(1) Nuance <3
I like nuance. Taking the time to think about things and looking at things in different ways. But I also like to keep things simple. Because of that, I sometimes have black-and-white opinions about things. Including money.

(2) Our money
Money. It is important to all of us. Whether we like it or not. We earn it, we spend it and after that, we hopefully still have some of it left to save or invest. But how does money work and who decides that? Does it actually work? In this Nostr Read I explain my opinion on money. 

Image 1: SpongeBob SquarePants, happy and nuanced 🫶

(3) Zombies and an island
Imagine this: there is almost no one left on earth. Because of a zombie apocalypse war or something like that. Whatever happened, there are now only 10 people left in the world: 5 men and 5 women. The ten of them go to a deserted island to start over. 

One of the women is paralyzed as a result of fighting the zombies. One of the men is so mentally damaged he can only spend his days lying in bed. Fortunately one of the other men likes to take care of others and can look after these two. 

There’s also a woman that is good at making fire and a man that is strong, likes physical challenges and guarding others. And there are 2 people that are good at building things with their hands and 3 people that know a lot about plants, animals, cooking and eating. 

(4) Society = doing things together 😊
The group decides to divide the work that needs to be done. They all have their role and do things together. They do not yet need money to decide who does what, the division of tasks is clear. And if something needs to be changed, they just agree on that as a group.  

One day, the 3 people that take care of the food decide to spend twice as long looking for food as they normally do. Because of that they gather way more coconuts than they normally would: enough nuts to last the whole group for 2 days! Somebody else has spotted a nice lake on the island, which might contain fish. The group decides to use the extra day that the coconuts give them, to weave a fishing net. 

It turns out that by using that fishing net, 1 person can catch enough fish to feed the whole group for a day. Which means that 2 of the 3 food gatherers no longer need to spend time gathering food, because 1 fisherman can now provide all the food they need 😊 

And that’s great timing, because it was a steamy summer that has led to several additions to the group: babies were born. Someone needs to look after the babies and the ‘designated nurse’ cannot do that, he needs all his time to look after the people that need physical or mental care. 

The group decides to promote one of the former food gatherers to daycare duty. The other food gatherer that is now out of a job is sent to scout the rest of the island, to look for other improvements the group may be able to make. 

The scout discovers a type of clay which can be used to write on. He decides to start writing down the lessons they learn on the island, to make sure they don’t forget them. The group’s timing is again great, because by now the babies have grown up, have started talking and are super curious to learn about the world. 

The scout / claywriter is promoted to teacher. He uses the books of clay to explain life on the island to the children. This saves the kids a lot of time: instead of figuring everything out by themselves, they can simply steal the clever tricks their parents have already discovered 🤩

(5) I thought this was a story about money?
I got caught up in my zombie-island story 😂 But stick with me and imagine: the group continues to do well and gets bigger and bigger. At the start of their adventure, they could discuss everything with all 10 of the group members and decide who would do what. But by now there are 1.000 of them and they cannot discuss everything with the entire group. 

Instead, they come up with a different plan. They found a large pile of very pretty shells on the beach. They count the number of shells and divide them evenly among the group. It turns out there are enough shells to give every member of the group 20, so there are 20.000 shells in total. The group decides to start using those shells to pay each other for the work they all do for each other. 

The people that gather the food sell the food for a certain number of shells. The people that take care of the fires get a shell for each fire they keep burning. The nurses get a certain number of shells per day. Everyone pays the builders a number of shells per month in order to live in one of the huts. And if you work hard or spend very little, you may end up having enough shells to pay a builder to create your own brand new hut! And so on and so on. 

If one of the food gatherers finds something extra tasty that is very rare, he may try to ask for more shells for that than for the ‘regular’ food. And as a result, he will earn more shells, as long as people want the extra tasty food and can pay the price he wants for it.

If other people see that this extra tasty food has a higher price, they may try to find and sell it as well. Maybe even at a slightly lower price than the original salesman, to make sure they get to sell their food. And because of this, the supply of the food increases and the price will decrease again. 

