Why Do We Believe In Bitcoin?
Opinion: For decades we havent had an alternative to government controlled currency. Now we have Bitcoin
Why Do We Believe In Bitcoin?
Bitcoin doesn’t need anyone to manage it. Governments can ban or regulate it however they want. Bitcoin doesn’t care! People will continue moving Bitcoin between electronic wallets irrespective of borders, laws or regulation so long as it has perceived value.
The problem with the existing financial system is our leaders can just magic more money out of thin air whenever they want. There is no value stability. Every time they ‘print’ they dilute the value of the existing currency in circulation and that completely distorts all market feedback loops. It basically breaks the underpinning of the free market.
It’s worse when the Americans do it because the dollar is the world’s reserve currency. Every time they print Dollars they are screwing over other countries as well.
The Americans have been able to borrow money for free for decades because they borrow dollars, spend them and just print dollars to repay their debts. This was fine when interest rates were higher than inflation but we don’t live in that world anymore.
Dollars/Pounds/Euros etc are fine when the supply doesn’t increase that much. Unfortunately, the supply is now increasing A LOT. Imagine playing Monopoly against someone who is also the bank.
That person can just keep creating money to buy whatever they want. They can outbid you for anything and they can never go bankrupt. The only way to end the game is for everyone else to lose or everyone decides to kill the banker!
Imagine if in the real world a few people had the power to print currency and buy anything they want. We live in that world! Since we live in that world how does anyone make any money and why does anyone accept the money that can be printed infinitely by the other guys? We accept it because there was no other choice (hello Bitcoin). All our taxes, international trades and valuations are denominated in a currency set by the state. When we think about money we think about it in terms of our local government currency. We have been programmed to think about money in terms of its Dollar/Pound/Euro value.
The biggest difference between wealthy people and everyone else is how they think about money and value. They prioritise accumulation of assets over accumulation of currency:
Most don’t have substantial savings in cash (not now interest rates are lower than inflation)
They invest in assets whose value is resistant to the ravages of inflation
Buying shares in companies hoping they will grow and outperform inflation can also work.
Gold is hard to mine and has been valued by people for thousands of years. Gold has always been seen as a good hedge against money printing.
Silver is easier to mine and corrodes over time. Silver is not so good but it does have practical uses in technology.
Property is also great. They aren’t making any more land and everyone needs somewhere to live.
We also now have Bitcoin. The total amount of Bitcoin can never be increased. It is easy to store and cheap to transfer and is the hardest asset on earth.
In the last 18 months the US increased the number of dollars in circulation by 40%. That’s crazy and we are only now beginning to feel the effects of it because it takes time to feed through the system.
Printing money to pay for stuff is nothing new, governments have been doing it for decades. Historically they have done it at a much slower rate than they are now. We have always let them too (mostly because no one understood what they were doing).
Did you know in 1933 the Americans government made it a criminal offense for US citizens to own or trade gold anywhere in the world, with the exceptions for some jewellery and collectors’ coins? Immediately following passage of the Act, the President, Franklin D. Roosevelt, changed the statutory price of gold from $20.67 per troy ounce to $35. This price change incentivized gold miners globally to expand production and foreigners to export their gold to the United States, while simultaneously devaluing the U.S. dollar by increasing inflation
They may try the same with Bitcoin (who knows?). This time however they will fail as they cannot pull in all the Bitcoin or do anything to the supply. Bitcoin is distributed across a globally decentralised network.
On Bitcoin
Bitcoin is a decentralised ledger of transaction run by a huge network of computer nodes. Manipulating Bitcoin requires you to control the vast majority of the nodes and computer miners. This is an increasingly impossible task as the network grows and expands.
As the Bitcoin network increases it will suck value and power away from government run currencies, making their money printing increasingly irrelevant. Governments rarely give up power willingly and they will fight back. It will start with award winning economists denouncing Bitcoin as a terrible evil. They will then try to ban it and some governments will use violence against their own people. It won’t work. Bitcoin will keep soaking up trust and value as more people grow increasingly disillusioned with the old system.
For generation governments have had near omnipotent power over our lives. This is potential all about to change. We could see government relegated to the status of service providers. We will be customers, not property. Viva La Bitcoin!
The Hardest To Produce, Most Durable Money Will Always Win.
During WW1 governments unpegged their currencies from gold so that they could spend more money than they had. If they had not done this someone would have run out of money quickly and the war would have been over in a matter of months.
This was possible because governments could hide how much gold there actually was for the money in circulation. You can’t do that with Bitcoin because anyone anywhere can check the Bitcoin blockchain at any time. (You can see it here)
Bitcoin cannot be inflated, is cheap to move and easy to store safely. It’s the hardest money in existence (even gold miners increase the gold supply by 1.5% pa).
The world has gone through a rough patch because of Covid and we expect things to get increasingly difficult. Already we are seeing protests and riots across the world. We expect these to get worse over the short term. Transformations are always painful but we hope to see everyone on the other side.
Are we right or are we wrong? Let us know in the comments.
Until Next Time
The Wealth Gap