Bitcoin: Hate it or love it, it’s here to stay. That is, at least according to the Lindy Effect, which asserts that the longer something is around, the more likelihood that it will continue to be around in the future. It’s security features, limited supply, decentralization, and deflationary nature all contribute to the king cryptocurrency who should continue to be the big swinging dick in the room surrounded by jealous altcoins. These attributes are great, but I believe that it’s greatest feature is often overlooked.
Most people don’t question things around them. They don’t ask why they go to Church, why they are eating McDonalds after mass, or why they go home and watch Netflix for hours on end. They just do. This is also the case with those crinkled bills in your pocket or the digits on your Wells Fargo account screen. Cheddar, Benjamins, Green backs, Moolah, Dinero. The almighty US dollar. People live their whole lives consumed by the desire and need to obtain dollars. Then they need more of them. And more. But they never ask where these dollars come from.
As stated in “The Death of Money” by James Rickards, “Central bankers control the price of money and therefore indirectly influence every market in the world.” This is true and in itself is not necessarily a negative thing. The United States Federal Reserve sets interest rates in order to keep inflation at a healthy level. Contrary to wide-held belief, a little inflation is considered healthy for an economy. No inflation or deflation can be very bad. The problem with this game of policy police is that they don’t necessarily exactly know what they are doing. Sure, they are the experts of the experts in economics. But they don’t call it the dismal science for nothing. Global financial markets are extremely complex and I won’t even attempt to dissect every nuance of it. However, as geopolitical conflict continues, the counterparty risk that presents itself is the very practice of central banking.
One major issue with the Fed is the lack of sound money. That is, our money is not backed by anything. On August 15, 1971, President Nixon told the Fed to stop honoring the dollar’s value in gold, which means that the world’s central banks could no longer exchange their dollar hoards for gold. This set off a chain reaction and central banks around the world realized they could print their own monopoly money as well. Whether it is for the best or not, this is what happened. So far, the United States has admittedly not had it that bad. We still have the best economy in the world. So one could say that although inflation has increased, leaving the gold standard has sparked economic growth. We have had it relatively good…so far. Some countries have not had it so good.
One classic example of hyperinflation is Zimbabwe when they printed money to pay for the war in the Congo. A combination of printing way too much money and demand-pull inflation caused an insane amount of inflation. At its peak they had a 98% inflation rate, with prices roughly doubling every day. You may have seen their 100 trillion dollar banknotes. They eventually abandoned their currency in favor of using the US dollar. Another example is the Asian Financial Crisis where Thailand decided to no longer peg the Baht to the US dollar. This sparked a wildfire throughout southeast Asia and was finally put out by an intervention by the International Money Fund and the World Bank. The damage was done, as the effects were also felt in the United States and Europe who’s economies slumped. There are too many examples like this to count, yet people seem to have short term memories. The question then becomes, what happens if the US dollar has trouble? As the World reserve currency, this would prove disastrous for the world economy.
The inherent risk of Central Banking policies puts the dollar at risk. It would be irresponsible and short-sighted to not acknowledge this. History tends to repeat itself. Even though the strength of the US dollar has been a stabilizing presence for the world, it is important to understand that we are not immune to risk. Foreign powers looking for alternatives to the petrodollar poses a huge risk. Even Billionaire hedge fund investor Ray Dalio recently warned that US losing reserve currency status would lead to a 30% drop in the dollar.
With it’s decentralization, 21 million coin limit, and deflationary nature all point to Bitcoin being a safe haven. Only time will tell, but it is important to stay vigilant and monitor risks carefully. If so, you may not merely survive the incoming crisis. You could thrive. If Bitcoin continues its success as a store of value, many more Bitcoin millionaires will be crowned. Maybe you can be one of them.
If you are interested in purchasing Bitcoin, I suggest using the Cash App. If you use this link, we’ll both get $5.