Keynes once said that “not even one in a million people can realize” how inflation destroys a national currency.

There must be, to a greater or lesser extent, widespread public misunderstanding of inflation, based on the school definition of inflation.

So what do you think inflation is? Rising prices?

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Surprisingly even the Wikipedia page is incorrect.

The real definition of inflation is an increase in the money supply.

Rising prices and declining purchasing power are not definitions of inflation, but consequences of an increase in the money supply. An example:

Let’s say the money supply in the United States is equal to $100,000.

The Federal Reserve prints $100,000 — it’s out of thin air, and banks print notes that don’t have any backing. Remember that the US went off the gold standard “temporarily”.

What is our money supply right now? At $200000. Now what is the dollar value of all the money holders? 50 cents is equal to 1/2 of your purchasing power.

This may seem like a ridiculous example, but let’s recall that the Fed allowed banks to keep only 10% of their funds in the bank. This is often called fractional reserve banking.

This means that if you have a balance of $10,000 in your bank account, the bank rules only keep $1,000. Assuming this is the case, let’s assume that the bank then lends $9,000 to another customer. Have you reduced your bank balance by $9,000? No.

Now you (Client A) have $10,000 in the bank, and client B, who just received the loan, now has $9,000. Where did the $9,000 come from?

In effect, the bank created this money out of thin air by adding $9,000 to the digital screen — an increase of $9,000 in our money supply. These two users have a total fund of $10,000, but spend a total of $19,000 in the economy.

Imagine that this is happening all the time, because people can get loans from commercial banks, especially since global interest rates have remained close to zero percent for nearly a decade.

Understanding this concept helps explain why banks have limits on withdrawals for a period of time.

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Fractional reserve banking, supported by the Federal Reserve system, means that every time a loan is made, the money supply increases — by definition, inflation.

Several countries have been dealing with the consequences of this problem this year: Venezuela, Turkey, Italy, India… I believe there will be inflation in more places as a result.

It is for this reason that bitcoin has a fixed money supply of 21m coins — an attempt to counter the covert activity of central banks through commercial banks. Review the articles in the Bitcoin origin community:

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Bitcoin is not anti-banking, it’s anti-central banking. This is a key distinction.

If we people start using money with a fixed money supply that cannot be arbitrarily increased by one side, this will force all entities in the world to compete fairly for the same resources — including governments.

That’s why some people think bitcoin is extremely valuable. If the government prints money to buy Bitcoin because its citizens use it, the paper money will be destroyed but the value of bitcoin will increase exponentially. There were hints of this in December 2017, when stupid people rushed in and took out loans to buy cryptocurrencies.

The fixed supply of Bitcoin attracts people who want to compete by creating real wealth (goods and services) to buy it. Money no longer exists out of thin air.

We have to create, service, create and build (not HODL, BUIDL) in order to get bitcoin.

Bitcoin (BCH) offers a way to rescue markets and enhance financial sovereignty and economic freedom for all participants.

The original link: www.yours.org/content/why…