Sound Money - The most important project of mankind
Reading time: 15 minutes, 12/18/2021, block time 714675
The awareness of responsibility
If you want to understand what money is, think about the following sentence:
"Remember that everything you buy, you buy not with money you've earned, but with life time you've sold."
Let's start from the beginning. To get you started in the world of sound money, I would like to ask you two questions:
What is money? What properties should money have?
Most of the population will not be able to give you a satisfactory answer to these questions. Therefore, let's take a brief overview. Money can be divided into three areas of application. Means of payment, store of value and unit of account. As a means of payment, our current money functions solely on the basis of trust. We perform work to get it and trust that we will receive a product or service in return. Money enables us to participate in an economic system as a medium of exchange. We are given the opportunity to trade.
Today we use unbacked paper money. It used to be different. Until 1971, the dollar was backed by gold. Every bill had the promise of being able to claim a certain amount of gold for it. Because gold is physically limited, the money supply could not be increased indefinitely. When the US government needed more and more money to finance wars and maintain broken systems, that promise ended. 1971 was a turning point in monetary history. The birth of today's unbacked paper money.
"The fundamental problem with conventional currency is all the trust that is needed to make it work. What we need is an electronic payment system based on cryptographic evidence rather than trust."
Let's move on to the next area of application, the function as a store of value. This is where the euro and dollar fail completely. Central banks create new money in unlimited quantities. The money supply is expanded non-stop. This flood of money is justified with the containment of ever new crises. Every company must be saved. Even those that have done badly or whose products are technologically obsolete. This is a disastrous intervention in the complex system of the market economy. After all, crises are there to make bad unproductive companies fail. Zombi firms waste important resources and labor that could be put to more productive use in innovative companies. Why is failure bad? Trial and error is an evolutionary process. Failure is the beginning of something new - a learning effect. This is how technological progress is made.
With interest-free newly created money, entire industries are subsidized that would have long since been eliminated under normal market conditions. Every euro that is newly created devalues the assets that people have in savings accounts or pension funds. A monetary system without interest is in the final stage of its destruction. Investments must have their price. An interest rate formed on the free market. When borrowing money is free, companies invest in unprofitable business models that ultimately waste resources and create misguided overconsumption.
When money loses its function as a store of value, this money is converted into other assets. A direct consequence of loose monetary policy is the sharp rise in prices of assets such as real estate, stocks, commodities, art or tangible assets. Most people are not aware of the great damage being done to our society when things like real estate are used as stores of value that actually serve a very different and much more important purpose. Housing is becoming more and more expensive and many families can no longer afford to finance a home of their own. In a healthy monetary system, housing costs would be much lower than they are today.
The problem of slow but steady inflation is accompanied by stagnating wages. Inflation-adjusted income has fallen permanently since 1971. In the past, an employee could feed an entire family. Today, that is no longer possible as a normal wage earner. Individuals have less and less monetary value at their disposal. This is a major problem for industry, whose products would become more and more expensive if they had not found a solution to this problem. A direct consequence of the devaluation of money can be observed in the food industry. The quality of our food is decreasing from year to year. The proportion of high-quality natural ingredients is being reduced more and more and replaced by chemical ingredients in processed products because they are simply becoming too expensive. In an environment of severe monetary devaluation, quality products cannot command a marketable price. The higher the inflation, the greater the pressure on the quality of our food. Since 1971, there has been a steady increase in obesity and disease in our society.
Inflation is a hidden tax
And the zero interest rate is now compounded by rising inflation. In earlier times, there were periods of 6% inflation. At that time we got 8% interest on a savings account. This resulted in a real interest rate of +2%. Today it is different. Central banks can no longer raise interest rates significantly because they would otherwise maneuver thousands of credit-financed companies into insolvency - a vicious circle. That is why today we suffer from negative real interest rates of 5-6%. Inflation is a hidden tax. The state benefits from it because its debts are devalued.
This is like a raid on society's middle class, which saves money and provides for old age. With such a high rate of monetary devaluation, savers lose a considerable part of their assets within a few years. This is tantamount to expropriation. Furthermore, it should be noted that inflation will be much higher for many people because their individual basket of goods is different from that of the official statisticians. So we see, Euro and Dollar are very badly suited for a permanent storage of value. Most people do not understand inflation. Inflation takes values away from many people and redistributes them to people with assets such as real estate, stocks and tangible assets.
