The Fall of Fiat Money

Lately there are more and more alarming articles about the fall of the dollar and the fiat monetary system in general, and how the problem could be solved by a gold standard or a cryptocurrency like bitcoin. But is it true?

It is generally accepted that the problem with fiat is that it has no value. So let's start with that. In simple terms, the U.S. Congress issues debt in exchange for the Federal Reserve Notes. Critics insist that the Federal Reserve Notes are created out of thin air. In reality, the U.S. Treasury Bills are converted into the Federal Reserve Notes that are used as money. Since the Fed Notes indirectly represent the U.S. debt, they are backed by the full faith and credit of the United States. 

It all sounds great, but many would point out that this is only true in theory, and in reality we are on the verge of a monetary collapse. This is why many profess gold backed money, while the cryptocurrency enthusiasts insist that their digital gold is even better. Yet the value of these assets is not constant since their value is mostly speculative, because scarcity is not of value in itself.

“It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” - Warren Buffett

What is needed is a security, rather than a scarce commodity like gold or a property like bitcoin. A security that can maintain its value independently of the fractional-reserve monetary system and the economy. A security that is tied to a value that remains stable in terms of goods and services. Clearly, it is the value of work needed to produce these goods and services. Such a security is debt.  

“Goods are wealth which you have, while money is a claim on wealth which you do not have. Thus goods are an asset; money is a debt.” - Carroll Quigley

But that is where we started. The debt based money is the problem we have now. Unless something else is the problem, and if we don’t fix it then switching to a different type of money by itself will not help. 

The problem is that we have two economies. A productive economy that produces everything, and the unproductive economy of the financial sector that speculates in the financial markets. Money created for the productive economy is used to produce goods and services. While money created for the financial sector is used to extract money out of the productive economy. At the same time, the financial sector has expanded over the last 100 years from 5% of the GDP to over 50%. Moreover, the financial sector misuses the power of money creation for its own benefit. For example, the central banks are now using the QE program to rescue the banking system. The enormous amounts of money created under this program benefit the financial sector at the expense to the productive economy.

If money were issued as debt to the productive economy there would be no such problems. But asking the financial sector to get out of the business of money is a nonstarter. The solution to this dilemma is currency that is verifiably tied to the underlying productive debt. To issue such a currency would require an independent monetary system comprising a set of institutions by which money is maintained in an economy, including a bank, a currency exchange, and a dispute resolution system.

 

Such a system is currently being developed. It is called the Axio Monetary System that was designed to outperform the fiat money, and to be operated like a credit union for the benefit of its members. Given its many advantages, it has enormous potential. 

 

 

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale.

What Will Replace The Dollar

Just a few years ago the fall of the US dollar was a fringe idea. Nowadays articles about the imminent collapse of the dollar are published nearly every week. With trillions being created in Washington, this seems to be certain. However, saying that the US dollar will collapse doesn't mean that it will, and if it does, the question is what can take its place.

To see whether the US dollar will collapse we need to examine what is the US dollar. By now everyone should know that the “US dollar” is really a “Federal Reserve Note” that is issued by the Fed, which is a private central bank. The vast majority also believes that it is fiat money without intrinsic value. This view is incorrect since the US dollar is backed by the US government obligations. What is also misunderstood is that the dollar is a security that states “this note is legal tender for all debts, public and private” and is enforced in the court of law. Meaning that courts of law are required to recognize the dollar as satisfactory payment for any monetary debt. So the dollar has value and it is supported by institutions including courts, banks, markets and the US government. At best the argument for the collapse of the dollar would be that some countries will no longer accept dollars. To see why this is a nonstarter we need to examine what are the reserve currencies.

There are three reserve currencies: US dollar, UK pound and euro. So what is a reserve currency, and what makes it different from all others. A reserve currency is the only means to issue international debt. Note that the EU is not supposed to issue debt in the same way the US and UK can, so as far as the EU is concerned euro is not a reserve currency. Similarly Chinese yuan is a reserve currency in name only. Moreover, all countries besides the US and UK can issue their national currencies in an amount corresponding to the amount of reserve currencies they have. In other words, all such national currencies are rebranded reserve currencies. Because the world economy is based on dollars, pounds and euros, all contract disputes are settled in New York, London or Brussels.

Now assuming the US dollar will collapse, what can take its place? And the answer is a reserve currency can be replaced by another reserve currency. However, neither the pound,  euro or yuan can step in to replace the dollar within the current monetary system. But what about an independent monetary system? A monetary system is the set of institutions by which money is maintained in an economy. At a minimum, such a system must provide means for maintaining accounts, performing transactions, resolving disputes, as well as making and servicing loans. 

