Programmable Money will Revolutionise the Economy
Money is stupid.
For all the elaborate innovations in modern finance, from intricate derivatives and sprawling Quantitative Easing (QE) programs to complex monetary policy frameworks, our money still has the sophistication of bronze-age coins dressed up in digital disguise.
The technology around storing and transacting money has improved vastly. But our core money itself hasn't evolved.
We will discuss a new form of money that’s vaguely taking shape on the horizon. It's called 'Programmable Money'. This isn't intended to be a moral lecture on the virtues or dangers of programmable money. Who has time for that nonsense?
Whether it ends up being good or bad will depend entirely on how it's used. And almost certainly, it will be both.
A great example of that is ammonia. What do we make ammonia with?
Fertiliser!
It literally helps feed the world.
But it's also used in explosives to blow stuff up. Same product, vastly different use cases.
The same goes for programmable money. It could end up liberating or enslaving us. So, probably a good concept to get your head around.
But like most things, it will probably end up at neither of these extremes. After all, it will be used and controlled by humans. The same species that brought you both penicillin and reality TV shows like Married at First Sight (Seriously, Why?)
Before we get into the nuts and bolts of programmable currency, let's set up some important concepts first, starting with how governments control money right now.
Monetary and Fiscal Policy
Let’s talk about the boring old workhorses of the economy, monetary and fiscal policy.
I can hear your groans of agony, but stick with me here. We’ll keep this as brief as possible, but it’s important context.
These two tools are meant to work in lock step to help guide the economy, although the reality often falls short of this ideal.
Monetary policy is the domain of central banks. It's traditionally just one big hammer.
Interest rates!
When the economy tanks, they swing low, slashing rates to nudge people into spending and borrowing. When inflation takes off and things overheat, they crank rates up to make saving more attractive and cool demand.
Fiscal policy is the government’s sandbox. They run deficits, hand out cheques, build highways, tweak taxes, anything to stabilise demand and keep the economic engine humming.
The biggest problem wth fiscal policy is that politicians often do the things that are popular and get them reelected, even if it's the wrong thing to do for the economy.
You might have heard of this guy called Trump.
He's gone beyond just abusing fiscal policy to make himself popular. And he does do that in spades, spending way more than he should. But, he's also not the first president in recent history to do so. We can’t lay the total US deficit train wreck at his feet.
But, he's worth mentioning because he's gone beyond abusing fiscal policy to the point of harassing and threatening the FED chairman Powell.
He’s trying to force Powell to adopt a populist monetary policy stance and lower rates, against the FED’s own operating framework.
This is exactly why central banks are meant to be independent. To keep the politicians' greedy paws out of the cookie jar.
For whatever brilliance and savvy that Trump might have, he's the worst person imaginable to have running monetary policy, and he's undoubtedly making it much harder for the FED to effectively control economic outcomes right now.
These two economic levers saved our collective pantry stores during the Global Financial Crisis.
Seriously.
We were teetering on the edge of another Great Depression. Central banks flooded the world with cheap money. Governments stepped up with stimulus, shovel-ready jobs, and infrastructure blitzes. Coordinated, fast, and forceful. It worked.
Just.
But these tools are blunt as hell. They hit everyone the same way. Whether you’re broke or ballin’, you get the same interest rate. Whether you’re renting or leveraged to the eyeballs, the policy doesn’t care.
So, while they're useful and effective, they cause distortions and come with a heavy cost.
Take Australia’s housing crisis. A huge chunk of the madness is thanks to ultra-low interest rates. Cheap debt fuels bidding wars. Prices go parabolic. Great if you already own.
Catastrophic if you don’t.
Meanwhile, retirees get smashed because their term deposits return pocket lint. Young people are chasing yield on crypto to catch up.
Yikes!
Savers are punished. Speculators are rewarded. That’s the twisted logic of a system relying on crude levers to steer a complex machine.
It’s not that monetary and fiscal policy don’t work. They do. But they’re crude and outdated.
We need sharper tools. Smarter ones. Ones that don’t blow holes in the side of the ship while trying to fix a leak.
