The meme „Fix the money, fix the world.“ is a more and more popular expression on the Internet. But what does it actually mean? In this article I would like to explain the background of this meme and present the central problem of our time.
We have been experiencing the following trends around the world in recent decades: asset prices are rising, economic crises are occurring again and again, society is splitting politically, many families and relationships are falling apart, and retirement planning is also becoming increasingly difficult. The cause of these phenomena lies in a monetary system that is built on inflation and thus requires and also incentivizes consumption and short-term thinking and action. How the monetary system works is not sufficiently addressed by politicians, central banks, economists or the media.
In the following, I will describe the individual problems that arise and show why the monetary system is responsible for them. I then outline the characteristics of a sustainable monetary system.
Problem: Asset Price Inflation
The prices for real estate, stocks or gold are skyrocketing and for the poorer and younger people it is getting more and more difficult to build up assets or retirement savings. Due to high rents, it is also harder to put anything aside at the end of the month.
Asset price inflation is caused by monetary policy. By expanding the money supply more and more, a redistribution takes place. And it is those who get the new money first who benefit, because they can still buy cheaply as a result. These are predominantly the states themselves, the large companies, the banks and the wealthy upper class. Through the redistribution effects, the social power and wealth relationships are cemented and society becomes more and more divided due to this inequality of opportunity. This redistributive effect created by an expansion of the money supply is also called the Cantillon effect.
It looks to us as an asset price inflation, but viewed the other way around, it can also be said that the purchasing power of government currencies is falling. Inflation, and thus the loss of purchasing power of our currencies, is driving us into consumption, as saving in an inflationary environment leads to losses. It is therefore increasingly difficult to make provisions for the future. Therefore, many people buy tangible assets, such as real estate, stocks or gold, to preserve their purchasing power, for which they have worked long and hard, which of course causes the price of tangible assets to keep rising. It simply makes no sense to save a currency that can be multiplied at will.
The monopoly on money is abused worldwide and our common denominator for all economic calculations and monetary transactions is manipulated by an expansion of the money supply.
Problem: recurring economic crises
Investment decisions are manipulated by changing and setting the interest rate. The interest rate is usually an expression of a person’s time preference and indicates how a person values the future compared to the present. If the present is extremely important to him, he will demand a high interest rate to lent his money and vice versa. The arbitrary setting and manipulation of the interest rate by central banks manipulates this trade-off between the present and the future.
Investment decisions are made that appear to be profitable but ultimately cannot be made. This misallocation of resources leads to recurring economic cycles. Central banks have continued to lower the interest rate over the past few decades, not allowing an allocation of resources according to people’s needs and instead they are tempting people more and more to consume at the expense of the future. Now the mountains of debt are high, resources are not allocated according to people’s needs and there is a lack of savings for the future.
The manipulation of the interest rate is causing distorted investment decisions around the world. Scarce resources cannot be used efficiently according to people’s needs in the current system. There are currently no incentives to provide for the future from within the monetary system.
Problem: many currencies and fluctuating exchange rates
Many different currencies exist around the world, making global life unnecessarily complicated for businesses and people. Fluctuating exchange rates and different regulations and bank accounts lead to inefficiencies and increased costs.
Solution: a fixed money supply, no manipulated interest rates, a global common denominator.
„Fix the money.“
We can state that a good monetary system is based on a money supply that is fixed/constant and cannot be increased arbitrarily. Such money has no loss of value and is therefore not subject to inflation, i.e. the purchasing power is maintained over time. Productivity increases and innovations even cause the purchasing power to increase, because the prices for goods and services decrease over time. Saving makes sense again in a deflationary monetary system and capital accumulation becomes possible again because people are not tempted to consume. The prosperity of society as a whole would increase and the redistributive effects of an inflationary monetary system would not occur.
The commodity, which is used as money and which cannot be increased arbitrarily, would automatically be used as a common denominator all over the world and a reasonable economic calculation for investment decisions would be possible again. This is exactly why gold was the common denominator of the world’s currencies for many years.
Manipulation of the interest rate is only possible today because the monopoly on money is in the hands of the central banks or the states. In a decentralized or free market for money, such manipulation between consumption and future decisions would no longer be possible and people would not be pushed further into consumption and into wasting resources. Recurring economic crises would be a thing of the past and mountains of debt would not be able to be accumulated at will. Libertarian economists often claim that a free market brings up a good money, but how do we get to a free market? It’s the other way around: A good money brings up a free market and a free society.
Problem: Territorial compulsory monopolist (state) destroys families and retirement savings
As already described, an expansion of the money supply and a reduction of the interest rate leads to short-term thinking and acting. This influences all our decisions and also affects our relationships. Families, friendships, marriages are increasingly characterized by short-term thinking, which leads to family chaos and isolation. In addition, there is a welfare state that is financed by taxes, which makes people believe that family and social relationships can be dispensed with.
However, this is a false sense of security, because the welfare state distorts incentives so that people do not take care of a family, retirement provisions and a social safety net themselves. The welfare state leads people into dependency, isolation and poverty in old age. The pension system becomes unbalanced because it pretends that one can have a pension without a family and children. This leads to demographic change, which in turn puts the pension system in a precarious position. Pension entitlements also lose purchasing power due to inflation, and poverty in old age and social tensions and misery are pre-programmed.
