Money 101: Currency Debasement Fallacy Versus Reality
Currency debasement is a phrase that gets tossed around. It is also something that is misunderstand. Once again, what was historically accurate 100 years ago is no longer the case.
In this video I discuss how the concept of currency debasement in a commercial bank monetary system is unfounded. The very premise of what gives a currency value goes against this concept. Of course, this is in stark contrast to the money printing central banks did under the banknote era.
▶️ 3Speak
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I don't think I've heard of Currency Debasement anywhere before this. I guess I haven't been looking at a lot of financial news lately. But it seems that a lot of these terms being used are no longer applicable to the current money situation, and will continue to be outdated with crypto and web3. The ones using them need to step up their game and get with the times.
https://twitter.com/jewellery_all/status/1747702583005720809
Summary:
In this episode, Task discusses the concept of currency debasement in relation to central bank money printing versus commercial bank money printing. He explains the historical perspective of currency debasement, where altering the weight or composition of coins led to their devaluation. Task then contrasts this traditional method with modern practices, emphasizing that commercial banks now primarily control the money supply through digital currencies. He contends that simply printing more money does not necessarily lead to currency debasement, as long as the money generated through lending contributes to economic productivity. Task highlights the importance of understanding how money creation impacts economic activity and dispels misconceptions about the causes of hyperinflation. He also touches upon the evolving nature of money systems, particularly pointing out the potential implications of transitioning to a cryptocurrency environment.
Detailed Article:
Task initiates the episode by delving into the topic of currency debasement, illustrating the historical methods of coinage debasement by altering the weight or composition of coins. He explains that in the past, currency devaluation was typically a result of physical actions like shaving off parts of coins or replacing pure elements with alloys, reducing the metallic content and intrinsic value. Task then transitions to the contemporary context, focusing on the differences between central bank money printing and commercial bank money creation.
The central argument that Task puts forth is the fundamental difference in the impact of money printing by central banks and money creation by commercial banks. He elucidates that while central bank printing of banknotes can potentially debase a currency, commercial banks primarily influence the money supply through digital currencies, which are created through lending activities. Task asserts that the key factor determining whether the increase in money supply leads to currency debasement is its link to economic productivity. He emphasizes that lending, which results in economic transactions like mortgages, car loans, and small business loans, drives economic productivity and does not inherently debase the currency.
Furthermore, Task addresses common misconceptions about hyperinflation and the role of central banks in stimulating the economy. He underscores that the ability of commercial banks to lend and expand the money supply is a crucial factor in influencing economic activity. Task dismisses the notion that central banks have complete control over economic outcomes, highlighting that lending behavior and the subsequent impact on the money supply play a substantial role in the economy's trajectory.
Toward the end of the episode, Task touches upon the evolving nature of money systems, mentioning the potential shift to a crypto environment with algorithmic stablecoins. He speculates on the implications of such a transition, noting the global and digital nature of cryptocurrencies and the exponential growth they could facilitate. Task concludes by reiterating the importance of comprehending how money creation influences economic productivity and dispelling misconceptions regarding currency debasement and money supply expansion.
Notice: This is an AI-generated summary based on a transcript of the video. The summarization of the videos in this channel was requested/approved by the channel owner.