ECONOMIC THEORY OF RELATIVITY

ECONOMIC THEORY OF RELATIVITY

REVISION OF INERTIAL REFERENCE FRAMES IN THE WORLD ECONOMY

Historically, universal means of exchange, acting as intermediaries in commodity exchange, acquired the status of absolute value and became the basis for determining value, leading to the devaluation of the objects of exchange. By creating additional value, people have invariably shared it with the financial industry throughout the history of civilization.

Despite the positive role of universal means of exchange in the past, they contain a built-in flaw that has led to economic crises over the centuries. Mankind did not possess technologies capable of eliminating the intermediation of a useless asset from the exchange process. Today, the question of the possibility of giving resources and created values the properties of money does not seem absurd.

With the advent of new technologies, we are on the cusp of a tectonic evolutionary shift in the economy that will occur as people realize this thesis. Throughout human civilization's development, the world economy has become globalized. The systemic differences between the economies of countries with different political systems have been "smoothed out" by the widespread recognition of the advantages of market principles of economic management.

Globalization and technological breakthroughs in the exchange of value imply the recognition of new values and virtual assets and the transformation of traditional assets, which will acquire the characteristics of money. In this way, values themselves will form a multi-sectoral monetary system in which universal means of exchange will lose their former importance. This future looks inevitable and is fully consistent with the logic of the evolution of money, which leads to values acquiring the properties of money.

The world economy is rapidly developing by the logic of an evolutionary process aimed at decentralizing relations between economic actors. In the future, the exchange rates of national currencies will lose their relevance. Instead, the supply and demand of values ​​of different origins will directly shape the global financial market without the mediation of an external asset and reference to national borders.

This process will begin in sectors that produce homogeneous products and technologically equipped infrastructures. I dare to suggest that the electricity sector will be the first such sector, where energy will become not only money but also a high-yielding asset, thanks to the integration of technology and the successful implementation of value growth mechanisms in decentralized finance.

Financial authorities must now reckon with the unprecedented phenomena brought about by the new technological order and the development of a self-regulating decentralized system of world finance. Instead of competition between national currencies - representatives of (1) total gross domestic product and (2) political-economic influence on its production process - we will see competition between sectoral values themselves directly, without the intermediation of an extraneous asset in the form of old money.

Even the reputation of economic actors down to the individual will take the form of digital assets and have a market price that is more informative than the inarticulate goodwill of large corporations.

How did I come to this conclusion, and what does the future of the global financial and economic system look like?

SECTION I

CONGENITAL DEFECTS OF THE UNIVERSAL MEDIUM OF EXCHANGE

Throughout the ages and today, the prices represented by the means of exchange do not reflect the fair use relative value of the exchanged values, because the formation of prices as an indicator of supply and demand is influenced by the value of the intermediary asset. The deflationary nature of gold or Bitcoin and fiat currency influenced by the financial bureaucracy have different effects on the economy. Still, both distort the idea of the real value of the objects of exchange, which affects the well-being of society.

Money was “invented” to facilitate exchange processes and give market liquidity to all kinds of property, but it very quickly became a symbol of wealth that was easy to store, move, and account for. This gave it the status of absolute value and made it the ultimate goal of any economic activity. Thus, it became the asset most in demand. Thus, the market value of this trade intermediary surpassed the value of the objects of exchange themselves.

The impact of universal money on people's and companies' wealth, in terms of redistributing the results of our activities, is much greater than it might appear.

GRAVITATIONAL INFLUENCE OF UNIVERSAL MONEY

I would call the impact of the universal medium of exchange on the economy "gravitational". In the past, gold, and today fiat currencies or Bitcoin, being the "most expensive" participants in exchange processes, distort the economic space, similar to the way a massive body affects the surrounding physical objects. In this case, however, the "gravity" is of artificial origin. Despite the demand for various useful values, their mutual exchange rates are always formed with an eye on the value of money.

Thus, money plays the role of a "crooked mirror" or prism that distorts the view of the fair value of an asset. Money denominates market prices for the entire range of assets in the general economic space. Ignoring the impact of the "common denominator" value through the prism through which valuations are made has an imperceptible but significant impact on people's assets.

It is important to note that using different discount rates in the asset valuation process does not solve the problem. Risk assessment is the appraiser's subjective view of the price of money, while the actual demand for each asset individually is different and reflects objective reality. Whereas in an acute systemic crisis, the value of money itself manifests itself with the most dramatic consequences: whatever the demand for a critical commodity: the value of universal money either devalues the results of economic activity due to uncontrolled inflation or impedes trade exchange due to acute shortages and high value of money, as was the case during the Great Depression.

Let me give a simple illustration of how price differences between different groups of goods denominated in a "common currency" do not reflect the real supply-demand relationship.

