Ben Kaufman
Aug 18, 2019 · 2 min read

Thanks for the response.

I agree that hyperinflation may not result the emergence of a non fiat money, but it is not likely to happen. Even in your example, the Reichsmark was first replaced with cigarettes by the market participants, and only later did the government issue the Deutsche Mark which then went into circulation. See this citation from Wikipedia: ”For all intents and purposes, it was supplanted by a barter economy (commonly, “cigarette currency”)” —

I am not aware of a case where no money was used within the market in the period between the collapse of a currency and the issuance of the next currency. The reason I assume is that if the government would be willing to change the currency and stop the inflation, they wouldn’t have stated the massive inflation of the original currency in the first place. I’m not however rejecting this possibility, I’m just saying it’s not likely.

For the second part of your comment, I would say there could be many reasons for how a digital currency like Bitcoin could emerge through the market. Other currencies hyperinflating seems possible, but not likely. So I would say this would happens as an “evolution” of the system.

I believe the digital age we reached requires a monetary evolution to a digital form of money. I find it similar to the evolution from cattle money to metallic moneis when society moved from nomadism to permanent settlements and cities, as I mentioned in the article.

I would imagine such transition as some natural selection process. The individuals which choose a more suitable money will be economically rewarded with more exchange opportunities and a gradual shift will start and at some point accelerate. This is without even mentioning the use of money as a store of value and unit of account, which in the presence of money more suited for these roles, will likely accelerate the process to a large extent.

I agree education is important and even crucial to some extent, but I will argue that economic reality will necessarily enforce itself upon people. I would say proper education, and the entire reason of studying economics is to make wiser decisions as to both improve the course of action and avoid mistakes which if performed will cause a problematic reaction. The more we understand economics the less likely we are to do such mistakes, but even with collective agreements if we ignore economic laws collapse will ensue.

This is why I believe even if a change in public opinion will cause monetary change, money still can’t be called a social contract, as if people will all decide on an unsuitable object to serve as money, it will collapse despite all good faith. There is a large role tradition and customs play in the contentious use of a certain money, but this is not a detrimental issue for monetary change.

Ben Kaufman

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Coding and Austrian Economics

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