RGDP is such a subjective term that it's going to be impossible to design a decentralized currency that targets it. Maybe there's a more objective highly-correlate proxy that would work.
Then there's the problem that bitcoin is an international currency and GDP is a measure of national economies. As far as I know, Sumner does not have a theory for optimal monetary policy for a currency shared by a coalition of nations (i.e. the EU). The management of the Euro roughly stabilizes NGDP in Germany, but not in Italy and Spain which is the source of the current crisis in Europe.
On the other hand, an old-fashioned monetarist coin (constant rate of increase - "Friedman Coin") would be easy to implement and a lot better than a fixed supply coin. I'll leave others to figure out the "Sumner Coin".
You're not trying to detect RGDP. You're trying to detect NGDP, but in a way that isn't fooled by more widespread adoption of the currency.
Who gets the extra Friedman coins? Also if you don't have a central bank stabilizing the supply of money via interest rates in response to velocity changes things can go to crap very quickly a la the Great Depression.
The problem with NGDP is the D. As far as I know, there is nobody (including Sumner) that believes the total nominal transaction volume of an arbitrary subgroup of international users should grow at some low constant rate over time.
Remember that MV = PY, Money Supply times Velocity equals Price Level times Real GDP. PY is nominal GDP, Y is real GDP. AFAIK, Sumner's followers argue that M should grow so that PY grows at some constant rate. V is assumed to be endogenous.
Now think of two countries with similar sized economies that share a currency. Imagine country 1 had Y growth of 3% and country 2 had Y growth of -1%. How should M change? As far as I know, this is virgin territory. Also, country 1 and 2 are basically Germany and Greece.
NGDP is easy to calculate for the users of bitcoin as every transaction is encoded in the blockchain. Of course, you are right that there is a difficulty because of a rapid unstable increase in V due to adoption, the NGDP of the Coin economy is measuring the economic activity of its users + some amount of canibalization of the legacy dollar economy. If you are looking for the "right" answer, I think it will elude you. But I have a "good enough" proposal for a Sumner Coin - start with the BTC reward scheme, and after PY stabilizes (i.e. changes less than 10% per month), use that as the base for PY and then set block rewards to grow PY by a constant amount. V is public so it is easy to calculate the appropriate M.
The Friedman coin is much simpler, since you are pegging M to a growth rate and not PY. Of course, the miners get the extra coins.
Both models decrease first mover advantage and relieve the need for transaction fees for stability of long-term mining. And for both models I would recommend an initial deflationary period to sweeten the pot for early adopters.
Comments
RGDP is such a subjective term that it's going to be impossible to design a decentralized currency that targets it. Maybe there's a more objective highly-correlate proxy that would work.
Then there's the problem that bitcoin is an international currency and GDP is a measure of national economies. As far as I know, Sumner does not have a theory for optimal monetary policy for a currency shared by a coalition of nations (i.e. the EU). The management of the Euro roughly stabilizes NGDP in Germany, but not in Italy and Spain which is the source of the current crisis in Europe.
On the other hand, an old-fashioned monetarist coin (constant rate of increase - "Friedman Coin") would be easy to implement and a lot better than a fixed supply coin. I'll leave others to figure out the "Sumner Coin".
You're not trying to detect RGDP. You're trying to detect NGDP, but in a way that isn't fooled by more widespread adoption of the currency.
Who gets the extra Friedman coins? Also if you don't have a central bank stabilizing the supply of money via interest rates in response to velocity changes things can go to crap very quickly a la the Great Depression.
>"You're trying to detect NGDP"
The problem with NGDP is the D. As far as I know, there is nobody (including Sumner) that believes the total nominal transaction volume of an arbitrary subgroup of international users should grow at some low constant rate over time.
Remember that MV = PY, Money Supply times Velocity equals Price Level times Real GDP. PY is nominal GDP, Y is real GDP. AFAIK, Sumner's followers argue that M should grow so that PY grows at some constant rate. V is assumed to be endogenous.
Now think of two countries with similar sized economies that share a currency. Imagine country 1 had Y growth of 3% and country 2 had Y growth of -1%. How should M change? As far as I know, this is virgin territory. Also, country 1 and 2 are basically Germany and Greece.
NGDP is easy to calculate for the users of bitcoin as every transaction is encoded in the blockchain. Of course, you are right that there is a difficulty because of a rapid unstable increase in V due to adoption, the NGDP of the Coin economy is measuring the economic activity of its users + some amount of canibalization of the legacy dollar economy. If you are looking for the "right" answer, I think it will elude you. But I have a "good enough" proposal for a Sumner Coin - start with the BTC reward scheme, and after PY stabilizes (i.e. changes less than 10% per month), use that as the base for PY and then set block rewards to grow PY by a constant amount. V is public so it is easy to calculate the appropriate M.
The Friedman coin is much simpler, since you are pegging M to a growth rate and not PY. Of course, the miners get the extra coins.
Both models decrease first mover advantage and relieve the need for transaction fees for stability of long-term mining. And for both models I would recommend an initial deflationary period to sweeten the pot for early adopters.