Surprising Difference Between Bitcoin and Gold - Do You Know It?

billionairepal (50)in #dtube • 6 years ago

Why did gold become the world's reserve currency? Why is it considered hard money. Why did it win against silver? I answer these questions from Stuttgart/Germany and I reveal a surprising difference between gold and bitcoin that hardly anybody knows about but that is essential when it comes to economy.

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VIDEO TRANSCRIPTION

Hi! Today from Stuttgart, Germany. Today we will talk about the economic difference between gold and Bitcoin.

See you in the next part.

[Music]

Let's start with the statement that money production has to cost something and without it the value of the money goes long-term to zero.

As you know, in the last 100 years the U.S. dollar lost 98% of its value.

And it happens with every fiat money, with every paper money that can be printed in any amount with virtually no cost to the party printing the money.

This type of money inthe long-term tends to zero. And it will happen in every country that uses that money.

This money will have to be exchanged at some point for new money and lose almost 100% of its value.

Every fiat money ends up in hyperinflation. It's really a bad characteristics of money if somebody can print it with no costs

Because then he/she can print it in any amount possible and they will print it.

When you watched my other video "Who steals from you without you even noticing it?", that I'll provide a link to here below this video... and maybe here.

You will understand how it works and why somebody printing money not only devalues money to zero but also takes away all your wealth.

And all the wealth of other people who can't print money. Good money is money that can't be inflated significantly by anybody.

And historically precious methods were used as money. As you know, for long periods of human history silver and gold were used as money.

And finally gold won that race. And I'll explain to you why gold won that race

And then we will go on explaining the difference between gold and Bitcoin and the conssequences of that.

First of all - How can you protect somebody from printing money? Or from creating money in significant amounts?

Of course, in relative terms to the amount of money in existence? For the fiat money you can't do it.

Just the government... directly or indirectly can create as much money as they want, as they wish and you can't do anything to effectively protect yourself

Or to effectively forbid them to do that. That's why precious metals are much better money because these are natural resources that you have to put in work

And assets in order to crete them. So, you have to mine them; you have to somehow process them; melt them to make them available as the pure silver or gold

Or any other metal. But the issue with almost any metal in existence is that the reserve, so to say, of that metal...

The stock on the market is pretty small in comparison to the production of that metal.

Because almost all metals are used in grand / big quantities in industry and the production of these metals is more or less equal to the consumption of them

And there is almost no stock available. Let's say you have as much production as the consumption

And also the stock of that metal in the market is the same as the production. Let's say 100 million tons of that metal a year... any given metal

What does it mean? It means if somebody want to inflate it and let's say involves great resources in to production of that metal

And let's say, doubles the production of that metal. What does it mean? It means that instead of 100 milion tons, 200 million tons are produced.

But the consumption is the same. So it means that you can actually double the supply of that metal on the market in the reserve.

That means you just inflate the amount on the market by 100%. In some metals the reserve, the stockpile of that metal is even less than the yearly production

So, the impact of raising the production just multiplies in the amount available on the stock market.

It means that you can inflate that metal greatly or substantially.

How does it look like with silver and gold? And why gold in the long-term won race for better money and became money for a long time?

And still is used greatly as the reserve money in the banks; in every central bank. Why ?

Because the amount of silver historically was between 10 and 20 times more than its production and in recent years the production went up to 20% of stockpile

Meaning there is only 5 times as much silver stockpiled in comparison to the yearly production.

Which means you have a inflation of 20% in silver right now, a yearly inflation.

And if you double that production, you can even get 40% inflation in silver, which is really significant.

Yearly inflation of 40% is really significant. So, it's not good as money. Somebody can really manipulate that production either directly by producing more

Or indirectly by manipulating the prices of silver. If there is a high price of silver, then the production is incentivized

And you can greatly increase the production meaning you can increase the inflation in silver.How does it look like in gold?

