Using money as a store of value is inherently problematic. One can store value as canned beans, as rice, but as money?
The usual trick to this is to lend money to young people to build homes and start families. The value is stored in their home, the bank holds a lot of mortgages to these homes, and these back a lot of on demand deposits.
This creates the notorious problem of term transformation, which can be ameliorated by flexible interest rate mortgages – or by an alarming willingness of the government to print money for cronies, but I am here addressing a different problem.
Suppose there are not enough young people building homes and starting families.
We then face the problem of money with nowhere to be stored. So the natural rate of interest falls to zero and tries to go negative So instead of storing it in young people’s promises to work hard and build a life for their families, we store it in taxpayer futures. Governments borrow to buy votes, and to “stimulate the economy” So money is backed by a liability on taxpayers.
An ever larger liability on ever fewer taxpayers.
But, surely money can store value even if backed by absolutely nothing. Money is always a bubble. So why worry. How can the capacity of government to borrow enormous amounts of money at negative real interest rates be a bad thing. Surely the interest rates that governments are paying show that our governments are more solvent than ever. The decline of the high IQ working taxpaying population and its replacement by people on welfare and single women in makework jobs has been a huge bonanza for governments, that has deluged them with free money. Indeed, the more single women in makework jobs, the less they will reproduce, and the more money the government can borrow.
Assuming a virtuous and competent government, a deluge of free money is not going to cause that government any harm. If, on the other hand, we assume government thinks no further ahead than the next election …