Inflation Doesn’t Exist For Bitcoiners

Posted in   Bitcoin   on  March 20, 2023 by  Money Bren0

Nothing in this article is financial advice. The writer is not your financial advisor. Investing contains risk and you can lose money. Consult your own professionals before making investment decisions. This article may contain affiliate links. 

For most people, inflation is an inevitability.

Every year, inflation means things are going to get more expensive, and that’s just the way it is.

Or is it?

What if I told you – inflation is now a choice?

What if I told you – it’s now up to you whether things get more expensive, or things get cheaper?

Most people misunderstand inflation.

When I said above, inflation means things get more expensive, that’s not actually correct.

Things have never gotten more expensive.

Let’s think back to the schoolyard.

I have a chocolate bar. You have a can of Coke.

I say, wanna trade?

You say, sure!

So we trade. And since a chocolate bar costs $1, and a can of Coke costs $1, most people would consider this a fair trade. One chocolate bar is worth one can of Coke.

Now fast forward ten years. A chocolate bar now costs $3. A can of Coke now costs $3.

Wow, inflation! Things have gotten 3x more expensive!

But this isn’t really true.

In the schoolyard, people are still trading one chocolate bar for one can of Coke, and it’s still a fair trade.

Therefore, the value of a can of Coke and the value of bar of chocolate are still unchanged.

They both are the exact same product as they were 20 years ago.

They both taste the same.

They’re both just as easy to find.

They both provide the same amount of satisfaction to the owner.

Most importantly, they still have exactly the same value in the market.

One chocolate bar still equals one can of Coke.

The reason they each cost $3 is not because they’re getting more expensive.

It’s because the currency you are using is getting weaker.

Read that again.

It’s not the items that are changing in value. It’s the currency you’re using.

Here’s how to make this picture a little clearer.

Instead of using dollars, let’s use a different currency.

Let’s use gold.

Let’s say (for argument’s sake) that ten years ago, a chocolate bar cost 1 gram of gold.

Now gold, unlike dollars, doesn’t lose value over time. The value of gold has actually gone up.

That would mean today, the same chocolate bar would only cost 0.8 grams of gold.

If your currency of choice is gold, and you keep your assets in gold, you have not experienced any inflation over the last 10 years.

The opposite actually – the chocolate bar has gotten 20% cheaper!

Before you paid 1 gram of gold for chocolate, and now you only pay 0.8 grams.

You would have experienced what we call deflation.

Since your currency is going up in value, everything on the planet would have gotten cheaper over time.

Therefore inflation has nothing to do with the products you buy becoming more expensive.

It has everything to do with the currency you choose to buy them with.

Your next question might be – what makes the currency get weaker or stronger?

If you did economics at high school, you would have learned this when you were 16.

A currency getting weaker is called inflation, and inflation only happens when governments print money.

There are no ifs, buts or maybes.

Whether directly or indirectly, the root cause of inflation is always from the government printing more money.

This answers the question why gold is not susceptible to inflation.

You cannot simply push a button and “print” gold.

To get more gold, you need to spend millions (billions) of dollars surveying land, buying machinery, digging holes deep into the ground, sending people down to spend hours and months and years mining it, then spending millions on trucks and trains to transport it all to a refinery to authenticate it, clean it, mint it into gold bars and coins, and finally sell it on the market.

However, if you want more dollars, three guys at the Reserve Bank simply sit down at a meeting table, look at each other and say, “Shall we create more money?”

Then they push a button and boom.

Another trillion dollars has been made.

This means gold is scarce, but money is not.

Which means the value of money easily gets inflated away, but the value of gold cannot.

So, gold might be a better alternative to dollars, but there are problems with gold.

It’s difficult to transport. All around the world people use armoured trucks and guards to transport even small amounts of gold.

It’s difficult to store and keep secure. To store large amounts, you need bank vaults or large safes hidden in your home.

It’s not easily divisible. If you have a gold bar worth $5,000, and you want to use it to buy some groceries, how do you do it? It’s completely impractical.

