Money Matters

Money, as a means of exchange, has undergone a fascinating journey throughout human history. The concept of money has continuously evolved to meet the needs of societies, from primitive bartering systems to sophisticated cryptocurrencies. In our current era, dominated by fiat currencies, we face significant challenges caused by high inflation rates. One thing that is important is to recognise the source of current inflation. The global response to COVID-19 lockdowns was universal. Print money. This is the root cause of current inflation and a significant contributor to the economic turmoil. It is curious to see governments trying to find scapegoats. One such scapegoat is technology, including artificial intelligence. 

In my upcoming novel, ‘The Planet Fortht: Enslaving Freedom', the society described on Planet Fortht uses decentralised stable cryptocurrency. I demonstrate how it works well in everyday life. This concept is not new. There are many proponents of a stable cryptocurrency, a term called stablecoin.

In this article, I will delve into the historical perspective of money, explore the issues associated with high inflation, and discuss the proposal to implement stablecoin as a path towards economic stability. ‘The Planet Fortht: Enslaving Freedom' serves as a demonstration of how a society can function in such a setting.

The Historical Journey of Money

The concept of money emerged in ancient times when societies transitioned from bartering to using objects with intrinsic value. Those objects included food items with long shelf life like salt and pepper and later precious metals such as gold and silver. Those were mediums of exchange. Gradually, precious metals gave way to government-issued fiat currencies, backed by trust in the issuing authority. The shift from tangible assets to paper money marked a significant turning point in the history of money, with financial systems evolving rapidly in the modern age.

The Challenges of High Inflation

In recent times, high inflation rates have emerged as a critical concern for economies worldwide. In response to COVID-19 lockdowns, governments universally increased the money supply. There was more money printed in response to COVID than the global wars.

Inflation, fueled by excessive money supply, erodes the value of currencies. This is leading to rising consumer prices, decreased purchasing power, and uncertainty in financial markets. Governments and central banks often grapple with the delicate balance between stimulating economic growth and containing inflation, and the consequences can be dire for citizens and businesses alike. It is those consequences that we are now experiencing globally.

Diminishing Marginal Utility

The law of diminishing marginal utility plays a crucial role in understanding why individuals pay different prices for goods. Economists use this law to explain the declining satisfaction or utility derived from consuming additional units of a particular good. As individuals rank their needs and goals based on importance, the value of a good is determined by its usefulness in fulfilling these priorities. For instance, consider John the baker, who allocates his four loaves of bread to different ends, ranking them according to their importance. The loaf of bread serving the least important goal sets the standard of valuation for the entire supply of bread. This is demonstrated well in this article here.

Stablecoins: A Viable Solution

To address the challenges posed by inflation and its consequences, a new digital asset class has gained momentum - stablecoins. These cryptocurrencies are designed to offer price stability by being pegged to a basket of goods and services. The underlying blockchain technology ensures transparency, security, and decentralization, making stablecoins an attractive alternative to traditional fiat currencies.

This makes it a true token of exchange, honouring the original need to have money.

Stablecoins would provide several advantages in today's economic landscape. First and foremost, their value stability shields individuals and businesses from the fluctuations experienced in traditional cryptocurrencies like Bitcoin and Ethereum. This stability fosters confidence in transactions and mitigates the risk of significant losses due to market volatility. Additionally, the borderless nature of stablecoins facilitates seamless cross-border transactions, fostering greater global economic integration.

The concept of diminishing marginal utility is also relevant to the discussion of stablecoins and inflation. Stablecoins, designed to maintain price stability by being pegged to a basket of goods and services, align with the principles of diminishing marginal utility. As the supply of stablecoins is managed to keep their value steady, individuals can confidently transact without fear of significant price fluctuations, ensuring that their needs and priorities are met consistently. 

Unlike traditional cryptocurrencies, stablecoins offer a reliable means of exchange, aligning with the notion that a good's usefulness to secure one's ends gives it value. By embracing stablecoins, we move away from the need for complex mathematical models to determine total utility and marginal utility and instead create a more stable and efficient economic system. In the face of inflationary pressures, stablecoins provide a promising path towards economic stability, honouring the fundamental principles of utility and value in a rapidly evolving financial landscape.

The Impact on Society

My depiction of the impact of stable currency as well as the widespread use of AI can be found in my upcoming novel, ‘The Planet Fortht: Enslaving Freedom’. In the meantime, think about how our society can implement and embrace stable currency, independent of governments. What would be the impact? Drop your thoughts in the comments.

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