What are the main consequences of currency debasement in a digital economy?

Currency debasement occurs when the value of currency decreases due to an excess supply of it. In a digital economy, the consequences can be considerable. As noted, when everything goes to zero in value, it reflects a fundamental economic principle: too much of something diminishes its value.

In a scenario where an individual is desperate for a commodity, such as water in a desert, they may pay anything for it. However, if an overwhelming abundance of that commodity is supplied, its perceived worth drops significantly. This principle extends to money; with increased money supply, the purchasing power diminishes over time.

• In the early 2000s, devaluation led to long-term economic effects where the purchasing power of individuals weakened.
• As of 2023, the global economy shows staggering debt levels, with governments pushing economic policies that facilitate further currency creation, effectively marginalizing individual saving capabilities.
• With the shift toward electronic money creation, managing the implications of currency debasement has become a central concern for financial authorities.

The impact of debasement extends beyond immediate transactional values; it affects savings, investment potential, and overall economic stability.