If the rate of return on producing boots and potato chips is equal, a person will choose to produce the less labor-intensive good - chips - even if the demand for boots is higher. If each industry had its own currency backed by the product of that industry, the exchange rate of the "shoe" currency would be higher. This would lead to an influx of investment in that particular industry. The shoemaker would increase his wealth due to the higher exchange rate of the shoe industry's currency as a producer of a more demanded commodity.

In mathematical terms, the price equation traditionally lacks a variable that accounts for the degree of real demand for assets or products for various purposes.

As a result, the benefit is not in creating value, but in extracting units of price, which concentrates most of the wealth in the financial industry on the useless, but most "valuable" asset - that's what happens in times of overproduction.

The global economy with all its institutions is on the threshold of another technological tectonic shift. Shortly, each asset class will be represented by its currency, so authentically backed that money will be associated with the commodity itself. Existing technological solutions already allow this to be done in several industries, especially in energy. Investments will flow directly to the most in-demand sectors, bypassing gold and other intermediaries from the past. The rates of such currencies will reflect the true ratio of demand for values ​​of various purposes and origins.

Throughout the previous history of economic relations, there was no other alternative: gold and all its subsequent forms effectively solved the market's problems, providing liquidity and simplifying the process of exchange. Today, the likelihood of eliminating the economy's perennial dependence on the hegemony of the intermediary - dollar, gold, bitcoin, etc. - is becoming increasingly evident.

UNIVERSAL MEDIUM OF EXCHANGE AS A CAUSE OF ECONOMIC CRISES

The problem with any universal medium of exchange is that it does not allow the market to respond on time to fluctuations in the ratio of supply and demand for values. This is because money is essentially an extraneous but indispensable asset in trade exchange that has its own value in the market. Lacking a link to the objects of exchange in conditions of inflation or deflation, universal money negatively affects the well-being and life of people. Bitcoin also doesn't solve this problem for the same reason. In addition, Bitcoin's deflationary nature removes people's motivation to create value.

In a deflationary environment, this effect is particularly pronounced when the demand for the medium of exchange (money) becomes much higher than the demand for objects of exchange. With insufficient cash to meet consumer demand for vital goods, the means of exchange are deposited in the financial industry as “wealth” while real wealth “dusts the shelves.”

This is most clearly demonstrated by the example of the Great Depression: when store shelves were full of goods, people who needed them could not buy them due to lack of money. Since ancient times, money, which is unrelated to the objects of exchange, continues to have more "value" than the objects of exchange themselves.

Under conditions of deflation and unemployment, when the value of money rises, all participants in the creative process suffer, except the financial industry:

A shoemaker may starve to death even if there is a great demand for boots. People who own food will freeze, but they will not come to the shoemaker's shop either. Both suffer from a lack of obligatory intermediaries for exchange, which, in such cases, is concentrated in the financial industry because of increasing scarcity. The most resourceful of the characters in this example will be able to exchange boots for food, eliminating the intermediary from the chain and thus solving the mutual problem.

Using this example, I show how the universal medium of exchange distorts real supply and demand in the formation of market prices, and by remaining the most “valuable” asset in the chain of exchange, affects people's lives.

In an inflationary environment, an excessive money supply leads to the depreciation of people's assets and income.

THE SOURCE OF WEALTH TODAY IS THE VARIOUS WAYS OF EXTRACTING THE MEANS OF EXCHANGE

Today, the source of wealth is the extraction of "impersonal" money, and the creation of real values is only a tool for this. The fact that wealth is measured in terms of the number of units of means of exchange, which have nothing to do with goods, makes one indifferent to the type of activity used to accumulate them, which has widened the range of non-economic sources of wealth. The adage "money has no smell" aptly characterizes this thesis.

As a result, when we engage in trade or investment activities, we pay tribute twice:

• Part of the value of the assets of economic actors remains in the best-capitalized global money industry.

• A bureaucracy that controls the value of money at its own discretion gains control over a portion of the value added (other than taxes) as part of the national GDP.

It is not a question of malice on the part of the financial bureaucracy, but rather that the result of regulation is either the loss of accumulated wealth through inflation or the loss of sources of income through a crisis of overproduction when money ceases to fulfill the function of a medium of exchange because of its scarcity and rising value.

Nevertheless, the acute phases of economic crises of a monetary nature, when the "fault" of money is particularly noticeable, do not occur every day. Therefore, the economic impact of the intermediary asset remains invisible, because we are immersed in this given since the emergence of social and economic relations, like fish in an artificial aquarium, not seeing from the inside what a more perfect world looks like.

CONCLUSION

We live in a world where the prices of different assets are denominated in a universal medium of exchange (dollars, pounds, etc.). Such prices, by definition, cannot accurately reflect the demand for each of the different asset classes separately, because they are influenced by the value of the intermediary - money.

Universal money constantly and imperceptibly affects the economy through the discrepancy between the money supply and the volume of GDP. This, in combination with government attempts to solve the problem through monetary and credit regulation, increases the risk of an economic crisis.