 

So if the US dollar were to falter, other monetary systems will compete to take its place. The Axio Monetary System will be one of them, and probably the only one able to provide currency with inherently stable intrinsic value, interest payments, privacy, transparency, secure ownership, free real-time transactions, international borderless transferability and convertibility, a variety of payment methods, free basic account services, and a legal framework. But most of all, the Axio was designed to serve the people. And even if the dollar does not falter, the Axio will still be able to compete against it.

 

 

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale.

Cryptocurrency for Common Good

Bitcoin was invented as equitable money that would be created and controlled by the people. However, with over a decade after the invention of bitcoin, we see that instead of being created by the people, bitcoin is created by a few massive mining farms using megawatts of electricity. This process is now more centralized than creation of fiat money by the worldwide banking cartel. It is primarily held and controlled by the crypto whales, and mostly benefits the speculators. Even more surprising is that so far no other cryptocurrency produced usable money, never mind equitable money.

The reason why decentralized cryptocurrencies failed is because cryptocurrencies, like bitcoin, are a “property” that have speculative value, while business operations are based on "securities". And there are no decentralized means for creating securities. Inability to support business operations means that decentralized cryptocurrencies will never be able to function as money. 

 

 

Given that the decentralized cryptocurrencies have failed and we know what has gone wrong, it is now possible to formulate the requirements for creation of equitable money.

Since a corporation is required to issue securities, this corporation should have a decentralized control like a credit union. Such a corporate structure would be able to issue money created by the people, controlled by the people, to benefit the people.

Most business transactions cannot be performed without a legal framework supported by some form of dispute resolution, and an ability to reverse transactions due to error, fraud, etc. To support dispute resolution, transactions have to be reversible in whole or in part.

What remains is to determine the type of a security needed to issue money. The answer lies in the relationship between money and goods, in which goods are the wealth, while money is a claim on wealth. In other words, money is a security that acknowledges a debt owed. To improve this process, issuance of money should be recorded on a blockchain such that the outstanding debt is equal to all the money in circulation. This would also demonstrate that the money supply is fully backed by the full faith and credit of the borrowers. Moreover, this type of money would be fundamentally different from the fiat money we have, because the proposed monetary system will be based on deflation instead of inflation. This is because the proposed system will accumulate the value of the interest payments within a supply of a fully backed currency.

As a result, this type of money would be based on diametrically opposite principles to the current system, such as deflation instead of inflation, public control and transparency for common good instead of secrets for private gains, it would be able to function within the current monetary system and will be able to compete against the fiat money. It would be a real revolution against the establishment, and it is already under way. It is called the Axio Monetary System.

 

Come, see the future!
Join the revolution!

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale.

 

The Future of Cryptocurrency

The global monetary system is falling apart. The Federal Reserve has dropped the reserve requirement to zero and is now buying junk bonds. This is a golden opportunity for cryptocurrencies to move into the mainstream. The question is, are they capable of performing at least as well as fiat money? Unfortunately, no.

The problem is that cryptocurrency enthusiasts mischaracterize cryptos as money. To support this notion, they often list the three main functions of money as a unit of account, a medium of exchange and a store of value. However, this list only describes the main functions of money and not what it is. Much confusion has arisen from failing to recognize that “Goods are wealth which you have, while money is a claim on wealth which you do not have. Thus goods are an asset; money is a debt.” - Carroll Quigley. Money is a security that acknowledges a debt owed. This is why cryptocurrencies are not money. Even the SEC now views cryptocurrencies, like Bitcoin, as speculative investments instead of securities because they do not secure assets. Having mostly speculative value also means that such cryptocurrencies have an indeterminate value that constantly fluctuates, making them unusable for anything besides trading.

 

So what is needed to enable a cryptocurrency to compete against fiat money?

First, to function as money a cryptocurrency has to be issued as a security, otherwise transactions will be barter. However, securities cannot be issued by a decentralized system. Only a legal entity such as a corporation can issue securities. Once issued such a cryptocurrency can be used in a decentralized manner, but it must be legally issued first.

Second, the main problem with fiat money is the fractional reserve system that permits creation of money without underlying assets, which is essentially a legalized counterfeiting of money. This is what cryptocurrencies are able to solve using a public blockchain such that the total amount of cryptocurrency in circulation is always equal to the value of the underlying assets. If the underlying assets are denominated in this cryptocurrency then it would directly represent the underlying. This approach would make the cryptocurrency creation process public, while allowing transactions to be kept private.

Third, a cryptocurrency requires a monetary system, i.e., a set of legal institutions to allow this cryptocurrency to function within the economy. At a minimum, the system must have the means for maintaining accounts, performing transactions, resolving disputes, and making and servicing loans. Such a monetary system would permit a cryptocurrency to function legally within the economy.

