Is the $100 Bill in your Wallet, Money, or Something that has No Value?

The first official currency is thought to have been created in 600 B.C. by King Alyattes of Lydia, now part of Turkey. However, the present system of currency has a vague future. Let’s try and find out why?

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Coinmonks

8 min readSep 19, 2021

Take a $10 bill out of your wallet, observe it closely. Look at the fine fibers it's made up of; it can go through dust, water; maybe it’s tear-resistant for certain countries. But it's still a paper.

The fact I’m calling a $100 bill, currency, and not money has a reason behind it. On June 5, 1973, as the USA was running out of gold reserves, President Richard Nixon announced that the dollar would no longer be pegged to gold.

Meaning, the one-dollar bill that you own wouldn’t have a value attached to it, and the government would be able to print as much currency as they want to. So from the term value, I mean it’ll just be a piece of paper that you’d be using to pay for goods and services, and nothing more. You’d be using it because your government says so.

Now the question that comes here is, what would you, as an individual, do when provided a machine to print as much currency as you’d like to and keep printing. You’d print more. Hence, what is your government doing? And would they be ready to give up this power to print more currency?

I guess no.

What Happens when the Government Controls the Money?

During WW2, i.e., from 1939 to 1945, Germans were finding and killing all the Jews present in the country. At that time, the German banks were working, and everyone who had an asset used to keep them in banks for extra security.

Jews During WWII (Source: AnneFrank.Org)

As the war broke out and Hitler started cracking down on Jews, they had to run. But where could they go? They were stripped of their right to property. The banks were under Hitler, so that they couldn’t withdraw their lives savings.

Therefore, they couldn’t run away since everything they owned was in Germany, and to run away, you need to pay someone, which the German had already confiscated. So in the end, they didn’t have anywhere else to go.

What is Money?

Now according to google, money is a medium of exchange in the form of COINS & BANKNOTES. But didn’t we just say that the currency provided by a government has no value until the government says so? Do you think it’s not how that works? Ever heard of something called demonetization?

What does the term money mean in the present era?

As of now, our entire financial ecosystem is built around the debt/ credit model run by the banks. So basically, it's the banks that run the world. What banks actually do is, through credit, they expand the supply of money.

Suppose you have $1 M in a bank, and I have $0. Now, I need $500,000 for my start-up. The bank will provide me a loan, and now, I can pay for goods and services worth $500,000 (while paying around 10–14% interest to the bank), and you can write checks worth $1 M. So the total supply of money is $1.5 M.

Sounds interesting, right? But what if something goes wrong? What if the lenders want their money back and the borrowers aren’t able to return it at the same pace? What happens then?

Remember the economic disaster of 2008? That’s what happens when the system fails.

2008 Financial Crisis (Source: The balance)

The aftermath of failure

We did talk earlier that the government can print more money, as much as they want to. Hence to tackle the failure of banks, the government keeps printing more money, such that the condition remains stable.

What happens then? The good old INFLATION.

Rich already have very little exposure to FIAT, and the middle/ poor class suffers the most and then sees their lives savings being drained out.

Therefore, we cannot entirely rely on something that can cost people’s life savings. Currency only works as a tool for us to pay an individual/ entity for goods & services, which that individual then passes down to pay for something else. And until the point we, the people, are using it to exchange these goods and services, it will be in existence.

So the question comes, should we be looking for an alternative to FIAT? I guess yes, so let’s see what things we should look for in an alternative.

Why would you want a transition to something else?

Since FIAT is an inflationary currency, and Gold is too hard to transport. We need something better, something that is able to fit in the below points (including many others):

Something that retains its value over time (FIAT is inflationary).
A single entity does not have control over it (Governments control FIAT).
It is limited in supply, so we cannot produce more of it (we can print as much currency as possible).
Something that’s easy to store, carry, and widely acceptable (The cost of transporting hard metal like gold, silver, etc., is too much).
Nobody must have the power to take it away from you (The government can seize all your assets, including the currency in your bank accounts. Further, anyone can put a gun on your head and take away your gold holdings).
If it’s digital, it should be secure enough so nobody can access it except you.

There might definitely be many other points, but moving on the outskirts, this is the basic idea.

What are the alternatives to FIAT?

We can rule gold out as it’s too hard to carry from one place to another. Further, once its reserves are near to end, humans tend to find more and hence keep the supply constant.

Digital FIAT is out of the list, too, as every FIAT currency has a serial number attached to it and is unique; however, your $1 in digital currency is exactly the same as mine; hence it is worse than FIAT.

Bitcoin might be the answer; its supply is limited to 21 million. Easy to store and carry. It is secured by cryptography, and hence nobody can take it away from you. You can memorize the seed phrase of your wallet, and nobody can steal it from you, even with a gun. No government can control the code in your head.

What do Cryptocurrencies change?

We are observing a revolution; some call it a technological revolution, I prefer it calling a financial revolution. Blockchain technology (the tech behind crypto assets) is still in its infancy, hence with time, its growing at an unprecedented rate. Even while I’m typing and you’re reading this story, things are changing in the crypto ecosystem. The thing that matters is whether we’ll be able to stay updated with the changing world.

Coming back to our topic, governments of various countries control FIAT. Further, all the banks around the globe work on the same principle, which makes it easier for a monopoly. I’m not saying that we are not democratic, but I might be intending to say that financially, we are not.

Bitcoin offers you this financial independence; not a single entity owns/ governs it. No authority can govern its fate; they can surely ban it, but they cannot control it. It exists for the people, and the crowd controls it.

Is it too volatile? Yes. Will it stay that way?

Most of the people who despise bitcoin come forward with a claim that it is too volatile to be accepted as legal tender for the exchange of goods or services. The thing they forget is, bitcoin has been here for just more than a decade, whereas the concept of banks was first introduced in the 14th century.

Banca Monte Dei Paschi di Siena is the first bank established in the Tuscan city of Siena in 1472. We have come a long way since then; banks had approximately 600 years to develop. At the same time, we’re judging a new financial revolution in its life of just 10 years.

So in the end, what’s going to happen?

Bitcoin is here to stay; it has been in the process of making for a long time, long before 2008, when Satoshi Nakamoto first released its whitepaper. We are in the middle of a financial revolution, and I believe the journey forward is coming with a lot of ups and downs. However, in the end, the crowd will always choose something that gives them more control over their assets. Finally, the reason all the governments and banks are scared of bitcoin, as it takes away their monopoly, i.e., the currency.

Thanks for reading; if you stayed till here and did like the article, show some love by clapping. Moreover, if you didn’t like any part and think otherwise, please do drop by my mailbox, we can definitely have a talk.

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