SECTION II

HOW DID THAT HAPPEN?

EVOLUTIONARY LOGIC OF MONEY

At the origins of modern economies, gold was the universal measure of value and the first money circulating everywhere. Its unique properties and the necessary degree of rarity facilitated the spread of gold as a universal medium of exchange. It was the best solution at the time. All subsequent forms of money are just "aggregate states" of gold.

Throughout the history of civilization, the universal medium of exchange has been the most optimal solution to ensure exchange transactions. As the scale of trade, the volume of transactions, the geography of economic relations, and the level of development of institutions and technologies grew, gold only changed its form in response to the demands of the time. Transformations concerned the increase in liquidity and speed of exchange transactions, but the universal nature of money remained unchanged. The universal medium of exchange never lost its main essence - a tool for the exchange of any assets. This is what made them the most liquid form of any property, the most expensive commodity, and the ultimate goal of any economic activity. The intermediary essence of money, which has no relation to the objects of exchange, remains unchanged until now.

STAGES IN THE EVOLUTION OF MONEY IN GENERAL TERMS

1. METALLIC GOLD = NATIONAL CURRENCY (BEGINNING)

In the beginning, physical gold met the needs of the trading processes of the time as the most convenient form of property and medium of trade exchange. Being both a medium of exchange and "absolute value", metallic gold did not need collateral (like Bitcoin). This made the medium of exchange more valuable than the objects of exchange themselves.

2. GOLD = DOLLAR = BANKNOTE

Then the growth of production and the expansion of the geographical scale of trade transactions as a result of the scientific and technological revolution in the early 19th century provoked the modernization of money. The "physical form" of gold could no longer serve the new scale of trade transactions. Therefore, gold-backed banknotes appeared - gold took a more liquid form. With a banknote, there was no longer a need to move physical gold in large volumes and over long distances because of the increased turnover and geography of trade transactions. The banknote became the first conventionally backed token of the gold and financial industries because it was backed by gold in bank vaults. Money changed its form, remaining the "value of last resort".

3. GOLD = DOLLAR = ELECTRONIC ACCOUNT RECORDS

As a result of the further acceleration of world trade turnover in the 20th century and due to the emergence of appropriate information technologies, banknotes were helped by non-cash money, which, again, has not changed its essence of "absolute value".

With the increase in trade turnover and the geography of trade transactions associated with the scientific and technological revolution and the development of technology, different forms of gold succeeded each other to satisfy the economy of the next technological mode.

NOTE

Despite the change of its "aggregate states", gold in the form of a banknote or electronic money remained a universal intermediary in trade, "by habit" perceived by people as an absolute value. This continues to play a negative role in the economy until humanity finds a way to eliminate the intermediation of an "extraneous" asset from the exchange process and to perceive it as the ultimate goal of economic activity.

Let's imagine that an alien from a more advanced civilization came to Earth. Without being biased by the authority of gold, he would be able to objectively assess the situation and ask a legitimate question: "Your economy is not limited to gold mining; it is driven by the demand for values that have human use value. Why do you value gold above all else and have even created an entire financial industry that has nothing to do with value creation?"

To which the most astute of earthlings could rightly reply: "You are right, but we do not yet have the technology to tokenize real values. Besides, the world economy is not yet so global that it would be possible to replace the universal means of exchange of tokens with industries, excluding the intermediary from the trade process".

This hypothetical dialog reflects the reason why mankind did not pay attention to the "inherent vice" of the universal medium of exchange. The lack of alternatives and technological unpreparedness of civilization did not allow mankind to pay attention to the imperfection of the most important attribute of the economy and influence on the trade process and results of their labor.

4. DOLLAR = GDP

The next stage in the evolution of money can be characterized as the first tectonic shift in the development of the institution of money. It affected for the first time the ancient basic characteristic of the medium of exchange - gold significantly lost the status of a securing asset.

For the first time, the evolutionary step was not related to increasing the liquidity of money and the speed of settlements, but to recognizing the priority of real values represented by gross product over gold:

• At first, as a result of the Bretton Woods Conference at the end of World War II in 1944, the US dollar was given reserve currency status purely for economic reasons - the US gold reserves covered only the formal side of things, but in reality, there was an understanding that the economic power of the US was capable of helping war-torn countries through loans backed by real US GDP.

• The subsequent abolition of the gold standard in 1975 confirmed the previous thesis. This happened as a result of one of the two prerequisites for the next evolutionary stage - economic necessity.

This need was so critical that the technological unpreparedness to ensure the credibility of dollar collateral was ignored. This had a spillover effect on the quality of the currencies of the "post-gold" era. The impact on the economy of this and subsequent events can be characterized by the title of one of the works of the creator of the rogue socialist-type economic system, V.I. Lenin: "One step forward - two steps back".

