CHALLENGE
New Money System
$1 MILLION (Prize amount to be confirmed. Announcement expected for next year)
A monetary system is a system by which a government provides money in a country’s economy. Modern monetary systems usually consist of the national treasury, the mint, the central banks and commercial banks.
The alternative to a commodity money system is fiat money which is defined by a central bank and government law as legal tender even if it has no intrinsic value. Originally fiat money was paper currency or base metal coinage, but in modern economies it mainly exists as data such as bank balances and records of credit or debit card purchases, and the fraction that exists as notes and coins is relatively small. Money is mostly created by banks when they loan to customers. Put simply, banks lending currency to customers creates more deposits and deficit spending.
Today’s global monetary system is essentially a fiat system because people can use paper bills or bank balances to buy goods.
