The One-Exchange Economy

In the land of Thoughtexperimenta

A new dictator comes to power

He wishes to outlaw speculation

The dictator decrees that each good, in a particular form, shall be exchanged only once, and the recipient must either use the good in that form or somehow process it into a more advanced product and sell it on to someone under the same restrictions

Obviously this effectively outlaws money, which is passed hand to hand many times - and this cruel dictator cuts off all communication & travel to the outside world

Now, perhaps Bitcoin could circulate in defiance of the decree, as could paper notes or physical coins

But as this is a thought experiment, we will assume 1984-like surveillance capabilities manage to prevent such things

So what will the value of dollars be? Zero - (or at least only the scrap value of green linen). What will the value of bitcoins be? Zero. And gold? Well, as long as there are dentists who fill teeth with gold, or jewelers, or scientists with scanning electron microscopes, or anyone who can use the physical metal, the value will be greater than zero, possibly much greater.

Now suppose the dictator relaxes the condition and allows the good to trade up to 10 times in a particular form? Or 100? Or 1,000? Still the dollars and bitcoins must lose all value, and still the gold can be worth substantially more than zero.

So what have we learned in the real world?

That Bitcoin's value (and fiat's) depends on indefinitely being able to exchange it into the future, while gold's does not. But isn't the whole point of Bitcoin that the system that allows fiat to circulate indefinitely will somehow break down?

Are you so willing to place the probability of Internet collapse at zero forever?