Step forward: Recognizing the priority of value over gold

For the first time the world "transcended" gold and made an intuitive step towards linking the means of exchange to real values - the national product (GDP) became the collateral of currencies. Prices expressed by currencies without gold backing began to more closely reflect the demand for the various assets produced by national economies. This happened not because of the realization of the correctness of such a step, but due to circumstances.

After World War II, the national currencies of the most important countries in world trade ceded priority in world trade to the US currency as a result of the Bretton Woods Conference. The currency of the country that retained its economic power, unlike the countries whose economies were directly affected by the war, became the reserve currency. At that time no one seriously thought about gold because of the criticality of the situation: "You can't get enough of gold".

Thus, at a critical moment for mankind, the world felt the priority of real values over gold in the search for a new paradigm of property relations. The universal medium of exchange as an economic category for the first time began to personify real values, albeit "piled in one heap". However, the formal de jure overthrow of the "metal idol" was not yet enough spirit, which led to an attempt of gold revenge in the early 70s of the XX century.

After the recovery of their economies thanks to dollar loans backed by gross product, the leaders of several countries suddenly remembered the "absolute value" - gold. They have not yet realized that it was the economy, not gold, that "pulled" the world out of the post-war crisis. The demand to "cash" dollars in gold shows that the consciousness is still biased towards the gold idol, even though real values have already proved their priority importance.

The evolutionary shift away from gold-backed money in 1975 did not happen because of the weakness of the US economy to pay its debts. It would have happened sooner or later regardless of the immediate triggering causes. If in 1944 the decision of the countries participating in the Second World War to peg their currencies to the dollar was intuitive in terms of recognizing the economy of this country as a guarantor of its ability to help overcome the consequences of the war, in 1975 mankind realized and officially formalized the priority of real values over gold.

It does not matter that it happened at the initiative of the US (the debtor). Even if the US had been declared bankrupt because of insufficient gold reserves, its economy at the time of the early 1970s was producing enough competitive National Product to service the dollar mass. It had something to offer instead of gold that other countries could not refuse. Gold was replaced by a "renewed" dollar, backed by real value - the National Product of the world's most developed and wealthy economy.

The loss of gold's economic importance was natural. The example of the USA about their national currencies was followed by the rest of the world. Gold has partially lost its relevance as a value, although the world still pays tribute to its habit by keeping it in its reserves.

Conclusion:

Abolition of the gold standard as an evolutionary step forward. The abolition of the gold standard was an evolutionary step forward in terms of an intuitive attempt to back money with real values (represented by GDP) instead of "useless" gold.

Backward Step #1: Losing money with intelligible marketable collateral

Due to the lack of technological capability to correctly collateralize national currencies with new and complex collateral in the form of GDP, the collateralization of money has been relegated to the abstract realm of perception.

Whereas currencies used to be backed by a specific asset, albeit worthless, it has become impossible to correctly and accurately determine the degree of backing. Currencies became fiat currencies, delegating the role of collateral guarantor to national governments.

As a result, "inarticulately" secured fiat money replaced gold and retained its universal role in the process of exchange of values. In addition, the reserve status of the dollar, obtained as a result of the Bretton Woods Conference and remaining after the abolition of the gold standard in 1975, continues to "pull" the lion's share of surplus value in favor of a certain part of the world's population. This leads to destructive fiddling associated with trade wars and manipulation of exchange rates by the authorities of competing economies.

Fiat money cannot be fully secured by "piling up in one pile" the values of the multi-sectoral gross product. The transfer of the right to guarantee the security of fiat money to governments has expanded the possibility of artificially manipulating the value of money by changing interest rates and expanding the money supply.

Together with the inherited universal character of money from gold, this has revealed additional imperfections affecting the economic space. Financial authorities, through changes in the value of money, control the economic behavior of people to correct their own macroeconomic mistakes unintentionally, but at the expense of society. The shortcomings of the universal medium of exchange are incorrigible due to its nature.

Conclusion:

The second prerequisite for a full-fledged transition of the institution of money to a more advanced level - technological readiness for a new type of collateral - was absent at that time. Multi-sectoral GDP cannot serve as a correct collateral for a universal medium of exchange. This is also the reason why the state made money fiat, acting as a "guarantor" of its security.

Step Back #2: Return of the Gold

The deprivation of gold backing for money and monetary regulation led not only to conspiracy theories about the causes of crises but also to legitimate questions about fiat currencies on the part of society. Due to the shortcomings of fiat currency and claims of monetary administration with the advent of more advanced technologies, resistance from the most marginal part of the supporters of the "gold paradigm" materialized in the emergence of Bitcoin. Bitcoin is inherently "perfect gold", immune from centralized manipulation.

Despite the emergence of virtual values that have the properties of money thanks to blockchain, no one has yet thought of radically overhauling the monetary system to make resources and sectoral values money.