The third area of application is the unit of account. Companies depend on being able to use a money with as stable a value as possible so that they can use it in their economic calculations. The longer this value remains stable, the better. If this unit of account changes rapidly, it is very bad for a company's chances of success. Constantly expanding the money supply is like a folding rule whose 2 meters are suddenly no longer 200cm but 220cm long. The next year it is 245cm long and the following year 270cm. What would a craftsman do whose unit of measurement is constantly changing? The world economy needs a stable unchanging denominator to measure values.
"When banks lend, it is a process of money creation. They don't own this money. They create it out of nothing."
Most people don't really understand the concept of banking. All banks are broke. Bank Santander, Deutsche Bank, Royal Bank of Scotland - they're all broke. And why are they broke? They're broke because we have a system called "fractional reserve banking," which means that banks can lend money that they don't really have. When you go to a bank to take a loan, that's a process of money creation. The bank does not own that money. It creates 99% of it out of thin air. This is a criminal scandal that has gone on for far too long.
Artificially increasing the money supply is the same as having a central scheduling authority increase the time allotment to 100 minutes per hour and 38 hours per day. You have to work more and more to get a constant monetary value. Remember that everything you buy is not bought with money you have earned, but with life time you have sold.
If we look at money in its most original function, we come to the following realization: money is a store of energy and time - our worked and lived time. Money is a claim. A claim on other people's time. Creating a claim on other people's energy and time out of nothing is ultimately slavery.
Back to a decentralized world
Another problem with the unlimited supply of money is centralization. Modernity is obsessed with comfort and security instead of freedom and discovery. The pursuit of deep and lasting meaning has been replaced by the constant pursuit of quick and superficial happiness. Sound Money is a rebellion against the most powerful bastion of socialism in the free world: central banking. In the past, our world was decentralized. There were small independent businesses everywhere. Today, there are only large corporations, which are gradually displacing the last small remnants of this old world. Without cheap credit money, large corporations like Amazon could never have come into being. All this has been brought about by the inflationary money system, not by capitalism.
"In the past, it took a large family to provide financial and social security. The state destroys human personal responsibility."
Social things must arise voluntarily. And it will arise when people have energy and time again. When they are sovereign individuals. The effects of an inflationary monetary system penetrate incredibly deep into our society. Think of our bloated social security systems that can only be maintained by printing money. It used to take a large family to provide financial and social security - a decentralized solution to problems. There was no need for the state to do this. The state destroys human personal responsibility. As a result, our society is having fewer and fewer children. Demographic change has become a huge problem. Its causes lie in the current monetary system, which is built on socialism instead of freedom. Sound money is the most important fundament of our society.
Sound money is deflationary
The world is in the midst of the 4th technological revolution. In the next 20 years, everything will be digitized. It is estimated that half of all jobs will be lost in the process. This is a humanitarian powder keg. Technological change has a deflationary effect on prices. That means products are becoming cheaper. For our economists, this is the worst case par excellence if we want to maintain perpetual growth. In our inflationary monetary system, everything is geared to counteracting the tendency of falling prices. As technological change accelerates, central banks must print more and more money to keep the economy going and prices rising.
But stop. Aren't falling prices desirable for us humans? If our cost of living goes down, we won't need the same income in the future as we do today. At some point, we would only need a half-day job to finance our lives. And this is exactly how the labor system should look after the digital revolution. If we want to prevent mass unemployment, we need to distribute the work processes that remain for people fairly across society.
"Isn't it a positive thing when prices go down and we as a society have to spend less than before? Isn't that precisely the goal of technological progress? To simplify the world."
The key to this working world lies in a deflationary monetary system. A money system that doesn't make the rich richer and richer, but serves the middle class worker because they have a value added income. A monetary system that rewards savers and punishes debtors. The state will also have to downsize greatly. It will have to limit itself to essentials such as infrastructure, homeland security and education, instead of penetrating the citizen with ever new levies that finance its sprawling interference in matters of the market economy. Centralized planned economies would be pushed back.
Isn't it positive when prices fall and we as a society have to spend less than before? Isn't that precisely the goal of technological progress? To simplify the world. At the moment, I rather have the feeling that we are making everything more and more complicated. Our goal should be to transition from a debt-based money system to a property-based money system. That's how we achieve sustainability, because the solution to the climate problem lies in our monetary system. Too much cheap money for too much consumption. Sound money changes human actions. Our time preference changes from short-term to long-term.
