The dynamics of money creation and destruction play a pivotal role in the economy.
When a loan is granted, new money is injected into circulation, stimulating economic activity. This expansion of the money supply can fuel investments, consumption, and growth.
On the flip side, when loans are repaid, money is effectively removed from circulation, acting as a mechanism to control inflation and maintain monetary stability.
This balance between creation and destruction helps regulate the overall money supply, influencing the health and functioning of the economy.
USA Government borrowing action is a de facto money creation QE even though the #FED is maintaining interest higher for longer.
The United States became the de facto central bank to the world through the dollar exchange standard, which was anchored to the gold standard until 1971. After World War II, the Bretton Woods Agreement established the U.S. dollar as the primary global reserve currency. Other countries pegged their currencies to the dollar, and the dollar, in turn, was convertible to gold at a fixed rate.
This system provided stability and confidence in international trade, with the U.S. effectively acting as the world's central banker. However, as the U.S. faced economic challenges and increasing trade deficits, maintaining the gold peg became unsustainable. In 1971, President Nixon abandoned the gold standard, severing the link between the dollar and gold.
After this, the U.S. continued to play a central role in the global economy, but the international monetary system shifted towards a more flexible exchange rate regime. The U.S. dollar retained its status as the primary reserve currency, relying on the strength and stability of the U.S. economy, further solidifying the country's position as a key player in global finance.
#Bitcoin, despite being in its infancy, aligns with the proverb "never underestimate the day of small beginnings." The cryptocurrency has demonstrated significant growth and resilience since its inception. Just as small seeds can lead to mighty trees, #Bitcoin's early stages laid the foundation for a transformative financial asset. The proverb underscores the potential for substantial developments from humble origins, encouraging a cautious yet optimistic perspective on Bitcoin's future trajectory.
Investors not entirely committed to Bitcoin may exhibit greater bullishness as they recognize that, over time, the cryptocurrency's share in their portfolio can naturally increase. This diversified approach allows them to benefit from Bitcoin's potential upside without the excessive risk of an all-in commitment. The gradual growth of Bitcoin's proportion in their portfolio, accompanied by strategic allocation adjustments, provides a balanced and potentially less volatile investment strategy, fostering a more optimistic outlook.
nostr:npub1a2cww4kn9wqte4ry70vyfwqyqvpswksna27rtxd8vty6c74era8sdcw83a 🤓
During a temporary #Bitcoin bull run, increased market prices may temporarily boost profitability for miners using various energy sources. However, over multiple bull/bear cycles, the long-term trend highlights the necessity for miners to rely on the cheapest electricity. Establishing agreements with grids, co-locating with energy producers, and leveraging geographically stranded off-grid resources become essential strategies. These approaches help miners navigate the cyclical nature of the market and maintain profitability consistently.
#BitcoinMining is highly commoditized because miners primarily compete based on the cost of electricity. To remain solvent, miners seek the cheapest energy sources, often utilizing stranded or wasted energy. This commoditization ensures that profitability hinges on efficient resource allocation rather than proprietary technologies, emphasizing the importance of low-cost electricity in sustaining operations.
Governments are not direct producers of goods or services; rather, they acquire funds through various means to finance their activities. Here's the case for why governments are perceived to generate nothing but obtain funds through taxing, borrowing, or printing:
#Taxation: Governments collect revenue by imposing taxes on individuals, businesses, and other entities. Taxes serve as a primary source of income to fund public services, infrastructure, and various government functions.
#Borrowing: Governments often borrow money by issuing bonds or taking loans. This debt allows them to finance projects, cover budget deficits, or respond to economic challenges. Repayment typically involves using future tax revenue.
#Money Printing (Monetary Policy): Central banks, often influenced by government fiscal policies, have the authority to print money. While this can provide a short-term solution, excessive money supply can lead to inflation, reducing the currency's value over time.
While these mechanisms fund government activities, it's important to note that governments play a crucial role in providing public goods, enforcing laws, and maintaining infrastructure. At least they should…the challenge lies in balancing financial management and managing human corruption to ensure sustainability and avoid adverse economic consequences.
The idea that #everythingTendsTowardsItsMarginalCostOfProduction implies deflationary forces, allowing central banks to expand the money supply without immediate collapse.
However, it's crucial to recognize that economic growth cannot be sustained indefinitely. While deflationary pressures may enable controlled expansion, the manipulation of the money supply has limits. Central banks must carefully navigate the complexities, as excessive money creation can lead to inflation, asset bubbles, and other challenges. Balancing economic growth with sustainable monetary policies becomes paramount to avoid long-term instability and the adverse effects of prolonged manipulation.
The argument against central banks causing inflation through manipulation highlights the potential drawbacks of attempting to fine-tune economic factors.
Friedrich Hayek's analogy of assembling a dynamic puzzle from an airplane underscores the complexity of the economy.
Central banks, by manipulating the cost and supply of money, aim to control inflation, but this interventionist approach can create unintended consequences, such as recessions.