Society has embraced the return of archaic gold in the form of Bitcoin as (1) a protest against centralized control and manipulation of the value of their assets and (2) because of an intuitive understanding of the loss of fiat currencies' intelligible collateral after the demise of the gold standard.

Bitcoin was invented by well-meaning enthusiasts as an updated version of good old but useless gold. The new gold has become the ideal in terms of the attributes of ancient money, brought to perfection with the help of blockchain. As a representative of the old "universality of money" paradigm, Bitcoin will continue to carry the inherent vice of "absolute value." As the "best gold," Bitcoin is doomed to perpetual "appreciation" due to its deflationary nature and perfect rarity.

SUMMARIZE

The prevalence of the "universal" paradigm of the world monetary system in people's minds and insufficient understanding of the full range of possibilities for the applied use of new technologies have not yet led to serious attempts to complete the current tectonic shift in the evolution of money in the sense of giving values themselves the properties of money.

SECTION III

INVISIBLE INFLUENCE OF UNIVERSAL MONEY

CHARACTERIZATION OF DIFFERENT TYPES OF UNIVERSAL MONEY IN TERMS OF THEIR IMPACT ON THE ECONOMY AND WELFARE

Fiat money and gold, being centralized currencies, because of the financial bureaucracy's predisposition to issue to solve economic problems, over time devalue people's savings and assets, triggering inflation. Their role in the crisis of overproduction was eloquently demonstrated in the 1920s during the Great Depression.

Bitcoin, on the other hand, does not stimulate creative activity, despite its serious advantages over "old money. Bitcoin is a transitional currency or a "trial balloon" of blockchain technology before the emergence of "real value money" based on it.

GDP growth, technology development, and the creation of new values are associated with investment activity, while the "new gold" in the form of Bitcoin suppresses it. The economic sense of any project becomes unobvious when it is enough to invest in ever-expanding money and do nothing to realize it.

Bitcoin's growth relative to any assets is guaranteed by the algorithm, so holding Bitcoin and doing nothing becomes more profitable than investing it in a project with any planning horizon. This is a consequence of the fact that Bitcoin is representative of "old money" that is not linked to objects of exchange. Its "gravitational" impact on the economic space will have an overwhelming effect on any economic activity.

This flaw is so obvious and significant in its dramatic impact on the economy that Bitcoin's proponents cannot avoid it. But impressed by its underlying ingenious blockchain technology, they try to portray this flaw as a virtue, claiming that bitcoin is "brilliant" at everything and that its inevitable appreciation will curb excessive consumption, thus having a healing effect on society. But they "forget" or refuse to realize that the growing scarcity of money will inevitably suppress investment activity: technology development - value creation - evolution.

An investor holding bitcoins is less interested in investing because it is highly likely that the future benefits of the project will be lower than the guaranteed benefits of simply holding bitcoins in one's wallet.

Bitcoin's deflationary nature leads to the inevitable widening of the quantitative gap between money supply and commodity supply. Therefore, it is doomed to increase its exchange rate relative to any commodity or asset. The cause of deflation will be not so much the growth of global GDP as the ever-increasing shortage of money. This will strengthen the negative "gravitational" effect of money on the prices of all products of the diversified economy without exception, and more and more of the added value will be deposited in the price of bitcoin without the prospect of reinvestment in creative activity.

Bitcoin and fiat money represent two extremes, each with a negative impact on the economy. In an economy with any universal medium of exchange, the growth of wealth is not always associated with the creation of a useful product, because money is value-neutral and becomes the ultimate goal of economic activity.

Whether people realize this fact or not, it remains relevant. Fiat money, subject to issuance by the financial bureaucracy, devalues the savings and property of citizens, provoking inflation. At the same time, bitcoin, despite its advantages over traditional currencies, does not stimulate creative activity and may suppress investment activity.

Thus, both forms of money - fiat and bitcoin - have their own shortcomings and can hinder sustainable economic development. This emphasizes the need to rethink the role of universal money in modern economic systems and find more effective solutions to ensure stability and growth.

ECONOMIC MOTIVATION ON THE DISTRIBUTION OF WEALTH AND INVESTMENT UNDER DIFFERENT TYPES OF MEANS OF EXCHANGE

The primary motive for human economic activity is profit and the accumulation of wealth. When wealth is identified with universal means of exchange - gold, dollars or bitcoins - the motive to increase wealth manifests itself in the form of accumulation of these intermediaries of the exchange process.

Real assets themselves do not yet have the attributes of money, so part of the added value forming savings is converted into an "intermediary" asset - money, forming financial capital and not participating in the creation of an additional product.

Thus, a whole industry of money generation has been formed, including through the credit multiplier, which surpasses in capitalization any of the industries that create real values. We convert real assets into universal money as the most liquid form of property, and this continues to give money the highest value.

When real assets and products of different industries finally acquire the properties of money with clear and accessible collateral, capital and wealth will be distributed directly to the most demanded sectors for the same reasons of "greed", while remaining both financial and investment capital.