Finally, the system must be controlled by its members, for example, as a credit union.

Given all this, it is clear that none of the existing cryptocurrencies are suitable for use in such a system. This is why Axio was invented. Axio was specifically designed to satisfy the fundamental goals for which bitcoin was invented for and to be able to function within the economy.

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale.

 

What is Next for Cryptocurrencies?

Bitcoin was invented as a test for a decentralized Peer-to-Peer payment system. Since then much effort was made to improve the idea, however none have produced a functional currency. The reason for this is that cryptocurrencies have fundamental problems.

1. Cryptocurrencies have an indeterminate value which is why they are only good for speculation and illegal activities.
2. A decentralized system means that there is no one there to resolve disputes or help when problems arise.

These and other problems prevent the use of cryptocurrencies in business, relegating their use to enthusiasts and speculators. Yet cryptocurrency activists resist any attempts to fix these problems in ways that do not confirm with their views. They are attached to ideas that were improperly used to justify Bitcoin as "money". But to move forward we need to acknowledge these problems.

In over a decade since Bitcoin was invented, no real progress in creating usable money has been made. If we want different results, we have to try a different approach. And a different approach does exist but we need to abandon all preconceptions. We need to get back to the original goal – to create money outside of the banking cartel that must function within the system yet be apart from it, and it must be under control of the people.

Such a project exists. It is called the Axio. The ideas behind the Axio project was started when bitcoin started out, but there was this belief that all these problems will be solved through some decentralized process. This has clearly failed. So this religious attachment to decentralization had to be abandoned and tokens had to become money. This is what Axio is about. Achieving the goals the bitcoin was created for.

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale. 

 

Axio and Deflation

The economic theory describes deflation as a decrease in the general price level of goods and services, and that it occurs when the inflation rate falls below zero. Then the theory describes causes of deflation and its terrible consequences. However, this theory is only true for the current monetary system. For example, the theory states that the major cause of deflation is when money becomes more expensive because of the scarcity of money. The theory does not consider that money itself can become more expensive since there is no mechanism for it. This is because the current monetary system is an inflationary system based on the decreasing value of money.

The Axio monetary system is a deflationary monetary system in which Axio will accumulate the value of the interest payments within a supply of a fully backed currency. This is because the Axio will be issued as debt and extinguished when it is repaid, while the resulting interest payments would increase the value of the Axio by the amount of the interest. However, deflation makes it difficult to repay loans with money that become more expensive over time. Left as is it would make Axio unusable for business.

The obvious cure for deflation is inflation, however it has to be done in a productive way that would benefit everyone. The solution is to issue additional Axio for the balance between interest payments received and the balance of the bad loans that would cause inflation within the system. This amount can then be used to pay for operating expenses of the Foundation, and the remainder could be distributed as interest payments to all depositors. This would help to stabilize the Axio by diverting excess value to depositors.

This approach would solve the problems of deflation, stabilize the value of the Axio, and would provide interest payments to the depositors without the need for inflation. It would make the Axio monetary system less susceptible to the fluctuations in economic activity that create booms and busts of the Business Cycle associated with the current inflationary monetary system. And given all the other great advantages of the Axio, would allow it to compete effectively against the established fiat currencies.

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale.

The Utility of Axio

Bitcoin was invented in 2008 as an attempt to create a decentralized Peer-to-Peer Electronic Cash System. This goal was achieved, and since then many improvements were made. Despite all this, cryptocurrencies remain technological curiosities incapable of competing against the established fiat currencies. The reason for this is that cryptocurrencies have fundamental problems. First, money is a financial obligation that represents an outstanding debt. This is why cryptocurrencies like Bitcoin are not money. Second, because cryptocurrencies strive to be decentralized, there is no one that is legally responsible for them and therefore they cannot be registered as a security or can provide for a legal recourse. These and other problems prevent the use of cryptocurrencies in business, relegating their use to enthusiasts and speculators.

The Axio was designed to address these issues so it would function as money, and to solve major flaws in the current monetary system, enabling it to compete against the established currencies. To accomplish this, Axio had to become a monetary system, meaning it had to incorporate all the major components of a monetary system. At a minimum, this system had to provide means for maintaining accounts, performing transactions, resolving disputes, as well as making and servicing loans. While the Axio was to provide the means for implementing this system. Within this system the Axio became an asset-backed cryptocurrency, with every Axio in circulation being recorded and accounted for. This system had to be able to expand and contract based on the demand for the Axio while remaining stable. It had to prevent the exponential growth of debt. It had to provide a legal framework, free transactions to both consumers and retailers, and to pay interest.

