In a recent online discussion re the fact money seemed "infinite" - so why not just formalize it as such - I briefly explained why I didn't think this approach would work. However, I found myself also relying on a term to do so, which I've not adequately explained in previous blog posts: time backed money. Time backed money is one way to describe directly compensated time arbitrage, on the part of local corporations which fulfill both business and local government roles. Time backed money could ultimately help to "fill the gaps", where the organizational capacity of fiat money (and the present supply side) fall short in terms of employment. The conditions in which this takes place would also represent a small scale alternate equilibrium.
While some continue to question the viability of fiat monetary policy, I view fiat monetary representation as a necessary and appropriate function of large scale economic formation. That said, I don't believe fiat money is fully capable of representing aggregate time value at the margins, particularly since aggregate resource capacity should still be able to outpace the contribution of time aggregates in the foreseeable future. Under any circumstance, it is difficult to anchor time value across the entire economic spectrum, to the other contributions of resource capacity which make up a nation's wealth.
During the twentieth century, fiat monetary policy assumed the responsibility of coordinating multiple resource structures on the part of national governments. Even so, unemployment remains a problem for rural areas and cities which have been "left behind", hence these areas would benefit from a different approach. It's not a stretch to suggest that were it possible to do so, the mysteries of residual unemployment would have already been solved in normal equilibrium conditions. Granted, nations have at times come close to full employment, but not without concerns re overheating - even though such worries are unwarranted in today's tight money environment.
NGDP level targeting on the part of central bankers would go a long way to address current monetary shortfalls, and it is a crucial first step in providing better monetary representation for the public. A nominal target would also serve as a reminder that aggregate income capacity need not be set aside for the priorities of either governments or financial interests. Just the same, a level nominal target cannot generate complete employment in terms of full labor force participation, even in the best of conditions. Time backed money could assist fiat money in generating more employment, but the ultimate measure of both depends on what happens in the real economy.
Fiat money of course represents time value alongside other resource aggregates, but mostly in the sense of time value claims from specific skills sets. Unfortunately, those earlier claims on time aggregate representation were often staked out during periods of rapid growth and fewer obligations overall on the part of governments. As a result, it is increasingly difficult for governments to assist in services coordination through fiscal means. Time backed money would grow the services marketplace, where fiscal policy is no longer able to do so. One of the best aspects of time backed money is that it would begin the process of generating vital services through monetary means, instead of fiscal obligations.
Time backed money would not be created by the Fed, but rather acknowledged by the Fed as it is generated through local corporations. It could also be thought of as a bridge between monetary policy and the ongoing circumstance of the real economy in primary equilibrium. Whereas fiat money is well suited to coordinate centralized activity from a broad perspective; local settings involving time backed money, would make it possible to take a closer look at economic conditions.