worried about inflation? buy bitcoin
Ireland is currently experiencing the worst inflation in 40 years. Current geopolitical happenings are touted as the cause of rising costs in energy, food, housing etc. All basic necessities for living. The definition of inflation as a rise in prices is incorrect. Inflation means an increase in the supply of money. Rising prices are a consequence of inflation, not its direct cause. Western economies are being subjected to historic increases in the supply of their currencies.
The increased supply of money causes a decrease in the purchasing power of that money. When you have more money in circulation chasing the same amount of goods and services, you get rising prices. It is important to note that every intervention made by governments in an economy hampers efficient production. And every government “solution” to inflation involves adding to the money supply. In this environment the problem of rising prices can only get much worse.
Inflating the money supply is a primary focus of governments and central banks. They want your money to relatively decrease in value. Decreasing value over time increases our time-preference, meaning we’d prefer instant gratification through consumption rather than saving money. It is the belief of those in power that consumption is what drives economic growth and creates jobs.
The vast majority of money created in the last two years has meant to stimulate consumption. The aptly named ‘PUP’ payment encourages the beneficiary to spend money on cheap thrills and treats, not to invest in the long-term. It decouples many from the idea that what you spend should be a direct result of what you earn through production, and spent on something someone else has produced themselves that you now want.
Inflation can be seen as a tax. You might give as much as half of the money you earn to income tax and USC, you also surrender 10–20% to inflation. Given that inflation is not ‘rising prices’, but the direct cause of rising prices, the only way to deal with inflation is to decrease the supply of money.
Bitcoin is a monetary network open to anyone, whose operation is distributed among individuals who run specialist hardware, known as miners. Anybody with a phone can buy and hold bitcoin, and can transact with anyone else. The rules governing the supply of bitcoin are laid out in an algorithm. The amount of new bitcoin ‘mined’ every year is small relative to the outstanding supply.
This is desirable in anything you use as a money. If the amount of the monetary good created every year is small relative to the outstanding supply, you are confident that your purchasing power will be maintained through time. This is why gold was chosen by the market as a successful form of money, and it is a key component of bitcoin.
It is technically impossible to inflate the supply of bitcoin beyond what is laid down by the algorithm. The certainty surrounding this innovation is unlike any other financial asset in the world today. This certainty is the reason for the value of euros, dollars, and pounds to lose almost 100% of their value relative to the price of 1 bitcoin in just 12 years. If you are concerned about inflation, one thing you can do is buy bitcoin.
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