Many economic discussions lead to the emergency argument of inflation. Inflationist argues that through inflation only, more significant demise can be avoided because if sound money is not temporarily abandoned, economic and social demise will be far greater than the actions of inflation. But if thought about that argument, it boils down that it is just a choice of a lesser or greater evil.
The liberal doctrines and policies of the nineteenth century were a product of a classical economy and were propagated into that time’s political minds. Many understood that a nation’s freedom is dependent on the ability to exchange. The private sector played a vital role since the ownership and production means were under less control of the government. Society came up with institutions because of the need to catch fraudsters and domestic gangsters that would not bend to society’s fixed rules.
However, a new problem came up, institutions became strongly influenced by governments, and the western societies had to endure governments trying to erode social liberties and freedom through social or economic institutions.
It is paramount to understand that sound money’s function directly protects your social liberties against the government. Sound money, commonly referred to as hard money, protects freedom and independence because of its properties. So, what defines sound money?
- Hard to produce – No money printer enables you to press as much money as you need. Gold needs to be mined, for example.
- The medium of exchange – Is widely accepted, and demand for the currency is of high importance.
- Store of value – It should be a store of value that is not much affected by price volatility. Money should appreciate in value.
- It is developed on the free market – Money is chosen because of its utility of the user and not because someone dictates it.
How does sound money protect you from the government? Having an independent store of value that cannot be inflated quickly protects you and your financial value from counterfeiters trying to inflate money. Money that can be inflated is far more likely to lose its value over time than the money that can not be inflated. The more inflation a currency suffers from, the consumer is far more likely to be incentivized to consume rather than to save money. This leaves the public exposed with no savings, and when a scenario of demise happens, only the government will be able to help those affected most by it. Inflation exposes human liberties and independence to the government imposing inflation.
Since today’s fiat currencies have that inflationist property and are effectively speaking no store of value, they cannot be adequately classified as money. They represent an imposed medium of exchange that has a decreasing backing value and is very easy to produce, not matching the criteria defined for sound money before.
How does Bitcoin come into play?
Bitcoin’s value lies within the fact that it reminded us of how money should be; therefore, Bitcoins value is considered subjective, giving it value because of the need for an alternative. Inflationist policies have been invented to deal with economic hardship. Still, since economists of today have forgotten that inflations should only be a financial tool and not an economic system, we have been living under the fiat standard for nearly a century now with no sign of stopping inflation. Bitcoin brings an opportunity the Weimar Republic did not have. Bitcoin gives the chance of a sound store of value that promises long-term appreciation due to its limited supply. And since we live in a time where inflation is more than just scary, the demand for Bitcoin starts to pick up because of the realization that this is a valuable alternative. Bitcoins properties of a limited supply (can not be produced more off), its ability to be a medium of exchange, and its store of value are all the reasons why Bitcoin has been chosen by the free market as the alternative to fiat.
So how does Bitcoin battle consumerism?
As people see that the appreciation of value has long-term effects on their financial life. People tend to understand the importance of having a medium of exchange that offers all the investment properties an investment should have. Since Bitcoin is a medium of exchange but also an investment, it is the opposite of fiat. There is no need for a bachelor’s in finance to understand to invest. There is no need to have a bachelor’s in banking to understand the simplicity of how Bitcoin is exchanged. Bitcoin showed me and many more than the current fiat system is rusty, and Bitcoin offers a solution to this problem. This has a massive impact on consumerism, since the time-preference shifts as soon as you invest in Bitcoin, you understand that having more value in the long-term is far better than having something now.
To conclude, the long-term economic impact of Bitcoin will be enormous since a significant proportion of the public will realize that their preferred store of value does not need to be complicated stocks or shares but merely some magical internet beans. This shift in psychology is aligned with our intuitive state of mind and is the most logical way to approach this crisis.