As national fiat currencies slowly, but surely, fall by the wayside, or get outright replaced by digital currencies, its time to review the advantages of using Bitcoin as money going forward.
Currency and money are not the same things, they just have many of the same properties. The textbook definition in your dictionary may even give credence to money being “stamped by public authority”. That’s interesting, given the fact that before there were governments creating paper currency people did exchange beads for feathers, or milk for eggs. There was barter, as currency, and Gold was real money for its ability to hold value since the dawn of time.
Currency is man-made to remove Gold as an independent, natural medium of exchange, to great effect. It takes power from the people and passes it to government in the form of “currency”. Money pre-dates government-created currency throughout the history of man, and their central banking system. If man only existed in the last three hundred years, currency as money would be fairly accurate, but overall, given definitions are incomplete. Knowing the difference between currency and money is important to your future, as the global economy becomes more and more unstable under a mountain of fiat-induced debt.
Money and currency are similar, but not the same
Both money and currency share many properties: They are both units of account (are numbered in value), a medium of accepted exchange and portable. They are both divisible (into smaller units of measure), durable (won’t physically turn to dust after a couple of days) and fungible (the value of the unit is the same for you as it is for me; has similar value here or there). What makes money different is it is also a store of value, meaning it will hold value, or grow, over a long period. Can you put it in a bank, safe deposit box, or under a mattress, save it, and it will retain its monetary value over time? Some currencies are better monies than others.
The Difference between Currency and Money
Many don’t understand the difference between currency and money, and which is which. For the sake of familiarity, let us use the U.S. Dollar, the world’s global reserve currency, the creme-de-la-creme, as an example. Is it currency and money, or just a currency? It is portable, fungible, durable, a unit of account, a medium of exchange and divisible into smaller units. Is it a store of value?
Your government, particularly in the U.S., will use a national scale to show an annual inflation rate called a CPI (Consumer Price Index) to reflect the value of of money versus various goods and services. In the U.S., the government has a vested interest in keeping the rate of inflation at around 2%. Any fiat currency is built on trust in the currency since it isn’t actually backed by anything of intrinsic value. The problem with the government’s numbers is they tend to be fudged to reflect the desired result. If beef is going up in price at 20% a year, which it has done very recently, it is replaced in the CPI with something else that will get the numbers desired. Suffice to say, if your look at the factors that make up CPI or the inflation rate, the goods and services used has changed dramatically over the last generation. This has been to keep the 2% story alive and well. (Just don’t look behind the curtain too much.)
Plus, you have the government on the hook for cost-of-living increases in many entitlement programs. And with more and more people dependent on the government, and the government over $18,000,000,000,000 in debt, showing the cost-of-living is stable helps the government immensely. Whether it is the truth or not is another story. Perianne Boring did a great article on this subject for Forbes last year if you want more detail on this topic. It explains how actual inflation, as of last year, was closer to 5% than 2%. A pretty big margin for error, I’d say. If you avoid the establishment narrative and do your own due diligence, it’s amazing what you can find out about how the economic world really turns.
So you can make a weak argument that Dollars are a kind of money but are just very “bad actors” as money unless you like losing value, consistently. The point is dollars are not an effective store of value because they lose value every year. Since the privately-owned and operated Federal Reserve took over national currency production in 1913, the U.S. Dollar has lost approximately 97% of its value. Many economic experts believe that it will continue doing what it has been doing for over a century, declining, until it reaches its true value of zero. Inflation means your dollar loses value every year, so how can it be a store of value? It cannot.
Bitcoin, or gold, in contrast, can be considered money in its truest definition. Bitcoin’s market value, in US Dollars, was about a five cents five years ago and is currently just under $250 USD. Critics love to bring up the peak of $1100 in November of 2013, but that was obviously a bubble created by Mt. Gox “Willy Bots” and China’s ability to buy Bitcoin before government intervention. Now that the market has corrected itself, Bitcoin has returned to its original trajectory it would’ve had if Mt. Gox hadn’t occurred. Its current value is well ahead of its value in October of 2013. The point is Bitcoin is anti-inflationary and is designed to be a store of value. It cannot be inflated to destroy its future value to pay for wars or debt. It is not debt-based, nor government controlled by a private subcontractor. It is governed by mathematic algorithms, and you know how many bitcoins there will be now and decades into the future.
Gold also has seen plenty of bubbles and market manipulation. It has been as high as $1900 USD or as low as under one thousand dollars over the last few years. Bitcoin certainly didn’t invent market bubbles and manipulation. Gold has been seen as money for thousands of years. The only real problem is making it divisible. It is somewhat difficult to mine and create coins and use them in the general exchange of goods and services. One nugget of gold is not worth the same as another nugget of Gold. You can make them all divisible and fungible, but it takes a government or a private company to do that. Gold is generally not circulated as money but held for overall investment value, and it has value as a useful metal in industrial capacities.
No currency or money has “intrinsic value”. We all give these things value or assign things value, based on our belief that we can exchange them now and in the future. Many have deep questions about how long Bitcoin will be around, as well as the U.S. Dollar. You may not want to invest, long-term, in currencies as much as you should in money. Money always beats currency over time, because of money’s definition as a store of value over time. Just look at Gold versus every paper currency that’s ever existed. Gold has remained valuable for thousands of years running. Gold is money; it’s just not very good at being money. Gold is a great investment, past, present, and in the future. Paper currencies of human history, not so much. Paper currencies have a very poor track record of lasting over time. The Dollar has been no different than any other fiat currency. The U.S. Military has just been able to “stretch the soup”, if you will. Nothing last forever in fiat currency.
Bitcoin has been declared dead over 50 times by the mainstream media, yet it has shown to be a great store of value if volatile. It is volatile while growing in relative value; upwardly volatile. Paper currencies, like the dollar, have shown volatility on a downward spiral over time. Just something you should think about.
If you haven’t already, Mike Maloney does a great job of going into detail about these key differences in this video, “The Hidden Secrets of Money”, Part one of a four-part series. Watching and subscribing to him would be a wise move to further your financial education, and understand where this all may lead, and where Bitcoin may fit into your future.
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