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"Render unto Caesar the things that are Caesar's, and unto God the things that are God's."
— Jesus of Nazareth, Mathew 22:21 
Unto Caesar
When Jesus was asked whether Jews should submit to taxation by the Roman Empire, he asked what the tax would be paid with.
Shown a silver coin minted with an image of the Emperor, he instructed his followers to “render unto Caesar what is Caesar’s.”
That judgment, which has shaped the relationship between church and state ever since, was deemed naive by some: Jesus must have mistakenly thought that the coins were simply owned by the person whose image they bore.
Two thousand years later, we’ve learned that he wasn’t mistaken at all: Money belongs to the government that issued it.
That has been starkly illustrated by the financial sanctions imposed on Russia in recent weeks: The $400 billion of reserves held with foreign central banks belong not to Russia, but to the governments that issued them.
We could have figured this out a little earlier, however. Perhaps by taking Modern Monetary Theory more seriously.
The Theory of Money
A central tenet of MMT is that money was created by the state with the express purpose of taxing it back.
Taxes create unemployment (you need a job to pay them) and some number of people will escape unemployment by joining the military.
In this way, issuing money and then taxing it back gives a government the means to enforce its laws.
In a cashless feudal system, by contrast, lords would invoke the divine right of kings in demanding wheat from farmers, beer from brewers and military service from young men.
In a monetary system, a government invokes its monopoly on the use of force and demands only state-issued money.
It’s up to you how you get it — you don’t have to be a farmer, brewer or soldier — but you have to get it from somewhere.
Money was an innovation intended to enable governments to more efficiently manipulate the behavior of its citizens.
Testing Times
Another core tenet of MMT is that the only limit to government spending is inflation.
We may now be bumping up against that limit.
The MMT playbook for the current inflation scare would be to lower aggregate demand by raising taxes.
That’s nice in theory, but laughable in practice.
A system that depends on politicians raising taxes is a system soon to fail.
So we instead ask the Fed to lower demand by raising interest rates — a blunt and ineffective monetary tool.
Those are the only two options — raise taxes or raise rates — because money hasn't changed much since the days of Caesar.
It’s still effective for manipulating behavior and imposing a government’s will.
But the arrangement is running into trouble: Striking the right balance between taxing and spending is an increasingly difficult balancing act.
And with CPI at 8%, people have started to notice.
As inflation erodes faith in the government's ability to manage the monetary system it created, we will be more open to alternatives.
Which means it’s time to innovate money again.
Stable Innovation
The two biggest innovations in the monetary system since Roman times have perhaps been the introduction of paper money (easier to carry around) and government bonds (money that pays interest).
But keeping your life savings in a duffle bag is hardly convenient. And if you keep it in government bonds instead, it may get taken away from you — if not quickly by seizure, then slowly by negative real yields.
So we need to do better.
Fortunately, it’s not just governments that can create money. A Cambrian explosion of private-sector monetary innovation is now underway: in stablecoins.
It’s early still, but the crypto industry is already improving on government-issued money in important ways:
Survival of the Fittest Money
None of these solutions will be replacing the US dollar as the world’s reserve currency any time soon. (FPI hasn’t even been issued yet.)
But innovation is happening quickly, and current events are making people increasingly open to new ideas.
Crypto is full of those new ideas, each rapidly iterating on the successes and failures of its predecessors in a process of natural selection.
In short: Stablecoins are money evolving by natural selection.
The end result promises to be better than what we've arrived at by government decree.
Money will be faster, safer, more useful and more interesting.
And also, for better or worse, something that Caesar cannot so easily lay claim to.
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Written by @bgilliam1982 and @aaronhasapen.
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