The Death of Fiat Currency and Control (an inevitability)

Here we are only going to ask a few questions to answer the #EconomicRecovery2020.

What was the economic impact of the Industrial-Age Revolution? It was the end of the Feudal system, best known today as the Rule of Lords and Nobles in Europe. Feudalism was a pyramid scheme where Lords who owned land allowed Peasants to live off the land and taxed their productivity in return. The taxes collected by the Nobles were not so much in money, usually a portion of crops or herds, but it was still an economic system (an interchange of value). Peasants needed to eat, those who gave them the means to eat, made the rules (by Fiat – by decree). Part of the economy was the forming of armies to protect the Land, this tax was paid in bodies and blood. That hierarchy (pyramid) is not so unlike the present day Nation-States around the world (Lords), and not so unlike the Corporations (Nobles) who deduct taxes from worker’s (Peasant’s) wages, which is conducted by Fiat! Using a form of currency that is created by decree (by Fiat) of the government.

Once the innovations of the day presented opportunity to make a living elsewhere, the Peasants left the fields, moved into cities and worked in factories. With the loss of their work-force, the hierarchy of the Feudal system collapsed beneath the Lords and Nobles, it was an inevitability. It took decades, but once it began it was unstoppably replaced by formal centralized governments. This is the fate of all pyramid schemes, at some point they are not sustainable. The weight of the upper layers is supported by greater numbers in each successive layer below. If the bottom layer (your labor-force) vacates, the whole system collapses. A new pyramid was invented, the money-based corporate economy. Suddenly Fiat-Currency was the economic medium of interchange, a necessity for the purpose of taxation.

What will be the economic impact of the Information-Age Revolution? Imagine a place where workers from all around the world can login, contract for, and conduct work. There are several Freelance marketplaces in existence already accounting for an estimated 5% of the US GDP. Where we are today (post-pandemic) with tens of millions of unemployed, there is a greater urgency and demand for the kind of opportunity afforded by these marketplaces. Technologically, it’s a small step for the Freelance Work-force to convert to cryptocurrencies. Then, with the addition of collaboration tools that can record agreements on the Blockchain, Freelancers could easily form into Franchises, free of many of the barriers typical to startups. With crowd-funding for capitalization, and innovation encouraged by a distributed authority architecture, Decentralized Autonomous Organisms (DAOs) will form spontaneously as the solution to double-digit unemployment around the world. This will literally be the re-enactment of Peasants vacating their fields for the greater opportunity of factory work. Along with them will go the economics of their productivity. The pyramids of Lords and Nobles will fall into ruin without their work-forces. The once robust fiat-currencies, made weak because of the enormous debt burdens amassed by overspending, will deflate and become useless for holding wealth.

What will be the result of Equal Opportunity around the Globe? Hungry People need to eat, whomever makes that possible also makes the rules. This is the lesson of history. What if people feeding themselves, and making the rules for themselves, was the answer to strife between nations? Economics, politics and power are all inseparable. Imagine, large and small Franchises made up of Freelancers from all around the Globe, living in a daily interdependence upon each-other. Nation-State’s borders will become invisible to the individual daily experience of The People. Remember, all the power pyramids throughout history have needed The Will of The People to empower their barbarianism. It is very difficult to win a war, as Saddam Hussein found out, when your Army surrenders in droves.

The first effect of Global-Equal-Opportunity will be individual, a dissolving of the ‘us and them’ perspective that alienates people of different countries. Foreigners working side by side, soon become friends. The second major effect will be reduction of national tensions as unemployment improves. The combined result: the ground on which separatism stands in various Geopolitical factions will give way to cooperation in a diversified world-economy, rather than competing in separate economies.

What if all the Fiats died, what would that look like? Each Fiat currency is a representation of the Nation-State that decrees it into existence. If they did not exist, would the Nations cease to exist? To answer this question we need look no further than the 12 European Union countries who originally adopted the Euro as their common Currency. Now 19 of the 27 separate Nation-States participating in the EU have influence upon the Euro as a commonly used Fiat-currency controlled by the European Central Bank. But what if it wasn’t a Fiat, what if it were a Crypto, what would happen to those Nations? They would continue in every way, except their economies would not be at the mercy of regulatory policy. This raises the question: Is regulatory policy actually necessary? Only when an economy is built upon speculation (credit/debt). When we spend money we don’t have, gambling that we will get it, before our debt payment is due, we create risk. Economies built upon the value of productivity do not create the risk of debt and therefore don’t need to regulate the risk not create.

Was the ‘Gold-standard’ replaced by Oil, and what can we learn? Money has two functions, the currency part (to transfer value from one to another in a transaction), and the wealth part (to store or bank an accumulation of value without degrading over time). The wealth part is only a concern when your transactions deliver more than you need to spend; when the economics are profitable. This is where the Gold-Standard (established by the Bretton Woods Agreement) comes in handy. There is only so much Gold around the world and everyone likes to own it, so making your Fiat-currency represent a certain amount of Gold causes it to become very stable. The price of Gold is stable, so your currency becomes stable, making it good for wealth storage. This worked really well for the US after WW II, from 1944 until 1971 when other nations started asking for the Gold, and the US Dollar was disconnected from it. Suddenly the USD was a free-floating-Fiat like all the others, and it wasn’t doing well. It had been popular because the Gold-standard made it safe for wealth accumulation and storage, but with no tie to Gold it was losing value quickly.

