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09 July, 2017
Mind you, the current system has plenty of flaws. Let’s face it: money is created by economists in the ivory towers of central banks and by licensed banks lending what has been deposited with them, which stays deposited at the same time as being lent, thereby multiplying. Money creation by banks is a privatised demand-driven system that periodically comes unstuck because banks either over-lend, or lend unwisely, so that the money gets lost and the original depositors’ savings evaporate — although these days most banks are “too big to fail”, and therefore implicitly guaranteed by taxpayers. The other problem with the current system is that although the value of money is fairly stable, it tends to devalue over time as a result of deliberate inflation. Central banks have been trying to get inflation up for a decade, in order to reduce the face value of the world’s excessive debt. Following the adoption of independent “price stability mandates” by central banks in the 1970s and 1980s, prices have been anything but stable: inflation has averaged 3.5-4 per cent per annum, dramatically reducing the value of money ($1000 40 years ago would now be worth a quarter of that). So those pushing for non-fiat money, that is money not controlled by central bankers and/or politicians, have a point: under the current system, governments debauch the currency for their own purposes and periodically banks blow it up through greed and incompetence. But the people trying to build an alternative system are basically anarchists. In fact, I’d say that global governments will soon need to declare that cryptocurrencies will never become legal tender, and legislate to that effect. You can play with them, and have fun trading and gambling, but actual money? Nah. That’s not to say blockchain, the technology behind cryptocurrencies, is also a scam, far from it. In fact, it looks a truly revolutionary technology that is likely to change the world through mass disintermediation — but not disintermediation of government.
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