The Republic of the Marshall Islands (RMI) and their Sovereign

While it is not in the interest of this blog to talk about digital currencies, the Republic of the Marshall Islands is of interest (as it is a great jurisdiction to incorporate into). This year the country adopted the: Declaration and Issuance of the Sovereign Currency Act 2018.

Results of the investigation:

  • It appears that the President of the Marshall Islands (Hilda Heine) has (unfortunately) been convinced by an Israëli startup (Neema) that the project was a way to get US$30 million into the country’s budget ;
  • With 12 million of the new currency units kept by the government, and distributed to various Trust Funds (National Trust Fund, Green Climate Fund, Nuclear Legacy & Healthcare Fund, and the Resident-Citizen SOV Allocation Fund) : it is already Christmas with ? Neema ? ;
  • Many months has passed: and still no signs of the crypto currency labelled the “Sovereign that is real money” ? ;
  • The money supply is programmed to be increased by 4% per year, according to the k-percent rule from the economist Milton Friedman (whereas the goal of that rule was to target a percentage of inflation) and this theory (of course) has never been tested…  ;
  • Having a free-floating rate between this digital currency and the US dollar (the other official legal tender of the country) is like returning to bimetallism in its time: and history has shown that it NEVER worked. It is very easy to understand why: just like you cannot transform Gold into Silver, you cannot transform the digital currency into US dollars [§304(5) of the law “The SOV is non-reedemable“], so: one of the currency will always be in excess of the other ;
  • Only one (poor) country has a two currencies system in the world: Cuba ;
  • The crypto market is currently crashing big time (mid-November 2018) ;
  • The blockchain is a fantastic waste of: electricity, energy, disk space ;
  • The blockchain is to be private anyway so why have one? ;
  • The blockchain is very slow compared to a centralized database ;
  • If you ask too much questions in their Telegram group: you just get banned from the group immediately, and in any case: they have no answers to provide you when asked, they are too busy censoring their potential (idiots?) customers ;
  • If the currency goes up against the US dollar: the government is losing out on seigniorage and should (quickly) sell more SOV … But at some point there will be no more SOV to sell (because of the k-percent rule). At this point the value of the SOV in the free market can either:
    • go down against the US dollar (see next point: nobody will buy it) and the government will not be able to spend it (bye bye Trust Funds) ;
    • or keep going up against the US dollar: and the government is back into the selling loop… until ultimately the value goes down anyway.
  • If the currency goes down against the US dollar: nobody will buy it (whomever the seller is) turning every holder into a seller (who wants to keep something that is losing value?).
  • From this little circus explained above: it is clear that the best interest of the government is to keep the rate pegged to the US dollar.

But this small country can still fix things up :

  • The Cabinet has the ability to pick the “Appointed Organizer”: Neema should be ditched at this point~ and a big company like Paypal should be picked (for them it’s easy: they just have to create a new currency of account, the KYC rules are already there, no blockchain, no waste) ;
  • Peg the digital currency to the US dollar: while it is not reedemable, everything will be clear and stable for every economic partaker ;
  • Repeal the k-percent rule [§305(4) of the law]: money should be created (or destroyed) on demand (isn’t that what the free-market is about?).