Cryptocurrencies
Crypto has emerged as the escape hatch for those who want less government interference in their financial lives.
It offers autonomy and deregulation. If you’re tired of inflation eating your savings, tired of banks freezing accounts, tired of politicians playing games with the money supply, crypto is the alternative.
No permission needed. No central authority to ask.
It’s programmable in its own way, but more importantly, it’s independent.
Bitcoin, Ethereum, and other decentralised assets have given people the ability to opt out of the traditional system to some extent.
As long as you're in one of these big groups of humans we call a society or country, you still have to operate by the group laws and rules and within it’s frameworks.
Or face the consequences.
That freedom has made crypto powerful. It's liberating.
But it comes with a trade-off.
If enough people move into crypto and abandon fiat currencies, it becomes impossible for central banks to manage the economy.
Yes, I can hear so many of you cheering and screaming: ‘that’s the whole point’.
Central banks would lose control over the most fundamental levers of money supply, interest rates, and demand stimulation. You can’t adjust rates or deliver helicopter money if everyone’s holding their savings in self-custodied wallets, outside the system.
Monetary policy only works if the central bank has control over its own currency.
So decentralised crypto is the answer for those who want autonomy above all else. However, when scaled up, it makes coordinated economic management close to impossible. And without that, society loses a tool that, while crude, has saved us from chaos more than once.
So if traditional monetary policy is a blunt instrument, which more and more promotes the interests of the rich and powerful, while leaving the poor behind, and crypto is the selfish escape of those not wanting to contribute to the good of the whole, then what's the answer?
Imagine if we could do away with our current sledgehammer approach to directing the economy, without losing any of the potency. In fact, imagine if central banks could gain vastly more control over economic outcomes, react quicker and fine-tune to a greater degree of accuracy?
We will get into one of the boogeymen of the crypto world now.
The CBDC Boogeyman
You might have heard about Central Bank Digital Currencies, or CBDCs.
The crypto-anarchist die-hards will spin you many lines about CDBC's. It's the attempt of governments to co-opt crypto for their own evil purposes. To take the freedom away and replace it with more control.
They’re evil incarnate.
CDBC's will kidnap your children and steal one sock from every pair you own.
And listen, that's definitely a risk. Let's be honest.
But ask yourself a question.
If you live in a society with an evil dictatorship government that wants to control and oppress its people, do you really think the currency is the thing that hands over all the power?
You don't think governments can freeze your bank accounts now, without the aid of a CBDC, if they want to? That they can't know you better than you know yourself, with all of our social media and digital trail that we leave behind?
You don't think they can send a SWAT team through your front door in the middle of the night, take away your house, your freedom, your computers and your crypto? You don't think they can torture a password out of you?
The idea that the currency is the thing that saves us from government tyranny is, well, hilariously bad. Governments have been terrorising their subjects for millennia. They don't need a special currency to do that.
Programmable Money
There is no shortage of articles on the evils of CBDCs and central banks and governments in general if you want to go down that rabbit hole, so we'll leave that up to the reader to explore elsewhere.
It's safe to say that crypto has gained popularity as a way of escaping government control over our lives, and certainly the extreme QE impacts of the post-GFC era.
So, of course, the people pushing for less government intervention don't like central banks messing in their crypto space and 'hijacking' the technology.
While the threat of tyranny and incompetence is ever-present, let's put that aside for now and focus on the utility of managing the economy.
Enter Programmable Money.
It's important to set the right context here, so that we don't confuse our terms. CBDCs are digital currencies issued by central banks. They don't have to be programmable, but they can be.
Programmable currencies are digital currencies that can have rules and conditions placed on them. They don't necessarily have to be related to Central Banks, and are not necessarily CBDCs.
We will focus on how programmable money could be used as CBDCs to better control the economy.
Again, this isn't just crypto. It's digital money with conditions and rules attached.
Imagine if money could respond to the world like software.
