Looking Backward from the Tricentennial

Chapter Thirty-Eight (part 2)

Julian stroked his goatee before replying to the economist. "The history lesson was cool—I had no idea how it all tied together—but this is the part I was hoping you could explain."

"Cash has always been free to use," Teara said. "You could take a ten dollar bill to the store, and when you physically handed over the money, the storekeeper received all ten dollars. But by the twenty-first century, most transactions were electronic, and banks extracted a percentage. Their payment system was like a toll road that people had to use to conduct business; bank fees added about 2% to the cost of all goods and services sold in the United States."

"Treasury accounts created a free public payment infrastructure, which translated into lower prices for consumers and more economic opportunities. Micropayments changed the way the internet functioned, allowing sites to collect tiny amounts instead of depending on subscriptions or ad revenue.

"Other countries had already done this. India, for example, had a nonprofit overseeing their public payment infrastructure, and by 2022, they were processing four times more digital payments than the US, Britain, Germany, and France combined. They were also leading the way in connecting with the platforms of other nations, like Singapore. The US was at risk of falling behind in global financial relevance.

"The Phoenix Cycle helped us become a leader in innovation again because we overhauled the monetary system along with the banking system. As we've talked about, Julian, the moral way to add to the money supply is by distributing it universally and unconditionally to every citizen, and a digital currency is the most practical way. Once citizen accounts were in place, the Treasury made accounts available to businesses and other residents. And of course, all government offices accepted Treasury Dollars for taxes and fees. Creating a public payment infrastructure was the real purpose of the American Union Jobs Program."

Julian laughed. "You've given me three different real reasons!"

Teara laughed too. "Some aspects really jump out, depending on what I'm talking about. But establishing a public payment infrastructure really was an essential part."

"But weren't digital dollars inevitable, even without the Phoenix Cycle? Cash was becoming less common."

"Maybe," Teara conceded, "but Treasury Dollar Bills were different because they were interest-free base money. Without the American Union, there would have been a very different policy choice made. In March 2022, President Biden issued an executive order related to cryptocurrencies and digital dollars. He defined the terms very carefully. Cryptocurrencies, created by individuals, were defined as digital assets. Digital dollars, on the other hand, were defined as digital liabilities, which would have ensured the US borrowed money into existence for a long time to come."

Julian nodded. "So Treasury Dollar Bills were a cryptocurrency, like bitcoin?"

"No," Teara corrected. "They were both digital assets, but very different in how they were made. Treasury Dollar Bills were created by the US Treasury, our central bank, while bitcoin was generated by a set-it-and-forget-it algorithm. The thing about money, Julian, is that for it to hold a stable value, it has to be managed as economic conditions change. This is why every nation in the world gave up the gold standard. It was inherently unstable because no one could manage the amount of gold."

Without breaking her gaze from Julian, Teara waved a dismissive hand toward Ray. "Remember how he said it would have been malpractice to prescribe a fixed amount of blood in the body? It's blood pressure that serves as a measurement of health—how well the body is managing the supply. Money is like that; a stable value is a sign of good health.

"Bitcoin could never hold a stable value because it was designed to generate artificial scarcity. While you were sleeping, Julian, the quantity of bitcoins rose from 19.3 million to 20.8 million—an 8% increase. The world's population, however, rose by more than 30%."