Imagine you would have a bank account where there is no bottom, meaning that you could spend as much money as you want on things that you need and want. What would you spend this money on? I think the majority here, would first secure themselves a lifestyle they are comfortable living with: Buying a house, get health insurance and maybe renew the old 2000 Volkswagen Jetta into a new BMW X3. After this a lot of people would probably try and help their family and community. But what happens if the living standard of you and your surroundings are levitated and more than the basic needs are satisfied? Well, this is where the stupidity comes in. I think that most people would start to gamble, speculate or purchase unnecessary things like fart gums (I made that up, but I am certain there would exist something like that).
I would argue that this scenario is what was and is still happening around the world but on a larger scale. This is what I want to discuss with you in this article today. We will talk about the monetary system in a nutshell, how inflation is basically destroying the whole world and what the solution might be.
Money System in a Nutshell
As you probably realized: the limitless bank account are the central banks who can print money on demand. This is certainly not a bad thing in the beginning. If a currency is starting off, its purpose is surely to secure a better living standard for its users and the economic growth of its issuer. With longer existence and unequal distribution of this money it started being used in lots of different ways where some of them are certainly not justifiable
In order to cover for these expenses, more and more money is being printed. This makes the people realize that their purchasing power is decreasing which incentivizes them to buy consumption goods like TVs, Iphones and other products which are not always necessary. In the first stage this would increase the productivity of the economy but if its increase is not sustainable, it will lead quickly into disaster.
Unwanted Spendings Because of Power Lust
Not only that but there are also expenses that the normal person does not want. Things like war or company bailouts are definitely not something that the normal day consumer would like to pay for. Well, this is where governments are using their most favorite tool: taxes! Governments are able to generate their income and finance all of their spendings by getting their “fair” share of the working force that is keeping the economy alive. While I would see some government spendings, such as health care or development of infrastructure as necessary, wars and bailouts are not on this list.
But this is not the only case where the current monetary system is flawed. Big companies and very rich individuals are avoiding their taxes by borrowing against their assets. This is basically an infinite money glitch where you are not paying taxes because you are borrowing money. Why is this so smart? Well, because those people are borrowing against assets, their interest rate is not as high. On top of that, the money that is supposed to being paid back is losing its value due to inflation. This means that the top percentile of this world is getting richer without any efforts from their side anymore.
This is where they are using their money into stuff that can be considered dumb in a broader sense. It is by financing politician’s campaigns or just enforcing ideologies that are not always the best ones to follow. A prime example would be Black Rock that is enforcing their ESG ideology on all the stock market companies.
Sound Money As Solution?
All of this sounds horrible and looks like it will not end anytime soon. But what could be a possible solution to this? Well, the first things that comes to everyone’s mind is probably a sound money system. In an ideal world, only money would be paid when you actually created something worth of value. In this system there is no incentive of throwing away your money because it could be worth 50% less tomorrow and it also get rid of these money glitches where people would be able to borrow money for almost no interest.
Yes, there might be the possibility of a death cycle in the other direction. Once everyone realizes that their money will gain value if you just spend it, nobody would start spending it. But I don’t think that this woold be the case for the majority. I think that everyone who would want a good to be purchased would have the assurance that it will cost the same in a few days once he saved up enough money. An even better solution could be something algorithmic that would adjust its supply and demand according to the current situation and therefore, keep all of the prices in a very stable threshold.
Conclusion
But why is that we are not transitioning to this kind of system? Well, the problem would be that the existing debts need to be paid. The problem with that is that the biggest debt holders are the governments themselves. In a case of monetary change, these governments would be defaulted and there would be most likely regime changes all around the world. While this might sound great on first glance, thinking about that is very scary. I would not want to risk a lot of extremist countries in the world and while this might just be a scary illusion, I don’t think that this is far from reality. At the moment I just feel like that humanity is stuck between many different scenarios that can only bring suffering.
Published by ga38jem on
LeoFinance
On 24th October 2022