That’s what programmable money is. Currency that comes with built-in logic, like smart contracts baked into every dollar. Money that behaves differently based on who holds it, what they want to spend it on, and what the economy needs.
We’re not talking about coupons or stimulus cheques. We’re talking about an entirely new substrate for value exchange, monetary policy with micro-targeting precision.
How It Works: Smarter Than Interest Rates
Let’s break it down.
Let’s deal with the radioactive elephant in the room.
Expiring Money
To many, the idea of money with a use-by date feels authoritarian. Creepy. A financial leash. Something a digital dictatorship would dream up between sessions of watching Black Mirror.
But that’s a strawman.
We’re not talking about expiring all money. That would be cruel, stupid, and economically disastrous. You don’t light the entire system on fire to warm up a cold corner.
Here’s the real point. Expiry is a feature you use selectively, like a scalpel in a surgical toolkit. And when you deploy it the right way, it becomes one of the most powerful economic tools imaginable.
Back in the GFC, Kevin Rudd sent out $1,000 cheques to millions of Australians. The idea was to get money flowing. Spur demand. Keep the economy from stalling.
It worked… kind of.
The poorest third of recipients, those living paycheque to paycheque, spent it. But many middle-class and upper-income earners saved it, paid off debt, or invested it.
That’s not a failure of intent. It’s a failure of targeting.
Now imagine this instead:
You get $1,000 in stimulus.
It expires in three months.
It can’t be used on rent or food, since you would buy those anyway.
It has to be used on discretionary spending like restaurants, holidays, electronics, furniture, and events.
Suddenly, the money becomes what it was always intended to be, a demand-side stimulant.
No waste. No deadweight. Just pure economic activation.
In fact, we’ve already done this.
As we emerged from the COVID lockdowns, many state governments in Australia issued activity and dining vouchers. You could only use them on specific things and within a deadline.
People didn’t riot for the authoritarian government overreach. They used them. It boosted the local economy exactly as intended.
That’s the essence of expiring money in action. Not as a tool of control, but as a precision stimulus mechanism.
Tagged Dollars (Purpose-Driven Currency)
Imagine your paycheque split into three categories:
Investment-grade money: Only for shares, ETFs, bonds and superannuation.
Consumable money: For normal day-to-day purchases.
Basic-needs money: Groceries, rent, medical, school supplies.
Feel authoritarian and creepy?
Hate to spill the beans, but the government already exercises this level of control over us. Think about the money that hits your bank account each time you get paid. It's not even close to what your employer is dishing out.
First, they throw an extra 12% at superannuation.
What if, instead of that whole cumbersome system, that money hit your bank account, but in a special account that could only be used on investments? You could direct it yourself instead of paying a super fund.
Straight away, you are getting control back.
Don't like that idea? That's fine, send it to a managed fund for them to look after it. No problem.
You've just got your choice back.
Dynamic Taxes Without Changing the Law
Right now, changing taxes takes years, parliamentary votes, and furious lobbying.
But what if you could adjust tax behaviourally through the money itself?
GST on luxury electronics rises to 20%, but basic goods stay at 10%.
Dividend taxes drop to 15% to encourage investment.
Fuel credits disappear for high-income earners but remain for low-income workers.
This is real-time, granular modulation of incentives.
Programmable money makes economic forces transparent. Knowable. Debatable. Auditable.
It also increases your control. Instead of a one-size-fits-all cash rate, programmable money lets each person operate in a system tuned to their context.
In the wrong hands, this is a Chinese credit score system on steroids, where the tax we pay is dependent on us being good little worker minions.
But, in a government working for its people, it could mean greater economic protection and prosperity for all. The ability to push and pull demand daily, rather than the interest rate sledgehammer that takes years to fully impact us.
But, when it comes to taxes, it's not only that.
At the moment, businesses in Australia have to charge their customers GST, hold the GST, and then pay it back to the government later. Imagine a system where the GST component is automatically forwarded straight to the tax office at the time of purchase.
This would remove all the regulatory and administrative hassles of dealing with GST. Businesses never receive the GST or have to handle it, and if businesses supply their ABN at the time of purchase, they never have to pay it either.