Even a simple conversion of the currency of one industry into another will become a "direct investment" without transaction losses associated with a preliminary freeze in the means of exchange. To characterize more precisely the quality of the described financial environment, let us call it by the physical term "superconductivity", implying the absence of obstacles on the path of moving entities.

The only beneficiaries of the economic effect will be the creators themselves, not the owners or players of the financial industry. The efficiency of the economy will increase many times over due to the increase in the speed of turnover, GDP growth, and the welfare of the population on a global scale. This will be the effect of removing the "extra drive" from the mechanism of the economy.

Nowadays, the production-financial cycle is considered to be completed when "old formation" money is received, as it is the main goal of economic activity. Wealth is deposited in "useless" assets: fiat currency, Bitcoin, etc. for an indefinite period until it falls into the "right" hands.

In our case, capital has only two "homes": either it will continue to work in "its" industry, or it will flow into another sphere that promises faster growth of wealth. Thus, capital will migrate from industry to industry, making the creators of value richer.

The exchange rates of sectoral currencies will accurately reflect the market demand for the products of various sectors of the economy. The movement of capital and the direction of intellectual and physical efforts of society will become more meaningful, and capital will not "get stuck" in useless intermediary assets, enriching idlers.

So far, only people with a higher level of consciousness see a fair way to increase welfare through the creation of social values. The majority of the population "makes money". In an economy with a sectoral currency system, creating the most demanded product will be the only possible way to increase wealth, even in the absence of good intentions.

When values themselves become money, eliminating the intermediary of the dollar, gold, or Bitcoin, the incentive to accumulate wealth and the noble desire to create will "work" together without contradicting each other.

Capital should represent both money, commodity, and investment at the same time. Then the motivation to increase wealth will direct physical and intellectual resources to those sectors that are of greater interest in the market at the time of making an investment decision.

Thus, as a result of inter-sectoral competition, all types of capital tend to concentrate on the most promising sectors of the economy, bypassing the stage of converting it into "intermediary instruments" of exchange for an indefinite period. Money must have a "smell" for investments to become more meaningful; but more importantly, from a motivational point of view, more profitable.

SECTION IV

THE CONCEPT OF SECTORAL SPECIALIZATION OF THE GLOBAL MONETARY SYSTEM

If useful goods had the properties of money, i.e. real values could be exchanged directly, such crises would be impossible. The technological readiness to integrate the blockchain network and IoT elements of several industries suggests the possibility of starting the process of full-fledged tokenization of industry assets.

Today, blockchain and offline data translation technologies make it possible to distribute decentralized data on stock in storage to the total number of coins in the network, while preserving the confidentiality of private data.

Thus, by full-fledged tokenization, I mean that “real money” should reflect a reliable measure of its endowment with real value, and coinage should be a consequence of the creation of a new unit of value.

Only then the determination of mutual exchange rates of different values will mean meaningful pricing as an indicator of real demand without the intervention of an intermediary at every moment.

According to my conceptualization, two basic conditions must be met to revolutionize the monetary problems in the economy:

(1) the reliability of decentralized data on the commodity endowment of the sectoral currency.

(2) producing goods and coinage must be part of a single process.

The combination of these conditions contains a market mechanism to protect the economy from crises related to inflation or overproduction, as this model eliminates the cyclical imbalance between money supply and economic activity in specific industries. If the coin has a floating collateral indicator and there is a direct correlation between coinage and commodity production, the purchasing power of secured coins will be maintained even if the demand for the commodity falls.

Inflation Cycle:

Today. When there is a commodity deficit in a particular industry, price growth has an inflationary character: the flow of cash from other sectors to the deficit industry is directed to the market of final products, which causes an increase in nominal consumer prices due to the excess of money unsecured by any value.

In an economy with a sectoral currency system of the proposed model, the growth of demand in a certain sector will lead not to an increase in the price of the final product, but to an increase in the exchange rate of the sectoral currency. The source of profit for the seller/producer, in this case, will not be the inflow of additional "Noname" money, but the growth of purchasing power and the exchange rate of the currency of a particular industry. This would be a direct transfer of value (without the intermediary of a universal currency) from other sectors to the "valuable" industry. The fact that the only source of coinage/mining is manufacturing gives the market of the entire economy an investment character.

Deflationary Cycle:

Today, in the case of overproduction, a fall in sales will lead to a sharp fall in profitability, rising unemployment, and deflation. The scarcity of cash as the obligatory and only intermediary in trade exchange throughout the economy aggravates the situation in terms of falling living standards despite the abundance of goods: cash leaves the real economy and loses its purpose as a “lubricant” for exchange processes, as the main money supply is concentrated in the financial industry.   

