Here is the abstract of the talk I gave at Bitcoin Expo2015.
We all know what money is, don’t we? `Money is the notes and coins that governments print and mint to facilitate economic transactions`. If only it was that simple. The vast majority of money does not exist as notes and coins, but as imaginary numbers written into a bank ledger. The bank which doesn’t need to have that money – uses its government-backed right to magic the money into existence through the Fractional Reserve System.
Money is a statement of faith in the value of these instruments of exchange. Money is simply a self-referential promise to repay a debt, with money – and government-backed threats ensure repayment … with interest. However, the magic collapses if too many people default on their loans, or if too many people demand their money back, precipitating a run on the bank.
Only blind confidence (or is that ignorance?) keeps this whole anti-gravity machine from crashing to earth. The time lag between borrowing, and repayment (in full plus interest) keeps this self-referential system of fiat money afloat. But this requires the creation of new money in the interim, in order to pay the interest over and above inflation. This leads to an exponentially increasing scale of indebtedness, which must eventually lead to collapse.
The history of money is that of government interference. State inspired inflation is as old as money itself; from ancient Babylon, to 14th century China, to the ‘Great Debasement’ of Henry VIII, to the Weimar Republic, right up to present day Zimbabwe. As far back as Plato’s moneyless utopian Republic, governments have wanted non-convertible currencies to protect their economies from external forces, and prevent wealthy dissidents escaping state oppression. Since this is impossible, instead they have always sought to erode three particular properties of cash – its anonymity, fungibility, and ability to store value. By placing Radio Frequency Identity tags in bank notes this is now possible.
Concerned individuals are responding by producing their own currencies. Bitcoin and other blockchain-based currencies are leading the way. In this talk Professor Angell will give his radical ideas of what this all means for the future of money.