When Money Changes Society

Inflation is usually treated as a number. Two per cent counts as stable, five as elevated, ten as crisis. What those numbers do to society easily disappears behind baskets of goods, core rates and interest-rate meetings.

Yet money is not merely a neutral medium of exchange. It is the coordinate system of a society based on the division of labour. Money compares contributions, assesses risks, establishes contracts and expresses expectations of the future. If that coordinate system changes permanently, more than prices change. Decisions change.

Companies finance themselves differently. Governments grow accustomed to new room for manoeuvre. Asset prices gain importance relative to earned income. Saving becomes more complicated, debt more attractive or even necessary. Preserving purchasing power requires engaging with asset classes, taxes and central-bank policy — whether one wants to or not.

The crisis of the fiat system is therefore more than a currency crisis. It is a crisis of time, incentives and trust.

This diagnosis lay at the heart of a conversation with property entrepreneur and Bitcoin author Leon Wankum. His most far-reaching thesis can be paraphrased as follows: when the monetary order loses reliability, society’s façade begins to crumble too. Bitcoin forms a parallel structure in this situation.

It is a strong thesis. For that very reason, it deserves more than agreement. It must be taken apart: what can be substantiated? What is a plausible consequence? And where does ideological interpretation begin?

Price stability with built-in purchasing-power loss

Today’s monetary system is called fiat because its money cannot be redeemed for a fixed quantity of a commodity. Its value rests on legal recognition, economic capacity, institutional credibility and the expectation that others will accept it tomorrow too.

That is initially neither fraud nor a historical aberration. Modern fiat currencies enable an elastic money supply, credit and monetary responses to crises. They have also supported highly complex economies for decades. Serious criticism must acknowledge this capability.

It must equally acknowledge that “price stability” in the euro area does not mean constant prices. The European Central Bank targets two per cent inflation over the medium term. It justifies that positive target partly through a buffer against deflation, limited scope for further rate cuts and difficulties adjusting nominal wages downwards.

From the central bank’s perspective, this is a stability strategy. From a saver’s perspective, it remains a planned loss of money’s purchasing power. At exactly two per cent annual inflation, an unremunerated monetary unit retains just under half its original purchasing power after 35 years. This does not automatically make everyone poorer: wages, interest and productivity can rise too. But simply holding money is not neutral over the long term.

Responsibility thereby shifts. Anyone building reserves must not only save but invest. They must take risks to preserve, as far as possible, the value of work already performed. Wealthy and financially literate households may find this obvious. For many others, it is an extra duty for which they lack time, capital or knowledge.

Already we can see why monetary order has social consequences: it rewards not merely effort and thrift, but access to assets, credit, information and professional advice.

When businesses become financing models

For businesses, interest is more than a loan’s price. It helps determine which investments appear profitable, which balance sheets remain viable and which business models survive the next downturn.

If interest stays very low for a long time, projects can be financed that would not emerge under stricter conditions. This can be positive: young companies obtain capital, innovation becomes possible and a severe recession can be cushioned. Low interest is not automatically economic mismanagement.

The problem arises when temporary support becomes permanent structure. Research often calls companies unable to cover interest costs from current profits over an extended period “zombie companies”. A Bank for International Settlements study of listed firms in fourteen advanced economies found their share had increased since the late 1980s. The authors partly associate this with falling interest rates and reduced financial pressure to adjust. They also warn of reverse causality and common causes such as weak productivity growth.

That qualification is crucial. The finding does not establish that central banks create zombie companies. It does show that cheap, repeatedly extended financing can delay unproductive firms’ exit. Such businesses tie up labour and capital. According to the BIS analysis, they can crowd out investment and employment at more productive competitors.

Corporate culture changes as a result. Success depends more on understanding refinancing windows, subsidy conditions and political priorities. The ability to navigate complex financing and regulatory environments becomes more valuable. Long-term product development, robust balance sheets and organic growth compete with the ability to secure capital as cheaply as possible.

Not all financed growth is artificial. Not every subsidy is harmful. Not every insolvency benefits society. But a system regularly socialising losses and selectively cushioning risks weakens the feedback a market economy requires. Prices and bankruptcies are unpleasant signals. Suppressing them permanently does not remove the problem. It removes information.