In the case of a sectoral currency system, overproduction would lead to an accumulation of unsold goods in the vaults of a particular industry rather than the entire economy. Falling industry currency and declining production means slowing coinage and increasing industry inventories. All this will lead to an increase in the industry currency’s commodity collateral. This will have a cushioning effect on the falling industry because in such circumstances the growing collateral will support the purchasing power of the coins.

​​This will avoid non-payment of wages, and the financial market will prevent a sharp collapse in the purchasing power of the currency due to the collateralization of the real value of the sectoral currency.

These two factors will have a moderating effect on the fall in workers' living standards and the rate of business loss: in a multi-currency economy with a wide range of secured currencies and reciprocal exchange rates, the market and demand are more elastic than in a “one-size-fits-all” universal currency economy. 

The money supply in the form of money with credible collateral will correspond to the commodity supply. Today, some industries are technologically ready for such translation of data on commodity or resource stocks into the digital space (blockchain) and implementation of such a model.

A future economy with a multi-sectoral monetary system will have a built-in mechanism for purposefully resuscitating a crisis or the possibility of economic recovery through the availability of a range of conversion options for industry and people to seamlessly change fields of activity or sources of income. Universal means of exchange are the source of virtually all severe economic crises. Mankind will always “pay tribute” to money as long as it is universal because it is an “external” asset that has no relation to real values.

SECTION V.

A CRITIQUE OF THE VIEWS OF FAMOUS ECONOMISTS

None of the famous economists of the past paid attention to the nature of universal money as the main cause of recurrent economic problems. Each of them perceived the role of money through the prism of their epoch and offered relevant solutions. This should not be seen as a mistake; on the contrary, in each historical period, they offered relevant views and the best solutions for their time. However, from the point of view of general evolution, these solutions were of a private nature and did not address the essence of the problem.

Each economist could examine the mechanism of the economy from a bird's eye view, analyzing the entire history of the development of economic categories and identifying the main source of current and future crises. I realize that this claim may seem ambitious and even unfair to such names. None of them could reason in the abstract: "Here's if...". They did not have to be philosophers to look at the economy and its institutions from the height of a contingent Creator.

I make this claim about eminent economists not to refute or discredit them; they were right to a greater or lesser extent for their time and have been of considerable benefit to mankind. However, the thought of the imperfection of the universal medium of exchange has never occurred to any of the economists of the past until now, since it has remained the only possible form of money throughout history.

Next, I will present the main theses of the works of famous economists who have proposed different approaches to understanding money and its role in the economy. Each example will be accompanied by my comments on how universal money has caused (1) the concentration of value added in the hands of unproductive forces and (2) economic crises arising from qualitative changes in the course of economic evolution.

• Karl Marx

"Capital: Critique of Political Economy" (1867):

Marx views money as an instrument of class domination. He argues that money represents the "universal perversion of individualities" and serves as a means of appropriating surplus value from the labor of workers.

The founder of communist ideology was based on the facts of class contradictions in countries with booming industries in the 19th century when the working class was under pressure from the owners of enterprises to increase productivity by increasing working hours and using child labor.

A significant flaw in Marx's analysis is the underestimation of entrepreneurial resources and efforts in the creative process. Physical labor is perceived by him as the only source of capital, while the means of production, property, time, and intelligence of the entrepreneur are not considered as full-fledged assets in the creation of surplus value.

Although he was right that money concentrates most of the value-added, he did not understand the nature of this dependence. Even if capitalists abandoned the means of production in favor of workers, the status of universal money would still provoke an unjust distribution of wealth.

Private property and its multiplication is the basic instinct of man; everyone is bound to take advantage of a favorable opportunity to appropriate someone else's property. It is necessary to propose the most natural mechanism of redistribution of wealth in favor of its creators.

Each time the economy transitions to a new stage of consciousness evolution, inter-class contradictions become more acute in the struggle for the role of the ultimate beneficiaries of the wealth created.

Since today any wealth continues to be measured in old-formation money (regardless of its aggregate form), the beneficiaries of progress are not the creators of value, but those who control money.

• John Maynard Keynes.

"The General Theory of Employment, Interest and Money" (1936):

Keynes emphasizes liquidity and the role of money in stimulating demand. However, his model can lead to inflation if real production is not taken into account. He emphasizes the importance of liquidity and views money as a tool to achieve economic stability, arguing that money can serve not only as a medium of exchange but also as a form of income saving.

It is important to note that the Great Depression was overcome without the advice of academic economists. The permissibility of a budget deficit at that time was considered blasphemy from the point of view of economists. Nevertheless, the need to urgently restore demand forced the government to take measures that led to the growth of the budget deficit.

Keynes later formulated and justified this method of regulating the economy to stimulate consumption and restore economic growth. This method can be compared to a lifeline, which he proposes to apply whenever it seems necessary to the government.