The really big problem was that the Bretton Woods Agreement also made USD the Reserve-Currency around the world, meaning that Nations would keep large amounts available to do business with each-other. As the world economy grew, demand for USD was high and the supply grew to meet it (more of it was printed, all backed by the same amount of Gold). When the tie to Gold was cut it was less safe for wealth storage because of less demand on the huge supply. The solution was to create a new large demand, which would need the large supply. In 1973 an agreement with Saudi Arabia to only trade its Oil for USD and then to store its wealth in US debt, created demand for USD again. In return, the US committed its military might as protection. Soon all of the OPEC nations joined in on the military protection deal. This trade agreement created what is called the Petrodollar which has served as the ‘Blackgold-standard’ functioning to stabilize the USD just like Gold did. Like Gold, there is only so much Oil, and everyone needs it.

There is one very big difference between the two stabilizing-standards; Gold is not a perishable commodity, while Oil is. It is the constant transfer of value (currency) by the Global Oil Industry that recreated a large demand matching the large USD supply, then when the profits (wealth) are used to buy US debt in USD for long term storage, it becomes ‘Money’ again, like ‘Gold Money’ that can sit in a vault without decaying. Remember that all Money only has the value, we as people, place on it. So the OPEC profits placed value upon the US debt making the USD valuable. Is the lesson to be learned from this history, nothing more than how to keep a Fiat-currency alive by the cost of bodies and blood spilled in The Middle East?

What is the Meta-Economic model of the OPEC-USD stabilization? Looking at the OPEC-USD relationship economically, there is a simple bilateral supply and demand mechanism. Forgive the complicated sound of it. It’s actually just the marriage of two different currencies, each a commodity with a perishable value only arrested by the demand created by the other. This symbiosis is what makes it stable. (The following is an oversimplification, but that is the function of a model, simplification without the loss of critical information.)

The natural demand on Oil as a consumable-commodity is the actual Human value placed into the whole system, creating a ‘currency flow’ by OPEC productivity. Oil is produced out of the ground and literally flows through pipes all around the World to the point of consumption in the gas tank of cars, factory furnaces and chemical formulations. Petroleum is a currency transferring value at every step along its journey from well to end-use. This half of the relationship is made up of countless agreements between hundreds of millions of people all around the Globe. We can put a border around all of it, with the concept of an ‘Economic Enclave’; a territory defined by an economy, i.e.: the flow of Blackgold. Then the other half of the bilateral mechanism is the overlay of USD flowing in the opposite direction. There are little pools of USD scattered all around the Globe which is used to transfer value into the Oil-Economy Enclave (OEE) and when it accumulates at the production end, it is stored in US debt-vaults. These debt-vaults only perish with the loss of demand on the supply of USD, so the OEE demand makes them safe wealth storage. These wealth stores return the USD from the OEE back into circulation around the Globe through other Economics feeding the little pools that feed into the OEE. The USD currency is a closed system where only a finite volume is needed, while the OEE is an open system that requires a continuous renewal; ‘productivity’ as its value.

The key point to recognize about the health of this marriage between the bilateral currencies is that they are flowing in opposite directions, and only one of them is actually a consumable. Therefore, only one of them needs to be replenished, while adding more (of the other) USD to the system injures the relationship. Printing more USD dilutes the value carried by its circulation, simply because it is not a consumable. This is why all Fiats eventually die and are replaced by another, causing pain and suffering in the process; because they are too easily (recklessly) printed. With a fixed volume of the Reserve-currency, the only variable is the demand on productivity, well managed, it makes the bilateral economic system very stable.

Will a Crypto-Reserve-Currency be a Bad/Good thing? This is a simple question. As seen above the nature and function of the Reserve-currency is to transfer value between Consumable-Economies. In the hands of governments, Fiat currencies are manipulated for self-interest and ultimately fail. When there is a finite fixed volume of it in circulation it serves well for Wealth-storage and Transfer-of-value. This is why a well-constructed Cryptocurrency is ideal for the purpose of the Reserve-currency.

What if the Global Economy consisted of Economic Enclaves instead of Waring Nations? Enclaves would be entrepreneurially rich environments attractive to independent Freelancers scattered all around the Globe, drawn together because of the communities they form. It may take decades to fully evolve, but this is the natural progression of the information-age; the forming of civilized societies unbound geographically and oriented by grand alliances such as the health of the Planet, clean drinking water for every Human, and the advancement of Science and Art. The differences between them will not be dictated by power-hungry regimes bent on proving superiority by the oppression of others, but by individuals whose passions are associated with the production of sustainability in every sector of the Global-Economy.

How do we get there? We begin with the development of the software, The DAOist Enclave Project (The DEP), and the seeding of a new civilized economy through The Benefactor’s Assimilation Escrow (The BAE). Then when we have created #GlobalEqualOpportunity (GEO) we participate in the revolutionary evolution of Humanity out of the barbarianism of the past. Please do your part to involve everyone in the solution to the now estimated 195 Million unemployed whose lives are on the line!

Please contribute to the GEO-BEA: make your pledge here at GEO-BAE.com
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