The political temptation of an invisible price

Politics also operates under monetary incentives. Taxes are visible. New debt is more abstract. Its costs lie in the future, spread across many budgets and households, and can temporarily be concealed by low interest.

A state with its own or collectively supported fiat currency therefore does not face the same hard financing constraints as a private household. In emergencies, that is an advantage. Pandemics, wars and banking crises cannot always be managed from current revenue. The ability to create liquidity quickly can prevent economic and social collapse.

But a crisis instrument can become political habit. If additional spending creates identifiable winners today while interest burdens, inflation or later consolidation remain unclear in the future, a systematic temptation emerges. Decisions are made before their full price becomes politically visible.

Inflation works differently from a tax increase. It is not approved on a single statement. It emerges from monetary policy, fiscal policy, credit, demand, supply shocks and expectations interacting. This complexity makes attribution harder. Nobody can simply assign every price increase to the central bank or state. It would be equally wrong to absolve monetary and fiscal decisions because energy prices or supply chains also play a role.

Trust depends on more than the inflation rate. It depends on whether official terms match lived reality. When an institution speaks of price stability while rent, food and assets rise significantly faster than some groups’ incomes, a perception gap emerges. The average rate can be statistically correct and still feel personally inaccurate.

That gap does not inevitably produce political disillusionment. Trust depends on much more than money. But a persistently hard-to-understand distribution of costs and benefits provides fertile ground for distrust of central banks, governments, markets and eventually fellow citizens seemingly on the right side of events.

From a society of achievement to a society of assets

In a stable narrative, work leads to income, saving to security and patience to wealth. In many people’s lived experience, that sequence has become fragile.

Those owning property or other scarce assets early could benefit from rising prices. Later entrants faced higher barriers. This does not mean every asset-price development results from loose monetary policy. Construction, scarce land, regulation, demographics, international capital flows and local demand also matter greatly. Monetary policy operates within that web; it does not explain it alone.

Culturally, however, the perceived message matters: owning assets seems to overtake working. Someone already owning a scarce good sometimes gains faster than someone making a new productive contribution. This can create the feeling that society’s ladder is being pulled up.

The response is not always long-term wealth-building. It can also be speculation. If conservative saving loses real value and conventional assets seem unaffordable, quick gains become more attractive. Leveraged products, meme stocks, short-lived tokens and betting markets promise to close the gap in one leap.

Here monetary order becomes a culture of time. The present gains weight because the future seems harder to calculate. Someone who does not expect patient saving to bring progress has less reason to defer gratification.

This is a plausible interpretation, not a proven natural law of society. Time preference describes how strongly people weight the present relative to the future. Whether loose monetary systems inevitably make entire societies more short-term cannot be deduced from a single indicator. Family structures, technology, social media, education, housing costs and personal circumstances act simultaneously.

Nevertheless, the thesis touches a sore point: money mediates time as well as value. A credible currency facilitates long-term contracts and thinking. If its purchasing power is experienced as unreliable, planning a future at all requires more effort.

Inflation as a psychological experience

The psychological effect does not begin only with hyperinflation. It begins where people lose control over everyday life.

Rising prices force repeated small choices: which foods can we still buy? Which bill first? Can the heating stay on? Must treatment wait? Will income last the month? For households with substantial reserves, these questions are irritating. Without a buffer, they become a lasting burden.

A large US study using two survey waves from 2022 and 2023 found that more than three quarters of working-age adults experienced price increases as moderately or very stressful. People with low income, income losses or difficulty affording food were especially affected. Notably, reported stress increased despite a falling inflation rate — plausibly because lower inflation does not mean the previously elevated price level falls back.

The authors explicitly emphasise that their study does not establish causality between inflation and mental illness. That caution must not disappear in a footnote. It would be irresponsible to attribute depression, anxiety disorders or social aggression wholesale to the fiat system.

The narrower relationship is supported: financial insecurity creates stress and hits vulnerable households harder. A monetary order becomes psychologically relevant when people experience stored working time diminishing, planning assumptions failing and protection against lost purchasing power demanding additional risks.

Perhaps the deepest consequence is a sense of learned powerlessness. Individuals are expected to manage sensibly, yet can neither choose nor influence the unit in which they calculate. They hear inflation is falling while their expenses are not. They see rising asset values described as prosperity although they make home ownership less accessible. A rift opens between macroeconomic success stories and personal daily life.