This opened endless possibilities for the Axio. For instance, because the Axio is not a national currency it will not be bound by borders allowing it to be used everywhere, and anyone would be able to open an Axio denominated account irrespective of their local currency. Such an account would permit transactions in Axio and other currencies while avoiding problems associated with some local currencies. For example, businesses in China would be able to offer their goods in any currency while maintaining their account in Axio instead of Yuan. And because transactions in Axio will be free, businesses would prefer payments in Axio over other currencies. Free transactions would eliminate the expanse of the existing monetary system, allowing Axio to compete against all other currencies. 

And that is just some of Axio's advantages. The possibilities are endless...

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale.

 

Axio as Money

Money started out as intermediate goods involved in a transaction that otherwise would have been barter. As intermediate goods, money had to be valuable, portable, and divisible. This is how a measure of gold or silver came to be used as money. Eventually, coins were devised to standardize the weight and therefore the value of money. However, this does not explain what money is?

 

Much has been written on the subject of money, yet it remains mysterious and highly debatable. The key to this puzzle is the relationship between money and goods, in which goods are the wealth, while money is a claim on wealth. Money is a “security” that acknowledges a debt owed. Simply put, money is debt. If money is debt, then it must be borrowed into existence.

 

People often say that “banks create money out of thin air”. What really happens is basically this: A borrower signs a loan contract with a bank to borrow an amount of money. This amount is issued by the bank and is represented by numbers in the bank’s computer. According to the loan contract, the borrower is responsible to repay the loan plus interest. Thus the amount of money issued exists temporarily until the loan is repaid. While the money created this way is backed by full faith and credit of the borrower via the loan contract, with value comprising the interest payments corresponding to the intrinsic value of human endeavors.

This process of money creation means that within a monetary system, the amount of money in circulation should be equal to the amount of the outstanding debt. Otherwise money would have no backing and therefore no intrinsic value.

The Axio is a project to create fully backed currency using basic blockchain technology. Specifically, a blockchain is used to secure the life-cycle of the Axio. Each Axio will be created to underwrite a loan and will be destroyed when it is paid out. This process of creation and destruction of the Axio will be secured with a blockchain. Consequently, the amount of Axio in circulation will be able to expand and contract in proportion to the demand for the Axio, while assuring that the Axio is fully backed by the full faith and credit of the borrowers. This would give the Axio many advantages over other cryptocurrencies, including a stable intrinsic value that does not depend on other currencies or commodities, free real-time transactions paid for by the interest on loans, legal basis of a security issued under the U.S. law, in addition to many other advantages the Axio monetary system will offer.

As a fully backed currency, the Axio would be able to compete with the fiat money, the value of which is set by supply and demand and people's faith in its worth. While fiat money loses value due to inflation, the Axio will have to contend with deflation, since the system will accumulate the value of the interest payments within a supply of a fully backed currency. Regardless of how the Foundation will deal with deflation, savers would be better off holding the Axio rather than fiat. Moreover, the Axio account holders will not be tied to their local fiat currencies, and any problems associated with these currencies. The goal is to be able to use the Axio as any other currency while providing advantages no other currency can offer.

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale.

Axio Monetary System

A monetary system is the set of institutions by which money is maintained in an economy. At a minimum, this system must provide means for maintaining accounts, performing transactions, resolving disputes, as well as making and servicing loans. While money provides the means for implementing such a system.

The primary reason cryptocurrencies remain a mere curiosity is because they failed to provide a functional monetary system. For example, cryptocurrencies are able to provide accounts and to perform transactions, however they are not suitable for making loans or offer a means for resolving disputes. As a result, current cryptocurrencies are unusable for business purposes.

The Axios Foundation will provide an Axio based monetary system comprising an Axio bank, a currency exchange, and a legal system. These institutions will provide the minimum required to maintain an economy. The Foundation will also provide payment methods that will support free real-time transactions, enabling the Axio to compete against the established currencies.

Axio will be issued as a debt, and as this debt is paid a corresponding amount of axios will be extinguished thus increasing the value of the Axio by the amount of the interest paid on the debt. Unlike other debt-based monetary systems, this process of money creation will be recorded in a blockchain so that the system could be audited, and control of the system will operate in a similar way to a credit union, which is controlled by its members as stakeholders and operated on the principle of people helping people.

With so much going for it, the Axio is positioned to become a dominant player in the race to create the next generation of cryptocurrency. As such, it has enormous potential.

 

For more information about the Axio Monetary System, please visit the Axios Foundation website. For an overview please refer to the Pitch Deck, with further information disclosed in the Blog, Whitepaper, Business Plan, Executive Summary and the Axio Token Terms of Sale.