The Monetary System of the Future

In today’s monetary system, wage-earners never win, as fiat currencies depreciate faster than wages increase. While an ongoing debate about raising minimum wage rages, both sides often miss the bigger picture of why workers demand higher wages – their purchasing power has been eroded. Or rather, it has been stolen, some might say.

Inflation persists as an insidious form of stealth taxation. This is a feature of our present fiat monetary standard and not a bug.

In today’s system, wealth and income inequality often get blamed on capitalism, despite the fact that a centrally-planned and controlled economy represents the antithesis of a capitalist system.

Capitalism also requires capital, i.e. savings. When interest rates are at or near zero, the incentive to save vanishes. 

Capitalism cannot happen under central banks enforcing zero interest rate policy (ZIRP).

Capitalism also ceases to function amidst an utter lack of free market competition. In a world where centralized oligopolies for services like social media, ridesharing, or investing dominate the landscape, the solution in the past has often been to move away from capitalism altogether. 

But today, decentralization offers a better option. With peer-to-peer monetary networks, rideshare drivers can get paid directly. Social media platforms reward users for content creation and curation. Exchanges can function in the absence of centralized control.

What might the solution to all of this be? Is there any hope for the future?

Creating a solution

It’s somewhat of a misnomer to say that crypto is the lone solution.

The monetary system created by ruling elites, cherished by oligarchs and scorned by the rest of us can’t be fixed. Attempting to do so would only recreate some altered version of the status quo.

Instead, we can create something new entirely. There are a few potential options.

Adjusting the status quo

The first option would involve replacing the US dollar with a new reserve currency. The status quo would remain the same, albeit with a different currency in focus and a new superpower at the center. For example, the Chinese yuan could be made the world’s reserve currency. This would amount to rearranging chairs on the deck of the Titanic as it sinks into the depths of the ocean.

Re-engineering the system

The second option would involve some altered version of the current system. There has been some talk of the IMF potentially using its Special Drawing Rights (SDR) currency as a reserve currency, for example. Perhaps the IMF could absorb all the debts of every nation on Earth and become the central bank of central banks, issuing SDRs to all member nations. This would unite all nations under a single currency and system. 

Rebuilding the system

Rebuilding the system is the third option and the one we’d most like to see the world shift toward. 

The monetary system of tomorrow could be based on a deflationary bitcoin standard rather than an inflationary fiat standard. Workers could see their purchasing power increase over time as a result. Other cryptocurrencies could be allowed to compete freely on the market. Central banks would lose their monopoly on currency creation. 

The monetary system of tomorrow could empower people to become their own banks and reduce or eliminate governmental influence over personal finances. Some economists have asserted that doing so could be key to creating a sound money standard.

Famed Austrian economist and 1974 Nobel Laureate Fredrick Hayek once said:

“I don’t believe we shall ever have good money again before we take the thing out of the hands of the government, that is, we can’t take them violently out of the hands of the government, all we can do is by some sly roundabout way, introduce something that they can’t stop.”

Cryptocurrencies seem to fit that bill quite well.

Putting ideas into practice

How would all of this look in practical terms? 

One simple form it could take could be to replace the gold standard with the bitcoin standard. The Satoshi could be used as a unit of account, the Lightning network as a medium of exchange (or various altcoins tied to bitcoin, if individuals prefer), and bitcoin could be the ultimate store of value.

All other currencies, whether they be fiat, altcoin, stablecoin, metal, or something else, could be tied to bitcoin. The Bitcoin network’s scalability would become irrelevant in this case, as small transactions could either occur on layer-2’s like Lightning or using different currencies and networks.  

A revolution overdue

Digital assets are an idea whose time has come. The worldwide appetite for a new monetary standard appears to be large and growing. Nations like El Salvador have already begun to integrate bitcoin into their financial systems, and this is only the beginning.

People everywhere want to be empowered and enabled to take control of their financial futures. Decentralized cryptocurrencies might be the most perfect vehicle created to-date that could make this dream come true for billions around the globe. The differences between the old way and the new way would be like night and day.

A currency backed by code. A system based on permissionless equality instead of privileged access or exclusion. And a monetary standard rooted in deflation and rising living standards as opposed to inflation and increasing impoverishment.   

Such a reality is within reach. It’s our hope that the new Bretton Woods conference will sow the seeds for this new and brighter monetary landscape.

This article is part 5 in a 5-part series about Bretton Woods. Blockworks will be hosting a new Bretton Woods summit in the same location, 50 years later. Find out more about the conference and apply to attend today.