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#Oil #NatGas #Bitcoin #Gold #SP500 3 Month Chart
How Money is Created
#Money creation is a complex process that involves several entities, including central banks, commercial banks, and the public. The modern banking system operates on the principle of fractional-reserve banking, where banks are required to keep only a fraction of their deposits on hand, lending out the remainder. This system is instrumental in money creation, influencing economies worldwide.
The Role of Central Banks
#Centralbanks, like the Federal Reserve in the U.S., play a crucial role in money creation. They control monetary policy and can influence the amount of money in circulation. One method they use is open market operations, where they buy or sell government securities. For example, when a central bank buys securities, it pays with bank reserves, effectively creating money that the sellers deposit in their bank accounts, increasing the overall money supply.
Central banks also set reserve requirements, dictating the proportion of deposits that commercial banks must hold in reserve, either in their vaults or with the central bank. Lower reserve requirements allow banks to loan out more money, increasing the money supply, and vice versa.
Another tool is the interest rate at which banks borrow money from the central bank. Lower interest rates encourage banks to borrow and lend more, which increases the money supply. Conversely, higher rates slow down borrowing and reduce the money supply.
Fractional-Reserve Banking
Commercial banks also contribute to money creation through fractional-reserve banking. When a bank receives a deposit, it's required to keep a fraction of it on hand, lending out the rest. The lent money eventually gets deposited back into the banking system, and a portion is lent out again, creating a multiplier effect.
For example, if the reserve requirement is 10%, a $100 deposit can theoretically create up to $1,000 in new money ($100 initial deposit + $90 new loan + $81 second-generation loan, and so on). This process is inherently inflationary, as it increases the money supply.
However, this system also poses risks, as banks may not have enough reserves to cover unexpected large withdrawals, potentially leading to bank runs.
#DigitalMoney and Credit Creation
In today's digital economy, most money exists not as cash, but as digital entries in bank accounts. When banks issue loans, they create money by adding the loan amount to the borrower's account. This money, created out of thin air, is backed not by physical reserves, but by the bank's belief in the borrower's ability to repay the loan with interest.
This system means that most of the money in circulation today was created through debt. This relationship between money and debt is fundamental to understanding modern banking and its implications on global economies and individual lives.
Austrian Economics View on Money Creation
#AustrianEconomics criticizes fractional-reserve banking and the central banking system, arguing that they lead to artificial #credit expansion, #unsustainable economic booms, and devastating busts. This school of thought advocates for a return to #soundmoney, like the gold standard, and banking practices that restrict credit creation to actual savings, thereby preventing the boom-bust cycle.
Bitcoin's Proposition
The Bitcoin Maxi's argue that Bitcoin, like gold, can act as sound money. Its supply isn't controlled by any central authority, and its issuance is predetermined and transparent, mimicking gold's natural mining constraints. Bitcoin, therefore, offers an alternative to the current credit-based system, potentially mitigating the economic cycles that characterize modern economies.
Conclusion
Understanding money creation is crucial in grasping the web that is the global economies, the nature of booms and busts, and the value proposition of alternatives like Bitcoin. The process is not just a financial mechanism but a societal tool with direct implications on wealth distribution, societal structure, and individual life.
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#Oil #NatGas #Bitcoin #Gold #SP500 1 Month Chart
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#CL #NatGas #Bitcoin #Gold #SP500 12Mo Chart
What is the Gold Standard?
The #goldstandard is a #monetarysystem where a country's currency or paper money has a value directly linked to gold. With the gold standard, individuals could exchange their paper money for a specified amount of gold. Countries that use the gold standard set a fixed price for gold, allowing for the free exchange of gold for money.
Historical Context
The #gold standard has deep historical roots. For centuries, gold's intrinsic qualities—such as its durability, rarity, and universal appeal—made it a reliable #mediumofexchange and a #storeofvalue. As early as the Byzantine Empire, gold was a standard for international transactions, with the solidus coin dominating trade.
In the 19th century, the gold standard became more formalized. The United Kingdom, one of the world's major economic powers, adopted the gold standard in 1821, with the United States following suit in 1873. This period, known as the classical gold standard, lasted until World War I and was marked by global economic stability, albeit punctuated by regular financial panics and crises.
