Money Without Boundaries

Chapter 12Bringing the Building Blocks Together

“It is technically possible to control the quantity of any kind of token money so that its value will behave in a desired manner, and that it will for this reason retain its acceptability and its value.”

– F.A. Hayek, The Denationalization of Money

During Part 1, we laid our foundation by looking at money throughout time and the fundamentals of money and banking. We explored theories around money and banking and examined the rise of cryptocurrency and the role model system. From there, we established four pillars or building blocks to put together a new framework around money.

• Pillar 1: There should be a risk-free asset.
• Pillar 2: Money is credit, and credit is money. Money always has been an asset or a claim on an asset. This is the Credit Theory of Money. Money can be created by borrowing against an otherwise risky asset.
• Pillar 3: Problems around trust can be solved via blockchain.
• Pillar 4: Advancements in capital markets technology like money markets, securitization, commercial paper, and repurchase agreements enable virtually infinite combinations of sorting, segmenting, grouping, and managing risk.

We can reframe these pillars as steps toward a goal.

1. The goal is to create a risk-free asset, a safe store of value.
2. The risk-free asset can be created via borrowing. This process creates money. This is the Credit Theory of Money in practice.
3. The multiple trust gaps associated with this solution can be managed and solved ...