Money as a Store of Value

Gradually, as humans became more civilized, they chose precious coins as their tool. The preciousness is the qualitative way.

Coins standardized the value and prevented fraud:

Mints are institutions exactly of the same nature as the aulnagers and stampmasters of woollen and linen cloth. Through a public stamp, they ascertain the amount and uniform goodness of those commodities when brought to market. The first public stamps affixed to precious metals were intended to ascertain the goodness or fineness of the metal.

Adam Smith

This money system was used by the commercial system and mercantilism.

• This disrupted native modes of valuation and exchange of using commodities and weights.

Coinage was later standardized into silver, and augmented by paper bank notes and paper stock certificates. This allowed rapid economic growth because people could now increase money nominally by writing bigger numbers.

This manifests as paper assets and paper wealth that can be created or be made to vanish quickly, through:

• hyperinflation and financial crisis during the Mississippi Scheme
• stock bubbles like the South Sea Bubble
• poverty and inequality during the industrial revolution

These problems persist even today.

Why Money Causes Problems

Money causes these problems because:

• it is a monopoly product by the central bank (wholesale)
• banks and financial institutions control its flow (retail)

Cryptocurrencies were supposed to address these problems by:

• having a constant, predictable supply not controlled by banks
• using market forces alone

However, the lack of control in cryptocurrencies made it susceptible to hacks and fraud.