Keynes offered a cure for the effects of the crisis instead of identifying the causes and preventing them in the future. His model could lead to inflation and deficits because it did not take into account real production. The Great Depression was overcome not by creating market jobs and directly stimulating efficient production, but by transferring skilled labor to areas that do not require special skills.

Inflation was prevented due to the reduction of the economy's costs as a result of large-scale infrastructure projects, which accelerated the turnover of goods and reduced logistics costs for enterprises. This ensured the creation of an additional product that "utilized" the additional money supply.

If this instrument is used without taking into account these nuances, a simple injection of money into the economy will lead to an inflationary effect, because the money supply will "serve" the already created final product, rather than investments in the creation of a new product.

If we ignore the lack of a technological component at that time, the best solution would be to instantly broadcast information about every change in the volume of industry products directly into the digital dollar and mint a new industry monetary unit when the marginal product of a given industry appears. However, this requires a transformation of the existing universal model into a multi-sectoral nature of the monetary system.

It should be noted that, unlike Keynes, I do not propose a remedy for a crisis that has already occurred; instead, I point out the root causes of such crises and propose the best solution to prevent them. This solution already exists, thanks to the technology available; it just needs to be seen and applied.

Milton Friedman.

"Capitalism and Freedom" (1962):

Friedman emphasizes the role of money supply in the economy and argues that changes in the money supply affect the price level and economic activity.

Although he favored the free market and minimal government intervention in the economy, he underestimated the impact of financial institutions on the economy because of the control of much of the wealth created through universal money.

The objective reality of what is happening in the economy depends on the subjective opinion and decisions made by participants in the financial sphere, which creates a mechanism of instability and causes crises such as those of 1998 and 2008.

Friedrich Hayek.

"The Road to Serfdom" (1944):

Hayek advocates a decentralized approach to money and criticizes government regulation. He believes that competition between currencies will lead to a more efficient allocation of resources.

Hayek comes closest to understanding the problems associated with "old" money; however, he limits himself to criticizing centralized regulation and does not address the very nature of universal money.

In addition, Hayek does not take into account the influence of monopolies and cartels on financial markets. As mentioned earlier in this paper, it is universal money that allows cartels to dictate terms in markets.

CONCLUSION. The views of various economists demonstrate progressive approaches to identifying problems in the economy; however, none of them have formulated the main problem of money in this way.

SECTION VI

GENERAL CONCLUSION

Blockchain technology represents a revolution in terms of giving individuals not only economic freedom and self-actualization but also the ability to self-organize entire communities of free people, up to and including the emergence of virtual jurisdictions. The possibilities of using this technology have not yet been fully realized by humanity.

Common sense and technology are ready to lead the public consciousness to accept a more adequate multi-sectoral currency system with a full-fledged collateral institution. A sectoral currency, denominated in units of specific value, would free the exchange rate from the price pressure of an "intermediary" currency as a relic of the past.

As the global industry information infrastructure develops, the monetary system will inevitably change according to the logic described here. My inferences follow only the logic of evolution.

The coming changes in the economic sphere could be the ultimate solution to the monetary problem of inflation and deflation, as the availability of data technologies in the digital space and the digital format of industry currencies can display the degree of provisioning at any given time.

This means that commodities will finally acquire the properties of money, and the mutual exchange rates of sectoral currencies will accurately reflect the supply and demand for the product produced by each sector. The possibility of manipulating the value of money will be gone, leaving the role of issuer and regulator to the market and its participants.

The main obstacle to this significant stage of evolution is the insufficient degree of globalization of the world economy and information technology. Today we are witnessing the emergence of the first sectors of the world economy that are ready for the next stage of money evolution.

The modern level of technology makes it possible to correct the "ancestral trauma" of money - to exclude the intermediary in the person of the universal medium of exchange from the commodity turnover. We can state the presence of both prerequisites for the next stage of money evolution:

• People recognize the need for change and have an idea of the format of the necessary changes.

• Humanity's technological readiness for the necessary infrastructure to emerge - blockchain and Internet of Things (IoT) technologies provide a unique opportunity to create a new decentralized monetary system whose subjectivity will seamlessly transition to the global economic community as a class of creators.

The combination of these two factors played the role of a "trigger" at different times - both for the emergence of secured banknotes and for the abandonment of the gold standard. So, the next practical step towards common sense and improvement of the institution of money is not far off: the issue of intellectual and technological readiness can be considered resolved, which means that political awareness is only a matter of time.

Material used:

1. Karl Marx

"Capital: Critique of Political Economy" (1867): Capital, Volume I

2. John Maynard Keynes

"The General Theory of Employment, Interest and Money" (1936): The General Theory

3. Milton Friedman

"Capitalism and Freedom" (1962): Capitalism and Freedom

"A Monetary History of the United States, 1867-1960" (1963): A Monetary History

4. Friedrich Hayek

"The Road to Serfdom" (1944): The Road to Serfdom 

"The Use of Knowledge in Society" (1945): The Use of Knowledge in Society