The current monetary system destroys the environment
Let's look at how interest-free credit money leads to resource waste and climate-damaging overconsumption. A good example of this is e-scooter sharing. Our big cities are packed with thousands of e-scooters. They are standing or lying around on every corner, damaged by vandalism or thrown into rivers. Because of their short lifespan, e-scooter rentals are not a profitable business. Many businesses are making losses or are on the verge of breaking even. In a sound monetary system with fair, market-formed interest rates, such business models would not exist. They would have no prospect of becoming profitable at some point in the distant future, because their profit would never exceed the cost of the money borrowed. E-scooter sharing is a symbol of unnecessary CO2 emissions, in the production of products that our world does not need. They are used mostly out of laziness and addiction to comfort. Is this what a sustainable society looks like?
"In a deflationary monetary system, products that are really needed are consumed. Consumption is more conscious. Without a deflationary money system, there can be no sustainable world."
Do we have to buy new cars every four years? Does every household really need two cars? Do we have to buy new clothes every year? Do we have to chase the latest trend to be hip? Do we need to own things twice and three times, in different colors, simply because it's cheap? Do our children really need this huge amounts of plastic toys? Do we need to buy a new smartphone, tablet, nodebook or TV every two years? Do we need to constantly gift ourselves with consumer goods, half of which will probably end up in landfills unused?
We are a consumption-driven society. All of these things would be questioned in a deflationary monetary system. Why should I spend my money when it is increasing in value. In a deflationary monetary system, products that are really needed are predominantly consumed. Consumption is more conscious. Ending overconsumption protects resources, the environment and the climate. Without a deflationary money system, there can be no sustainable world.
Sound money is based on mathematics instead of trust
Now let's move on to a new monetary system that will fundamentally change these things. I won't bore you with too much detail here. That would go beyond the scope. Therefore, I will limit myself to a few basic advantages. We are talking about the digital money Bitcoin.
Bitcoin is a peer to peer monetary system. Payments are sent, without needing a 3rd party, from one point to another. Within seconds, a payment can be sent to the other end of the world without a bank or PayPal as an intermediary party. The bitcoin network verifies the transactions. In our old money system, we have to trust. And that trust is abused.
For example, we trust that the value of money will remain stable. However, that is only the case when a thing is in limited supply. The scarcity of things creates much of the value. Of course, so does demand and the difficulty of creating it. But primarily it is scarcity that makes things valuable. Euros and dollars are constantly expanding in quantity. With bitcoin, there will only be 21 million of them. That's the amount of money programmed into the Bitcoin protocol that no central authority can ever expand. You won't change Bitcoin, but Bitcoin will change you. That is the great promise of Bitcoin. The number 21 is set in stone. Only two things are really scarce: time and Bitcoin.
"Bitcoin is a monetary system governed by rules instead of rulers. Bitcoin does not have a boss and also no government. There is no central power deciding anything."
Bitcoin is a monetary system governed by rules instead of rulers. Anyone can propose rule changes. Bitcoin is the same for everyone. The suggestions are then discussed by network participants and if a common consensus is reached, rule changes can be implemented in the Bitcoin software code. Bitcoin does not have a boss. Bitcoin also has no government. There is no central power deciding anything. Bitcoin is awakening the world from the nightmare of financial slavery and is a dream of freedom come true. Bitcoin eliminates this power peacefully, it eliminates the need for money creation in a non-violent way. The revolution behind Bitcoin does not seek to overthrow or attack the old system, but offers a better system with its innovative solutions. A changeable monetary system for the deflationary effect of the digital revolution through exponentially growing technology. Old narratives need to be broken down. We should finally allow technological evolution in our monetary system as well.
Bitcoin technology stores new transactions on a blockchain every 10 minutes. These blocks, which are strung together, have a serial number that represents a timestamp. Each new block is verified and checked for correctness by the nodes of the Bitcoin network. A node is a small computer, about 10 cm in size, on which all the data of the Bitcoin system is stored. This has the advantage of worldwide decentralized data storage. No central power can censor in the Bitcoin network. This network node verifies our transactions in the monetary system of the future. With Bitcoin, we don't need to trust any 3rd party. Bitcoin is absolutely forgery-proof. We know rather than believe, because every single transaction is stored on hundreds of thousands of computers, spread all over the world.