Well, in gold the yearly production was historically 1.0 and 2.5% and in the recent 50 years it was between 1 and 2% of the stockpile of gold

Meaning the production of gold has only a small impact on the supply of gold on the world market.

And you can even by doubling the production achieve maybe 4% inflation in gold, but certainly not more at the moment.

So, gold is protected from manipulating, from inflating it by the large stockpile in the world and the relatively small consumption in the industry.

That's why gold was and is better money then silver and that's why it took over silver's function as money and as reserve money as well.

And this quality of any metal, of any asset we call the relative production elasticity.

If you can increase in relative terms the production of any special asset, of any special commodity in significant way,

Then it means you have a high relative production elasticity. So, the production elasticity of silver is much higher than that of gold

And the lower the relative production elasticity of any asset, the better it is for the function of money.

So, what is the relative production elasticity of Bitcoin? Here I will surprise you!

The relative production elasticity of Bitcoin is zero. It is exactly zero!

You can't manipulate the production of Bitcoin. You can't increase the production. You can't inflate Bitcoin at your will.

Because every 10 minutes 12.5 Bitcoins are produced. 12.5 new Bitcoins come into existence every 10 minutes.

And independently of how much energy and how much power you invest into Bitcoin production, you can't increase that number.

12.5 Bitcoins are created every 10 minutes. That's the formula andevery 4 years that amount is divided by 2.

It is called halvening in Bitcoin. The next halvening we will have in May / June 2020. And then we will have 6.25 Bitcoins produced every 10 minutes.

And by increasing your hash power, by increasing your energy consumption you can only get a bigger chunk of that amount of money produced every 10 minutes

But you can never increase that number produced in 10 minutes. That means that the relative production elasticity of Bitcoin is zero.

There is no production elasticity in Bitcoin at all. Nobody can inflate Bitcoin at their will. You can maybe manipulate the price of Bitcoin

But it doesn't have any impact on the amount of Bitcoins produced in a long term. I baught Bitcoin in 2015, when the yearly inflation was around 10%.

Because I knew in the next year there was going to be a Bitcoin halvening, which meant that the Bitcoin inflation will drop by 50%.

And next year 2016... it was half of the year, it was before the halvening. The next year was after the halvening and we had 6.8% inflation

In 2017 Bitcoin had 4.35% inflation. So, much lower already from almost 10% to 4.35%.

In 2018 we had inflation of 3.82% and in 2019 we have a yearly inflation of 3.68% already.

And in 2020 we will have the halvening again. So, the inflation will drop significantly again to 2.61%

And then in 2021 1.71%.

Every 4 years we have this constant amount of Bitcoin that is in roduction for 4 years and then it drops by half

But relative terms it drops from year to year, because there is more Bitcoins in existence but the amount produced is the same

So, in relative terms it is less percentage that is produced and then every 4 years it drops significantly by halving this number

And then the curve continues. So, in 2021 we will have inflation that is similar to that of gold, i. e. 1.71%

And in 2025 we will have an inflation in Bitcoin of 0.83%. Below 1% and from that one on we will see a significant difference to gold

Where gold will have, let's say, the inflation somewhere between 1 and 2% but Bitcoin will have a decreasing inflation

And it will be much lower than that of gold and nobody will be able to raise that amount.

Nobody will be able to inflate Bitcoin, nobody will be able to manipulate / impact the production of Bitcoin.

As we saw in this video the low production elasticity is very desired characteristics, very desired quality of any money

And the lower this elastisty, the better for the money.

Historically gold had the lowest relative production elasticity. That meant it was the hardest money because nobody could inflate significantly gold

But now we have another virtual asset that have zero elasticity. So, the best elasticity you could think of. There is no elasticity in Bitcoin.

It is much harder money than gold. And in that respect it differs significantly from gold or any other precious metal, any other asset

And of course, the difference to fiat money is just dramatic.

I hope you could learn something from this video. I invite you to leave comments below. What's you experience? What's your opinion?

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