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MemberOctober 26, 2023 at 13:43
Lyn Alden discusses this in her book Broken Money (or in her interviews, for example Bankless this week)… My interpretation here.
Imagine there is a war.
The country that can print money out of thin air is able to finance the war effort by extracting all the wealth from its people.
The country on hard money standard (e.g. gold) can only finance the war effort via taxation (= coercition) and war bonds (= voluntarily). If the war is not popular (too far away, unjust, painful, etc), the people won’t buy the bonds. If taxation is too much, people will revolt.
So, weak money allows for total war. The country with weak money will win the war. So all countries will switch to weak money.
But even without war. It’s like a darwinist selection of moneys. 20th century is the moment when gold became uncompetitive because of the progress of telecommunications. Moving gold became too slow and expensive, and so people switched to weaker moneys (fiat), because that allowed to transfer the money electronically. The downside: centralization of the ledger (via banks, then central banks).
To get back to hard money, we need a money that imposes itself sneakily to the countries…