Bitcoin supports technological progress
So many great things are being developed in the Bitcoin space. Completely new payment systems such as streaming payments, which is only possible through very low transaction costs. Sats, the smallest units of Bitcoin, are settled every minute while they are being used. This is revolutionizing the monetization of digital content on the Internet. Let's think of subscription models for journalistic content. People who use it little subsidize people who use it a lot. As a result, most people don't use it at all. This technology will also find applications in industry. Rented machines will be able to charge for their operation at the same time. The model of monthly payments will disappear. This will eliminate very significant credit costs in the interim financing of production processes. In the future, you will only pay for the time actually used. Flat rates will disappear. Streaming micro payments are the basis for a future sharing economy. Bitcoin makes our world more efficient.
The technology behind Bitcoin consumes large amounts of electrical power. This is a good thing because this electricity consumption makes Bitcoin the most secure network in the world. This process allows people all over the world to monetize electricity - no matter where they are geographically. Bitcoin encourages the use of renewable energy sources, in part by using overproduced electricity that the consumer or the power grid does not currently need. A good example of this is wind turbines that are shut down in such situations. This procedure incurs high costs and leaves a lot of energy unused. Due to the sharp rise in electricity prices, many companies are faced with the decision to produce their own required electricity - for example, via a combined heat and power plant or a solar power system. A small Bitcoin data center can make in-house power generation profitable in many industrial application areas that were previously unprofitable and therefore not realized. The technology behind Bitcoin is causing our power grid to decentralize. Many medium-sized and also large industrial companies are starting to take an interest in this. This is what real energy transition looks like. The German platform Terahash enables companies to inform themselves about this topic and to network.
The separation of state and monetary system
Bitcoin also represents equal opportunity and fairness in the economic system. Our current system is distorted by interventionism, money distribution and subsidies by the state. There are hardly any free markets in today's economy. Large corporations get bigger and bigger because they have unlimited access to money. Medium-sized and small businesses do not have that. Thus, money and power become more and more centralized. Technological progress is inhibited.
Let's now take a brief look at the world outside the major industrialized nations. Another problem with today's monetary system is that more than 80% of people don't even have access to the banking system. They don't have a bank account and if they do, from abroad to their families back home, they often pay 20-30% transfer fees for a payment transaction. To use Bitcoin, all they need to do is download an app. A few minutes and you're ready to go. Through the Lightning network, which can be seen as another layer of Bitcoin, money can be sent within seconds without any fees. Bitcoin can even be sent via SMS using old Nokia cell phones. For people in Africa, this just changes everything. This thing is in the world and it's a powerful humanitarian tool.
"When the world discovers Bitcoin as an immutable unit of account for value, it will shock the international economic world to its fundamentals."
France is still engaged in monetary colonialism in Africa. The CFA franc is still the official currency in many countries of Central and West Africa and has been devalued repeatedly in the past. France has a right of first refusal on the products of these countries and pockets a not inconsiderable portion of their trade surpluses. Another example is the International Monetary Fund (IMF), whose task is to support third world countries through financial development aid. What comes out of this is exactly the opposite. For the IMF's dollar loans are tied to extremely perfidious conditions. These countries are forced to change their economic activities to products that the western world needs. Most of the time, these products are raw materials that are exported to producing countries for further processing. Sincere development aid would consist in helping these countries to produce their own products for the world market. But the IMF distributes the unbacked paper money to the poorest countries of the world and forces them to change their economy from food production to export production. The results of this is hunger and even more poverty. Our current credit money system systematically exploits Africa.
The separation of state and monetary system is inevitable, just as the separation of religion and state was. Independence and decentralization prevent abuse of power. Comparable to the separation of powers between the judiciary, the legislature and the executive. The history of many thousands of years has shown that the state is not able to resist a recurrent devaluation of money. In the Roman Empire, the amount of gold and silver in coins was constantly reduced. Economic problems that led to poverty among the population were combated with socialism and monetary expansion. This collectivist approach ultimately led to the collapse of the Roman Empire. An analogy to the money creation of today.
A generation that must take responsibility
With the technology that Bitcoin offers us, we have been given a powerful tool. It is now up to us to use this tool and make this place a better, more sustainable world. We need to realize this responsibility. Do you want to stand idly by while a tiny fraction of us humans destroy our world, or do you want to help create something new, something better, that will peacefully replace the old system? And now don't think you can't do anything about it. You have the choice which monetary system you want to use. Don't shirk your responsibility. It is our generation that has to carry this burden.
