Bitcoin will be what triggers rampant hyperinflation
Within the last year, the US Federal Reserve has printed more US Dollars than they had printed for the last two centuries. With such drastic influxes of currency, one would surely expect the US, and even the entire world to be on the verge of hyperinflation.
But where are the $10,000 loaves of bread? I was promised people hauling wheelbarrows of money to the supermarket to buy groceries! Instead, all I’ve gotten is a stock graph that won’t go down, but not much else has actually changed…
How is it possible that we have thus far avoided general Hyperinflation; and not just general Hyperinflation, but much inflation at all?
Avoiding Hyperinflation
A large part of why the US avoids hyperinflation is three-fold:
The first reason is that the US Dollar is the only currency you can use to purchase certain things that have definitive value: Oil is one, and ownership of the largest and most successful companies on the planet is another. These two ‘assets’ create a consistent global demand for US Dollars to counter-act all of this money printing we’ve been doing.
The second reason is that, unlike Zimbabwe, Hungary or Post-War Germany, the US is not exactly printing and donating money into its system. It is in fact lending it back into its system at interest. This creates a situation in the future where that money will (eventually) have to be paid back (and destroyed), and at that time the money supply in the system will shrink counter-acting inflation. This promise of a future day when all loaned out printed money will eventually be drained out of the system does afford reassurance against hyperinflation.
The final reason is that despite its overwhelming debt. The government of the United States of America is still a trusted borrower. In fact, despite paying out almost nothing in yield, treasury bonds are still bought and consumed without hesitation.
So that’s that. No Hyperinflation. Right…?
A New Paradigm
In 2008, Satoshi created something that has never before existed in human history. It is possibly the latest non-incremental technological jump that we as a species have experienced. (AI research being an incremental jump that’s been getting better over the last half-century).
With Bitcoin, Satoshi provided a way for people to finally own their own wealth efficiently without requiring the permission of a government, a king, or even a tribe chieftain.
If you require permission to own wealth, was it ever really YOUR wealth?
And thus, Bitcoin represents the only ‘real’ wealth that can be truly and efficiently owned by someone.
So what does this have to do with Inflation?
Over the last few months, we’ve seen Bitcoin’s price explode higher than anyone could have imagined a mere year ago. The price as of writing this is $56,000 USD.
We’re starting to see industry and institutional adoption, and perhaps most telling of all; Companies are starting to accept Bitcoin for major purchases.
The companies beginning to accept Bitcoin as payment are just a forward vanguard at the moment.
What exactly happens if their ‘expedition’ into Cryptocurrency succeeds beyond their wildest dreams?
What happens when Morgan Stanely (that has begun to allow exposure to Bitcoin to their clients) then go on to report those clients now lead the pack in terms of investor returns?
What happens when Tesla posts that selling Cars for Bitcoin netted them an insane profit as Bitcoin’s price rose from $56,000 per coin to over $1,000,000?
It is reasonable to expect that most, if not all companies will begin to just accept but PREFER Bitcoin as payment for their goods and services.
The Fiat Strikes Back
Given a hypothetical world in which Bitcoin and other Cryptocurrencies are the “preferred” method of payment. What’s a Central Banker to do?
After all, If the merchants and retailers of a country prefer to do business in a currency that isn’t controlled by its country… Then what power is really left with the government of that country?
“I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls the British money supply controls the British Empire, and I control the British money supply.”
So what happens with that money supply becomes a matter of distributed ownership?
At some point, we have to expect that the purchasing of goods using Bitcoin itself is legislated against.
The Return Of the Hyperinflation
This is how general hyperinflation will break into mainstream society in the US. The merchants, being unable to legally accept bitcoin any further will simply peg their prices against Bitcoin.
Instead of a loaf of bread being $2.50 USD, It will be roughly 0.00004 BTC.
BTC has a tendency to grow dramatically in price due to the limited supply of coins.
Human productivity will slowly inch forward. People will build bigger factories, producing more cars, more apples, more entertainment, and more exciting experiences… and all of this will compete for the same limited supply of bitcoins.
So what happens to the price of bread when BTC hits $1,000,000 a coin? If the bread merchant was pegging the price of his bread to BTC, then that bread is now priced at $40 USD per loaf… and it will only get higher from there. The only force offsetting this is how much bread we can produce.
