<aside> <img src="/icons/library_purple.svg" alt="/icons/library_purple.svg" width="40px" /> This document lays out foundational information about how Lumina’s banking system will work, and why we've chosen it over other existing monetary systems
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The common economic issues caused by conventional monetary systems prompted Lumina to look into alternative methods for banking, currency and monetary policy.
Conventional banking systems generally have a federal reserve which loans money to commercial banks, which dramatically increase supply through fractional reserve lending. This means loaning out people’s deposits. This means banks always have less cash than the amount of money in existence. Disadvantages • Allows 3rd parties to create currency • Allows fractional reserve lending • Allows risky investment banking • Allows manipulation of stock markets • Allows use of false Triple-A ratings • Allows shady banking practices • Requires government to insure deposits in-case of bank failure • Creates currency out of thin air And do so, all outside of the government's control. These actions can and have caused multiple economic collapses. Cases have proved over and over that corrupt bankers always win at the expense of the general populace and government.
Commodity currencies means currency that is backed by a commodity. While this may seem good in theory, there are great disadvantages that come along with the concept. They will be described below. Disadvantages • Requires large sums of commodities • Limited commodity equals limited currency • Government cannot “print” money to survive • Government can collapse if taxes are not enforced • Banking becomes economically unviable • Commodity values fluctuate • Bank runs can occur • Hoarding becomes more common • Can’t create more currency without commodity supply • Outside the control of Government • Requires 100% reserve ratio • Robberies can destroy reserve ratios which may cause bank runs
A cryptocurrency is a decentralised blockchain that stores transactions in the blockchain history. It’s a safe but slow method of currency transaction. Governments can use cryptocurrency but it defeats the whole purpose of the decentralised aspect of cryptocurrencies.
Disadvantages • Well funded organisations can hack cryptocurrency • Can’t create more supply • Near-impossible to tax • Near-impossible to regulate • Incredibly slow transaction rates • Allows a black market • Allows tax evasion • Very high volatility • Too unstable to be viable • Banking becomes economically unviable • High energy usage • Made to be decentralised, but winds up centralised to increase speed
As no existing monetary system fulfilled the needs of Lumina, we set out to build our own. Our goal was to create a monetary system with:
We opted into using fully-digital currency with a state-run bank. This means there is no physical cash, no 3rd party banks, and the government has full control over the monetary system.
Our currency will be called Aura (Ѧ). and the state-run bank called Lumina Bank
The advantages of Lumina monetary system are covered below.
It can enable the banking system to create trustworthy credit scores and increase the volume of loans while maintaining economic stability.
At first, these benefits weren’t obvious, but using Lumina banking, currency and economic system, our nation obtains by-product effects and various immunities. Some of the hidden benefits of our system are:
<aside> <img src="/icons/thought-alert_purple.svg" alt="/icons/thought-alert_purple.svg" width="40px" /> It's important that Lumina’s currency has a tangible value, this section outlines how we will achieve that.
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This question is one of simple supply and demand, specifically, how can we engineer a demand for the currency and increase its usage and ubiquity.
Currency stability is where the prices of goods and services remain at a stable price. A currencies stability is determined by the stability of supply and demand for the currency.
Lumina will maintain the supply of our currency by carefully controlling all Government spending (injections) and through various currency withdrawal. There’s a few ways we plan to back the value of our currency, firstly, we need a list of products, services, commodities and resources in demand.
In the city we are building, we will have an abundance of available land that would be put on sale for citizens to purchase, with Aura, or foreign currencies (which would be exchanged into Aura prior to purchase).
Provided that there is a demand for land, there will be a demand for Aura.
As a lot of land purchases will naturally happen with foreign currency, citizens that hold Aura will be able to exchange it for foreign currencies, which they can use to buy products not available in Lumina, removing the risk of holding a currency with low utilitarian benefit.
This one is particularly important and rather cunning. Citizens may need loans, whether it’s to buy a home, land or start a business.
Our national bank will give out these loans, and secure them with assets (like the home, or land they’re buying). In order to prevent bankruptcy and seizure of assets, these citizens will need to work to pay off the interest + principal due on the loan.
This means that the government and businesses can hire and employ these people, and pay them with Aura, which they need to pay off their loans. This creates a supply of Human Labor, incentivising businesses to hold and generate Aura, so that they can use it for payment of staff. This creates a demand for Aura.
It's a win-win situation:
Our government will offer infrastructure services such as:
Citizens will be able to spend their Aura on these services. This increases the utilitarian value and demand for Aura, as essential services are now consumable using Aura.
As the government controls the main costs of living, they’re able to control the price and stability of a currency artificially, even during inflation spikes (which may cause the government a temporary abstract loss, but maintain stability of our currency & city).
A profitable government business also reduces the supply of the currency when the surplus (profit) is returned to the government budget, which removes the need for new currency creation and creates excess surplus (which can be destroyed, deflating the currency & increasing it's value)
Our government will sell merchandise online to fund early projects. This will not be a major funding source, but an early method of money generation to fund initial costs like servers, early expeditions & etc.
Our government will accept foreign currency donations which can be used to buy-back Aura, increasing its demand, or otherwise spent on Government projects which deliver economic value.
Our government will also sell settlement packages for citizens which include things like land, service credits, transport and other benefits which can be used to fund government projects which create economic value.
Whenever a citizen exchanges a foreign currency into Aura, our government will try to save and retain the currency and will offer to buy-back Aura at a cheaper price, reducing the amount of Aura in circulation, which increases its demand. Excess foreign currency can be put towards funding government projects
Small fees can be charged when converting Aura to a foreign currency, disincentivising citizens from selling their Aura when it can be more effectively spent on other things in Lumina.
See full page Settlement System
Lumina will use Settlement packages to generate foreign currency in order to fund initial infrastructure projects and settlement
Exports allow a nation to receive foreign currency for the export. This foreign currency can be invested into the economy or used to buy-back Aura on the market, which reduces supply and therefore increases demand.
Exports ideally should aim to match or exceed imports, but this is not possible initially so we must find ways to bring in foreign currency via donations, plans, and exchanges.
Some various example exports are:
Interest rates in our nation will be determined by the Lumina Bank. Interest rate factors range from, slow/fast economic growth, inflation + more
The Government will initially provide a surplus of jobs to citizens. All jobs will be included on the Lumina Government website, where we’ll include online job postings that allow citizens to apply. These jobs will inject currency into the economy. Some types of jobs are: