Reimagining Money

Balance is Equilibrium | Equilibrium is Balance

What is this?

It Starts With Bitcoin

Two Types of Money

  • First, we will start by remembering the Gold Standard: what it was and why it failed.
  • Second, we will inspect the Fiat Currency Standard which came after the Gold Standard: this will bring us to the present day.
  • Finally, we will imagine what a new type of money might look like: here we will be introduced to Ampleforth, a new synthetic commodity money.

The Gold Standard

The world population: notice the inflection point around 1950.
World trade: another rise around 1950/1960.
World GDP: another sharp post-WWII inflection.
From Ray Dalio’s “How the Economic Machine Works”
  1. The emergence of the Eurodollar System, which probably accounted for a lot of the actual money supply expansion to facilitate global economic growth (also a complex and mysterious subject).
  2. The Gold Standard eventually failed.
President Nixon suspending dollar/gold convertibility in 1971

The Fiat Currency Standard

Growth of major central bank balance sheets since 2008 (image from Reuters Graphics).
Total debt securities since 1965 from St. Louis FRED data.
The real value of $1 declining over time. Notice the trend adjusts slightly higher around 1945 and then distinctly higher around 1971. Chart source.
  • First, fiat currencies have completely unlimited supply. In the best case this results in mild inflation which erodes purchasing power over time and in the worst case results in hyperinflation which destroys economies.
  • Second, supply expansion in fiat currencies tends to be dilutive. That is to say, the new currency is not distributed equally throughout the economy (the Cantillon effect). This results in wealth inequality and in general is not efficient.
  • Third, fiat currency monetary policy is discretionary. Despite how well-intentioned policy makers are, it is impossible that their decisions can always be optimal for the economy as a whole. In practice, they often prefer time-inconsistent monetary policy which has a positive impact in the near term despite creating problems in the longer term.
  • Fourth, discretionary monetary policy in a purely fiat based monetary system tends to exacerbate the ordinary boom/bust cycle creating greater financial volatility for economies and societies.

Gold vs. Fiat

Inflation Adjusted Gold Prices (courtesy of macrotrends.net)

Reimagining Money

  • The money should be able to serve as a reliable store of value and stable unit of account.
  • The money should have a dynamic supply so it can adapt to adverse or changing macroeconomic circumstances.
  • The money should be resistant to hyperinflation and hoarding.

Finding Ampleforth

Ampleforth is a money which constantly seeks equilibrium.

Follow the White Rabbit

  1. First watch these three short videos: one, two, three.
  2. Read the Ampleforth white paper.
  3. Read the Ampleforth Red Book.

Credits

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