Thread by @GabeGreco

Everyone needs to understand inflation for what it really is: an engine for wealth inequality.

This could perhaps be the most important lesson I’ve learned from studying #Bitcoin

In this thread I’ll try to explain in some detail how I’ve come to look at inflation.

Inflation has been advertised for centuries by certain economists (central bank propagandists) as a necessary force for stimulating economic action.

What they essentially claim is that the medium of exchange that people use in an economy needs to lose value over time so as to make those people more willing to spend it.

Inflation at a simple level means more units of money/currency are created, thus decreasing the value of each individual unit of the money/currency.

And this system can be stable if handled correctly. An example from history is the late 19th century when the world was on a sound, hard money standard. Gold was used as prime money and people experienced decreasing prices along with greater standards of living.

Today, if you are not aware, the Federal Reserve (the Fed) is responsible for the monetary policy decisions of the United States. They are a central bank and operate as a private institution separate from any government.

The Fed has private shareholders and they hold nothing in reserve. In other words, it’s not federal and there are no reserves.

Here are the three key objectives for the Fed as laid out by Congress:

Maximizing employment
Stabilizing prices
Moderating long-term interest rates

I can tell you with certainty that the Federal Reserve is playing a game they cannot win. They cannot accomplish their objectives because they are operating a scheme which inevitably leads to failure and massive inequality.

Let’s examine the past ~100 years of monetary history.

Over the course of thousands of years, freely acting people all over the globe determined that gold was the best technology to exchange value across space and time. Gold became prime money for basically everyone.

During the 20th century, central banks slowly siphoned gold’s power away by enforcing the use of their regional currencies.

If you look at the early versions of the US paper dollar in the 20th century, it states that the bill was really just a receipt for gold.

In executive order 6102, the US government deemed it illegal for citizens to own gold and it was confiscated.

As the US govt. and the Fed built up a large supply of gold, they were able to manipulate the exchange ratio between their dollar and gold.

In 1971, Richard Nixon removed the dollar’s convertibility into gold.

This is an important point to make - the current monetary system we have today has only been around since 1971 - about 50 years, that’s it!

(I highly recommend you check out wtfhappenedin1971.com)

To summarize the recent history of money - the world determined gold was the best money and it was used globally as the monetary standard. Governments and central banks then took that power away from gold and in 1971 we began using something called fiat currency.

Fiat currency has value because governments have a monopoly on violence and central banks have a monopoly on monetary policy.

This is where we begin the see the detrimental effect of inflation - the Cantillon Effect.

The Cantillon Effect is a well-known feature of money that has existed for centuries. It shows that the people who are “close to the money printers” receive a disproportionate advantage in an economy compared to those who are not.

In old times, emperors whose faces were stamped upon coins would periodically clip off the metal contents from the coins and mint new coins for themselves to steal value from their citizens.

Clearly this power steals wealth from an average citizen and transfers it to those who have the power. Many empires have fallen because of their greed and ignorance when dealing with monetary policy.

This is not much different than what governments and central banks are able to do today, but they are able to perpetuate this scheme is a much more shadowy way.

Now that the gold standard no longer exists, they are able to essentially “print money.” What they really do is edit a database that they hold privately and manipulate it in ways that they see fit.

I’m sure you can see how this benefits the few at the expense of the many.

Those who are close to these “money printers” are able to see their interests fulfilled before anyone else and the rest of society must deal with the downstream consequences of the shifting in productive assets.

For this recent reaction to the pandemic, the Fed “printed” the equivalent of $50,000 per US citizen.

Last I checked people only received $1,200.

Where did the rest of this newly printed money go?

Much like in 2008 when the government and banks bailed out corporations that failed, those close to the money printers in 2020 were able to benefit disproportionately compared to the rest of society.

This monetary standard we operate on is utterly unsustainable and creates far more problems than I’ve laid out in this thread.

It is my belief that the answers to these problems lie in an unmanipulable, unconfiscatable, and verifiably scarce money - #Bitcoin

Many of these concepts go much deeper but I hope I was able to explain them simply so that the main ideas come across clearly. If you’ve read this whole thing I hope you learned something useful :)

I could record some podcasts to go more in depth, lmk if you’d be interested!