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Yours, Ours & Mine: How Crypto Helps Us Reclaim Our Money Supply
(Guam, USA) – As developers race to build the digital launchpads, orbital space stations, and intergalactic infrastructures of decentralized finance, The Alchemy Pay protocol is being celebrated as the oil of gladness in FinTech’s gallant quest into the cryptoverse. Ideally, the mission to decentralize finance is the fantastic voyage that conquers new frontiers of time and value for everyday people.
While the word “alchemy” is traditionally associated with the illusive transformation of common metals into gold, the production of magical elixirs, and the formulation of universal solvents, the Alchemy Pay token (ACH) is actually making such dreams come true! Alchemy is converting the myth of its namesake into reality as a proven blockchain scaling provider for some of the biggest names in cryptocurrency. Perhaps that is why earlier this month COINBASE added ACH to the growing list of tradable assets on its exchange. But ACH is just one of many new tokens recently introduced to users of this central exchange, whose operators have lain claim to the prospect of becoming “the Amazon of Crypto.”
It’s all got me to thinking about how we arrived here: a metaphysical new consciousness of what money has been, what it’s becoming, and what it can be.
Photo credit: HBR, Wikicommons.org
Whatever money once was...
From bronze ribs, rings, and axe blades to mulberry bark, cowry shells and wampum; and from rock salt, tally sticks, and gold taels to Katanga crosses, squirrel pelts and potato mashers, money has assumed countless many forms over the centuries.
In the years of yore, sometimes money devolved into fiat and the alloying of precious bullion with cheaper metals. But more often than not, any given currency held intrinsic value and was a portable store of wealth that could be exchanged for other goods and services. Whatever its face value, it traded freely because its common appraisal was widely recognized in the marketplace. Of course, silver, gold, and other precious ores have also been utilized as means of exchange for centuries in the form of jewelry, ingots, trinkets, or coins. Whatever its worth, money and its historical highs and lows all redound to the traumatized status of the world reserve currency of our day.
An empty treasury
The loss of the innate significance of American money occurred over time, from the gold and silver standards inherited from centuries past to the expanding supply of the debt-riddled fiat currency we spend today. Rising government write-downs; the profligacy with which money is spewed from central banks; and the cheapening of the hard coin supply with less expensive metals are all clear signs of the debt spiral at hand.
According to CoinNews.net, in 2020, the U.S. Mint spent 1.76 cents on every penny and 7.42 cents on every nickel it produced. Fortunately, the bureau still came out ahead on dimes and quarters and wound up a half billion in the black on seigniorage. But with the constant debasing of our money supply, how much longer can it be before the Mint itself goes bankrupt?
Cheaper coins
The year 1964 saw the last mintage of 90% silver coins for general circulation in the U.S. And the silver content of American coinage continued to dwindle from the mid-60s through the mid-70s. Today, we’re to the point where even our “copper pennies” are 95% zinc! Which is better than aluminum, but don’t think that’s not an option.
The U.S. Mint experimented with aluminum pennies in the early-1970s, but I presume the metal proved too soft for circulation. While you’re thinking that one over, consider what “precious metal” negative-interest-rate Bank of Japan has been circulating since the mid-1950s to pump out yen tokens.
Although the face values of America’s paper money certificates were once presumed to represent an equivalent measure of silver or gold, the practice of fractional reserve banking meant that actual deposits did not always equate to the face values of notes wagered. Better assurances of fungibility were held in pure gold and silver coins instead of their paper “equivalents.”
The devaluation of currencies is a common thread weaving the span of centuries and the breadth of society, whether it be through alloying precious metals with lesser ores or circulating banknotes in abundances beyond the reserve commodities they purport to be backed by.
Swimming in a sea of red ink, today we take it for granted that central bank currencies can only be supported by a sovereign issuing authority’s ultimate capacity to pay down debts and defend its citizens’ way of life.
Photo by: Sgt. Alex C. Sauceda, U.S. Marine Corps. More info at Wikimedia.
Retaining value
Fortunately for U.S. citizens, American money is still backed by the most sophisticated defense force on the planet while remaining the world’s most dominant reserve currency. Our dollar is tirelessly traded on Wall Street and foreign exchange markets circumferencing the globe.
The USD also enjoys the prestige of being the main means of exchange for nations purchasing petroleum, thereby giving it additional status as the world’s top petrocurrency. Owing to the U.S. petrodollar's high-demand fossil-fuel backing and America’s eager gunboat diplomacy, many countries’ currencies are pegged to the USD for sheer sake of this imperial coin's stability.
Heck! Whole foreign economies are dollarized because of the greenback’s relative dependability. Furthermore, as of this writing, no fewer than three U.S. Dollar-pegged stablecoins are listed among CryptoSlate’s top 20 digital currencies by market capitalization.
