Paper money, the latest incarnation of the “Physical Object Money,” or POM, is incredibly handy. Unlike livestock, tally sticks or gold, it can be readily transported in one’s pocket. It’s certainly easier to regulate than cacao beans or wampum shells. It’s tangible, which brings comfort to many people. It can be readily transfered from one party to another, through purchases and payments, gifts, legacies, taxation, theft — and bribery and influence-peddling.
Therein lies a major part of the problem.
Stability is yet another problem. The value of currency (what it can buy) fluctuates, drops in value and can be deliberately manipulated by government as well as unethical people working in powerful financial institutions. How many of you find that, no matter how much money you earn or receive, the cost of basic necessities almost invariably takes up most of that paycheck?
Even the value of gold and other precious metals or real estate is subject to the whims of the market, deliberate manipulation, world events and other external forces beyond our control.
Alternatives?
The fact that other forms of exchange have existed throughout history demonstrates that “money” can be almost anything a society or community agrees on (subject to government authority and taxation). For example. during the Great Depression of the 1930s, the town of Tenino, Washington, issued its own currency, printed on flat pieces of wood. At least 50 communities around the world have issued their own currency, which has helped local communities and businesses to stay afloat during “hard times” (so-called “business cycles” — or more accurately, “boom and bust” cycles — are literally baked into our economic system). Granted, these local currencies have to be backed by a central government’s own official currency, and in the U.S., indivdual states are prohibited from issuing their own money. Nonetheless, these stopgap measures do something to help small communities weather severe economic storms — but they only offer temporary and limited relief.
Recently, we have seen the growth of “cryptocurrencies,” which employ a form of technology known as “blockchain.” This type of currency has a number of advantages:
- simplified transactions
- fewer and smaller transaction fees
- greater privacy and security
- reduced fraud
- instant payments and transfers
There are also major downsides, as well. Like POM and other financial instruments, cryptocurrencies are subject to wide fluctuations in value. Furthermore:
- when data is lost, so is the currency
- few merchants accept cryptocurrency
- no refunds or cancellations if it is transfered by mistake
- cryptocurrency exchanges are susceptible to hackers
- they’re easily used for illegal transactions
That said, the blockchain technology behind cryptocurrencies has made possible a new medium of exchange that can tame the beast of Capitalism and turn it into a system that works for all.
To Be Continued...