During the discussion that took place in “part 1: how banks earn money,” we discussed the ways in which banks generate money by playing the “fractional lending” game. To phrase it another way, banks “take the money that you deposit and mysteriously convert it into five or ten times more in order to lend this additional money to other individuals who may need loans.” After that, they will get interest on each dollar that you deposited as well as each dollar that they generated using the magic scanner from your deposit. Banks are able to generate money from two different sources in this manner. It’s possible that you’re thinking, “All right, banks are lending out my money to those who are in need of it.” They are the ones who will be responsible for paying the interest costs on such loans. I won’t be paying anything at all. This does not have a significant impact on me. no, not quite… When banks create more money, who is supposed to pay the price? you are able to (we all do). An rise in the amount of money that is circulating in the economy is a result of printing additional money. As a result of supply and demand, the value of money decreases in proportion to the size of the money supply. As an illustration of this, if there were a large number of Ferraris in production, the price of these automobiles would be lower since there would be a greater quantity of them accessible. that is, vice versa. In the event that there are fewer Ferraris available, the value of those Ferraris increases, resulting in an increase in their price. Therefore, the value of the $1,000 that you put into your bank account actually decreases as a result of the fact that banks begin printing all of this more money and injecting it into the economy. The price of things will go up if there is a greater amount of money competing for the same quantity of items. This is referred to as inflation. The vast majority of individuals are economically disadvantaged as a result of inflation since their money is a) losing value and b) losing its ability to purchase things over time. The decision to create infinite quantities of money in 2008 was granted by the President of Zimbabwe in order to pay for the costs of the government. However, there are disadvantages that come with printing money in unlimited numbers. It resulted in a hyperinflation of 6.5 sextillion percent, which is equivalent to 22 years of inflation. The only thing these folks were doing was purchasing bread with a wheelbarrow full of cash. To learn more about it, go here. Just try to fathom how much money would be required to pay for things like rent, medical bills, or a home. In addition, the Federal Reserve of the United States has only lately said that it is prepared to create an infinite quantity of money in order to provide assistance for the economy of the United States amid the coronavirus crisis (read more about it here). If they proceed with this, it raises a number of issues, including the following: What impacts will this have on the economy of the United States and the world in the long run? In the event that additional money is printed, what are the potential outcomes? How will this affect the value of the dollar in the future? In addition, what kind of an effect will this have on our individual wealth over the course of time? Who will emerge victorious in the outcome? The difficulty is that as a society, we are not especially conscious of the existing monetary system and how it may be potentially detrimental to us. This is the source of the problem. It is possible that this is due to the fact that our educational system does not educate us about money. As a result, we tend to think of our existing monetary system in the same way that we think of the laws of nature: it is what it is and it will continue to be what it is. On the other hand, it is precisely this attitude that makes it the ideal formula for financial institutions to maintain a monopoly. In order to comprehend the development of money in the future, it is necessary to have a solid grasp of how and why our existing monetary system operates. In addition, the first step in safeguarding our own wealth is to have an awareness of our monetary system. Is it possible for bitcoin to safeguard our wealth? Bitcoin is a kind of digital money that was first developed in the year 2008. At the time, the individuals responsible for it implemented a method of protection against inflation known as halving on a periodic basis. It was the first scarce digital asset that did not have a centralised owner, such as a bank or a politician. Bitcoin was the first token. The fact that its monetary policy is rigorously regulated to 21 million coins is the reason why it is so rare. there is neither more nor less. The distribution of this information is not being influenced or controlled by those in positions of authority. The monetary policy of bitcoin is very suitable for market players such as yourself and me who are interested in safeguarding our money from those in positions of authority. The reason for this is that bitcoin levels the playing field in terms of money by limiting the production of money and wealth. This ensures that the wealthy do not become even wealthier simply by printing more paper money, which is a price that we must all pay in the end and not necessarily the banks. Bitcoin is the beginning of something very remarkable: a money that does not have a central authority, something that is both essential and essential. Former trader and risk analyst Nassim Taleb is a statistician and risk analyst. Netcoins makes it easy to purchase bitcoin or any other cryptocurrency in Canada, whether you’re interested in doing so. You are able to register right here.
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