Nevertheless, the federal government’s printing presses and coining machines continue to hemorrhage more fiat, the dollar continues to slide in spending power, and sooner or later something’s got to give.
Pricing out
It’s not as if the almighty American dollar isn’t in real danger of further long-term devaluation, instability, and waning influence as federal debt approaches $29 trillion and China vies for dominant reserve currency status as it leverages blockchain technology to digitalize its yuan into an instantaneously fungible central bank digital currency (CBDC).
Here at home, where the Fed still contemplates the pros and cons of making its banknotes CBDCs, American taxpayers and cryptocurrency enthusiast haven’t forgotten the federally negligent 2008 housing crisis. Yes, the one that left embittered homeowners and retail investors dangling while the U.S. Treasury’s Emergency Economic Stabilization Act of 2008 bailed out big banks and corporations.
The general perception is that weak national banking regulations had encouraged mass housing sales to unqualified buyers across the nation; that thousands of risky and delinquent mortgages had been rolled into high-risk assets that were traded on Wall Street; and that hardworking everyday Americans who did pay their bills on time were left holding the bag with the cheapening of their money supply, which was inflated to cover Wall Street losses while highfalutin bankers got off scot-free.
As the fallout from the crisis continued to diminish the earning-and-spending power of the middle class over the next several years, average Joes were still struggling to get by. Soon picketers were descending on Zuccotti Park in the much publicized Occupy Wall Street encampment protesting the Congressional lobbying, hands-off “oversight,” and fast-and-loose trading practices that had led to the Great Recession.
Meanwhile, prevailing economic conditions were widening the gap between haves and have-nots and quietly giving rise to the birth of the cryptocurrency revolution. (Thereby foreshadowing the advent of decentralized finance.)
Blockchain arrives
The cryptocurrency subsector of the economy began in earnest in 2009 with the rise of the pseudonymous Satoshi Nakamoto, mysterious forger of the first viable blockchain cryptocurrency, Bitcoin (then priced as low as $0.0008). BTC and altcoins grew evermore popular among early adopters who quickly warmed up to the potential of this homegrown online money supply that they could control themselves through mining and anonymous usage.
Since then, blockchain coinage has certainly been abused by its share of black-market swindlers and quick-rich scammers and has suffered some reputational loss because of it. But hasn’t fiat currency been through the same drill, in all markets black and gray and on all collars blue and white?
Nowadays, even though crypto prices are heavily influenced by the trade whims of whales, Bitcoin and the slew of altcoins that have risen in its wake are still broadly seen as a collective backlash against the abuses of the central banking system.
The rebellion culminated in the Main Street vs. Wall Street movement that followed the 2008 housing crisis in what amounted to an involuntary citizens’ bailout of toxic commercial banks deemed “to big to fail” by Capitol Hill, the White House, Treasury, and Federal Reserve. In other words, Occupy was the sudden mass rejection of big-banks’ long-term destruction of middle-class wealth as well as the negligent complicity of the central authorities over the course of too many decades. Yes, this was the lance-prick that broke the bull market’s back!
Retaining value through deflation
Unlike central banknotes (U.S. paper dollars, hard metal American coins, and digital debits and credits), cryptos are not on loan from the Federal Reserve System to the U.S. Treasury at interest. While the Treasury sells debt to the public-private Fed consortium in exchange for a government-sanctioned money supply issued as credit and generated by the United States Mint, the worldwide collective of cryptocurrency producers doesn’t follow this system.
Rather, independent crypto masterminds, minters, and prospectors are driven by the decentralized income to be derived from the creation of new crypto coins and tokens as well as the use cases and speculation that promise to follow. Visionaries, investors, and developers generate encrypted digital money for use on public blockchains. They do this on their own terms, building original technologies, using their own computers and personal property. Crypto entities such as private companies and DAOs control the inflation of their native tokens either by preprogramming them to stop the coin presses once a certain circulation is reached, or simply by destroying excess mintages in a practice called burning. This crowd believes the preprogrammed worth of these new assets must be hedged against the inevitable speculation.
Different cryptocurrencies represent different stores of value. Some focus on privacy and acceleration of payment. Others are more concerned with solving scaling problems in FinTech, DeFi, or trading ecosystems through the development of smart contract infrastructures and affordable gas fees. Various cryptos are tokenized representations of hard assets like real estate, commodities, sneakers, or works of art. And some hold special access privileges for fans and club members. Non-fungible tokens even allow gamers to purchase virtual goods and services for use in alternate digital worlds. Today, money can be anything we want it to be and do anything we need it to do while rewarding us the full value of our life work.
Note: No part of this article is investment advice. Please do your own research.
Thumbnail photo credit: Hand-colored portrait of a Japanese man in armour, Baron Raimund von Stillfried (1839–1911), Wikimedia.org.
