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The Death of Money: How Covid-19 Is Hastening the Demise of Fiat Currencies

Money, money everywhere, but what is it worth? It’s ironic, but the more money there is, the less it’s worth. Read my thoughts on our changing monetary regime, and its spiritual corollary, in this week’s edition of Isn’t That Ironic?”.

Note: Today marks the fifth post in my series on the likely changes wrought or accelerated by the present virus. In the first post, I looked at the idea of creative destruction—how old structures are destroyed as they are replaced with new ones. The second post looked at how data has become the most valuable commodity in the world. The third post reviewed the four stages of the modern digital disruption of society. In the fourth post, I looked more closely at how the current wave of digital disruption will affect the professions and the way we do business. Today, I consider how the nature of money itself is changing. Of course, there’s a spiritual meaning as well.

Money is changing. Money always changes. The dominant money is generally issued by the dominant world power. In the 16th and 17th centuries, the Spanish, gold piece of eight was the main international currency. (By the way, when you cut the piece of eight into quarters, each quarter was two bits of it. That’s where the term “two bits” for a modern quarter dollar comes from.) During the 18th century, France was the world power and the French franc became a sort of international currency. Then Britain had its century in the sun and the pound sterling was used as an international currency. During the 20th century, the United States became the dominant world power and the US dollar became the main international currency and the world’s reserve currency. But the current monetary regime is once again under pressure. What’s coming next?

I think the great nation-states are grasping for power and gasping their dying breaths. During this pandemic, nation-states have grabbed massive power for themselves. Citizens are finally becoming alarmed by it and starting to push back.

Governments are also bankrupting themselves with Covid-19 aid. All the major nations were technically insolvent before, now real bankruptcy will appear. There was already so much debt in the world that it could not possibly all be paid back. All three categories of borrowers—households, corporations, and governments—were at historically high levels of debt and the credit cycle had already started to turn toward higher defaults. Debt is the biggest bubble of all time—looking for a pin. Covid-19 is the pin.

Now, governments have collectively waved their magic monetary wands and created about 10 trillion dollars out of thin air—at exactly the moment when the creation of real economic goods and services has declined. This is the classic prescription for inflation. What we call “inflation” is really the fall in the value of money. It’s ironic, but the more money there is, the less it’s worth. Every government eventually does this and it is always associated with the fall of a great power. Every major government is doing it today and it will be part of their undoing.

The digital revolution has made many government functions either irrelevant or procedurally obsolete. It has undermined most arguments for large countries; small countries are not vulnerable anymore and they pose smaller risks to their citizens and their neighbors. Natural regional differences, cultural differences, and now ideological differences are tearing many nations apart. We have seen this process begin with the UK leaving the European Union. The stresses that were apparent in 2012-15 between the northern and southern parts of the union have not gone away and other nations will almost certainly leave the union.

Even here in Canada, the stresses between the prairies and central Canada have reached the point where nearly half of Albertans would vote for secession today and an official separatist political party has formed this month. Alberta will likely secede within a decade or two and that might precipitate the devolution of the country into several countries.

In case you think I’m crazy, just try to trace all the changes in borders during the 20th century. Borders change. That is a simple fact of history. Borders are not sacred. Did you think in 1990 that within a few years Yugoslavia would become eight separate nations and suffer brutal civil wars? When you celebrated New Year’s Day 1989, did you imagine that the Soviet Union would cease to exist within two years? These events were widely believed to be impossible—until they happened. In the next decade, the impossible will become common.

But, back to money. My point in this digression is just to point out that the nation-state as a political entity is also undergoing change, even though no one has really noticed yet. Governments are desperately trying to control and manipulate us more than ever. Covid-19 is showing us that, in the digital world, we need government less and less. What people do need is to be free to work, live, move anywhere.

But everyone should have noticed what’s going on with money. National currencies have all been devaluing. The US dollar lost about 95% of its value over the past century. With the monetary insanity since 2008, national currencies are nearly in self-destruct mode.

And this, at the very moment in history when an alternative is emerging—fittingly a non-national, digital alternative. Bitcoin. Although it has its detractors, most detractors have recently been scrambling to profit from Bitcoin, to try to control it, or to produce their own alternatives to it.

Bitcoin really is money. It has all the necessary characteristics of money, and then some. It is a store of value, a medium of exchange, a unit of account, it’s fungible, and infinitely divisible. Plus, it cannot be manipulated by governments or devalued, it can be used anywhere in the world, instantly, with almost zero transaction costs, on mobile devices. Like cash used to do, Bitcoin provides autonomy (no need for a financial intermediary), discretion (is hard to trace back to you), security (from fraud, etc. because your personal information is not attached to it), and safety (is very difficult to steal). What’s not to like?

The main problem so far with Bitcoin’s use as money is its extreme fluctuation in value. These fluctuations have actually moderated in recent years and its value will likely stabilize over the next decade—at a much higher value than today. Keep in mind that all currencies fluctuate in value. Since 1980, even the US dollar has bounced around wildly, fluctuating by as much as 100% during this 40-year period. And that’s just the US dollar index (vis-a-vis other currencies). That doesn’t even mention that the US dollar has lost over half its value vis-a-vis goods and services during this period.

What’s the spiritual meaning underlying all of this talk about changing money? The new money will bring freedom and personal responsibility, direct relations between buyers and sellers anywhere in the world, and a new honesty in money.

Spiritual freedom, responsibility, honesty: Each one of us is becoming freer to seek our own spiritual path and to connect with the divine in our own way and time. The use of spiritual intermediaries (priest, pastor, shaman, etc.) will decline. Organized religion will decline. It has been for over half a century. More people will take responsibility for their own spiritual development rather than sitting in church every Sunday and thinking they have God on their side. That was never spiritually honest. We cannot “fake” our relationship with the divine. And God is on nobody’s “side”. The question is not “Is God with us?” but “Are we with God?”

This is also a spiritual corollary to direct relations between buyers and sellers. It’s a direct connection to God, or the Divine, or Source, or the Infinite, or whatever you want to call it.

Spiritual Value: On a spiritual level, it’s also about what you value. Do you value material things: cars, money, houses, social status, job title, etc.? The master teacher advised us to “store up treasures in heaven”, where they are imperishable. Only love is eternal, all else perishes. Love is the new spiritual currency, not dogma, not buildings, not rituals, not even symbols.

Covid-19 has hastened the time when all of us will come to question our values—what we hold most dear. The time has come to examine ourselves, our beliefs, our values. All of us will find reasons to change what we value. The truth is always within. Look there.

God Bless You!

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