The True Tragedy of King Midas

King Midas loved three things: his daughter, his roses, and gold. While inspecting his rose garden one morning, he came across a passed-out satyr, still hung over from the previous night. Midas had his servants bring this satyr into the palace and treat him as an honored guest. When the satyr recovered, he introduced himself as Silenus, the mentor of Dionysus. Silenus stayed in Midas’s palace for seven days, feasting, drinking, and discussing a great many topics.

At the end of Silenus’s stay, Midas personally escorted him back to Dionysus. When Silenus told Dionysus of the king’s hospitality, Dionysus offered to grant one wish for Midas.

Midas thought about the things he loved. He loved Zoë, his daughter, but he already had her in his life. He loved his roses, but he loved them because he grew them on his own and was proud of his accomplishment. And he loved gold. More gold would enrich his own life and would boost the Phrygian economy.

“I wish that everything I touch turns to gold” Midas told the god.

“Sure,” responded Dionysus. With a snap of his finger, the wish was granted.

On his way home, Dionysus tested his new powers in a forest. He picked up several branches, each of which instantly turned to gold. As he wandered, he came across a hunter.

“What beautiful golden branches!” proclaimed the hunter.

“Take some!” Midas offered. “I’ve forgotten how heavy gold is, and it’s still a long way back home. Besides, I can make more any time I want!”

The hunter accepted the golden tree branches, and offered one of his knives in exchange. When Midas took the knife, it turned to gold.

Midas continued on his journey, eventually meeting a fisherman at a river. Like the hunter, the fisherman marveled at the golden knife. Midas gave it to him. When the fisherman began to protest, Midas picked a stone from the river to demonstrate that he could make more gold. As soon as Midas touched the stone, it turned to gold. The farmer graciously accepted the golden knife and the stone. After that, Midas came across a barley farmer. He offered the farmer various golden objects that he had created along the way.

When Midas finally reached his palace, he began touching everything and turning it into gold. He turned his chairs and tables into gold. He turned his cups and plates into gold. He found the most beautiful rose in his garden and turned it into gold, preserving its beauty forever.

But then King Midas began to realize a problem. When his servants went to buy supplies for a feast, they found that everything cost far more. With all of the additional gold in the Phrygian economy, it was quickly losing its value. The gold coin that could previously buy an entire barrel of wine was now barely enough to pay for a single grape. The influx of gold made it easier for Phrygians to purchase olives and Docimaean marble, but they were unable to sell their livestock and barley. And while it made existing debts easy to repay, no Phrygian could secure a new loan.

Midas saw the inflation that his golden touch was causing. To deal with the problem, he summoned his wisest economic advisors. One suggested controlling the inflation by enacting price and wage controls. The other advisors agreed that it would be a good solution for inflation in general, but that it wouldn’t address the underlying surplus of gold.

Another advisor suggested using promissory notes to buy gold at rates slightly below the traditional value of gold. This would take most of the new gold out of circulation while discouraging foreign speculators from taking advantage of the offer. Once the market was stable, the king would start releasing the gold back into circulation at a controlled rate. Everyone else thought that it was a good idea, until another advisor pointed out that Midas would continue creating more gold every time he touched something, so this was not a long-term solution.

Yet another advisor suggested switching to an alternate medium of exchange, such as silver. After all, gold was used because it conveniently had all the properties of money. But now that it was no longer scarce, there was nothing preventing the Phrygians from adopting a currency backed by silver, fiat, or even the blockchain.

The other advisors protested, citing that while gold was indeed an arbitrary choice, it was now the primary reserve currency throughout the Mediterranean. If the Phrygians adopted an alternative currency, their goods would still be undervalued in the international market. A local currency would also be far more volatile and open to manipulation by the king or wealthy speculators. Finally, a currency based on the blockchain did not fulfill the cognizability property of money, since most people would not be able to easily identify its value.

It was then that Midas’s daughter Zoë spoke up. “As we discuss, it’s becoming clearer and clearer that there is no simple economic solution. Luckily, we have a magical solution. You must ask Dionysus to take back this gift.”

The king’s councilors agreed. So Midas traveled again to meet with Dionysus and explained the inflation it had caused.

“No problem, buddy,” Dionysus told him. “Just go to the river Pactolus and splash around for a bit. Then all the stuff you’ve touched will go back to normal.”

Midas traveled to Pactolus and fully submerged himself. When he got out, he discovered that he no longer turned the items he touched to gold. When he returned to his palace, his furniture and other possessions were back to normal. Even the rose he had turned to gold was a plant again, already beginning to wilt. Soon enough, the value of gold in the Phrygian economy was back to normal, their trade deficit was erased, and loans were again being extended.