The Great Monetary Reset: Economic Snake Oil is Bitcoins Hidden Catalyst
Quantitative easing (QE ) is the terminology used when a central bank purchases predetermined quantities of government bonds. This unorthodox monetary policy is used when inflation is low and common policy has become useless. Central banks implement quantitative easing by dropping interest rates and purchasing a definitive amount of bonds and other assets from commercial banks and other institutions. Theoretically, the revenue generated from the sold assets is used for lending, and when mixed with low interest rates, encourages commercial and personal borrowing, thus stimulating the economy by producing more jobs and opportunities.
Wealth Inequality and the Truth Behind QE
Sounds all in well, doesn’t it? not so fast. The quantitative easing process is a major contributor to wealth inequality and the reason for this is quite simple. Regular every-day people didn’t own massive portfolios or have most of their wealth in hedge funds, regular people store their assets in the form of fiat currency, usually in a bank. Majority of the time, the wealthy make up the demographic who hold financial assets, and when the money supply increased, the exchange rate of the dollar was weaker in comparison to things like real-estate and stocks. For example, say you’re at an auction and someone in the crowd is artificially driving the price higher, this is the same concept, but through inflation.
Since the economic crisis about a decade ago, the Federal Reserve has printed trillions of dollars in a fruitless attempt to produce a “wealth” effect on the economy. During this period, everything appeared to be going extremely well, including job creation, unemployment falling, and the stock market reaching new highs, but this was all an illusion.
Economic Smoke Screen
After the Great Recession, and under the Obama administration, the US recruited around 1.5 million bartenders and waiting staff, while losing an equal number of high-paying production jobs due to QE, globalisation and exporting services. Europe followed suit when the European central bank (ECB) implemented its own form of QE. During this time, economic growth appeared to be booming in both America and Europe, but that was simply “on paper” so to say. The jobs added were low paying and without benefits, which lead to people drowning in debt and late on bills because they couldn’t keep up with the forever inflating price of assets.
Many economists believe failed monetary policies have damaged global financial infrastructures beyond repair. Dutch National Bank has even mentioned of the possibility of a monetary “reset” and needing gold reserves to repair the system. When looking at the big picture, fiat currency is a relatively new concept which hasn't had the best track record. The average life expectancy of fiat currencies is only 27 years, with the U.S. Dollar and British Pound surviving the longest. This has lead to many people storing their wealth in gold, and for the first time in history, bitcoin as well.
The gold standard originated from the general acceptance of precious commodities as currency. Typically, the most valuable commodity is chosen as a type of base in which a note or certificate is pegged to. For well over 5,000 years, gold’s mixture of scarcity, elegance, and luster has caused the metal to become the most popular form of currency.
Like gold, Bitcoin cannot be manufactured at random and both commodities require a “mining” process which limits output and drastically reduces the chances of hyperinflation. Because of this, in a sense, many consider bitcoin a variant similar to digital gold, with some even going as far as claiming bitcoin is superior to the real thing.
No matter where your opinion lies, its inevitable that the financial infrastructure will collapse, and statistics can easily prove this. Whether its in 3 years or in 300 years, money, as we know it, wont be around in the future. Many believe block-chain technology, bitcoin, and smart contracts are the future of finance, and rightfully so. Crypto is increasingly becoming socially acceptable, and people are starting to open up to the idea of digital assets. We have also seen a surge in institutional interest within the last couple years, which is a sign that the party is far from over.
Bitcoin has evolved, becoming a household name and purchasing the digital asset hasn't ever been easier. With the publicity bitcoin received in the 2017 bull-run, we can only imagine the attention it will garner if it makes another historic climb. This recognition, along with quantitative easing, virtually non-existent interest rates, and a doomed financial infrastructure, may pave the way for unimaginable new highs for the digital gold.