Supply is the Secret

Without exception, everyone must have wondered one day or other, in one way or else, in secret or out loud to someone, that since currency (money) is made from paper, and since paper is nearly unlimited and renewable, and enough for all the human beings out there – then why on earth do all the governments not print enough money and solve the problem of poverty once and for all?

This question dawned upon me slightly late, but when it did, I was in a tremendous combination of discovery and crisis. It was as though I, a little kid, had ascertained the ultimate secret to ending all the problems in the world – be it poverty, malnutrition, health, corruption, or unemployment. I couldn’t wait to unveil my intuitive finding to the rest of the world.

That didn’t happen, alas. One of the things I have learned living here on earth is that ideas that occur to us are not always novel. Some ideas are really original: for example, the idea of making a plane in such and such way, that occurred to the Wright Brothers, might have been very original, or the idea of Theory of Relativity and the equation might have been really unique in every respect – but except for a few exceptions, most ideas are those that have already occurred to and have been considered already by fellow human beings. The idea of a Communist society must have occurred to many people before Marx, but he must have been the first one to be an influential writer in that regard.

Anyway, coming back to my story, this idea that had occurred to be was not, hence, “original”. It took some time to understand but I figured out that just printing more money wasn’t going to solve all the problems so easily.

If you haven’t already figured it out, this is what the explanation usually goes like: assume that governments really decide to do this, to print more money. Imagine this: all central banks print unlimited money and the government sends truckfuls of money to all cities and villages. Some money out of these garbage-truck-like trucks slips and falls on the roads, but people can’t care less since these trucks are distributing all this money to people as if money is water and has really started growing on trees. Let’s say governments have decided to 100x everyone’s money. Everyone alive is a millionaire, and all bank accounts have multi-digit balances.

What happens next? The initial guess is that now that all people have the required purchasing power, the problem of poverty should be solved in a matter of time. But that is not what happens.

To go further, we have to go to the fundamental concept: what is money? What is the purpose of money? Although four to five purposes of money are usually talked of, the basic purpose of money is to act as a medium of exchange or a store of value. This means that the number on the note is relative: it’s not absolute. It is always measured with respect to what is being exchanged.

Going back to our dream world, we find that since people are suddenly so rich, and everyone turns up to buy the thing, the supply falls short and suppliers in turn have to shoot up the price. The process is repeated many times and at last find that people eventually arrive at the position from where they began: now millionaires are considered poor, billionaires form the middle class, trillionaires are mildly rich and quadrillion-aires are those who are the ones to be rich. Things are just the same, with two little differences: one, that prices of all the commodities are also now 100x, and two, that all trees are gone.

So what is the secret, then, if not increasing the money supply? We return to the definition we early discussed: money is just a store of value, a medium of exchange. It is no value if independent.

The secret, I have figured out, at last, today in the morning, while dressing up, that the secret to ending poverty is to increase the supply of every commodity instead. We get oxygen for free – no one in the world is oxygen-poor, isn’t it? Why – because the supply of oxygen never falls short! It’s easily accessible, available to everyone, and almost unlimited with all the trees around.

Water was mostly free until recently, but even when it comes at a cost, it is very mild. Why – because water is also available in most of the parts where humans live, in abundance. When its supply starts falling short of its demand, some cost is tagged to it. The solution then will not be to give everyone money thinking it will solve the problem – but to somehow increase its supply.

If the supply of Gold were to shoot up today – say Elon Musk discovers a mine full of gold on Mars and brings all the gold back to earth – then gold would become abundant, easily accessible, and it will lose its value – more so because people will realize that it’s not too useful – a unit of banana will be more valuable than a brick of gold if you are not some extreme form of King Midas!

Therefore, the answer is not more money: the answer is more supply. Availability and accessibility, that is the answer.

The Secret is simple: Supply is the Secret!