On an alternative measure of the need for money

The main idea: the volume of play involved in a fair lottery is indicative of either too much or too little money in circulation. 

0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 09.10.2023, and the current version may have been updated several times from its original form. 

1.1 If you want to leave money creatin to the market, you need to establish some sort of feedback loop whereas people don’t just create money ad infinitum, but grope (in their totality) toward some efficient volume.

1.2 I think I have solved this issue to a satisfactory degree     , but for a long time I had been thinking of an alternative design which I could never finalise in theory. Although this has now been overtaken by the coupled currencies design, still worth laying out the main intuition. 

1.3 Imagine you offer a lottery of fair odds to all comers, whereas you can invest any amount denominated in the currency being managed and either loose it or double it with equal chance. No fees or other consideration make this anything but a perfectly balanced game, and you can play instantaneously for arbitrarily large sums.  

1.4 What would large changes in the volume of money being played tells us? In one case, if there’s too much money in circulation (obviously different than to much wealth), people will play the surplus more.

1.5 In the obverse case, those having too little wealth (not just money) would play for a chance to improve their lot.

1.6 Paradoxically, a large increase in the volume of play could imply either too much money going around, or too little. I assume that whoever is managing the game (monetary authority, coin issuer, etc.) would have to rely on some other datum to determine which scenario is in play, but probably the difference would be obvious otherwise (velocity, etc.). I  any case, the manager now has a real time indicator of monetary policy stance.