And what if someone thinks they earn too few shells to live the life they want to live? Then they can start working more hours to earn more shells. Or try to learn a different way to earn shells instead of (or next to) their current job, in order to earn more shells per hour. 

(6) Cool island story bro, but what does this have to do with ‘the real world’?
My text above is probably a bit (too) simple. But it helps me to understand and explain several things that happen in the real world: 

1. A group of people agreeing to do things together = a society. The 10 people could also have decided to each live under their own tree and figure it out on their own. But together, life is easier and more fun.  

2. If the group wants to keep improving life, they first need to make sure enough people stay alive. So people that take care of the food (farmers, hunters, fishers), of other people (doctors, nurses), of safety (military, police), of energy, of housing, of machines etc. etc. are all super valuable to the group. Everybody counts.

3. Finding clever ways to work more efficiently = technological progress. By weaving the fishing net, the group managed to find the same amount of food in less time. Which freed up time to discover new technological improvements. 

4. You need to first make time to come up with clever ways to work more efficiently, before you can use them to save time. Making that time = investing. Because the group decided to work twice as hard one day, they found enough coconuts to free up the time to weave a fishing net. So the extra coconuts they found were really time, stored in the form of coconuts. By using that stored up time well, they made technological progress, which helped them free up even more time later on. 

5. Taking care of kids = daycare. By having someone take care of the kids, the members of the group that are good at building things or hunting or gathering food, can spend more time on those tasks. While some of the other people that are less good at those tasks, can probably take care of the kids just as well. 

6. Explaining the lessons learned as written down in the clay books to the children = education. High quality education allows the group to improve life more quickly. Because the children simply get a headstart in life compared to their parents. They do not have to first wander the island for a lot of years to learn all the lessons in practice. Instead, they get taught the most important lessons at school (and of course via the upbringing their parents and society give them 😇), which gives them a great start. Which they can use to help improve life even further 😊 

7. Shells with which you can buy things = money.

8. Prices that change based on (a) what you are selling (b) the number of people that are selling the same thing and (c) how bad other people want to buy the thing you are selling = market dynamics / supply and demand.

9. Doing something extra in your own time because you want to earn more shells = entrepreneurship. 

10. Learning a different way to earn shells instead of your current job = retraining. 

Image 2: some examples of technological progress that frees up time 😇

And there are probably many more ‘real world examples’ hidden on my zombie island. But I will now get to money, I promise 😂

(7) You are taking pretty long to get to the problems with money…
Here I go. In the zombie island above there is a fixed amount of shells. Every member of the group got 20 shells when they started using them. So 20.000 shells in total. The amount of shells that each group member ends up with, depends on what he or she does after that. On how hard and smart they (can) work, on how much they buy, or in short: on the net value they provide to the society. 

But now imagine that 1 of the 1.000 people on the island discovers an extra pile of shells. And this is not a small pile: he discovers 2.000 shells that are exactly like the other 20.000. He does not tell the rest of the group that he found these extra 2.000 and does not share them with the others. He keeps all 2.000 of them to himself. 

This person just became a lot richer without providing any value to the group. He originally started with 20 shells, just like all other group members. Now he has 2.000 extra shells all of a sudden. Because of that, he can pay more shells for food, for the nurse, for an extra nice hut to live in, and so on and so on. He effectively ‘stole time’ from the rest of the group. 

The rest of the group will notice that prices start to rise. Because there is now 1 person that can offer more shells for things. And because all others did not get extra shells, they can not. Because on average, they still have 20 shells per person. And they now have to compete with someone who has at least 2.000. 

(8) That’s a lot of shells man, but what does this have to do with real life?
In the real world, new money is also constantly being created. And because of that, 1 unit of money decreases in value over time. On top of that, the new money that is created is not divided evenly across all people. Just like in the island example above, some people have better access to the new money than others. 

The images below show the amount of dollars (= the main form of money used in the world at the moment) and euros (= the money in NL). As you can see, the amount of dollars and euros has been rising for many years, at a pace of 6-7% per year. Which means that 1 dollar or 1 euro decreases in value by 6-7% when compared to the initial situation the year before. 