Bitcoin as a parallel structure

Bitcoin addresses precisely this rift. Not because its price is stable — clearly it is not. Not because it makes credit, banks or states unnecessary. And not because a society with Bitcoin would automatically be fairer.

Its alternative lies elsewhere: in binding rules.

The Bitcoin network enables digital value to be transferred without a central settlement body. New units emerge according to a publicly traceable issuance schedule; the total is capped at 21 million. Changes cannot be announced by a central bank. They would have to gain acceptance in the open network among users, developers, miners and economically relevant nodes.

Bitcoin thus offers no parallel government, but a parallel monetary infrastructure. In principle, anyone can use it without applying for permission to save. Those holding their own keys do not hold a claim against a bank; they control access directly. Transactions can cross borders and rules can be independently checked.

These properties are political even though the protocol knows no political party. They shift trust from institutions to verifiable rules — and responsibility from intermediaries to users.

The risks lie precisely there too. Self-custody is unforgiving of mistakes. Someone losing keys or handing them to fraudsters often has no reversal service. Market prices fluctuate sharply. Distribution is unequal. Political and tax rules can complicate access and use. Proof of work requires substantial energy; serious assessment must openly weigh consumption, energy mix, grid effects and benefits.

Nor does the 21-million limit guarantee stable purchasing power. Scarcity alone does not create demand. Bitcoin remains dependent on people valuing its rules, security and usability. Its monetary value is not a natural constant but an ongoing social judgement.

The fair formulation is therefore not that Bitcoin solves the fiat system’s crisis. Bitcoin makes it possible, for the first time in digital form, to organise partly outside that system’s money-supply regime.

That is less than salvation — and more than a new investment product.

Two orders, two kinds of uncertainty

Fiat money and Bitcoin do not eliminate uncertainty. They distribute it differently.

In the fiat system, short-term nominal value is relatively stable while long-term money supply and purchasing power are politically and economically variable. Institutions can intervene in crises, support banks, create liquidity and stabilise demand. This elasticity comes at the price of discretion, distributional effects and possible gradual depreciation.

With Bitcoin, the long-term issuance schedule is comparatively rigid while short-term market price can be extremely volatile. Nobody can expand supply to fight a crisis. But there is also no monetary stabiliser intervening when demand collapses.

The real choice is therefore not security versus uncertainty. It is institutional discretion versus protocol-bound scarcity — each with its own costs.

A pluralistic society need not make this choice uniformly. That is what makes a parallel structure interesting. Bitcoin need not replace the euro tomorrow to exert discipline. The credible possibility of moving part of one’s savings into a globally transferable asset that cannot be expanded at will already changes the relationship between citizen and monetary order.

Exit is no substitute for political participation. Partially opting out monetarily solves neither housing shortages nor weak productivity, public debt or social division. But options limit dependence. And limited dependence changes power.

The crisis is real — but it has more than one cause

It is tempting to attribute today’s confusing world to one single fault. The fiat system is particularly suited to this because money is involved almost everywhere. Involvement, however, is not sole causation.

Weak businesses also result from bureaucracy, energy prices, demographics, insufficient competition and technological lag. Political distrust has historical, media-related and social causes. Psychological burdens do not arise from inflation alone. Cultural short-termism cannot be separated from smartphones, pandemic experience or disintegrating communities.

Criticism gains strength by acknowledging this complexity. The fiat system need not be responsible for everything to affect everything deeply. Because money is the common unit of account, its incentives reach areas that initially seem non-monetary.

That is why responding to inflation only with higher interest and then returning to business as usual is insufficient. The decisive question is what society emerges from a monetary order where preserving purchasing power requires investment knowledge, debt creates political room, and asset ownership sometimes outpaces earned income.

Bitcoin does not answer this fully. But it makes the question unavoidable. For the first time, a global monetary alternative exists whose basic rules are not tied to a single country, bank or central bank. It is volatile, energy-intensive, technically demanding and politically contested. It is also open, scarce, verifiable and voluntary.

Perhaps this is the most important parallel structure Bitcoin offers: not a ready-made new world, but a benchmark for comparison. Since Bitcoin, the existing monetary order can no longer claim political elasticity is the only conceivable form of digital money.

The façades do not automatically crumble. But they become transparent.