Inflation is the main problem of the money system and economy in general. It has always been there and it is still present nowadays, which can only mean one thing: there are no real methods of fighting inflation.
Economists offer several methods, but they are all only theoretical – they look very well on scientific papers but when applied to the real economy they lead to consequences even more devastating than value loss.
We will continue telling you about the problems of the current money system and the solutions that the Reserveum Group project may suggest. Our development – the protocol of a fair currency called Reserveum MAX, – may rebuild the whole system and make it work not in favour of the governments or corporations, but for the people.
Before describing all of the advantages of our protocol, let’s see how the governments have been fighting inflation for the past centuries.
Money Supply Regulation
This method is pretty simple: if there is not enough money in the economy, it is spent less frequently, so sellers need to lower their prices to attract any customers at all. Overall, this is how it happens since all people behave the same way. But there’s still one small detail left.
When it happens in a whole country, the process gets a little more complicated than on paper. There are social and political factors involved, and the economy stagnates.
Lowering inflation with lower money supply results in the following:
Central Bank raises the interest rate -> Bank loans become more expensive -> Companies and people stop taking loans -> The money supply is lowered -> Purchasing power decreases too -> Sellers lower their prices to support the turnover -> Companies get smaller revenues -> Companies reduce their workforce to lower their expenses -> The unemployment rate grows -> Poverty rates grow -> Companies limit their innovative research to lower their expenses -> The economy stagnates -> The trust in the government lowers, comes political unease.
Yes, the inflation rate lowered, or better say, slowed down, but at what cost? Can you consider the economy healthy if people don’t live their full lives being too busy surviving? The Reserveum Team believes it is not normal for the modern world. This is not the way it should be. And we know how to fix it. But let’s take one step at a time.
The next way to deal with inflation:
Government Price Control
This is another textbook example of an economic utopia. What can be easier than fixating prices at a certain level with government laws? But there’s still one small detail left.
In fact, it can actually work in a command economy where every product has only one producer and there is no competition at all. It has been working for decades in some socialist countries, there is even deflation present – the process when the currency rate grows as prices lower.
But democracy is the winner in the fight of ideologies so most countries have switched to the market economy. There are thousands of private companies that produce goods and services, and hundreds of producers can make the same things and compete for consumers’ attention. In these conditions, it is impossible to set one threshold for prices because products always differ from each other in terms of quality and other characteristics. Manual price control would only make producers make equally bad products for the domestic markets and look for other markets internationally. Also, the government messing with price regulation will inevitably create a shadow economy when high-quality exclusive products are sold illegally.
The solution is simpler than it seems.
Luckily, not all the best minds concentrate on theory only; some choose to check their findings in the real market, and these are the people united by the Reserveum Group. Our analysts have found an elegant solution to the inflation problem that does not ruin the structure of the economy but vice versa improves some of its aspects.
So, we suggest dragging the money system to the centre of the economy from its outskirts, making it the core that forms a healthy ecosystem, not an auxiliary element it has been so far.
The first condition to make such a construction is a decentralised currency. If we want money to manage the economy effectively, we should exclude the case of someone manipulating it, i.e. maintain absolute independence of the money system.
Decentralised currencies are quite common now; they have been around for over 10 years, and the number of different currencies grows from day to day. But they are underestimated and considered just another speculative instrument while cryptocurrencies can do so much better. The main this is that crypto protection from inflation can be built into its structure.
The Reserveum Group is developing a protocol for a Reserveum MAX cryptocurrency that would function as money, be fully protected from inflation and only grow in price over time. It is decentralised, backed by other cryptos, and managed by a smart contract; its users will be able to manage the whole process by voting. This token’s smart contract implies the constant growth of the token rate and regulates its money supply excluding the currency deficit or surplus from the equation. It sounds too simple to be true, but in fact, it’s all we need to solve the inflation problem. It could have worked with the fiat money system too but it is centralised, which means there is always someone who wants to use uncontrolled emission of extra money not backed by anything.
So, we have given you our idea of creating non-inflationary money and we’d love to know what you think about it! Share your questions and concepts with us; if you have your own suggestions on the future of fair money, we’d be glad to review them and incorporate them into our development process.
According to the analysis group findings: reserveum.org