While it's the idea of expiring money and other nefarious-sounding possibilities that grab our attention, the biggest gains are likely to come from the more basic stuff.
Simplifying tax.
No more tax returns. Let's remove the whole layer of the economy called tax accountants, whose sole purpose is to lubricate the wheels of bureaucracy.
Isn't that a dream we should all aspire to?
Imagine if we could just take the hundreds of thousands of full-time roles that are dedicated to facilitating the tax system, and send those people out to build more houses, plant more trees, help more elderly people have a better quality of life, become doctors and nurses, teachers and child carers.
We're not trying to hate on accountants specifically here, but the point is, there are many efficiency gains to be had.
Programmable money has the potential to create a much more efficient and powerful economic system.
These are just a few ideas. The possibilities are endless.
Volatile Money
One of the interesting concepts that this creates is the idea of Volatile Money, a term coined by The Markets IQ.
It flows from the idea of variable taxes based on types of goods purchased, the person spending the money, the type of business selling the goods, the area the money is spent in, the time of day or day of the week or year the money is spent, among many other potential factors.
Basically, if money can gain or lose power based on the circumstances in which it's stored and spent, it becomes volatile in its purchasing power.
This has far-reaching implications, which must be carefully modelled, studied and debated.
For instance, while we say central banks target inflation and employment, these are the end results they are trying to influence. The mechanisms they're actually triggering to get to those outcomes are the Money Multiplier and the Velocity of Money.
The majority of money in our economy is lent/borrowed money. The actual base money is just a fraction of what actually exists.
This is called fractional reserve banking.
It's the basic function of the banking system. Base money is best thought of as what's 'printed' or created by the Reserve Bank.
Essentially, banks take deposits from people with savings, keep a reserve of that money on their balance sheet, and then lend the rest to worthy borrowers. By lending this money out, they’ve 'created' money.
The ratio of all the money in the system (also called broad money) to base money is the money multiplier. As more lending occurs, the money multiplier increases. As more loans are repaid, the money multiplier decreases.
The Velocity of Money, on the other hand, is how quickly money moves through the economy.
A high money multiplier combined with a low velocity of money can signal serious economic fragility. It suggests the economy is heavily reliant on debt, but that money isn’t circulating. People are borrowing, but not spending.
This often points to a stagnating economy weighed down by indebtedness and a lack of consumer and business confidence.
We can actually measure the economy using these principles.
Effective Demand (GDP) = Base Money × Money Multiplier × Velocity of Money
Programmable currencies have the ability to more directly target demand, but they also have a greater risk of unforeseen effects.
Volatile Money is one potential risk.
Imagine if consumers are encouraged to spend big on plane tickets to stimulate the economy, and international travel takes off. But, by either design or oversight, airlines are incentivised to pay down debt and save, instead of borrowing money to upgrade their fleets.
The airlines' massive balance sheets become a black hole for all that stimulus. Money that moved quickly from consumers' hands into the airlines’ is soon not moving.
The more granular we get in our targeting, the more we create the risk of volatile money creating places to pool or flow too quickly and working against the intended outcomes.
In Summary
CBDCs are just one potential use of programmable currencies.
The way in which they could be used is unlimited, even within the central bank realm.
While risks of tyranny and system failure always exist, so does the possibility of achieving a vastly superior economic system. One that fine-tunes the credit cycle and completely eliminates the boom-bust of it all. Creating instead, a steadily humming machine that we can all participate in fully and benefit from.
Not to say a few hiccups here and there along the way aren't likely. And this is just an idea at this stage.
But one thing's for sure, there's no opting out of society anymore.
We’re dependent on each other to create a functioning and robust world, and hiding away in our own chosen escape coin just won't cut it. Don't ditch the system. Be an active part in improving it.
Programmable money has the potential to act as a doorway into a vast new economic system with greater wealth and efficiency for all. It has its risks and trade-offs like everything else we do. But that doesn’t mean we shouldn’t give it a fair shake and find its potential.
