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Wednesday, February 23, 2011

Inflation And The Future Of Money


The most basic and fundamental rule of economics would probably be the law of supply and demand. If there is less of something, it will cost more to acquire. And if there is more of something, it will cost less to acquire. For example, the Mona Lisa is worth a fortune because there is only one original. If someone, somehow, created a perfect duplicate of the original Mona Lisa so that there were two originals in existence, what would happen to the value of the first? It would drop by 50%, with the new Mona Lisa acquiring 50% of its value.

Well, what happens when a monetary supply, such as dollar bills, is inflated by 100%? There are twice as many dollar bills in existence (twice the supply), so the value (purchasing power) of the dollar bill gets cut in half. Except, it doesn't take a lot of work to print up as many zeros as you need.




Inflation is destruction in that, purchasing power gets siphoned away from productive and trusting people and placed into the pockets of the already-wealthy whom often use their new money to fund wars. Furthermore, inflation is flat out theft if you do not get the consent of an informed victim before you grab their purchasing power from them. Inflation hits hardest those on fixed incomes from retirement funds and the poor. Also, due to recession caused by inflation, companies tend to cut corners on wages more often than other areas.

It's easy for a company to raise wages by less than they should be raised when adjusted for inflation, because most people don't understand or care about how our fiat currency works - as long as they see themselves getting a raise they are satisfied. The free market consistently gets blamed for the effects of inflation, because while wages rise, the prices of bread and gas rise faster. The 'evil ceo' gets blamed, when in reality most of the blame should go to the printers of fiat currency.

Furthermore, infinite money is never enough for the printers of fiat currency. Wouldn't it be nice if the state would simply print up the money you owe them in taxes, instead of shaking the change from your pockets after every workday? The printers can print literally as much as they desire, as much as they could ever need, yet they still insist that you give them the income that you had to work hard to earn. The point is that, since desires are infinite, and fiat currency offers the largest incentive possible, there can be no stopping or slowing the presses. Human greed will inevitably drive inflation into hyperinflation into collapse, over and over again, until we recognize the shell games around us.


There can be no stopping the cycle of inflation outside of the collapse point for the following reason. When you print a bunch of money to spend, it raises the price of all goods and services around you - forever. Long after you're done spending your printed money, you will still have to suffer the effects of inflation (higher prices) for the rest of your life. The more things cost, the more you would need to print, ad infinitum.

So, what kind of money would we see in the future? Money which cannot be inflated - money which cannot be centrally controlled. Money that is digital. A decentralized digital currency.

Decentralization of money is imperative. Without a central control, no one person can control the money supply. This means so many wonderful things at once - for example, no more easy infinite money for warmongering institutions, and no more records and tracking of any person's finances.


Why digital? Several reasons. The money of the future will be improved in every way, including its security. Digital currency could be kept on a hard drive, or a portable pen drive, or on remotely accessed computers. Unlike paper money, gold, and other physical items like jewelry, muggers and 'revenue service' agencies won't be able to take your digital currency - especially if currency transactions take place with futuristic encryption practices. Also, if everything else is being sped up by going digital, you can bet that a futuristic digital currency would be even more efficient and convenient.

Admittedly, it is next to impossible to conceive of a digital currency that is decentralized and also secure from inflation or fraud. But if we understand the qualities of the kind of money that we want, we can eventually create exactly that, given enough time.


What could we do with cheaper electricity? A whole lot more, if we didn't have to worry about buying our electricity from old wasteful and expensive technologies. All that effort could be and would be poured into extra, new ways to raise the quality of life for everyone - improvements to be enjoyed by even the former sellers of high-priced electricity.

Likewise, what could we do with a currency which was 100% free from tampering and control? A whole lot more. If people aren't robbed, they're going to feel more secure and have more incentive to be productive, plus they will also have more money to spend on various luxuries of life. There would be more jobs, more creation of goods and services, and more goods and services being sold.

29 comments:

  1. It's a good idea in theory, but i can forsee numerous problems as far as implementing it...not to mention what happens to people who try to compete with the federal reserve, e.g. Bernard von Nothaus.

    But almost anything would be better than the fiat system.

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  2. anonymouse, are you me? i thought exactly the same

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  3. wow kinda have to think about this one

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  4. Back when gas was a quarter is when quarters were made of silver. It's about the same price now as a silver quarter.

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  5. what anonymouse said lol. if there is one thing i know about money, it is that it's only constant is that it is always moving and changing and thus, never constant

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  6. i want to buy a coke with a nickle

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  7. they should just kill the penny already

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  8. I want to say something intelligent after reading this, but for some reason i cant stop thinking about george washington's face wiping my butt.

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  9. Investing intelligently is the way to battle inflation, nice post.

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  10. Yup pretty soon, dollars will be quarters, then pennies.

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  11. The drill instructors were a bit worse than in Full Metal Jacket haha.

    Anyway, interesting blog man.

    Will definately keep an eye on it

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  12. remember when a penny actually got you something

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  13. Interesting, I was just studying inflation for my macroeconomics exam tomorrow.

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  14. Pretty informative.
    I think I agree on this actually.
    This was seen along time ago in sci-fi I think with the concept of "credits".
    I once had a thought that people would revert to the bartering system by using information as a currency.
    By information I mean literal information, or even software etc.
    It would be nice since the "currency" would have value itself.
    But the concept kind of falls apart since there's no real standard for debt, whereas a decentralized digital currency as you mentioned would easily address this problem.

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  15. Some people think that to solve the problem with money is to print off more money. Some people are also stupid.

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  16. One of my friends brought this up to me the other day. Interesting concept

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  17. Nice blog. I love listening to the elderly talk about money, like buying a sandwich for 50 cents, heh.

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  18. tinfoil hats are great, but honestly the dollar is not going to crash for a while. I believe it will keep its steady downward pace, but it will continue to be stable for a while.

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  19. Very interesting story. Discussed this in economics today.

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  20. Have you noticed that there is barely any difference between the Canadian and American prices on books now? Soon it will be $12-U.S. and $9 Canada.

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  21. Wow, good post on inflation. I really like the part about digital money, but I think it would be too strange for most people to want to use.

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  22. A very good read. Something I don't really know much about.

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  23. Economics,the wretched science...

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  24. Inflation and centralized money seem to be necessary evils we accept to avoid other evils. Purely electronic currency is a great idea, and I bet it will be implemented in our lifetimes. Abolition of inflation would make it very difficult for the government to have fiscal mobility. I do agree though that oftentimes the cost of misappropriations of funds, generated through inflation, get unfairly passed on to the consumer through unnecessary rises in price level. Good read.

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  25. Cheaper electricity does sound appealing. I wish everyone would allow the wind farms near us.

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  26. Mass production is killing the country.

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  27. Too bad the gap between the rich and the poor is widening - the rich get richer, and the poor get poorer.

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  28. There has to be a better way than this. Money should be irrelevant. People should be respected by their thoughts and ideas, not the size of their wallet. IMHO

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