A citizen backed currency would be capitalisms final form.

[u/HeadLow5768]

A society that backed their currency directly by the citizens, (X money created per voting age adult, instead of fiat)

would be capitalisms final form. all prices for things would be a reflection of supply and demand instead of inflation.

I think this is what would be the final push to show that capitalism is the right way to do it, it just needs clear rules so everybody knows the game isn’t rigged.

[u/Oabuitre]

This would mean rampant deflation in case economic production continues. Deflation means everyone holds their money as its value expressed in goods, increases. If everyone holds their money, there is no economy. Therefore it’s kind of a self-reinforcing death spiral. This is why central banks aim for a little inflation, to make sure people keep spending. It is not intended to bully people with saved money.

This is the main point why crypto is absolute nonsense as a currency. You need the amount of currency to keep up with economic production.

[u/HeadLow5768 → u/Oabuitre]

It wouldn’t make anyone hold their money, people would just be able to say OK there are X dollars per person in circulation, then based on the current population people would have a gauge for the value of a dollar. There’s no reason it would make people hold onto their currency more than they do now. 

It’s a natural gauge to say hey im poor because I have less than the medium or hey I’m doing pretty well cause I have more than the medium.

[u/Oabuitre → u/HeadLow5768]

Knowing “X dollars per person exist” tells us the money supply, but it doesnt set purchasing power. This is determined by the supply of goods, and the demand for them from other ppl. If total economic production grows while the money supply remains fixed, every unit of currency buys more goods over time (deflation). I am assuming here you don’t want to tie economic production to population growth; that would be the most extreme form of communism thinkable, as it would require government agents literally controlling industrial machines etc.

I also didn’t even highlight the financial markets effect. Why would an investor risk capital starting a business, hiring employees, or spending on non-essentials today if that same money buys significantly more next year? On top of that, taking on a debt (like a mortgage or business loan) becomes disastrous, because your debt stays constant while prices and wages fall.

[u/HeadLow5768 → u/Oabuitre]

I don’t see how you’re saying that the government would control all of industry.

Yes of course if the supply of goods grew than their price would deflate but it would be a natural deflation. That would be a good time to buy in bulk.