Money for nothing

Since the inception of the Federal Reserve, the economic landscape of the United States has been shaped by its measures to control the money supply, set interest rates, and ensure the stability of financial institutions.

Its role as the guardian of financial stability, however, has not been without criticism. A growing faction of people are joining the ‘End the Fed’ movement, advocating for an alternative financial system. To appreciate the significance of this movement, one must first understand the underlying mechanics of the current financial system, and why cryptocurrencies like Bitcoin are poised to potentially challenge it.

The United States dollar, for many decades, has been the world’s reserve currency. It’s powerful and universally accepted, yet beneath the surface, it’s backed by nothing more tangible than the trust and confidence in the U.S. government.

As the Dire Straits would say, money for nothing.

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The scheme is simple, everytime we face a crisis, the FED intervenes by increasing the money supply to stimulate the economy. Allthough they don’t like to recognise, they just print money.

I love this clip from March 2009, in the midst of the financial crisis, where Ben Bernanke, then Chairman of the Federal Reserve, initially asserted that the Fed was not ‘printing money’. At least he tried…

After several questions, he elaborated that the Fed was, in fact, creating electronic credits. Essentially, this is how the modern economy functions – new money is created digitally and used to purchase securities, which subsequently injects more money into the economy.

But don’t worry for the money value, it’s baked by the USA government!!

Well it’s true they are now negotiating again to increase the debt ceiling before they decide if they fail to pay the social security or the bonds 😉 It’s like choosing how do you prefer to die.

“Tendency is your friend” they use to say. Take a look at this tendency and tell me: would you borrow money to them?

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There could be a solution: cut the military cost to zero.

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But something tells me we will not see it 😉

It’s true that this is not an asolated problem for the US government, it’s a global concern. Take a look ate the Debt-GDP ratio for the G7 countries:

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As these concerns grow, Bitcoin, and the blockchain technology that underpins it, emerges as a potential contender in the financial landscape. Bitcoin operates independently of any central authority. Its value isn’t determined by government policy but by the supply and demand dynamics within its network of users. Furthermore, its supply is algorithmically capped at 21 million bitcoins, preventing inflationary tendencies.

Bitcoin’s underlying technology, blockchain, also poses an interesting proposition for the future of finance. With its decentralized and transparent nature, blockchain allows for secure and verifiable transactions without the need for intermediaries like banks or financial institutions. This could result in a more efficient and inclusive financial system, especially for those who are currently unbanked or underbanked.

Some say cryptos are not serious, and it’s true, there ara a lot of meme coins, but take a look at this Wall Street headline of this week:

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Three main “serious” banks treated as meme coins by the Wall Street journal 🙂

To say Bitcoin will replace our current financial system may be premature. But, for the first time in the recent history, we have an alternative. As dissatisfaction with the status quo grows, it will be interesting to see how cryptocurrencies like Bitcoin continue to evolve and potentially redefine our understanding of money.

Yours in crypto and AI.