Voluntarist, Bitarch

Do you know why in the United States after 1971 labor productivity continued to grow at a constant rate, but at the same time real incomes of people abruptly stopped following the growth of productivity and remained virtually unchanged? Or why after 1971, over 50 years, the consumer price index soared 7-fold (what cost 1 dollar in 1971 now costs 7 dollars), although before 1971 it took almost 200 years for an approximately similar price increase? Or perhaps why the share of US residents living with their parents until age 29 gradually decreased until 1971, but began to grow again after? Or why the cost of housing relative to workers’ incomes in the US has only increased several times during this period?

The answer is extremely simple – on August 15, 1971, US President Richard Nixon finally liquidated the gold exchange standard, canceling the fixed conversion of the US dollar into gold. After this, the US dollar turned into paper that was effectively backed by nothing. It was after this decision that the impoverishment of Americans, who had previously only grown wealthier, began.

This rather simple fact clearly confirms the absolute failure of paper money as a means of exchanging goods between people and accumulating wealth. The use of paper money is merely a reliable way to become poor. After all, what else can be expected from money that can be printed in unlimited quantities, thereby devaluing people’s savings, while enriching officials, government structures, subsidized oligarchs, and banks, who received the new money supply first and realized it at the old prices. Or what else can be expected if money is distributed boundlessly at an artificially low interest rate for the development of businesses that would be absolutely unprofitable and failing at a rate formed under free market conditions. Indeed, the theory of the Austrian School of Economics does not call unlimited money emission and credit expansion the main causes of economic crises for nothing.

People will only grow poorer until we abandon government paper currencies in favor of money that is not controlled by any centralized governing bodies and has a strictly limited issuance of new coins. Precious metals demonstrated their reliability as a means of exchange and wealth accumulation in the past. But in today’s digital world, where information technologies play a key role in all types of activity and relationships, cryptocurrencies can serve as a reliable means of exchange.

Voluntarist, Bitarch

Record inflation in the US has once again shown that one cannot rely on currencies with unlimited emission and centralized management, such as modern government (fiat) money. For a long time, the US dollar was considered a fairly stable currency, and many chose it specifically as a means of accumulating wealth. Now, all dollar savings are merely awaiting devaluation. The reason for this is the inadequate economic decisions of the US government during the coronavirus pandemic; it decided to combat the arising difficulties by increasing the money supply. And no government in the world can guarantee that it will not make decisions leading to the devaluation of money and the impoverishment of people. Rather, the opposite should be expected—inflation is beneficial to governments, enriching those whose hands the new money supply reaches first (for example, the government itself and state banks), since they can spend these funds at pre-inflation prices. Thus, there is no such fiat currency in which your funds would be safe.

Cryptocurrencies demonstrate a different picture—of course, not all of them, but certainly those that are truly decentralized and crypto-resistant. The emission of such currencies is limited by the mathematics of large numbers, and centralized management is absent—any changes in the network’s operation (and even the implementation of updates by developers) are possible only with the direct consent of the holders of the majority of the computing power involved in it. Together with the absence of any restrictions on the exchange of funds (funds can be sent to any person in a matter of minutes, even one located in a distant country on the other side of the Earth), this makes cryptocurrencies a valuable asset in the eyes of an increasing number of people—the well-known Bitcoin, for instance, recently broke another record in its value.

Sooner or later, the governments of all states whose currencies are considered guarantors of savings stability will, mistakenly or even intentionally, make decisions leading to an uncontrolled increase in the money supply, meaning the devaluation of money and the impoverishment of people. And each time, cryptocurrencies whose emission remains at the initially set level will only become more popular as a means of accumulating wealth, or even as a means of exchange. The decline of fiat money is inevitable when such a good alternative exists!