I’m pretty sure it was 1971, but it could have been 1972. Either way, it was in kindergarten, and I was five years old. Our teachers had established a plan to encourage us children to have good manners. They had hung a big board on the wall, with all our names written on it. If you are good, kind, helpful, or polite, they draw a black dot next to your name. Wrong, and they gave you a red one. It was about following the rules of the school for the children, and the sheer transparency of it encouraged many of us to try our best.
At one point, an additional prize was introduced for the best behavior: a small piece of cloth. According to the team, this was more valuable than the top ranking on the black dotted line. And it was tangible. You can prove you’re elite, even in the sandbox.
After that, a business plan started among us children. For cloth, you can take a bucket of filter sand. For two, you can get candy. Suddenly, we can exchange the work (sand sifting) with tokens or sweets.
Then one day, a new teacher arrived. For whatever reason, he generously distributed the scraps of cloth. They just changed the rules governing their distribution. Suddenly, everyone had it, and you had to spend four on a piece of candy instead of two. Some children started complaining. The cloth he had so hard to find was now scarce, and he wanted more.
As you might expect, fabric scraps were given more and more freely. Before long, everyone could take as much as they wanted. In the end, he was lying all over the place. They were worthless. No one wanted them anymore. You can’t trade anything with them. And so, when I was only five years old, I experienced real hyperinflation.
What does this have to do with Bitcoin?
In kindergarten, the rules were simply changed. The new teacher wanted to be nice, we kids complained, and suddenly many scraps of cloth were handed out.
Bitcoin rules cannot be changed.
It is a completely different story with our fiat currency. They also have rules. The problem is that no one can make sure that the rules are followed. Here’s an example: The European Central Bank is not allowed to finance governments forever by buying bonds, yet it does so, shamelessly and without anyone doing – or being able to do – anything about it. And who would intervene?
Here is another example. The Maastricht Treaty’s Stability and Growth Pact stated that the budget deficits of the EU member states cannot exceed 3% of their GDP, although the official limits were built. (five times). According to the Maastricht Treaty, there are clear penalties for countries that fail to comply with deficit limits. But not once was such a punishment given. No attempt was made at all.
This may be politically expedient and logical for any reason, but it shows how difficult it is for us to follow the rules. It’s like New Year’s resolutions that we make with great conviction, but often don’t stick for long. The result is what matters. The money goes up and, after a while, it becomes worthless. The US dollar has lost 97% of its value over the past century. The British pound, which once stood for the pound of silver, has met the same fate. All because new dollars, euros, or pounds have been created, or to put it another way, they have been printed.
The result is the same: when the scraps of cloth are worthless, everyone who handles them loses their wealth.
This cannot happen with Bitcoin. Its rules are fixed, and no one controls the system and cannot change the rules.
Find out more in Bitcoin: The Real Money!
This story is just the beginning. Take a deep dive into how inflation costs your money, your savings, and your time Bitcoin: The Real Money and Alex von Frankenberg, Ph.D. This paper is available now.
