Could Crypto ideas go mainstream? (Part 1 – Economics)
Whether its Proof of Work, Proof of Stake or Distributed Proof of Stake most cryptos have one thing in common and that is they mint new coins (in other words print money) to reward those who provide value to their ecosystem. It doesn’t matter if this new money goes to miners, nodes, holders, developers or Santa Claus, the concept is the same. New money is created to pay the bills.
So this got me thinking. What if we took cryptos out of the discussion for a moment and asked the question – Could this basic idea be applied to the realm of national or even global economics using fiat currency?
Bear with me for a moment while I flesh out this hypothetical situation.
Let’s imagine that we have a fairly normal developed country with a government and population concerned about providing basic health, education and welfare. But instead of taxing peoples wages, or businesses….they fund the government budget via printing new money and run a tax rate ON EVERYTHING at 0%
Now for the historians out there I’m not talking about the sort of money printing of the Weimar Republic, Zimbabwe or even the modern day Venezuela. This isn’t unlimited printing of money to get out of debt or fund out of control social programs because either of these would pretty much always result in hyperinflation – I am talking about a FIXED supply of new money that is used to fund government spending as opposed to raising money through taxation.
Suddenly government just got a whole lot smaller as we don’t need a tax office or a whole bunch of bureaucrats tracking and micro-managing every aspect of the economy. So we’re saving money already, business is now a whole lot simpler and we still have a basic (ideally minimalist) government providing social safety nets for those who might otherwise fall through the cracks.
But what about inflation? Who would be the real winners and losers here?
Good and important questions. Inflation would run higher than we’ve become used to in the modern age. Money would not be for sticking under the mattress, it would need to be put to use with investments to keep ahead of inflation but it would still be possible to effectively save for retirement by actively investing in productive businesses and assets.
This is basically how STEEM and STEEM POWER works. New STEEM is created to reward people for adding value to the platform and it is intended to be used for liquidity and spending, but to protect your STEEM against inflation you need to inVEST in STEEM POWER and put that wealth to good use. The economics of STEEM is proving that this model can work.
Is it really a huge leap to suggest that this economic model could be used on a national level? What do you think?
In Part 2 I will have a look at some of the new governance and political models that cryptos are innovating with and see if they too could be applied to the mainstream. If you liked this article, please follow me and stay tuned.
Images and Credits :-
https://us.123rf.com
http://thefederalistpapers.integratedmarket.netdna-cdn.com
https://fixingtheeconomists.wordpress.com
http://learntoprepare.com
Here in the US they tax the citizens and print money. Why would they do one if they can get away with both?
Well I think many people would agree with me when I say they can't get away with both. The US monetary policy is totally unsustainable and will eventually destroy the value of the US Dollar.
Wr export our inflation. The USD is still a reserve currency, so we get away with it....
You can keep telling yourself that if you like :)
If it were true wouldn't the US just print its way out of debt? It can't because if they did the USD wouldn't remain the reserve currency for long....and it probably wont anyway.
Sorry, I am not really undestanding this part
When you say...
Who is "they". Who is in charge of creating this new money? And when we do create new money we are in fact taxing ourselves because our money is worth less due to inflation.
I am all for getting rid of the huge bureaucratic wasteful governments that over regulate our lives but also understand there needs to be some kind or form of government to allow protection of the most vulnerable in our society.
I think we need to start by throwing away labels, like leftie/rightie commie/socialist and just judge ideas based on their merits. I love ideas from all over the political spectrum and at the same time hate many ideas. To me, the perfect model is a model that is not based on one particular ideology but one that incorporates the best practices from all. If we voted on ideas instead of politicians the world would be a better place. Large sums of money would not be wasted on pointless popularity contests and everything would have to be transparent. A.I can achieve this and when the banks fail and we look to crypto for the answer we may finally get closer to a fairer world for all.
End rant lol sorry.
"They" would be the government. Yes, I understand that printing money creates inflation and I covered that in my post, it is effectively a hidden tax but it's one applied universally across all capital. It is not just targetted at wage earners or businesses selectively while allowing big corporates to avoid it altogether.
Don't apologise for your rant. For the most part I agree with you. In my follow up post (Part 2) I'll talk about governance structures and how we might be able to make some of these important decisions on government spending without too much of the political ideology (and career politicians) involved.
It's ridiculous to think that a privately owned, non-transparent entity like the US Fed could even exist and get away with what it does. US Government can't even audit them. Could you imagine what would happen to us if we tried to do that, lol.
I was always under the impression as a small naive kid that the government made the money, nearly fell off my seat when I found out that wasn't the case.
Phew! This is quite a relief to hear. Thought I was the only one who had grossly wrong impressions about a country's "money". Specifically the fiat currency. For decades, I thought the currency was limited to a certain amount, with institutions like the World Bank making sure countries don't print more than what was registered. And ALL were in notes of various denominations. Either in the hands of individuals and companies, but mostly held in bank vaults. Especially in a central bank.
You want to get really sick to the stomach? Go read (or audio book) The Creature from Jekyll Island. If anyone reads that and says everything is ok... run.
In my humbel opinnion, this is the way to new order.
thanks for your post
Nice post.. you put forward an interesting premise. Looking forward to part 2
With no controls on how much money a government could produce inflation would offset taxes. You would need a raise every year that equals how much you would have paid in taxes because everything will increase that much per year. So you might as well as pay taxes.
I think you're missing my point. The money printing would have a fixed limit, just like cryptos do - but instead if it being enshrined in the code it might be enshrined in the consitution for instance.
We have inflation now. Prices go up now. This model is as much about eliminating bureaucracy, creating efficiency and levelling the playing field as anything else.
Yup agree with BO also transparency, one of the major flaws with the current system.
I laughed XD
I think I have something similar to your hypothetical situation going on in my AER-verse. Totally think it could work.
Yes this is right but you need to take
It to the next level.
Governent should not be in charge of creation of the currency.
There should be a currency that is created only for the government to
Use. The only way government can get the currency is if the government creates a fund me campaign for each part of the government.
The currency is divided equally between all of the citizens. Each of the citizens
than chooses which parts of the government they want to fund.
This puts the power of the pocketbook
In the hands of the citizens.
Just think how much more responsive government would be knowing they have to justify their budgets to the people who have the ability to not fund them. This would be an entirely new way of governing.
Very interesting and I will cover some of that in my follow up post about governance.
But I have often wondered if that kind of idea could be phased in. Like every time you fill in your tax return, you nominate where the first $5K in taxes should go. It can't be implemented overnight but could easily be phased in.
Please run with it
Because this can also be used at local level so it can be tested.
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