I’ve started to be interested in Bitcoin in the last few months and started accumulating some on a monthly basis. I was smart enough not to invest during the 2017 bubble and not in the months following, because I thought the leaders of the western world would simply make it illegal. I know that would be extremely unfair, but so does making Marijuana and Gay marriage illegal, and these issues took decades to change even in the “free world”. I believe that the only reason Bitcoin is legal is because many politicians secretly own bitcoin and benefit from it, and that bitcoin will explode upwards when this will become public sometime in the next 2-3 years.

Let’s get back to the question. In theory, inflation is a way to push the people into lending their “unused savings” to people/businesses who need the money and are ready to pay interest.

Imagine that you have 10000 people and each has $200k (and no other savings at all). Each one can decide to lend his money to a business that promises the following: 50% chance that by the end of the year the business will return $600k for the investment (i.e. 3 times more), and 50% that it wouldn’t return any.

As individuals, you’ll have to be crazy to take this risk – and you will prefer to keep your money as is. If the inflation rate is high, and keeping the coin’s scarcity the same is not possible, you will psychologically be encouraged to unite with the other 9999 people, form a bank, and cover each others’ risks. The expected value for profit is obviously positive, and the chances that you will loose money are extremely low.

Nowadays, you can also invest your money in gold which has a limited scarcity – but the vast majority of people will only do that through the bank and not stash gold at home. When you buy gold through a bank, the bank doesn’t actually buy the gold – it only manages its own internal risks so he will be able to return you as much as gold is worth (and I’m not even getting into the fact that in modern economy, the banks are allowed to lend businesses/people 10 times more money than the value invested in it).

If people could stash “money with solid scarcity” at home, and won’t lend it to others, the economy will become stagnated. Free country will loose, and more totalitarian countries will benefit.

Obviously, this is only a theoretical discussion. In this theoretical world, the freedom to have money-with-solid-scarcity is less beneficial than a forced inflation. Of course that in the real world, pushing people to invest in banks and not giving them other options, creates huge corruption in the banking system. I would agree if some people here will argue that in a theoretical world, smart and decent Socialist leaders that plan the economy centrally can save us from redundant competition – the only problem is that in the real world the people that get to this leadership positions are either stupid or corrupt.

Another argument would be that turning 10% of the population to slaves can also benefit the economy, and the average citizen will benefit. When it comes to choosing between freedom vs “a better economy”, I will always choose freedom.

The way I see it, bitcoin is neither good or bad, it’s just another element in the mechanics of the economy. Just like nuclear weapons, which can either lead to a nuclear war or actually lead to a “cold war” balance which will eventually lead to peace.

What do you think? Will the future adoption of bitcoin benefit free western countries because it will force the banking system to be less corrupt? Or will it benefit countries like China because western economy will become stagnated?



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