A world that uses Bitcoin (or another scarce cryptocurrency) as a base currency could create a better, more innovative one. One could argue that the velocity of money is driven by the demand for luxury goods and services. On top of that, an economy is only as good as the labour within it.
The money hoarder will exchange the hoarded currency if there is a good or service that he/she desires. If there is no desired good or service, then there is no reason that the money hoarder should put his/her money back into circulation. This will give the markets a reason to innovate and create demand for luxury goods and services. There will be less complacency in the markets as companies and industries compete for your money.
A historical example of complacency is the Spaniards post colonization of America. After the Spaniards colonized the Americas, they inherited vast amounts of gold. What was once a scarce commodity was less scarce. Instead of boosting exports to create more wealth, Spain boosted imports letting their gold leave their country. Every nation, except for Spain, was competing for Spain's wealth leaving Spain with out gold.
It is very hard for a nation to run out of money, as they would just have their central bank digitally print money and pump it into the system. Instead of having scarcity drive the markets and stimulate growth; countries have excess supply of money. The argument for this is that people will be more likely to spend it, increasing the velocity of money and stimulating growth. This idea isn't new, and it predates John Maynard Keynes. John Law, a Scotsman (1671-1729), believed that the role of money was to facilitate trade. Law argued for paper currency. Paper currency had the advantage over bullion in that its supply could be regulated to stabilize its value and the level of economic activity.
During Law's time, they were dealing with gold/precious metals, and metals are not easy to transport. It also must be measured, etc. So paper money made more sense. Now we step into a digital era, where paper money makes less sense. The more money that is pumped into circulation, the more money that is required to pay for goods and services.
If the world were to adopt scarce cryptocurrencies we could have two outcomes that I'd like to focus on. Assuming we use the more popular and talked about scarce crypto, Bitcoin. 1) People would hoard it, driving down the velocity of money. 2) People would desire to have more bitcoin spurring economic growth and stimulating the economy with innovation and luxury goods/services. This would increase the velocity of money as people would exchange their hard earned bitcoins for things they desire.
In either scenario, we could still have a central bank, and taxes. The government could still step in during economic downturns to stimulate growth. They could also deal with interest rates as well to cool down economic activity.
follow on twitter @postmattern and @CrypTokenNews
The money hoarder will exchange the hoarded currency if there is a good or service that he/she desires. If there is no desired good or service, then there is no reason that the money hoarder should put his/her money back into circulation. This will give the markets a reason to innovate and create demand for luxury goods and services. There will be less complacency in the markets as companies and industries compete for your money.
A historical example of complacency is the Spaniards post colonization of America. After the Spaniards colonized the Americas, they inherited vast amounts of gold. What was once a scarce commodity was less scarce. Instead of boosting exports to create more wealth, Spain boosted imports letting their gold leave their country. Every nation, except for Spain, was competing for Spain's wealth leaving Spain with out gold.
It is very hard for a nation to run out of money, as they would just have their central bank digitally print money and pump it into the system. Instead of having scarcity drive the markets and stimulate growth; countries have excess supply of money. The argument for this is that people will be more likely to spend it, increasing the velocity of money and stimulating growth. This idea isn't new, and it predates John Maynard Keynes. John Law, a Scotsman (1671-1729), believed that the role of money was to facilitate trade. Law argued for paper currency. Paper currency had the advantage over bullion in that its supply could be regulated to stabilize its value and the level of economic activity.
During Law's time, they were dealing with gold/precious metals, and metals are not easy to transport. It also must be measured, etc. So paper money made more sense. Now we step into a digital era, where paper money makes less sense. The more money that is pumped into circulation, the more money that is required to pay for goods and services.
If the world were to adopt scarce cryptocurrencies we could have two outcomes that I'd like to focus on. Assuming we use the more popular and talked about scarce crypto, Bitcoin. 1) People would hoard it, driving down the velocity of money. 2) People would desire to have more bitcoin spurring economic growth and stimulating the economy with innovation and luxury goods/services. This would increase the velocity of money as people would exchange their hard earned bitcoins for things they desire.
In either scenario, we could still have a central bank, and taxes. The government could still step in during economic downturns to stimulate growth. They could also deal with interest rates as well to cool down economic activity.
follow on twitter @postmattern and @CrypTokenNews
research was done using: The Ordinary Business of Life: A History of Economics by Roger Backhouse
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