Deflationary bitcoin vs inflationary fiat currency – the stress test

in bitcoin •  14 days ago

Death of money book cover.jpg

The beauty of bitcoin is in its finite supply.
It is fixed at 21 million and there will never be any more than that, as written in the digital architecture of the asset. And with scarcity or lower supply comes higher demand. Already 80% of all bitcoin has been mined, the rest due by 2140, in bits and pieces or satoshis between now and then. Add to that the fact that some has been irretrievably lost forever – up to 4 million by some estimates – and you have something like digital gold. There is only so much of it, and so it is the opposite of fiat currency.

Fiat currency
Government printed paper money is almost infinite in supply because they just keep printing more of it. Or they add some more to a bank’s balance sheet electronically in the form of “quantitative easing” (money printing) or lending it out on credit to bank customers who need a loan to buy a house or car, for example. When the bank loans out the money, it is simply adding some numbers to its balance sheet, not actually even printing some more paper notes and certainly not taking some of its literal paper fiat notes from its vaults. In fact 90% of the money we give to our banks to keep for us is already loaned out.

From those loans banks receive interest
So they create more money for themselves which wasn’t there before and add it to their books. This in itself is a type of con game philosophically or morally or even economically. But my main point here is that fiat is depreciating in value by the day, while bitcoin is increasing, despite price in the moment. The longer you keep your fiat bank notes, the less they are worth. That is inflation brought on by printing more notes. The dollar has already lost 95% of its value over the past 100 years or more. It is worth about 5c compared to its original value, and this is a fact stated in USA parliamentary records. Besides that the dollar and all currencies are destined to go to zero. The fiat currency of your country will buy you less and less every year as the purchasing power diminishes with more printing, simply devaluing the notes already in circulation.

Bitcoin is deflationary
It's the opposite of fiat. Lower supply and higher demand increase the value with time. The problem here is that people will see the potential increasing value of bitcoin and therefore not want to spend it. They will rather keep it and hoard it like gold, knowing it will rise in value with time. And as a result they are not using it as money to trade but merely as a store of value.This is not a bad thing except for the fact that it will stop people from using it as money. So is bitcoin, at that point, actually a currency? Is is a cryptocurrency if it is not used for trade? Well is gold a currency? Perhaps not, but it is still the best store of value. Once it was a currency, used to trade with. And once it used to back paper currency. But those days are gone. They may be returning soon though, if we were intelligent. But don’t hold your breath.

Being deflationary used to be considered bad
It meant the price of goods went down with time, not up like they do now with inflation. And actually deflation is a good thing when it comes to bitcoin. The current inflationary fiat system is what has led to exponential debt levels that can never be repaid. America, China and the world have crossed the tipping point of no return when it comes to repaying their debt. The interest alone on that debt is beyond reach. And that is the foundation of the criminal act of usury and interest on debt to begin with. When inflation goes hyper, as in Zimbabwe and Venezuela, it renders the fiat currency useless. Then even bitcoin is more stable and user friendly, which is why bitcoin and other cryptocurrencies are being used vociferously in such places. Even Iran, also crippled by immoral sanctions has a premium on bitcoin. It can circumvent sanctions, go beyond borders for payment and hold value better than some defunct fiat.

Despite bitcoin’s deflationary nature...
it will still be spent on essentials out of urgency, as we see in the most urgent countries just mentioned. The deflationary nature of bitcoin or any currency will also force one to think first before spending it, whereas with inflationary fiat, you would rather spend first because it will be worth less in the future. Deflation will also prevent one from going into too much debt. The entire debt system is a crime perpetrated on the masses by the government and specifically by the bankers, the elite money lenders, who even put entire nations into debt based on the fake money printing system. It’s fake money, backed by nothing, certainly not gold any more. It’s backed by fear, fear of the military power of that nation. It is built on confidence, and that is a sentiment that can change on a dime. As the confidence in fiat continues to fade in the 21st century, we will see a time where our kids no longer use paper money at all. It will all be digital, numbers on a screen. Also either the gold standard has to return or fiat will die.

The future of money
It the wake of fiat will emerge an entire new monetary system. A new money is on the way. Whether it will be bitcoin or another cryptocurrency or something else is uncertain. It may be something we have not seen yet, or a combination of all of the above. Perhaps it’s a universal credit to facilitate the universal basic income (UBI), which will change the concept and need for money as we know it altogether. But fiat is on its way out. Enough of us have seen through paper money printed like toys without limit by fools who feed inflation to run their broken system based on debt. It is crumbling and will be over one day, so get ready to rethink your financial future, re-evaluate your sense of worth, your value of everything, including yourself.

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And with scarcity or lower supply comes higher demand

Scarcity does not create demand. For example, let's suppose that I have 5 oranges for sale every day and there is one person willing to buy one orange per day. I decide to only sell one per day, is that act going to generate more buyers for my product?

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Yes, I agree with you there, scarcity does not "create" higher demand, but it can potentially lead to higher demand in bitcoin when investors see that the supply is limited so they become more eager to buy up the scarce bitcoin available.

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