1 min read

Sound money

The money in your wallet is not sound. By that, I mean that it's not stable. This is because of inflation. The government can tax you so you have fewer dollars, but government can also increase the money supply, shrinking the value of the money you already have. This makes your money actually a pretty poor means of exchange.

Imagine you're an apple farmer. You just harvested for the year and decide that you need to sell your crop at $1 per pound in order to have enough money to keep the farm going until next year's harvest. If you manage to sell at that rate, you might think you're all set, but when it comes time to pay your workers, buy fertilizer and pesticides, fuel up the tractor, and pay for little Timmy to go to preschool, you're likely to find your expenses have gone up.

At this point, you're forced to cut back your expenses or get a loan to cover the difference, hoping you'll make more with next year's harvest to pay it back. In the coming year, apple buyers are forced to pay more, and it's not the farmer's fault. Their expenses went up because of government money printers.

Now imagine all of this took place with a different kind of dollar. One way to prevent the rapid depreciation of your money is to get rid of inflation all together. If the money supply is fixed, you can trust the stability of your money. Zero inflation is a nice ideal, but it's unlikely to be adopted by government-backed currencies. To achieve this, merchants would have to start preferring decentralized cryptocurrencies over dollars.

Personally, I just want the rate of inflation to be predictable. Government needs to be held accountable for the power they hold over the money system.


P.S. You could even completely replace taxes with inflation. That's the way Koinos works. For real world applications, you'd likely still want to have certain things taxed where you want to discourage bad behavior or control certain types of property (like land).