A strong monetary standard, like that of bitcoin, has many advantages for society over inflationary standards based on fiat.
It is well established at this point that bitcoin is the best form of solid money the world has ever seen. As a reminder, bitcoin excels in each of the qualities of money: durability, portability, divisibility, uniformity, scarcity and acceptability. More importantly, bitcoin is the scarcest money ever, with a fixed supply of 21 million bitcoin that will ever exist. Whatever the demand, the offer is defined by programming and will never be modified.
This article focuses on the reasons why it is important to have a strong monetary system. How do economies, societies and individuals benefit from operating on a healthy monetary system? Throughout history, gold has been the most successful form of sound money. I am convinced that bitcoin will be the healthy currency of the future.
Sound currency imposes fiscal discipline on governments
A healthy currency imposes fiscal discipline on governments. Having a monetary system with a solid monetary base means that the money supply cannot be inflated at will through the use of the printing machine. In turn, for governments to spend, they must provide their citizens with a value equal to the amount of tax revenue collected. In a healthy monetary system, eternal wars are not possible, zombie businesses (unprofitable businesses still operating only because of bailouts) do not exist, and the savings of individuals cannot be degraded at will by bureaucrats. .
Compare how governments should operate in a healthy monetary system to how they operate today in an unhealthy (fiat money) system. Eternal wars are funded by printing endless money, zombie businesses of all shapes and sizes are bailed out time and time again, and personal savings are being eroded at breakneck speed.
Case in point: Over 40% of all existing US dollars were printed between May 2020 and May 2021. To mark the occasion, this means that anyone holding US dollars during this period saw the value of their wealth plummet more than 40%. . Going back even further in history, since the creation of the dollar, it has lost over 96% of its value.
With healthy money, the opposite happens, value is stored in the future without degradation, and purchasing power increases over time.
Healthy currency propels economies to prosper
Economies thrive in healthy monetary systems. When the unit of account is stable and not manipulated at will by governments, economic actors benefit from increased ease of trade, increased levels of savings, and generally higher levels of prosperity.
Benefiting from efficient economies, higher savings rates and increased prosperity, individuals and societies have the advantage of planning for the future, rather than constantly reacting to the present. This, in turn, leads to advancements in everything from architecture, literature and engineering to the arts and sciences.
To demonstrate this point, we turn to two periods of history: the golden age of Rome and the United States before 1971.
The golden age of Rome
The golden age of Rome existed under a healthy monetary system. The aureus was the basic monetary unit of ancient Rome and the Roman world from the 1st century BC to the 4th century AD.
The aureus was made of gold, the strongest currency of the time. As part of a strong monetary system, Rome’s golden age flourished and led to many revolutionary achievements that the world has benefited from since, including breakthroughs in architecture, such as systemic use of the arch, which forever changed the way buildings were constructed (the Colosseum and the Pantheon were built during this period).
Additionally, there have been breakthroughs in engineering, such as the use of aqueducts to bring water to cities for consumption and irrigation. The Romans also did things like develop the first legal system and build the most sophisticated road system the world has ever seen. Literature and art flourished and the modern calendar was developed. Eventually, as has always been the case throughout history, the government moved away from a strong gold-backed monetary system and degraded the currency, ultimately leading to the downfall of the empire.
The United States before 1971
From 1879 to 1933, the United States was on a gold standard. All currencies in circulation were backed by gold held by the Federal Reserve.
Then, in 1933, President Roosevelt ordered that all gold be transferred to the Federal Reserve for the set price of $ 20.67 an ounce. In 1934, the government arbitrarily increased the price of gold to $ 35 an ounce, effectively increasing gold on the Federal Reserve’s balance sheets by 69%.
This increase in assets allowed the Federal Reserve to inflate the money supply. The government maintained the price of $ 35 an ounce until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars into gold at a fixed value, thus abandoning the standard altogether- gold. How has the United States behaved since 1971? Let’s look at some graphics.
Compare that with how economies work in a healthy monetary system and how they work today. The unit of account is constantly fluctuating, making trading unnecessarily complex and inefficient.
Take, for example, the foreign exchange market of $ 6 trillion and more. Governments and businesses employ millions of people who focus solely on currency conversions, settling international payments, managing foreign currency reserves, and more. None of this unnecessary complexity exists in a healthy monetary system.
In addition, savings are almost non-existent. Most American savers have less than $ 5,000 in their bank accounts. Are people free to think long term and plan for the future when any kind of financial setback wipes out their savings completely? No, and the analysis of the situation around the world painfully shows it.
Healthy money benefits individuals
There are many benefits to people living under a healthy monetary system, some of which have been discussed above. Freed from having to run ever faster and work longer to keep pace with the devaluation of their savings, individuals have the opportunity to focus on activities that benefit society. In healthy monetary systems, families are bonded closer, communities are strengthened, and individuals have the ability to explore the arts, sciences, engineering, and literature in ways that lead to breakthroughs that will benefit. to their societies as a whole.
Compare the quality of life of individuals in a healthy monetary system to the quality of life today. The social unrest is palpable. The political division is extreme. All over the world, physical and mental health problems are commonplace. Why? More than fifty years of exploitation of an unhealthy monetary system have taken their toll on the world. Fortunately, we now have the opportunity to return to a strong monetary system via the strongest currency in the world, bitcoin.
The Bitcoin Sound Money standard
A world under a bitcoin standard would be very different from today. Most importantly, the system will benefit all participants. A key aspect of bitcoin from this perspective is that there is virtually no inflation. Removing the ability for governments to print money will dramatically narrow the wealth gap, which is the root cause of many of the societal problems we see today.
Bitcoin is also an incentive to save and manage money properly. There is no bailout under a bitcoin standard. Personal and corporate responsibility will be essential for success. Savers will no longer be punished for having diligently saved only to see their savings downgraded on a whim by central bankers. People will be free to plan for the future knowing that the unit of account is stable and unchanging.
Under a bitcoin standard, we are not penalized for patience and have no urgency to deploy capital. This prompts companies looking for capital to create real value before raising funds in the capital markets. This in turn will eliminate zombie companies that only survive because they benefit from today’s accommodative monetary policies.
Bitcoin will also restore the sanity of the stock markets. Currently, stocks are measured in dollars, which is an ever-changing unit of measurement, making any rational analysis of a company’s valuation impossible. Under a bitcoin standard, the unit of measure by which companies’ cash flows and valuations are measured becomes a constant. The gravity of this situation cannot be emphasized enough.
Bitcoin encourages limited government oversight and spending and will initiate a shift towards an era of self-sovereignty. This era of sovereignty, along with the need for governments to deliver value to their citizens, will cure many of the evils we see today due to the large amount of wasted and misappropriated government spending.
Finally, having bitcoin as the global reserve currency will strengthen more than the United States. In particular, it will benefit the citizens of countries with hyperinflated currencies (Venezuela, Zimbabwe, Argentina, etc.), as well as countries oppressed by dictatorships and other forms of undemocratic government. Fortunately, bitcoin offers the citizens of the world another choice to store their wealth.
I know what I choose. Do you?
This is a guest post from Don. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.