Our parents' generation could not change the existing monetary system. They simply did not have the necessary tools. With the invention of Bitcoin, this circumstance was fundamentally changed. Our generation now has the choice to use a better uncorruptible monetary system. This brings with it a great responsibility. We should now ensure that our society becomes aware of this responsibility. The state has turned us into irresponsible yes-men. It has deprived us of any responsibility as acting, free individuals.
How often do I hear the sentence: "There's nothing we can do about it. That is not true! Because there is an alternative to our current centralist system. The alternative is called Bitcoin. Bitcoin is the same for everyone. Bitcoin decentralizes. Bitcoin gives you back responsibility. Bitcoin gives our society the free choice to leave the path we are on. You can no longer hide behind politicians and claim you have nothing to do with it. Every shopping list, every choice of payment method and that money you use to save as a store of value is your ballot. Every single one of us is responsible for what is happening in the world right now. Because we participate in it. We consume this world. Finally face up to your responsibility.
"Our current monetary system also removes any responsibility from politics and the state. Unlimited money printing is the solution to all problems. Ailing systems are no longer reformed, but continued with fresh money. That is inconceivably irresponsible."
We enjoy the comfort and quality of life of today's world. We live like gods, like maggots in bacon. We take the path of least resistance. We don't want to leave our comfort zone. This change will not be easy. But we have to do it, because otherwise we will destroy this planet. Our society suffers from collective repression and amnesia. We don't want to see it, even though we know full well that it's there. We know what is happening out there, but we do nothing. Because we don't feel responsible. Don't pretend that this is none of your business.
Our current monetary system also removes any responsibility from politics and the state. Unlimited money printing is the solution to all problems. Broken systems are no longer reformed, but continued with fresh money. This is incredibly irresponsible. The very existence of bitcoin inevitably gives us back responsibility over these things. Because you have the choice to use a better monetary system. So the time for excuses is over. We have a responsibility to future generations to use a money system that is adapted to technological change, if it already exists. Can you still look your children in the eye without denying their future?
Start small by using Bitcoin to save. Bitcoin's immutable scarcity makes it an excellent long-term store of value. This is why Bitcoin is often considered part of retirement savings. Due to its large appreciation potential, even small amounts can grow to very large value in 20 years. Download a Bitcoin Lightning Wallet and get your first experience with how it feels to send Bitcoin to other people in seconds. It's all very simple. There are more and more stores or online stores that accept Bitcoin as a payment method.
The Bitcoin community has developed into an international freedom movement. We do a lot of education and outreach on economics, money, energy transition, philosophy, society, politics, science and history. When you engage with all the profound facets of Bitcoin, you embark on an intellectual journey. Many people walk this path together by organizing themselves into groups and meeting at monthly meetups. Here you have the opportunity to create great projects and actively participate in a free money system. I hope to have aroused your interest. Because you should know one thing: We Bitcoiners are becoming more and more. Be part of this new world and actively help to build a Bitcoin circular economy.
What problems does Bitcoin solve for you?
- Best store of value for retirement savings.
- Cash replacement through peer-to-peer payments in seconds.
- Self-determined privacy. From transparent to anonymous, everything is possible.
- Censorship resistant. No bank that refuses a transfer or blocks the account.
- Deflation instead of inflation. Rising value of money and falling prices.
- No account maintenance fees.
- Very low to no transaction costs.
- Saving instead of consumption. Lower time preference. Long-term instead of short-term.
- Personal responsibility is strengthened.
- Autonomous instead of dependent on service providers or platforms.
- Rule-based instead of arbitrary. No one can increase the money supply.
- Taking responsibility for a sustainable and efficient world.
- Supporting energy transition and climate protection.
- Establish a monetary system with decentralized power structures.
- Many stores offer an inflation discount for Bitcoin payments.
What is Bitcoin for me:
Today's system denies us our responsibility as a free individual. Bitcoin gives us back this responsibility. Bitcoin is a peaceful revolution.
Buy Bitcoin with Relai:
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Never leave your Bitcoin on the exchange where you bought it. Bitcoin means taking responsibility yourself. Buy a hardware wallet and send your Bitcoin to your own address. Only with this private key your Bitcoin really belong to you. Not your keys not your coins.