastructure because it has all the records. The spending history by top-level category would reveal the kinds of things that the person asking for donations is spending on. So, if the person is asking for help due to health reasons, then the category or categories that indicate "spending on health or medical purposes" would show a higher total spending and other categories would show a much smaller spending level.

With all this arranged by the financial infrastructure, those who personally don't know the one who asks for such monetary help will have sufficient data to make their donation decision.

For citizens who enable the "Fund Me Please" feature, society disables their own ability to do one-way money transfer to anyone. This lasts for the entire duration of time when the "Fund Me Please" feature is active and some additional amount of time that is commensurate with how long those donated funds would last based on the speed of spending when the "Fund Me Please" feature was turned on for the citizen. The reason is that citizens and society donated their money to this citizen. We do not want this person to be donating such donated money to others.

While thinking about "seeking help publicly" and "enabling donations from public to individuals", one can also think about "society matching such donations". This is a bad idea because it forces others in the society to eventually pay for such "matching donations".