Author: Zhu Jiaming
Source: Digital Economy Commune
Editor's Note: This article is the preface of the famous economist Zhu Jiaming for Dr. Long Baitao's new book "Digital Currency: Inheritance and Innovation from Slate Economy to Digital Economy".
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We have entered the third decade of the 21st century. No one can really anticipate what events in the third decade will affect and change the world's economic, political, social and ecological systems. However, one can be sure that human economic activity will continue and that currency will not disappear in the next ten years. It is just that the currency will change significantly in the next ten years, and all the clues have been fully revealed in the 2010s, especially in the last two or three years. The value and significance of Long Baitao's "Digital Currency: Inheritance and Innovation from Slate Economy to Digital Economy" is here. Long Baitao proposed in the preface: "The general public has learned that currency is the most powerful force in the world and surpasses any economic, military and political force." Now is the historical moment to put currency under a historical perspective, look for the all-round difference between digital currency and traditional currency, and show the trend of human currency evolution. However, existing monetary theory is not enough to accomplish such a historical mission. Therefore, new ideological resources need to be introduced to inspire, interpret, and recognize the evolution, status, and trends of money. Only with the introduction of new ideological resources, the main line of this book-digital currency-can be thoroughly explored.
1. Biological genetics and mutation theory. Thousands of years of human currency history prove that currency has an unimaginable tenacious vitality. From its origin, its development and evolution have never stopped. If we recognize the history of money as a continuation process and the inherent "genetic" mechanism of money, then we have to ask the question: Does money have an inherent "gene"? If so, what is this "gene"? Long Baitao agreed that the currency originated from the "slate economy" of the two river basins in the Bronze Age 3000 years ago. Palaces and temples were the main economic entities, and money was created as a means of debt repayment. Nowadays, the debt currency supports the Fiat Money system commonly used by major countries in the world. Money is just an IOU. Can we say that "IOU" is the gene of money?
There is also an empirical proof of the origin of the currency: the "stone coin" used by the residents of the "Yapu Island" in the Pacific, which the locals called "Fei". The island has a long history, and prior to the modern invasion, the island's inhabitants represented wealth by the number and size of the stones they owned. There is such a story, a family once owned a huge "stone coin", which was sinking into the sea on the way back to Yapu Island. Despite this, other residents acknowledged that the family actually owned the wealth represented by the stone coin. It is no exaggeration to say that this case reveals the "gene" nature of money, that is, the "value" that people often say. Such "value" can be reflected in the transaction process, and it can also exist in the mind. Genes are the basic unit of inheritance of living beings on Earth.
In the biological world, "heredity" is not absolute, and genes are very likely to undergo structural changes, leading to genetic mutations. Because of heredity, the relative stability of species can be maintained; because of mutation, it may lead to the evolution of species and the creation of new species. This theory can be verified in the history of money. From the perspective of the origin of money, the "IOU" and "value" that money has are inseparable, which is likely to be the currency's genes, and then form a unique DNA, which makes the currency have a strong "replication" characteristic, which supports the stability of currency. one side. In this book, Long Baitao focuses on analyzing the operating mechanism of commercial banks and modern central banks based on the "loan to create money" theory, and uses various financial phenomena in the field of digital currencies to indeed touch the underlying mechanism of currency evolution.
2. Enlightenment of quantum characteristics. In the "quantum mechanics" literature, no one seems to object to the "superposition", "measurement" and "entanglement" of the three characteristics, and these three characteristics completely violate people's common sense of understanding the macro world. In other words, no similar phenomenon can be found in classical mechanics. The so-called "quantum superposition" means that a quantum system can be in different quantum states. "Schrödinger cat", that is, a cat can live and die at the same time, is a cartoonized "quantum superposition". The so-called "quantum measurement" means that the quantum will change its existence state because it is measured. In other words, in the quantum world, any external measurement and observation will cause quantum uncertainty. The so-called "quantum entanglement" means that in a quantum system, although there is no force or connection between two particles, any changes to the quantum state of one particle still occur, and the other will immediately feel And make changes accordingly. That is, when the characteristics of each particle have been integrated into a whole, it is no longer possible to describe the characteristics of each particle individually.
In all human economic activities, currency is closest to the "superposition", "measurement", and "entanglement" characteristics of currency: currency has always existed in different forms at the same time. Historically, such as gold, silver and copper can be used as currency at the same time Existence; now, digital currency and non-digital currency coexist, thereby forming a "currency superposition" phenomenon that exceeds "quantum superposition". Currency can also change due to different "measurement" criteria. For example, gold and silver have changed because of the "gold standard" or "silver standard" measurement scale. For another example, interest is also the "measurement" standard for money. Changes in interest absolutely affect the value structure of the currency itself. Currency has a strong nature of entanglement. The exchange rate is the most typical phenomenon of currency entanglement. The fluctuation of the value of any one currency affects the value of at least one other currency. In today's world, it is almost impossible to cut the world's major currencies from the world monetary system.
3. Catastrophe theory. There are two entry points for understanding the "mutation theory". First, the structural stability and morphogenesis published by French mathematician René Thom (1923-2002) in 1972 as the framework of a "catastrophic theory", which holds that any theory in nature or human society There is a distinction between a stable state and an unsteady state in a state of movement. The "abrupt change" refers to the process of transitioning from one stable configuration to another. Or as defined, the transformation of a non-linear system from one stable state (equilibrium state) to another stable state occurs in the form of a "mutation". Once "mutation" occurs, it is irreversible and a new stability can replace the original stability. Second, based on the biological "gene mutation" theory, "mutation" belongs to an extreme state of "mutation." "Gene mutation" is universal, random, low-frequency, harmful, and non-directional. Characteristics. In 1944, Schrödinger proposed in "What is Life?": The stability of life and heredity and the jump-like mutations of radiation (mutations) under radiation, indicating that life is subject to quantum laws .