How the Gold Standard Worked
Under the gold standard, countries agreed to convert paper money into a fixed amount of gold. A government had to hold significant gold reserves to meet conversion demands. This system aimed to stabilize currency values and international exchange rates, facilitate trade, and prevent governments from printing excessive money.
However, the gold standard had its limitations. It could create deflationary pressures: as economies grew, the money supply could not always grow correspondingly because of the finite amount of gold. This limitation often led to deflation, where prices dropped as money became more valuable.
The Gold Standard's Demise
The gold standard began to unravel during World War I, as countries printed more money to fund their war efforts, leading to inflation. Post-war, countries attempted to return to the gold standard, but the economic toll of the war and the Great Depression complicated these efforts.
The final vestiges of the gold standard system were abandoned in 1971 when President Nixon ended the U.S. dollar's convertibility into gold, marking the transition to fiat monetary systems.
The Gold Standard and Austrian #Economics
#Austrianeconomics, a school of economic thought that emphasizes the spontaneous organizing power of the price mechanism, is generally supportive of the gold standard. This perspective argues that the gold standard limits the government's ability to inflate the money supply, thereby preventing the distortionary effects of inflation on the price system.
Friedrich Hayek, a prominent Austrian economist, criticized central banking's discretionary policies and advocated for competition in currencies. He believed that such competition could potentially reintroduce a form of the gold standard, as markets might favor currencies backed by gold or other valuable assets.
The Gold Standard and Bitcoin
#TheBitcoinStandard posits Bitcoin as a digital counterpart to the gold standard. Like gold, Bitcoin has a finite supply, with only 21 million Bitcoins to ever be mined. This characteristic aims to make Bitcoin immune to the inflationary pressures that fiat currencies are subject to.
The book argues that just as the gold standard provided an economic basis for prosperity and stability before the world wars, Bitcoin could be the basis for a new era of economic stability and fairness in the digital age. It highlights how Bitcoin shares key characteristics with gold that make it suitable as a monetary standard—scarcity, divisibility, portability, verifiability, and recognizability.
Conclusion
The gold standard has had a profound impact on economic policies, theories, and the global financial system. Its principles continue to influence contemporary economic thought, particularly in discussions around #Bitcoin and stable coins. Understanding the gold standard is crucial for anyone delving into the complexities of monetary policy, the history of international finance, and the emerging digital economy.
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#CL #NatGas #Bitcoin #Gold #SP500 6Mo Chart
The Prequel to Why Bitcoin?
Prologue
In the dynamic confluence of technology, finance, and energy, understanding the nuances of money—its history, mechanisms, and potential for future transformation—is not just a scholarly pursuit but a strategic imperative. As we stand at an inflection point, with digital currencies like Bitcoin poised to disrupt our traditional financial paradigms, delving into the historical milestones, such as the pivotal year of 1971, the principles behind the gold standard, and the intricate mechanisms of money creation, debt, and credit, is critical. This exploration is not just about understanding these concepts in isolation but about envisioning how they could intersect with cutting-edge technology to redefine our world. This guide is an expedition into these complex territories, drawing insights from the past and present to navigate the uncharted future.
Summary
Our expedition into the financial realms underscores the intricate dance of economic forces and human ambition. The year 1971 was more than a historical marker; it was the genesis of a new monetary era that set the stage for today's economic theatrics. The gold standard, now a relic of the past, continues to hold lessons for the future, especially in discussions around financial stability and autonomy.
Money creation, a privilege of the banking elite, is a process shrouded in complexity and controversy, a magic trick with profound implications. Meanwhile, debt and credit are the lifeblood of our economy, sustaining growth yet also planting seeds for potential turmoil. These forces, seemingly mundane, hold the power to ignite economic booms or trigger devastating busts.
From the lens of Austrian economics, our current financial architecture is a precarious one, teetering on the brink, sustained by policies that inflate bubbles destined to burst. Herein lies the argument for a return to sound money principles, a sentiment echoing through the chambers of gold standard advocates and cryptocurrency enthusiasts alike.
Bitcoin emerges as a beacon in this discourse, a digital defiance against traditional monetary systems. Its immutable supply and decentralized nature present a stark contrast to fiat currencies, offering a glimpse into a future where money is not just a tool for transaction but an instrument of true economic empowerment.
