Fiat money, the biggest Ponzi scheme in history.
*Fed Chairman JPOW printing USD
What is Money
Many of us don't ever think about money, but money is a really complex system that few actually comprehend. Humans are different from any other species on the planet: we have found a way to channel energy across time and space. We project ourselves into the future by storing value in the present. The fruits of our labors in the present, will be preserved for our future self. Throughout history this effort has evolved dramatically; our choices for stores of values have grown more advance. First, we used perishable goods such as livestock, wheat, and fish. This was more of a barter system, yet it was still a way to store value across time and space. However- there was a problem- perishable goods rendered insufficient at storing value across time and space, because of their lack of durability. Humans then searched for alternatives, they needed something hard (something that could not be produced easily and deteriorated or devalued). Humans arrived on seashells, stones, and eventually gold. Each form of money got harder, and harder, until we adopted gold, which was the hardest money around for some 5,000 years.
But why is gold a hard money? Gold is hard because of its stock to flow. A stock to flow model refers to the current supply (stock) vs the incoming supply (flow), pretty simple right? In order for a money to be hard it must have a reliable and predictable stock to flow. While also being, you got it, hard to produce, which makes the supply inherently more valuable. Gold thought history has had a pretty reliable stock to flow, at least more than any other money prior, so it gained the hardest money title easily. Incoming supply- per year- has averaged anywhere form +2% - +4%, hence its reliable and predictable stock to flow. Humans were easily able to store value across time and space with gold, they did not need to worry about their money losing purchasing power, but rather over the years it would increase in purchasing power.
*The higher the score the better
This chart shows the traits of money. Verifiable: Can it be verified as real? Fungible: 1 unit = 1 unit. Portable: can it move across space? Durable: can it be lost, destroyed, or withered away? Divisible: How many times can it be divided into a smaller unit? Scarce: how many units are there (think stock to flow)? Censorship resistant: Can it easily be seized, halted, or shut down? Unforegable Costliness: How hard is it to forge? Programmable: Can it evolve as technology evolves? Decentralized: Is there a controlling entity who makes all the rules? After looking at this, you may understand why I say bitcoin is the archetypical money. Bitcoin has every possible trait a perfect money could have.
Think of bitcoin as an upgraded gold, a gold that is 100x better. The best store of value ever made. It can be easily verified in a matter of seconds. It is fungible. It can move across space in an instant, in the most secure manner ever known to man (most secure computer network on the planet). It is durable, as there is no psychical versions of it. It is divisible up to 100,000,000 units called satoshis. It is the most scarce money/asset ever, there will only ever be 21 million. Its incoming flow gets halved every 4 years. It cannot be censored, or confiscated by anyone. It is impossible to forge. It can be programmed and made better with additional layers (think lighting network- makes transactions faster). It is the most decentralized program on the planet, no single entity controls it, nor makes the rules for it. So how does it compare to fiat?
*Dan Held GIF illustrating bitcoin's sound money properties VS fiat money soft properties
The Evils of Fiat
Fiat money isn't even money. It lacks the most important trait of money: it cannot store value across time and space. Think about that. Not only will your money fail to maintain its value across time, but it is guaranteed to lose value over time. Go back to why we use money. We use money to project ourself into the future, by trading our time now, and storing that time in something of value. Time is the most scarce asset in the universe. This is what money is: a harnessing of time (aka energy). And this is why money must be a store of value, it must hold its value as time elapses. A never ending infinite supply cannot grant that. We cannot work forever, so we trade our time in our youth, in order to have more time in our old age. Aquiring as much time as we can so we can live comfortably later.
So... how in the world can we do that when our money is constantly being devalued. Think about it like this- the people who control your money are robbing you of your time (also why a decentralized money is important). You cannot save your fiat and expect it to maintain its value in the future. You are being forced to work for as long as you live. Thats slavery! Pay attention! The powers that be are pointing a gun to your head and saying "work slave!". You never had a choice on whether or not your money is being devalued. You never got a vote, or any sort of say. The powers that be know what's best for you, after all your stupid enough to use their money so... But seriously this is an evil system, it's not even a joke. It hurts the weak the most, those who are to uneducated to escape the fiat system in some form of investment (more than half of Americans). We are slaves to those who control the money printer. Debt is forced upon us because there is no other option. We continually have to get more and more fiat to compensate to the never ending devaluation of our time.
The fiat system is a debt system. It allows the powers that be more control over those who use it. A main way new fiat is 'mined' (lol) is when bankers give out loans. When a loan is made new money is created out of thin air. Big bankers can give their corporate friends loans for >1% interest, whilst us plebs are stuck with +7% interest loans. Their friends, who are first in line, go and buy assets to escape the constant devaluation of their time. Those last in line are using these loans for genuine purposes, yet they are subject to devalued money and higher interest rates. Simply because they are last in line. Remind me again how's that's fair? This system only punishes one person: everyday people.
There is a reason the fiat system makes me so angry. It is a humans right issue, no joke. It takes advantage of everyone besides the elite. There is something called the cantillon affect."The Cantillon Effect describes how new money creation benefits those who receive the money first, at the expense of those furthest from the creation of new money. In today’s monetary system, banks and corporations are closest to new money while the middle class/ lower class is furthest". Basically, because you are not a buddy with someone who control the money, you lose big. You are forced to take dollars that have been stained with devaluation. Imagine your in a soup line with 25 people. The first 5 people get everything in the soup- all the meat, carrots, peas, etc. The next five get a little less, then the next five even less, until finally, the last five get liquid. Congrats you played yourself. But it wasn't your fault, you just happened to be last.
Be a student of history and examine each time humanity tried this form of money. It has never worked and every time it has failed catastrophically. It is a dangerous game to be playing, especially when you expand the monetary base +40% per year. This will not stop. Your money will continue to get you less and less. The energy you are expending now will be worth less and less, requiring you to work more and more. I challenge you to think of money as pure energy. When you make your next dollar ask yourself how much energy that cost you. Will you be able to store your energy in that dollar? Can your future self rely on your present self, while you attempt to store value in fiat? Is that money actually even money if it does not store value?
This article is a two part series. In the next I will explain how and why we arrived on the fiat system.