The inherent challenge lies in the dynamic and intricate nature of economic systems, emphasizing the potential risks and inefficiencies associated with central bank interventions.
Advocates for a more hands-off approach argue for allowing free market forces to play a larger role in shaping economic outcomes.
Supporting the free market dynamics of supply and demand, exemplified by #Bitcoin, emphasizes the principles of transparency, fairness, and independence from centralized control. #Bitcoin's decentralized nature, driven by a blockchain ledger, ensures that no single entity controls the money supply or can manipulate transactions. This empowers individuals, promotes a level playing field, and aligns with the principles of a free market, where value is determined by genuine market forces rather than artificial interventions. Embracing Bitcoin illustrates a commitment to a financial system that operates with minimal interference, fostering trust and resilience.
Asking who controls the ledger highlights the essence of decentralized money like #Bitcoin. In traditional financial systems, centralized entities control ledgers, which can be prone to manipulation, censorship, and single points of failure. #Bitcoin's decentralized ledger, the blockchain, is maintained by a distributed network of nodes, ensuring transparency, immutability, and resistance to censorship. This decentralization fosters trust, security, and resilience, making Bitcoin a promising candidate for the future of money.
MicroStrategy Acquired 850 Bitcoin For $37.2 Million In January 💸
According to a post by MicroStrategy Chairman Michael Saylor, the company purchased another 850 BTC for $37.2 million in January. Notably, this brings the company’s total BTC balance to 190,000 BTC (worth $8.1 billion). Saylor also added that he believes that the next 15 years will be a “regulated, institutional, high growth period for Bitcoin, very different from the last 15 years.”
https://www.theblock.co/post/276343/microstrategy-acquired-850-bitcoin-for-37-2-million-in-january
By #CoinBureauInsider
Before Bitcoin, the traditional financial system relied on centralized authorities to mitigate friction. Centralization offered efficiency but came with drawbacks like single points of failure, censorship, and limited access. Bitcoin, as a decentralized system, emerged to address these issues, providing a trustless and inclusive alternative where individuals have control over their assets without relying on intermediaries.
Thanks for noticing I’m writing on both platforms some times same content different format 🤓
Imagine that you have been saving your hard-earned dollars for years, slowly building your portfolio. You have invested in stocks, bonds, and real estate. You feel confident in your financial future since you have built a diversified investment portfolio. However, you hear news that the government has decided to print more money to fund its budget deficits.
As the new dollars enter the system, the value of existing dollars begins to decrease drastically. The prices of goods and services start to increase, which affects those who have saved their money or live paycheck to paycheck the most. Suddenly, what you can buy with the same amount of money is less than before. The riches are getting richer because their wealth is mostly comprised of assets, which automatically go up in value when inflation occurs.
Inflation acts as a tax on the poor that benefits the rich. The poor tend to have most of their wealth tied up in cash and debt, which loses value over time due to inflation. In contrast, the rich tend to hold a large portion of assets that appreciate in value as inflation takes effect, such as real estate, precious metals, and stocks and bonds.
To guard against the impact of inflation, it is essential to have a diversified investment portfolio where the assets make up a significant proportion.
In conclusion, inflation is a silent and insidious tax on the poor, but if you build a diversified portfolio with assets that appreciate with inflation, you can protect yourself from its effects. So, think about your money and investment choices carefully, and allocate your portfolio wisely to endure the test of inflation.
Banning #Bitcoin solely due to its use in illicit activities would be analogous to banning other widely used tools and currencies, like banks, USD, euros, real estate, knives, or ropes, just because they can also be misused is simply stupid. It's more effective to address illegal activities through targeted regulations and law enforcement rather than banning entire technologies or assets.
People hate loosing more than they like winning 🥇. If you don’t learn how to lose you will never win, fear of losing will prevent you from winning.
#read #understandBitcoin
#LiquidityCrisis
When governments increase borrowing, they tap into the available pool of funds, creating a demand for cash. Simultaneously, if the Federal Reserve (FED) tightens monetary policy, it means they are reducing the money supply by raising interest rates or implementing other measures. This tightening action aims to control inflation but can exacerbate a liquidity crisis.
The government's heightened demand for cash, combined with reduced liquidity from the FED's tightening, creates a squeeze in available funds. This can lead to higher borrowing costs for both the government and businesses, potentially triggering a liquidity crisis. The delicate balance between government borrowing and central bank policy becomes crucial in maintaining a stable and well-functioning financial system.
The delicate dance 💃
Governments recognize that excessive economic stimulation can lead to inflationary pressures. When an economy is flooded with too much money, the increased demand for goods and services can outpace their supply, causing prices to rise. This inflation erodes the purchasing power of a currency. To maintain a stable and balanced economy, governments must carefully manage stimulus measures to avoid overstimulation, which could contribute to currency devaluation and other negative economic consequences. Balancing economic growth with inflationary concerns is a delicate task for policymakers.
But printing always win, sadly is inevitable due to human nature…