As we venture further into this digital era, the lessons from our monetary past are not mere echoes but guiding voices as we forge our path. Whether we're transitioning into a world where cryptocurrencies reign supreme or one where they exist alongside fiat currencies in a complex financial tapestry, our understanding of these historical and economic nuances will be the compass that guides our journey.
1. What happened in 1971?
In 1971, a critical event known as the "Nixon Shock" occurred. U.S. President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, effectively ending the Bretton Woods system. This system was a global agreement where most countries pegged their currencies to the U.S. dollar, which was convertible to gold.
Why did this happen? The U.S. was facing high inflation and economic challenges, partly due to the costs of the Vietnam War. By ending the gold standard, the government hoped to stabilize the economy. However, this decision had global repercussions. It led to the modern system of floating exchange rates, where the value of a currency is determined by the forex market.
The end of the gold standard meant that governments could print more money without needing a gold reserve to back it. While this increased financial flexibility, it also introduced risks like higher inflation and economic instability. This event is a pivotal point in understanding Bitcoin, which seeks to offer an alternative to traditional fiat currencies by limiting its supply, akin to gold.
2. What is the gold standard?
The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. With the gold standard, individuals could exchange their paper money for a specified amount of gold. Countries that use the gold standard set a fixed price for gold, allowing for the free exchange of gold for money.
The gold standard is significant because it provides a fixed asset to back a currency, ensuring governments don't print excessive amounts of money. However, it can also lead to economic problems. If a country doesn't have enough gold, it might not have enough money to support its economic needs. The gold standard can also tie the hands of policymakers, limiting their ability to respond to economic crises.
3. How is money created?
In modern economies, money is created through a process called fractional-reserve banking. Here's how it works: you deposit your money in a bank. The bank then loans out most of this money to others. When those loans are deposited into other banks, a portion is loaned out again. Through this process, the banking system creates more money than the original amount deposited.
Central banks also create money by buying assets like government bonds. This process is called quantitative easing (QE). They do this to influence economic activity, like encouraging spending and investment when the economy is slow.
4. What is debt?
Debt is money borrowed by one party from another. Many entities use debt as a method of making large purchases they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.
Debt can be used effectively to improve one's financial position or business operations. However, if not managed carefully, debt can lead to financial ruin and severe economic consequences on a larger scale.
5. What is credit?
Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date, generally with interest. Credit also refers to the creditworthiness or credit history of an individual or company..
For individuals and companies, credit is vital for significant purchases and investments. It's a fundamental component of a modern economy, allowing for transactions, investments, and risk-taking that drive economic growth.
6. What happened in Venezuela?
The story of the wealthiest country in a continent, destroyed by Fiat gone to the extreme end of a socio economic system.
This series will explore the topics above like a study guide accessible to those with a curious mind.
Been a while how are you #Nostr
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See you all tonight! #FortBitcoin
#[0]
Good morning everyone. We are having a #NorthTexas #Bitcoin #MiningSummit next week at #TCU and would love to have y’all join us.
https://www.eventbrite.com/e/north-texas-mining-summit-tickets-615267109487
"North Texas Mining Summit" on Eventbrite!
Date: Wed, Apr 19 • 8:30 AM CDT
Location: Neeley School of Business
The #FortBitcoin meetup is the perfect place to connect with other Bitcoin enthusiasts while enjoying some #Texas-style hospitality. Bring your appetite for tacos and Bitcoin knowledge! #FortWorth
#bitcoinerevents
Checkout the 19th Fort Bitcoin:
Checkout this Meetup with Fort Bitcoin: https://meetu.ps/e/M1CVF/TS8gK/i
Join us at Lot 12 Rooftop Bar for the #FortWorth Bitcoin meetup on the 19th after the @TCU event. We'll be discussing the latest trends, networking with fellow Bitcoiners, and enjoying drinks. See you there! #FortBitcoin #TCUevent #BitcoinNetworking
#BitcoinerEvents
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#LastLook at #Energy
$WTI is flat +0.44 0.5% $82.60/bbl
$Brent is flat +0.10 0.1% $86.19/bbl
$NatGas is up +0.11 5.5% $2.12/MMBtu
$BTC $30,301.16 +19.9 0.1%
His podcast with Dan Carlin was 🔥
#Bitcoin
Base Layer
#Bitcoin in the lead in 2023
