Sci-Fi Money
By Davi Barker

In the upcoming film Silver Circle an underground rebellion goes toe-to-toe with the Federal Reserve and its latest central planning monstrosity, the Department of Housing Stability. The key arrow in the rebels’ quiver is an alternative silver currency called “Rebel Rounds.” Science fiction often has an amazing predictive power, as authors reach into the future and drag back an artifact for us to emulate (or prevent). Unfortunately most science fiction is auspiciously silent on the issue of money. Usually characters swap nondescript digital “credits” in arbitrary denominations. Gene Roddenberry notoriously declared currency obsolete in the Star Trek universe, with the exception of “gold-pressed latinum” used by the Ferengi who only served as an absurd caricature of capitalists to be ridiculed by the mighty socialist Federation.

Before we can speculate what money looks like in the future we’ve got to ask, what the heck is money anyway? Keep in mind, I’m no economist. This is little more than the ramblings of an unpublished sci-fi writer moonlighting as a economics blogger.

Historically economists recognized four functions of currency that can be summed up in an old mnemonic limerick: “Money is a matter of functions four, a medium, a measure, a standard, a store.” In modern parlance, a medium of exchange, a unit of account, a standard of deferred payment and a store of value. To simplify I reduce it to two characteristics: Stability, meaning it should be nonperishable, and without wild fluctuations in value, and fluidity, meaning that it should be easily divisible and transferable without depreciation. Determining the efficacy of a commodity as a currency is a relatively simple matter. If the commodity’s score for stability is plotted on the vertical of a graph, and it’s fluidity is plotted on the horizontal, then calculating the total area of the graph will give you the measure of the commodity’s quality as a medium of exchange. When given the choice a free market will tend toward the commodity that scores the highest on this index, and over time it will become the standard.

Historically markets chose precious metals because they rank high in both stability and fluidity. As elements they will never spoil or corrode. Being metals they hold their form making them easy to standardize and transfer. These characteristics, along with their relative scarcity have made them the chosen currency for thousands of years. So, why has the usurious fraud of paper currency continued in the face of so many alternative rebel silver projects? Part of the answer is legal tender laws that obligate it’s use, but the fact is paper may score higher than silver on the stability/fluidity index. That’s not a defense of paper currency. It’s just an economic reality caused by those legal tender laws. Let me explain.

The stability score of paper starts out strong. Like any con, it’s most successful before the marks get wise to it. But over time it’s stability score drops at an ever increasing rate until the point of collapse. It’s a mathematical certainty. Until then paper makes up for its lack of stability with high fluidity. Paper weighs less than metal, and checks make it possible to transfer virtually any amount. So long as coinage is accessible it is functionally divisible, and because it’s legally obligatory it’s already accepted everywhere. So, even though inflation causes a constant depreciation, people tolerate it because of its ease of use, at least for now. At some point, that line will be crossed, and the instability must inevitably lead to a collapse, so it’s those with the longest view who are seeking alternatives.

The anti-Fed rebels like to imagine the collapse is right around the corner, but I’m not so sure. All our historical indicators of paper money were actually paper, but the dollar is more digital at this point, which means it’s potential fluidity is exponentially higher. Credit cards allowed the transfer of huge sums over great distances... for a fee. PayPal enabled people to circumvent credit card companies over the Internet. Now there are many applications to transfer funds instantly using smartphones. The Information Age has created unprecedented fluidity in the currency, which has extended the life of the dollar beyond all previous examples of paper money.

What we have now is a state monopoly destroying the stability of the dollar, and an ecosystem of private fund transferring services constantly competing to improve its fluidity. After the collapse inevitably comes these technologies will still exist, ready to substitute whatever currency comes next. Whether they know it or not, these companies are developing the digital infrastructure of the future currency.

Rebel silver projects haven’t failed because of a deficiency of stability. Moving forward they will succeed when they shift their strategies toward competing with the dollar in the realm of fluidity. Bitcoin is the first in what I can only assume will be an avalanche of digital currencies to come. It has all the fluidity of the dollar, but it’s adoption has been stunted by uncertainty surrounding its stability. In fact, the value of Bitcoin has been incredibly volatile. Part of the reason is that the value of Bitcoin is not based on a commodity, but in its anonymity. That shouldn’t be scoffed at. Economic privacy is incredibly valuable, especially right now, but it’s a value that is inexorably tied to the economic interventions of the state, which are unpredictable. The future belongs to liberty, and in the free market of the future, which will be characterized by competing state free currencies, protection from state manipulations will be the norm. It’s like medicine. Once Bitcoin succeeds, it will render itself unnecessary.

I imagine the first state free currencies will be based on the commodities sold by the firms that issue them. Gas cards will be enumerated in gallons and become as fluid as Visa and Mastercard. Mobile applications will instantly calculate the exchange rate between a gallon of gasoline and a frequent flyer mile. For a time the digital market will resemble the barter economies of old, only much faster. But this system will be subject to extreme volatility as it is essentially the same as stock trading and companies will come and go. So, some commodities will only be desired for their utility. At that point they will make the same decision that the old barter economies made for the same economic reasons.

The currencies of the future must combine the stability of precious metals, and the fluidity of digital exchange. That becomes entirely possible once you realize that the only thing it takes for a financial transaction to occur is a transfer of title. A gold brick will sit in a vault and be simultaneously owned by thousands of shareholders who transfer their shares instantly from any distance from any electronic device with Internet access. When commercial space travel becomes a reality this will be crucial because physical precious metal is heavy and will require tremendous fuel to transport, but digital signals are weightless, and can be sent as easily to distant colonies as to your corner grocer.

Physical possession of money will still be desired by many consumers. Even though it would require the overhead of shipment and storage many will pay that price for the security. As a precious metal advocate people often claim that there is not enough gold and silver in the world to serve as a currency. This is simply a misunderstanding of supply and demand. If the demand of the market dramatically outpaces the supply of precious metals the value of precious metals rises to meet demand. One of the most interesting things about gold and silver is that as elements they are divisible down to the atom without depreciation. Up to now they have been minted into coins as this technology met the distribution needs of the past. But in the future I imagine devices will be developed that can store incredibly small volumes of precious metals, and when necessary heat them to a liquid state and transfer very precise measurements from one device to another. The device could test the purity of the metal, give a digital read out of its contents, and perhaps even dispense a coin from its holdings when desired. If the market is allowed to innovate such devices could become as cheap as cell phones, or perhaps even integrated into them.