Whereas the centralized control of the money supply and the ability to sustain imbalance causes wealth to consolidate, a fixed money supply naturally causes the currency to become further decentralized and more distributed, delivering greater balance. The pricing mechanism with the least distortion provides the clearest signals as to what other people value, and derivatively, provides the greatest assurance that the information communicated is not a false signal. Each time and cumulatively, it advantages and further embeds the incumbents, just as the market is working to eliminate imbalance. For those lowest on the economic spectrum, wages paid in dollars (labor) were devalued, and asset prices were directly manipulated higher. Posted by Guy | Sep 8, 2020 | Finance, Philosophy | 0 | Unabridged, Uninterrupted, & unmatched. That view is fortunately flat wrong and economically unsupported. In a digital age, Bitcoin is sound money that can be sent over the internet and has the potential to change the nature of money for everyone. As a simplified construct, think about money as the coordination function within an economy. When presented with that opportunity relative to a certainty of the worse outcome, it becomes a clear choice. This vicious cycle was only ever made possible because the Fed has unilateral control of the money supply. The currency’s ability to coordinate economic activity degrades gradually and eventually fails completely; everyone pays that inevitable price. Understanding the fundamental and foundational role money plays in the economic engine establishes the logical connection between systemic economic issues of imbalance and the artificial manipulation of the money supply. False and distorted economic signals, created through the manipulation of the money supply, are counterproductive for all in the long run, but in the short-term, benefit those to whom the imbalance is positively skewed. Whether it is a medium of exchange, gold 2.0, a hedge against inflation or purely as a speculative asset, all of these answers are valid. That is the root of all structural economic problems, and until it is fixed, the world will remain suspended in an increasingly fragile state. He both made the precise argument which central bankers use to defend their actions while also articulating the power it would place in the holder of a currency with a fixed supply. In this interview, I am joined by Parker Lewis, Robert Breedlove and Vijay Boyapati to answer the question: what is Bitcoin? It also creates long-term economic instability by distorting price signals over decades and widens the wealth gap by constantly advantanging those on the right side of imbalance. The Fed chooses the former, trading short-term stability for long-term instability and distortion. Made worse, it actively impedes the ability of those on the lower end of the economic spectrum to contribute and to command a greater share of the resources within an economy. Of course, there are other factors at play. While it may seem like logic, it is an anecdote that lacks any fundamental economic argument in defense of the manipulation of price levels. If misbehaving children cannot find a way to share a toy and play nice, what do you do? The benefit skewed to the side of existing imbalance, as it always does when imbalance is being sustained artificially. No value leaks outside the system; no inefficiency can be introduced through the production of money. As prices change, behaviors change, and everyone adapts. And another and another. In order to believe the tall tales of technology and globalization causing economic imbalance, one would have to be willfully blind to the impact of centralizing the money supply, which in turn caused banking to become the epicenter and lifeblood of the economy, and which made it possible for imbalance to actively be sustained over decades as a policy decision. While there is never perfect balance, the existence and fluctuation of price levels is how an economy works toward balance through trial and error. Whether new entrants are joining the network or trade occurs from within, value is always transferred, and through that transfer, value is actually created. By sustaining imbalance, those that principally benefited from the existence of imbalance are continuously advantaged at the expense of everyone else. The money supply is not the only way economic activity is manipulated. False price signals vs. true price signals. It is so because it’s the only way for the cycle to be repeatable and symbiotic rather than one-off and zero-sum. That is what the market attempts to do every time the Fed steps in to keep the dream alive. As the economy slows and as price levels begin to change counter to the Fed’s desired course, the Fed increases the supply of dollars in the financial system by purchasing debt instruments (typically government treasuries) and crediting the accounts of the sellers with newly minted dollars. Those that took the risk own the consequences, and it’s back to the drawing board in a never-ending game aimed at marrying individual ideas and skillsets with the preferences of other market participants. But, the massive and growing economic imbalance which exists today is not the inevitable and unavoidable consequence of free market capitalism; instead, it is principally a result of central bank monetary policy, which allows economic imbalances to be sustained in ways that would otherwise not be possible. If you enjoy The What Bitcoin Did Podcast you can help support the show my doing the following: Become a Patron and get access to shows early or help contribute, Bitcoin: 3FiC6w7eb3dkcaNHMAnj39ANTAkv8Ufi2S, If you do send a tip then please email me so that I can say thank you, Subscribe on iTunes | Spotify | Stitcher | SoundCloud | YouTube | TuneIn | RSS Feed, Share the show and episodes with your friends and family, Subscribe to the newsletter on my website, Follow me on Twitter Personal | Twitter Podcast | Instagram | Medium | YouTube. Central bank monetary policy is the exogenous force creating massive economic distortion and extreme levels of inequality. That is the power of bitcoin. At the Democratic National Convention (August 2020), Congresswoman Alexandria Ocasio-Cortez described the Bernie Sanders presidential campaign as, “a movement that realizes the unsustainable brutality of an economy that rewards explosive inequalities of wealth for the few at the expense of long-term stability for the many.” That the current economic system is working very well for a few at the expense of the many has become more widely recognized and accepted across both sides of the political aisle in recent years. Once one actually appreciates the fundamental role which money and the pricing mechanism play in coordinating economic activity, it becomes clear as day that sustaining imbalance is precisely what occurs each time the Fed intervenes to stabilize price levels. As increases in demand naturally outpace ever diminishing increases in supply, there is one principal way to acquire bitcoin: by delivering value to an existing holder of the currency. Parker Lewis‘s most recent installment of the “Gradually, Then Suddenly” series. More recently, Bitcoin is widely considered as gold 2.0 and a must-have asset to protect your wealth against inflation. The market function to eliminate imbalance would have been for prices to change. It is the fluctuation in prices inherent to undistorted markets that actively prevents large scale and systemic imbalances from forming. But, focusing there would be like trying to fix the windows on the 100th floor when the bottom ten stories are each being supported by a single Jenga block. That is the root of all structural economic problems, and until it is fixed, the world will remain suspended in an increasingly fragile state. A few weeks ago, I gave the attached presentation (see…, Unchained Capital, Inc. NMLS ID#1900773 | NMLS Consumer Access. With a fixed supply of 21 million, enforced on a decentralized basis and controlled by no one, bitcoin has taken away the ability to manipulate the monetary function entirely. The advantages gained from manipulated incentive structures are allowed to continue in a way that would not be possible absent the Fed’s policy decisions. On the other hand, the inequality which has been created and exacerbated by a flawed monetary system is an inequity, and it is not natural to a free market economy. a fixed supply), more people will. […] There is no freedom without noise—and no stability without volatility.” — (Taleb & Blyth, Foreign Affairs, May/June 2011 Issue). No one has to trust or question whether bitcoin’s price signals are true because its fixed supply will guarantee it. It will no longer be possible to sustain imbalance. Bitcoin is accessible to anyone, and everyone that chooses to use it is afforded the same protections.

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