Bitcoin and cryptocurrencies — new money for the post-fiat era
The world economy is sinking into crisis, and central banks are frantically trying to stop inflation. That’s what experts at Elliott Management, one of the world’s largest investment funds conclude. A closed report by the fund says that one of the world economy’s main problems is hyperinflation, because of which “the world is on the brink of the biggest financial disaster since World War II”.
The founder of the X11 Finance fund, Pavel Andreev shares these concerns. X11 sees the reason for the current crisis in the bad choices of monetary authorities. “This has now become obvious, but the problem is only the tip of the iceberg,” Andreev says. The current crisis was inevitable andat its heart are the shortcomings of the modern financial system, where the state has a monopoly on issuing unsecured money and derivatives, according to X11.
It was during the coronavirus pandemic that the printing press was turned on. Central banks built up the money supply by several dozen percent, and now they are trying to turn the tide by raising rates.
At one time, turning on the printing press saved the world economy. This happened during the Vietnam War and the so-called oil crisis, when nominal annual average dollar inflation exceeded 10 percent per year. It was then that the world began to transition to the Jamaican monetary system, the U.S. dollar finally lost its direct gold backing and the exchange rate became floating. As a result, other world economies also switched to a floating exchange rate, which created the modern fiat system.
Inflation: note the peaks from 1966 to 1982
As a result, the determining factor in the world economy was the policy of the US Federal Reserve (“the Fed”), which issued more and more dollars every year and reduced the requirements for financial institutions, such as banks, for capital ratios. All this was one of the causes of the 2008 financial crisis, which like the effects of the Coronacrisis was simply the result of a flood of money.
To imagine what uncontrolled printing of money by central banks can lead to, we can take a recent case from this century (2007–2009), when the inflation rate in Zimbabwe reached 231,000,000% and the government of the country decided to use the American dollar instead. Before that, Zimbabwe issued a banknote for 100 trillion Zimbabwean dollars. The banknote itself looks like a meme to residents of countries with moderate inflation, but to the people of Zimbabwe it represents a real tragedy.
X11 warns that it is too late to fight inflation. The genie is already out of the bottle and attempts to control it will not help. The crisis in the fiat system will deepen. Real inflation in various commodity groups over the last two years is much higher than the Fed’s numbers, at nearly 100%. And this is just the beginning, especially given intensifying geopolitical conflicts and rising energy prices.
In this situation, investors have few safe havens. To keep money in dollars or other currencies in such a situation is unwise and it is better to invest in reliable digital assets, such as bitcoin. And this, too, should be done in a new way, because the traditional banks and brokers are no longer working with the CIS countries.
That’s what solutions like the decentralized hedge fund X11 Finance, an innovative service for the post-fiat era, are for.
