The parallel money system

Why has the government been questioned when deciding to interfere with the economy? Why do we have recessions and even depressions in the first place?

Milton Friedman was an American economist who questioned the government’s position when it interfered with the economy. Opposite to Keynesian economics, which supports government intervention, Milton claimed that the government was a guilty one who constantly caused the economy to run into recession and occasionally into depression.

Why was the government bad at the economy?

The government likes to tell people what they should and should not do. However, the government has no better understanding of the economy than people do. They got resources and do not face any consequences even if they make mistakes. 

The market is a price system

Price is information transmitted from buyers to sellers. It assesses the relative values of exchanged goods and services. If the market sets prices, it shows consumers and producers are at the agreement that the market is the most efficient route to complete such transactions. Price usually contains the most important information between buyers and sellers before completing the transaction. Any distorts of such information will make the route inefficient and lead to waste. The government is wasteful simply because they usually distort price information through its influence, make unilateral decisions that impact the economy incorrectly, and waste resources for the general public to determine what is going on. 

In the current high inflation environment, the government made a mistake regarding the inflation assessment and made mistakes likely again during the recession and turned the economy upside down into recession faster than they anticipated. 

What is the function of the market?

The market is meant to distribute resources according to people’s needs, not their ability to pay. However, the government wants people to think the market is their ability to pay, so they can manipulate the pay rate that directly influences the market. When the market was forced to change, the consequence was that the market would have to restore its balance after the change, then the government would change it again; the market would restore again. Will a break point exist when the market can no longer heal itself? The answer is yes, and it triggers inflation. Inflation is bad because it eats the value of money. Similar to a black hole, it sucks everything in no matter what and does not give anything back.

How to restore the market?

There are several ways. One is to replace the government with a new one to reset the economy. But, of course, the cost is enormous and politically intolerable. The second is to replace the central bank. It is unacceptable because big banks will not allow it, and politicians forbid it. The third way is to replace it with a new fiat currency. It is not permitted politically if your fiat current is the world reserve. It would trigger a global financial crisis. The fourth solution is government controlled economic system. When the government controls the economy, it can easily control unemployment to a manageable level to press down inflation and then continue interfering with the market until it can no longer do so. Then the first solution will kick in.

The parallel money system

In the modern digital economy, we luckily have alternative money that helps us better understand the market and our economy. Compared to the existing financial system, the cryptocurrency market cannot be manipulated by the government but to protect the users. This is because the economy in the digital currency is a pure price system. Therefore, the government cannot and would not care to interfere with the system. Thus, the market can fluctuate, but it is always restored to equilibrium. 

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neyPhoto by Aditya Saxena on Unsplash

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