The welfare state and the pension system, both of which are foreseeably unable to function in the long term, are only possible through arbitrary taxation and redistribution by the territorial coercive monopolist.
Problem: Decision and liability are separated
Today’s political system, which is financed by money printing and the collected tax money, has the problem that the decision makers are not liable for the effects of their decisions. Thus, the actors have no „skin in the game.“ This leads to riskier decisions being made and the taxpayer having to pay for the mistakes. Also, bailing out companies and handing out subsidies is only possible through the states‘ monopoly on money and power. Today’s bureaucracies are impediments to productivity and progress because they pass regulations and ordinances that would never be accepted in a free market. The people thus pay for the introduction of the rules and, in addition, for the control of the rules, although they do not want either at all. The current political system arbitrarily interferes with people’s cooperations and creates incentives for corruption and leads to senseless wars.
Incentives for peaceful cooperation are diminishing as it becomes increasingly profitable to influence policy, which increases political distribution struggles. All because there is a monopoly of money and power that favors each other and does not have to take responsibility for its decisions.
Solution: Encrypted money, decentralization of the money monopoly, „skin in the game“.
Money encrypted by cryptography has the advantage that no one can access someone else’s store of value and thus cannot confiscate their life’s savings. The monopoly of power and money could thus no longer finance itself.
Dependence on the state would thus end and every person would once again be in a position in which they would have to be liable for their decisions, even with their own assets. Relationships with family members and friends would become more important again. A long-term thinking and acting would be necessary for an old age provision and for bad times.
So why „fix the money, fix the world.“?
I have now shown that the current monetary system leads to redistribution effects, economic crises, irresponsible use of resources and fragile relationships because incentives are set for consumption and short-term thinking and action.
Through a new monetary system based on a fixed money supply, decentralization, and encryption so that a monetary monopoly can no longer occur, we can repair all of these systemic failures. The world needs a store of value more than ever before.
„Fix the money, fix the world.“
Such a system incentivizes long-term thinking and more cooperation. Technological progress and productivity growth will even provide deflation, which means money will become worth more over time.
Hint: The current system is in a path dependency and there is no escape from this. This is why politicians, central bankers, economists and the media keep being quiet about this issue. Whether they don’t know, don’t get or don’t report it, I don’t know, but one thing is clear: we must not rely on the mentioned actors, because they have brought us into the imbalance of the current system and are profiting from it.
Don’t save your money in a currency that can be multiplied at will. Cultivate relationships with family and friends, because you will need them when the state, the welfare state and the central banks are no longer there. Take responsibility for every area of your life yourself. Think and act for the long-term.
Brief monetary history of the last decades:
Until 1971, our money was backed by gold, which had the advantage that the money supply could not be easily increased. But since the abolition of the gold standard (WTF happened in 1971), we have a fiat money system and with it an ever faster growing money supply. In 2009, the Bitcoin network started as an experiment for an encrypted payment and store of value system with a programmed fixed money supply. In the following table, I show the important features and differences of these three money systems.
|Money supply||Organization||Security||Functionality||Form of money|
|Gold||Small inflation||Hierarchical/centralized||was corrupted by the central banks and the government to a fiat money system||Didn’t work||Physical gold and paper money|
|Fiat money||Unlimited supply||Hierarchical/centralized||Boom- and bust cycles, manipulation of interest rates, redistribution effects||Destroys society and it’s incentives, will fail for 100%||Digital and paper money|
|Bitcoin||Fixed supply||Decentral||Encrypted through cryptography||Future will tell||Only digital|
Bitcoin is our hope:
The past has shown that the monopoly of money has always been manipulated when there was the opportunity. Bitcoin is an attempt to change the current system, which results in inflation, economic crises, interest rate manipulation, excessive consumption and waste of resources, arbitrary redistribution, and ultimately demographic change and a deterioration of our relationships, for the better, because we get a store of value that cannot be manipulated by anyone. The incentives are set in such a way that there can be a network effect – those who do not participate will be left behind. The supply of Bitcoin is scarce and those who ignore, deny or don’t catch on to the change will have a bad position at the start of the new monetary system, if it catches on.
It’s time for Plan B: „Fix the money, fix the world!“
That we need a change in our monetary system is clear, whether Bitcoin will prevail no one can currently say. However, it is the result of many thousands of years of monetary history. If you want to learn more about the economic theory behind this article and behind Bitcoin, I recommend the literature of the Austrian School of Economics. The economists Ludwig von Mises and F.A. Hayek were instrumental in shaping monetary theory, capital theory, interest rate theory, and business cycle theory. Furthermore, they have shown that socialism and interventionism are not sustainable. They show that only the free market economy, in which private property is central and every form of force and coercion is rejected, is feasible in the long term.
In my german book „Eine Revolution der Denkart“ (A Revolution of Thinking), I explained the key findings and showed why current economics is based on false assumptions. I highly recommend the book „The Bitcoin Standard“ as it presents monetary history in detail using various monetary systems.
Here are a few more memes from the rabbit hole that illustrate the whole issue quite well:
I hope that this article could inspire you and clear up some confusion.
Leo Mattes (twitter)
Also check out my playlist about Bitcoin, Cyber Hornets and BTC Shanites.