Previous Reading: Bitcoin & Deflationary Economy
Governments will find they cannot shut down Bitcoin. It would be akin to shutting down the internet. If they tried to, those enlightened to it would get on a plane and leave the country because the end or at least totalitarianism is coming.
What does the world look like (economy, real estate, employment, social justice, political activism) with the adoption of bitcoin not just as a store of value but also used transactionally?
The current fiat monetary system we live in today structurally has no way to save itself against technological growth. Everything in an entrepreneurial framework must be deflationary. Innovation breeds deflation. If you add technology to the mix, it becomes exponentially deflationary, coming up against existing monetary policy in the US and abroad.
Our monetary policy stands on a framework of cheating by merely printing money. Inflation is a tax against those not able to pay it, otherwise known as those not investing in appreciable assets. Either you believe that government is responsible for the problems we have and can solve those problems itself. Or you think they cannot solve it and there needs to be another way. Bitcoin is that other way, and it is a forcing function. Once bitcoin is adopted as a holder of value, and that adoption is occurring, monetary manipulation will be forced to fix itself as a result. Governments will have to become smaller because they will lose their authority to monitor fiscal policy to the new technology.
Either we vote for more government control and totalitarianism on one side of the equation (keeping bitcoin out) or for a free-market economy driven by bitcoin on the other. Bitcoin adoption will force a free market economy.
Dangerous implications of inflation exist when prices may rise, and wages do not, or where wages rise more slowly than prices. If all prices, wages, and interest rates adjusted automatically and immediately with inflation, then no one's purchasing power, profits, or actual loan payments would change. However, if other economic variables do not move in sync with inflation, or if they adjust for inflation only after a time lag, then inflation can cause three problems, unintended redistributions of purchasing power, blurred price signals, and difficulties in long-term planning. People affected by inflation include those holding cash, whether in a safe deposit box or a cardboard box under the bed. When inflation happens, the buying power of money diminishes.
Retirees are one group of people receiving a large share of their income in a form that does not increase over time, through defined benefit plans, also known as pension plans. Most pensions have a fixed nominal dollar amount per year at retirement. Even if inflation is low, the combination of inflation and a fixed income can create a substantial problem over time. Similar issues arise for all people trying to save for retirement because they must consider what their money will buy several decades in the future when the rate of future inflation cannot be known with certainty. Hourly wage earners are also an essential part of working-class society negatively affected by rising inflation. As prices for goods increase and their wages remain stagnant, overall purchasing power declines.
A borrower paying a fixed interest rate benefits from inflation rising. The borrower is acting in contrast to the investor receiving a fixed interest rate who suffers from rising inflation. The lesson is that when interest rates are fixed, increases to the rate of inflation tend to penalize suppliers of financial capital because they end up being repaid in dollars that are worth less because of inflation. At the same time, demanders of financial capital end up better off because they can repay their loans in currency with more reduced value than initially expected.
We are in a period of intense quantitative easing. Our government continues to print money to keep companies viable and inflation levels controlled. What is the end game for such large amounts of QE?
Continue reading on the Dangers of hyperinflation in history
Sources
Podcast: We Study Billionaires Episode 330: Bitcoin & A Deflationary World
The Price of Tomorrow by Jeff Booth
Khan Academy Video: Induction to Inflation
Forbes Article: Bitcoin vs Inflation by Roger Huang
コメント