Image 3a: dollar (from 286,6 billion in januari 1959 to 22.667,3 now = 6,7% per year)

Source = https://fred.stlouisfed.org/series/M2SL****

Image 3b: euro (from 1.070.496 million on 01-01-1980 to 16.245.831 now = 6,1% per year)

Source = https://data.ecb.europa.eu/data/datasets/BSI/BSI.M.U2.Y.V.M20.X.1.U2.2300.Z01.E****

The process behind this money creation is pretty difficult. For starters, there are different ways to count the amount of money in the world. And the way in which the new money is created, by who it is created and how it finds its way into society, is different per type of money. 

I am not going to act like I fully understand all technicalities in the money creation process and cannot explain all of them 100%. I also don’t want to have to use too much bankspeak. But in short: central banks (via the rules they set for regular banks) and regular banks (by giving out loans to their customers) decide on the amount of money in the world. 

I used to think banks first collect savings from people that have more money than they need, which they then use to give out loans to people that need money. Would make sense. But that is simply not how it works. When banks give out a loan, they create the money they lend out ‘from nothing’. As if someone had a machine to make new shells on the island 😱 If this sounds too strange to be true or you don’t want to just take my word for this (great 💪), read up on ‘fractional reserve banking’ or ‘money creation’. 

(9) Mo Money = Mo Problems?
I think so. There are many sources that discuss the problems of fiat money in detail. I for example really like module 2.3 of this course > Looking Glass course

In my opinion, the main problems can be summarized in 3 points: (1) it is not fair (2) it distorts prices and (3) it leads to more short term thinking. 

It is not fair, because the people that can get the ‘new money’ more easily have an unfair advantage compared to the people who have a harder time getting it. Think of people that own houses, companies or shares in companies, versus people that don’t. Prices of houses, companies or shares in companies generally rise faster along with the extra amount of money that is created than salaries do. Or think of people living in a country with dollars or euros versus people living in countries with even worse types of money. 

It distorts prices, because when new money is constantly created, you don’t know what causes a product or service to become more expensive. It could be because people simply want to pay more for it (‘increased demand’) or because there is less of it available for sale (‘decreased supply’). But it could also be ‘artificially’ more expensive, simply because of the higher total amount of money that now exists. Because more money for the same amount of things = more money per thing = a higher price. 

It leads to more short term thinking, because if you know that 1 unit of your money will be worth less a year from now (simply because there will be more units of money in the world by then), it makes sense to spend that money today rather than tomorrow. 

(10) But problems exist to be solved!
I think a form of money in which the amount of money is fixed, would solve these problems: 

1. Because no new money is created, it cannot be divided unevenly 😊

2. Because no new money is created, an increase in prices simply shows there is more demand or less supply for a product or service. To which society can respond by buying less or trying to find more supply. Or the other way around: if the price of something decreases, that simply shows there is less demand or more supply for that thing. And in response society can either buy more or supply less of that thing. In short: fixed money will lead to ‘real’ and more useful market dynamics 😊

3. Because no new money is created, you no longer have to assume your money will be worth less a year from now. Even better: you should assume your money will be worth more a year from now. Because all of us work hard every day to do more great things in the same amount of time. By being a society with great education and the technological progress from working hard & smart 😊

(11) Cool story bro, now what?
I believe that most people are good. And that they want to improve life a little bit every day. For themselves but also for others. And I believe we can give everyone a better chance at a great life by improving our money. By switching to a form of money where the total amount is fixed. 

If we do that, we will no longer have unfair differences simply because one person has better access to the new money than others. Instead, everyone simply tries to offer value to the rest of the world and earn money by doing so. 

And of course we still have things like taxes and social security benefits and charity and all that good stuff. For people that are also 100% valuable just like all others, but for some reason cannot (fully) translate their value into money. We make sure those people can also lead a nice life, because life is more fun if we help each other 🤩

(12) Again: cool story bro, but what are we actually going to do?
I currently see bitcoin as the best candidate to become that new form of money where the total amount is fixed. Bitcoin is technically designed in such a way that the total amount of bitcoins is fixed. And everyone with a smartphone or a computer can join the bitcoin network. 

