A parallel monetary system based on the redeemable self-decaying money -- The ultimate hedge and safe haven of private wealth in the rising wave of over issuance of fiat and token money/stablecoin

TL;DR

This paper proposes a novel parallel monetary system based on redeemable self-decaying money (RSDM), aiming to serve as a safe haven amid overissuance of fiat and stablecoins, with theoretical models and practical scenarios discussed.

Contribution

It introduces the concept of RSDM as a modern 'good money' and develops an optimization model for multi-monetary systems, offering new insights into wealth preservation strategies.

Findings

RSDM can act as a safe haven in a multi-currency system.

A triple-monetary system enhances wealth stability and safeguards against Gresham's law.

Potential applications include activating dormant gold assets and establishing collateral-backed RSDM.

Abstract

A currency with stable purchasing power can always provide a psychological haven for people around the world. However, since the collapse of the Bretton Woods system, issuing more cheap currencies has become a common trend in the international community, and the legalization and over issuance of stablecoins will strengthen this trend. In this context, our study focused on a parallel monetary system based on a redeemable self-decay/devalued money(RSDM). Firstly, we point out the idea of redeeming gold at a fixed denomination with gold certificates is similar to an impossible perpetual motion machine. Only when the face value of a gold token self-decays or self-depreciates and the weight of the reduced value can compensate for the storage cost of physical gold, can it be convertible or redeemable. Secondly, we pointed out that as a modern "good money" under the Internet environment, it must have two basic functions: long-term value storage and zero logistics cost of money circulation. Thirdly, we found that a single type of money is difficult to shoulder the responsibility of modern "good money". Only a parallel monetary system, including RSDM, such as a triple-monetary system consisting of RSDM, domestic fiat and major international reserve currencies, can form the ultimate safe haven of wealth and safeguard the reverse Gresham law. Based on this analysis, we build an integer programming model for currency optimization selection in a multi-monetary pool. Fourthly, several potential application scenarios of RSDM in the real world were discussed, including a new approach to activate dormant gold assets in India based on RSDM, and the gold monetization scheme in the United States. Finally, the demand for RSDM with precious metals as collateral was analyzed, providing theoretical support for establishing a sound parallel monetary system based on RSDM.