Thread by @SahilBloom

1/ A Thread on Sound Money

Imagine it is the year 2200 and you land on a tiny planet inhabited by friendly aliens.

Walking around, you admire their incredible alien technology.

You wonder aloud, “What is the basis of this thriving planet?”

So you enter the market...

2/ The market is thriving. Buyers and sellers transacting with ease.

But instead of the paper money you are used to seeing on Earth, you notice all transactions are being completed using small seashells.

Curious, you tap an alien on the weird lump you think is its shoulder.

3/ “Excuse me,” you say, “But why are you using those seashells as money?”

After it processes your strange language, it looks puzzled.

“The ‘seashells’ you belittle are very rare, impossible to produce, come in different sizes, and are durable.”

“Ah, sound money!” you reply.

4/ But suddenly, you hear a loud noise nearby and see another spaceship landing outside the market.

The market gate swings open and who saunters in? None other than Mr. FEDerico, the man of endless means.

He climbs the tower in the center of the market and clears his throat...

5/ “I have come from Earth and will buy your technology! I have 100 million seashells as payment.”

(Seashells, of course, are easy to find on Earth, despite their rarity here).

The market turns into a frenzy - sellers going crazy over the profit potential.

What happens next?

6/ Mr. FEDerico zooms off with his technology, but not before he has inflated the seashell supply.

With the massive influx, the value of seashells collapses. Savers are punished as sellers raise prices.

The thriving society collapses. Without sound money, it could not function.

7/ As you wander around the now barren planet, you marvel at how quickly it all broke down.

You hop back into your space ship, ready for the long flight home.

“Aliens are wild,” you laugh, “That could never happen on Earth.”