Hey Jessconomists
I'm a techy by nature and I knew a teeny bit about money. Still, not much to be a savvy investor, I saved up, bought stocks, took out unit trusts and other investment vehicles and you know worked to towards accumulating wealthy by selling my labour and investing and saving. It was a simple existence, and I didn't think much of it, then all of that changed the day I discovered Bitcoin, I made some quick gains, and I was hooked.
I needed to know more and my journey into understanding more about Bitcoin lead me down a rabbit hole I was not ready for and one that I am still falling to this day, this blog is often me thinking out loud trying to make sense of all this.
Money used to mean paper and coins in my mind, with a little interest attached to it, but it has become so much more.
Money and currency are different
The first lesson I needed to learn was the difference between money and currency. Money is something that holds value over time, a safe place to store money to be used later for productive actions, saving your excess purchasing power. Currency is a method of trade; it is used to exchange goods and services and is a transaction layer but does not store value. Living in a world of currency for so long has had us conflating the two.
The emergence of currency in the modern from has also lead to several new ways of measuring value with currency and so far, I've learned of five of them.
Image source: - iaspaper.net
Fiat currency from a central bank
The one we know and live and kill one another over is central bank government currency; it is the one we use every day, and we've become used to it as an idea. Cash or rather physical cash has dried up over the years, and no currency keeps more than 5% of physical cash in circulation these days, most of it is digital representations held in banks.
Bank deposits
Bank deposits are the most significant form of money creation in the world due to "fractional reserve banking" I put this in quotations because it started like that,. Still, banks have since moved to well keeping no reserves and dancing around the fractions to become money printers essentially.
When you deposit money into a bank account, this is essentially an unsecured loan you give the bank. The bank then uses that to create currency in forms of a credit to a 3rd party. If I have a $100 in my account and the fractional reserve is 10% the bank is allowed to create $90 in loans and then charge interest on that.
This process is repeated a million times over and creates more currency than we care to think about
Quantitative easing
As you can tell from my previous description of bank deposits that most of this is built on a house of cards and the premise that you will work and deploy your future income to pay back the money that was created, to make it real. When this is no longer possible at a rate that will bring down the entire system, central banks will step in with a tool called quantitative easing.
They mainly take all the debt from banks and corporations and put it under their balance sheet at face value and give banks and corporations the cash equivalent to go out and spend.
They permanently transfer the debt to themselves by printing funny money and injecting it into the financial system.
Stable coins
This is a form of representative money; it has no value; it only represents value stored by a 3rd party or system. A stable coin can be backed by fiat, precious metals like gold or silver or a basket of assets, debt or even a percentage of the value of a network, like we see with MakerDAI and other algorithmic stable coins.
Bitcoin
The hardest money ever created, it's the first cryptocurrency, and it stands head and shoulders apart from any other altcoin, which is inherently more of a utility or a digital form of stock or ownership in a network.
Bitcoin has a fixed supply and can only be created through mining; it's also got adjusted inflation and has a predictable and sound monetary policy.
Have your say
What do you good people of HIVE think? Which form of money would you like best or trust most?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
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