The State as we all know, has been in a continious effort to control all transactions. How feesible would an attempt for the State to abolish paper currency in place for a digital currency? Would they simply do away with it the same way they had with gold and silver as legal tender? Would their tightening of their fist on currency lead to an explosion of illegal private currencies establishing for their sole necessity on the black market? Wouldn’t a state run digital currency make hyperinflation just that much more easily triggered?
Not only is this condition possible, but it seems to be quite probable, if not inevitable. Such a transition would take time as the market naturally transitions from physical currency to electronic currency. Once electronic currency emerges, that is backed by fiat paper currency, and once the market trusts this currency, then the government can easily eliminate the fiat paper backing and take complete control over the monetary system (its ultimate goal).
Hyperinflation under such conditions would be entirely impossible in a nondemocratic political system. The government could, whenever it pleased, reduce the total quantify of money by any amount, and, conversely, increase the total supply of money by any amount. The economic consequences of such a condition would be disastrous:
Continuous malinvestments at the expense of warranted investments
Significant periodic inflations followed by forced deflations and dramatic contractions
If democracy still manages to somehow exist in such a condition then the various parties will have every incentive to continuously inflate, like today, but there will be absolutely no self-correcting mechanisms, and hyperinflations will become inevitable.I don’t think that democracy could survive under such conditions. The government would assume complete authority.
But the economic consequences pale in comparison to the social consequences of such a condition. We would essentially become slaves. The government, whenever it wished, could simply “cut you off.” You would be absolutely powerless.