#109 The Great Race

Good Morning Everyone,

“Fiat money is a type of currency that is not backed by any commodity such as gold or silver, and typically declared by a decree from the government to be legal tender. Throughout history, fiat money was sometimes issued by local banks and other institutions. In modern times, fiat money is generally established by government regulation.”

- Wikipedia

The majority of people still do not understand why bitcoin is so important. Most people do not realise what is actually happening at the hand of central banks, and how fundamentally broken the monetary system really is. Most are unaware of how much power has been concentrated amongst a very tiny number of people, and at the expense of everyone else, as a result of the predatory fiat system.

Preston Pysh provided the best analogy i’ve heard to explain the nature of central banking in a conversation with Peter McCormack - which you can listen to here from the timestamped position. I highly recommend you take a listen. It’s explanations like these that should be explained to every child or teen.

He explains it through the lens of monopoly.

Imagine you have 2 monopoly game boards with 4 players at each and while one player is typically the banker, imagine there is a fifth person as the central bank adjusting the money supply as needed. So each time someone passes go and collects $200, the banker tops up the supply to maintain balance, as is the typical rules of the game.

In this scenario imagine that the players from either board can go and buy properties from the other board if they wish. So they could own the same property on each board if they wanted to.

Now imagine the following scenario where one of the central bankers whispers to the players on that board that instead of collecting $200 when they pass go, they will increase it say $700, and not to tell the players on the other board, thus increasing the money supply on that board significantly in comparison to the other.

Lets say that money supply increase is happening on board one. The players on board one begin to accumulate a lot more capital compared to those on board two. After a little while those from board one begin buying properties on board two. The players on board two begin to wonder what is going on. How is there so much currency flowing into our board from the players on board one? They begin to jerry that the players on board one must be cheating. This incentivises them to collude with their central bank as they realise it’s the only way they can compete. So the central banker on board two increases their amount to $1000 when they pass go.

Now imagine each board is a country. This very aptly frames where we’re at.

This is the dynamic we have with fiat money. This creates the situation where each central bank is essentially in a race against the others to increase the supply of their currency. It’s a race to debase. This is only possible in a fiat world, where there is nothing anchoring the supply to physical reality.

When you look at the insane balance sheet expansion of central banks, you can see this clearly playing out.

The following charts show the expansions of major central banks from 2003 to today. They’re displayed in their own respective currencies and then compared vs USD below.

US CENTRAL BANK BALANCE SHEET

$720B - $8.95T (8x increase)

EUROPEAN CENTRAL BANK BALANCE SHEET

$800B - $8.82T (9x increase)

CHINA CENTRAL BANK BALANCE SHEET

$5.16T - $38.55T (13x increase)

JAPAN CENTRAL BANK BALANCE SHEET

$1T - $5.62T. Peaked at $6.85T (5.5x increase)

COMBINED & ALL MEASURED IN USD

Fed: Blue / ECB: Yellow / BOJ: Orange / PBOC: Cyan

The last chart helps to provide a more apples to apples comparison by measuring the balance sheet expansions using USD and as you can see while in the short term most look to be attempting to normalise, the trend is very very clear.

This system is broken, and it is incentivising the parasitic class to do whatever it takes to maintain control, and to do so at the expense of the many.

Thankfully, bitcoin fixes this.

Reject the frame of central banks. The system does not exist to benefit you. Adopting a bitcoin standard is our way out of this mess, and while there will be volatility in the short term, in the long term bitcoin is the most sound and secure monetary network we’ve ever had.

Central banks have no chance competing against an open source, decentralized monetary network for the world. It’s just a matter of time.

Hope you all have a great day. I’ll talk to you tomorrow.

AK

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