The common point of the above two types of "mutation theory" is that the evolution of nature and human social systems has always been non-linear, and both can cause mutations due to internal and external reasons. If you use the "catastrophic theory" to interpret the history of currency evolution, you will find too many "catastrophic" phenomena. The proposals and resolutions of the Blington Forest Conference belong to the "abrupt changes" in the global monetary system. In the past decade, the formation of a digital currency group led by Bitcoin is a larger "mutation". This "mutation" not only reflects the increasing influence of external technology, but also explains the currency itself. Has a non-linear evolution mechanism. It remains to be seen how central bank digital currencies will lead to the "alienation" of traditional currencies and even stimulate the "mutation" of the current digital currency system.
4. Chaos theory. Edward Norton Lorenz (1917-2008) was recognized as the founder of this theory in 1963. However, although chaos theory has spread for many years, there is still no definition of "chaos theory" generally accepted by scientists, and scientists in different fields often have different understandings of it. However, there is almost no controversy about this cognition: "Chaos theory" is a theoretical system in the field of mathematics and physics that studies linear systems. Its most important contribution is the use of simple models to introduce clear cycles. Sexual results. Uncertainty, non-repeatable, random irregular movements, and unpredictable phenomena such as the "chaotic effect" existing in nature and society have been included in the research scope of "chaos theory". In addition, the chaotic changes in the initial conditions proposed by the "Chaos Theory" have been continuously exaggerated, and the theory that their future state will make a huge difference, especially the "butterfly effect" described by Lorentz has been widely recognized. After entering the information society and digital economy, currency has the characteristics of increasing uncertainty, non-repeatable, random and irregular movements, and often conforms to the framework of "chaos theory". Therefore, using the "chaos theory" to interpret currency phenomena will be greatly stimulated.
The most typical case: The post-Blington Forest meeting's world currency system has become increasingly unpredictable and has such "disorderly" characteristics. Since the 1990s, because modern governments and central banks have become more and more subject to the influence of transnational capital, it has led to the frequency and destruction of global and regional financial crises, which has exacerbated the "disorder" of the global monetary economy. In addition, too many things demonstrate that any minor error in the central bank's monetary policy, because of the so-called "butterfly effect", may eventually threaten the security foundation of the entire international currency. From the cause to the result of the 2008 world financial crisis, it is a process of constantly magnifying errors in monetary policy and the financial system. Later, it was difficult to explain the logic of the crisis.
5. Psychology. The combination of psychology and money should be said to have started with the American economist Irving Fisher (1867-1947). Fisher's "currency illusion" theory in 1928 revealed that people are accustomed to respond to the nominal value of money and ignore the specific psychological illusion of their actual purchasing power changes. Fisher wants people to get rid of the "money illusion" and focus on the purchasing power and potential value of money. Now, not only do people continue to be trapped in "currency illusions", but the government is even more conscious of using the people's "currency illusions" to implement inflation policies. In recent years, because of the combination of psychology and monetary phenomena, The Psychology of Money has emerged. As far as most related books and articles are concerned, "Money Psychology" is concentrated in the so-called wealth management category. Because of the inherent connection between psychology and behavioral science, there should actually be a "monetary behavior". In human history, never before has the "general public" cared about money and finance so much, and has never had such close effects as the "Cantilon" effect on people's lives.
The interactive relationship between the digital currency described by Long Baitao in this book from its birth to its growth, and the “general public” belief and identification of the wealth form in the digital economy era, emphasized that blockchain smart contracts can help to take account of fairness. The relationship of efficiency describes the prospects for sharing a coinage tax, achieving inclusive finance, and digital democratization. It is worth noting that Bai Tao suggested in the book that only the operation of the People's Bank of China among the major economies may truly be in the public interest. It is really important to adjust the "psychological expectations" of the "general public" regarding monetary wealth. In the second half of last year, the Libra fever spreading around the world and involving different social classes was almost an unprecedented psychosocial movement. Behind it was a collection of various psychological elements such as ideals, fanaticism, expectations and anxieties. History has proven time and again that changes in the psychology and behavior of the "general public" economy and wealth will have an inestimable impact on social transformation and constitute a deep driving force for the great social transformation.
In the face of the rapidly developing digital economy and digital currency, in the face of rapidly developing science and technology, and in the face of rapid social transformation, the limitations of the traditional currency theory from neo-classical to Keynes are obvious, and it is in awkward position. Currency philosopher Georg Simmel (1858-1918) had hoped to "understand" modern life with the help of "money", so "our task is not to complain or tolerate, but to understand." More than a century After that, Simmel's mission still exists. Now we need to understand the digital age through the digital currency, understand the digital currency through the digital age, and then understand the digitalized era and culture through the combination of the digital economy and digital currency. To recognize digital currency, we need to use and introduce new ideological resources, and gradually form a new currency theory.
The "big change that hasn't happened in a century" is still underway. In this big change, digital currencies will play an important role, and the structure and system of the monetary economy are facing all-round changes, affecting the distribution of global monetary and financial resources. It is expected that Long Baitao will continue to uphold the spirit of realistic, independent, diligent, rigorous and humble research before the tide of history, and make efforts and breakthroughs in currency theory and methods.
January 12, 2020