The Unique Property Site Blog

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2022 is coming, and with it The New Money

What is going on right now with money?

Suddenly, out of nowhere, has sprung this new money. Bitcoin, Ripple, Monero, stable coins, and all the other crypto-currencies. They threaten to overturn the traditional view of money.

Those who dont understand the whole point of money simply stare and say "But it's not worth anything."

What such people dont understand is that the whole point of having money is precisely because it has no intrinsic value.

Bartering works in a very simple society, but not in a highly complex modern society. Way back before money, if you had chickens, you would probably have a surfeit of eggs. If someone else had six apple trees, and didn't need all that fruit, there is the chance to barter one product for the other. Back then there weren't any shops, so there would be nothing to buy.

Those days are gone. Probably just as well. We now use money instead, and the whole point of money is that it isn't worth anything at all, it is only an intermediary and is useful only inasmuch as people agree to use it as such. You can see what the eggs and apples are worth by finding out what money people will give for them.

Look at the money in your wallet. It consists of paper with printing on it. It's no use as anything other than a kind of contractual equals sign. I go into a shop. The small rolls cost 12 cents. The larger rolls cost 16 cents. Bread costs anything from 45 cents to 1 euro 50. Try swapping any of that for an hour's use of a JCB to dig a new driveway.

OK, so bitcoin isn't worth anything intrinsically either. What gives it value is the same as what gives a 20 euro note value. It's got nothing to do with anything other than people accepting it as being worth what they agree it is. Once people lose faith in a currency it becomes worthless, often very fast.

But what is happening right now?

All around the world governments are printing money, giving it away, and in doing so they are trashing its value.

The game of dollar creation is no more than a massive ponzi scheme. It goes like this: US government cant afford to pay for things, so it issues bonds (pieces of paper) that guarantee it will pay the buyer of those bonds a premium for holding them. That premium is currently round about 2% p.a. Let's assume you've just bought a ten year $1000 bond. In ten years' time what will happen? You will sell the bond back to the government, collect your $1000, and wonder what to do with the money. In the meantime the government has been paying you $20 a year for the privilege of using your money. Ooops! Only $20 for the use of your money? That proves your money isn't worth very much!

In the meantime, inflation in the USA is galloping past 6% a year (and that's the government massaged figure, but real people know it's probably closer to double that). I haven't worked out the exact figure, but in ten years' time that $1000 will have a buying power of about $350. Not a good deal by any measurement. But let's forget about you. The government doesn't give a toss about you and your financial problems. They are busy printing more bonds to sell to other mugs. They even have to print the dollars to pay you back your measly $1000. And that's the way the money goes. The government never pays back anything, it just prints more money to keep the ponzi scheme going.

If we remember the first rule about money and value, we already know that a piece of paper only has value if everybody agrees it does. In a ponzi scheme everybody thinks it's great when the scheme starts, but some way down the road people begin to realise it's all phony. Doubt creeps in. Eventually that doubt reaches epic proportions and the ponzi scheme collapses, and everybody is broke. Yes, everybody.

The ponzi scheme can last a long time, especially if there is no alternative. Up until very recently there was no real alternative at all. Gold and silver are alternatives in one sense. They act as a store of value. But no-one wants to use gold when paying for goods in the local supermarket.

Let's briefly jump back to China and its ponzi property schemes. They are great when there is nothing else to invest in over there, and they are fine while people keep investing and the prices keep rising. But we all know what happens when people stop investing. It doesn't take long for the collapse to gather speed.

In the West we have bitcoin and the other crypto coins. No-one wants to use them in the local corner shop, or to pay a bus fare, but that's not a problem. Bitcoin ends up being a store of value as well, but it is portable, fungible, and increasingly people want to be paid in crypto. It has value inasmuch as people say it does, just like the silly pieces of paper in your wallet. But what you actually use for daily living in a digital world are tokens based upon the crypto currency of choice.

That option becomes even smarter when you realise you can use your crypto-currency to underwrite your tokens. You never use the crypto-currency, it sits in a staking pool as collateral for the tokens you are using to buy things or services.

Here's an analogy. Bitcoin is like gold used to be. It sits in your bank (your hard wallet -- hard because it is stored offline unless you are doing a transaction) as your collateral, while tokens which are based upon bitcoin's current advertised value are used in much the same way as fiat currency used to be used when its value rested on the price of gold in the vaults before it got tied up in ponzi schemes.

Now comes the interesting part.

All the major tech companies are busy creating their own tokenised currency. You buy digital land in Dreamland or Sandbox with their own tokens, which are collateralised by bitcoin or ethereum holdings. You can now build a digital business on your digital land, and operate from there. It's happening right now, and making people money which can be swapped out for fiat money.

People love the fact that they can swap into fiat currencies to spend. I'm sure you know the adage: Bad money drives out the good. People will use bad money, that is, get rid of it before it loses value, and keep the good money because it holds its value or even gains in value.

Want to buy services on Facebook (sorry, Meta), then use Meta's new currency, the Diem, and use that in the digital realm. We now have, or will soon have, currencies operating in different environments. Rather like the peso in Mexico, the loonie in Canada, sterling in the UK, and so on. You will have Meta's coin to be used in their environment, another in Sandbox, another in Dreamland, and so on. And do remember these companies are already the size of small countries, and they are growing apace. Last time I looked, Apple was worth as much as one of the top ten economies of the world.

The message? Money is changing, and there are going to be more currencies to choose from to do your trading. And as these currencies grow in use and the companies operating those currencies get ever larger, government currencies are, relatively speaking, going to suffer.

As a matter of interest we already have a couple of cities in the US turning to crypto-currencies for investment purposes. There will be more. And if things carry on the way they are going these new currencies are going to rise rapidly in value.

The economic landscape is likely to change drastically as alternative economies in the metaverse start eating away at the traditional economy.

It's time we started preparing for a new world order.

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