Image 4: bitcoin & trees are relaxed 🥸

The bitcoin system still needs to be developed further. Not all ~8 billion people in the world can use it to pay each other right now. But I believe more and more people will start using bitcoin, simply because they start to notice their time is slowly being stolen by our current form of money. 

And if more people start using bitcoin, new technical solutions will be found that allow all ~8 billion people to use bitcoin. Because the more people use bitcoin, the more valuable it becomes. And the more valuable it is, the more reason people have to come up with solutions to use bitcoin. 

And who knows, we may even discover a better form of money than bitcoin. That would be totally fine with me. As long as we move towards a form of money that is fixed (or where the newly created money is divided among all of us more fairly), I think it’s great 😊

(13) But what about the environment?
This story is already way too long for my taste 😭 I’ll try to keep this short and provide some other sources for whoever is interested in more details.

Bitcoin will not use all the energy in the world (blog Lyn Alden). The amount of energy bitcoin uses will not get completely out of hand if more and more people start using it (LinkedIn post Daniel Batten). And because of the way bitcoin works, it is good at using sustainable energy or energy that would otherwise be wasted (see both links for more details). 

*Image 5: Christmas lights and bitcoin 😇 *

Also: if you do not like bitcoin because of its energy use, have you calculated how much energy the current fiat money system uses? I have not, because that would probably be even more difficult than estimating the energy bitcoin uses 😂 

But just think about it: all those bank offices, company cars, business flights, computers and so on. To be fair: you should only look at the ‘payments and savings’ part of the fiat banking system to make a fair comparison to bitcoin (because that’s what bitcoin does). But I think that even just that part of the fiat banking system will use serious amounts of energy. 

And even more important in my opinion: many things in the world use energy. That is not a reason to not do those things. We simply have to decide for every thing we can do, whether we think that thing is worth the energy it takes. 

Is a fairer form of money that can decrease a lot of problems, worth spending some energy on? I think it is.

(14) But what about criminals and way too rich bitcoiners?
Criminals can definitely use bitcoin, just like they now often use dollars or euros. Is bitcoin the type of money they prefer? Nope, that would be our reguler money (Europol report), I guess that means we should get rid of that as soon as possible? 😜 

And what about those early bitcoiners that are way too rich? It’s true that people that adopted bitcoin early will be very rich if bitcoin becomes the new money of the world. That feels a bit unfair to a lot of people and I personally also don’t think it’s ideal. 

But at the moment, the money in the world is already divided very unevenly. There are many nice reports about this, I recently came across this report by Oxfam Novib (Dutch link, but there are many reports like this one). According to their research, the richest 0,1% of people in the world has more money parked in tax havens than the poorest 50% of people in the world have all together 😑

In a world that uses bitcoin as money, there would definitely be a lot of inequality at the start. But the world is also very unequal at the moment. Whether inequality will be higher or lower if we would switch to bitcoin, I really can’t say. 

But there is an important difference. The people that would start with a lot of bitcoin, will have to spend that bitcoin to buy products and services. Because of that, the people they buy those products and services from, will get more bitcoin. And no new bitcoins are created that can be divided unevenly across the group. 

So in the long run, the amount of bitcoin per person will depend on how hard and smart you can provide value for the rest of the world 😍 

And I am going to repeat this just to be sure: we will still use taxes and social security benefits and charity etc. to take care of people that cannot earn (enough) bitcoin for whatever reason. Because those people are also valuable and life is more fun if we help each other 🤩 

(15) Thanks Menno, I am now going to get back to my life!
Thanks for reading this story! As I wrote at the start, I like taking the time to think about things and looking at things in different ways.

So I would like it if you let me know if you see holes in my story. Or if you see things differently than how I wrote them down. I can learn from that, so please reply below if you feel like it 😊

P.S. I can’t promise I will incorporate your comments in the story. Because it is my story and I am a bit stubborn (or so they say 😇). But I read everything 🫶