The global financial system is failing, but the good news is that there is a clear path to understanding the role of money in society, the flaws in the current model and what the most solid monetary revolution is.
What is Money?
Money has three main functions that make it essential for the economy and commerce:
Means of exchange
Facilitates the exchange of goods and services, eliminating the need for barter (direct exchange of items).
Example: You use money to buy bread, rather than trying to exchange something like a chair for bread.
Account unit
Allows you to measure and compare the economic value of different goods and services in a standardized way.
Example: A car costs $50,000, and a bicycle costs $1,000. Money serves as a basis for comparing values.
Store of value
Preserves purchasing power over time, allowing you to save wealth today for future use.
Example: You save $100 today hoping that it will still have enough value to buy something relevant tomorrow.
Throughout history, we have seen different forms of money attempt to serve these functions: from gold to today's fiat system. However, modern money, especially that based on fiat currencies like the real, is increasingly failing to preserve value and guarantee stability.
The Flaws of Modern Money
The book, Broken Money, details the problems of the global financial system, many of which are even more intense. See how these flaws manifest themselves here:
Inflation and Money Printing
Inflation is a historical problem, eroding the population's purchasing power.
This is because governments can print money without limits to finance spending.
Post-pandemic inflation, caused by massive money printing, is a perfect example of this.
This practice is amplified by the increase in public debt, which forces the Central Bank to resort to very high interest rates to contain inflation – at the expense of the real economy.
Result: Money loses value faster than the population can save or invest.
Systemic Inequality
In the current system, those who have access to large capital, banks and global investments gain more, while the common population suffers:
Monetary policies favor banks and large investors.
The middle and lower classes lose even more purchasing power with inflation and indirect taxes.
And then you may be wondering: Wouldn't it be easier to lower the interest rate? The answer, unfortunately, is not that simple.
Reducing the interest rate "at the stroke of a pen" could cause more harm than good. This compromises the credibility of the Central Bank, drives away foreign investors and increases the risk of uncontrolled inflation, as it stimulates excessive consumption and credit. Furthermore, this practice can generate economic bubbles, further devaluation of the real, capital flight and irresponsible debt on the part of companies and consumers, creating a cycle of economic instability.
All this is not a system error, but an inevitable consequence of a concentrated and centralized model.
Hyperinflation and Loss of Confidence
Countries facing political and economic crises, such as Argentina and Venezuela, completely lose confidence in fiat money. In Brazil, was experienced something similar in the 1980s and 1990s.
The memory of hyperinflation still haunts Brazilians, and the recent devaluation of the real against the dollar rekindles this fear.
Centralization and Control of Money
The book highlights the excessive power that governments and banks have over money. This is evident with:
Blocking of bank accounts in debt situations or legal disputes.
Excessive monitoring of financial transactions.
The lack of privacy in modern digital financial systems, such as Pix (not to mention the future Drex), which are convenient, but extremely centralized and controllable.
What is the Solution?
A viable alternative to the failed, centralized system is Bitcoin, which solves the structural problems of fiat money by introducing a form of currency that is:
Decentralized
Nobody controls Bitcoin. It cannot be censored, confiscated or manipulated by governments or central banks.
For Brazilians who live with economic instability, Bitcoin offers financial autonomy.
Scarce and Predictable
Unlike the real or the dollar, Bitcoin has a fixed supply of 21 million units. This creates protection against runaway inflation.
While the real lost more than 40% of value against the dollar in the last decade, Bitcoin, as "digital gold", preserves and multiplies wealth exponentially, if you know how to act at the right moments in the cycle.
Crisis Resilient
Bitcoin is antifragile, that is, it grows in the face of crises. Countries with fragile economies, such as Turkey, are already seeing their citizens adopting Bitcoin as a store of value.
In Brazil, during periods of crisis, we see greater interest in Bitcoin as a hedge against uncertainty.
Countries like the USA, Russia and Japan are already entering the accumulation race, as they understand that this is the future of money.
Accessible and Fair
Anyone with internet access can use Bitcoin, without discrimination or the need for a bank. In countries where, for example, women are prohibited from having bank accounts (such as Afghanistan and Saudi Arabia), Bitcoin plays a role in financial freedom. In Venezuela, where hyperinflation destroyed purchasing power, it is used to preserve value and carry out daily transactions. For Syrian and Ukrainian refugees, Bitcoin allows them to safely carry assets when crossing borders, even without access to banks.
For the 34 million unbanked Brazilians, it represents a real solution for financial inclusion.
In addition to Bitcoin, Lyn Alden also explores how emerging technologies such as stablecoins and smart contracts are complementing the decentralized finance ecosystem.
Stablecoins like USDT and USDC can offer stability in transactions, especially in countries with fragile currencies.
Ethereum and smart contracts are creating new alternative financial systems, with direct access to loans, insurance and other services.
However, it is necessary to be alert to the danger of CBDCs (Central Bank Digital Currencies), which expand government control over money and reinforce the problems of the current fiat system.