Nonetheless, gold has served in some form as a type of money and store of value for over 5,000 years, primarily because it’s recognised globally, and is one of the only non-inflationary types of “money” we have.

This is why during recessions (when most money printing happens), the popular trade is always to move assets into gold.

But today, we have another non-inflationary currency.

When the Bitcoin whitepaper was produced in 2008, it described a currency that shared many characteristics with gold, but solved many of its problems.

It was easily divisible into millions of units.

It was easy to store securely, as an encrypted file on a computer.

It could easily be sent and transported anywhere in the world, just like an email.

And it was deflationary, with its supply hardwired into the algorithm, meaning it could never be “printed” and its value could never be inflated away.

Bitcoin has become a bigger success than anyone suspected.

In just under a decade, it’s gone from “weird internet money” to a currency now held by many of the world’s smartest and richest billionaires and investors, it’s been used by countries to settle international trades, it’s become the official currency of two countries, it’s held as an asset on multiple Fortune 500 company’s balance sheets, but most importantly, it’s getting used by more and more people every day, and by many of the smartest and richest people in the world.

Most importantly, similar to gold, Bitcoiners have not experienced inflation.

Since its inception, Bitcoin has only trended upwards – as was always expected under the basic laws of supply and demand.

It’s as simple as:

  • Demand continues to increase.
  • Supply continues to stay the same.

This means if you have been holding/using Bitcoin as your primary currency, inflation has been non-existent for you.

In 2015, a brand new Honda Civic would have cost you 100 Bitcoin.

In 2019, it would have cost you 4 Bitcoin.

In 2023, it would cost you less than a single Bitcoin.

Instead of inflation, you’ve enjoyed deflation.

Everything keeps getting cheaper.

You might be scratching your head right now.

This sounds odd, right? Like it can’t be true?

The reason it sounds that way is because it’s the first time in history people have had this choice.

When it came to money, people have only ever had one choice – the national government currency.

These currencies have always been inflationary – there has never been a time when governments have stopped printing more of it.

Naturally, as they continue to print, the currency constantly gets weaker.

Therefore, every year you need more of it to buy the same things.

A gallon of milk was 20 cents, a few years later it’s 50 cents, a few years later it’s $2, before you know it your currency is so weak you need $5 or $10 to get the same amount of milk.

And with a government-issued currency, this is not only common, it’s inevitable.

When it comes to your dollars becoming worth nothing, it’s a matter of when, not if.

Some governments are better at delaying the inevitable than others.

In Zimbabwe, for example, they did a terrible job, as they did in Venezuela, and Argentina.

All of their national currencies are practically worthless today.

But even in the USA, while they might be delaying it better than most, the value of a US dollar is dwindling down to nothing.

As you can see in the graph below, the US dollar has already lost 97% of its purchasing power since 1913.

Fun fact: There has never been a fiat currency that has gone up in value.

Every single fiat currency has had its value destroyed by inflation, and almost all fiat currencies have eventually ended up worthless and no longer exist.

None (that I can find) have lasted longer than a couple of centuries.

The majority of fiat currencies throughout history didn’t even survive 50 years.

The oldest fiat currency we have today is the pound sterling, which officially became a fiat currency (no longer backed by gold) in 1931.

Since then, in less than 100 years, it has lost 97% of its purchasing power, similar to the US dollar.

So what is the case for Bitcoin?

Does it mean you should convert all your wealth into Bitcoin immediately and spend the rest of your life living off your Bitcoin debit card?

You may think I’m being facetious, but there is a subpopulation of people who have been doing exactly that over the last decade (1, 2, 3) and are now extremely wealthy because of it.

But no, that’s not what I’m suggesting.

All I’m suggesting is this: Now you have a choice.

Now that Bitcoin is widely available to the masses, for the first time in history people have the option to keep their wealth in a deflationary currency.

That means a currency that increases in value over time.

For the first time in our lives, we get to choose if we experience inflation or not.

Want to get started in Bitcoin? Read my guide on buying your first $100 in Bitcoin here.

This is not financial advice. I am not your financial advisor. Always consult your own professionals if you for advice on your financial affairs.

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