Why will the fiat currency bubble pop?

in #money7 years ago (edited)

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Your true wealth is time and freedom.
Money is a token to hold these values so they can be exchanged.
The commonly used currencies today called fiat currencies are not based on commodities like gold or silver, but on the word of a central bank.
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Commodity currencies based on gold or silver are either coins made of these materials or tokens that are backed up by reserves that can be exchanged for these materials in the bank that issued the currency.
Gold and Silver can not be created and because of limited supply and high demand it is prone to high volatility.
The coins made of gold a few years ago could be worth 3 times more today.
Because of this banks started to use a different model.
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The first fiat currencies were created by kings and emperors and can be traced back to ancient China. They were backed up by the word of the currency issuer.
Today, fiat currencies are only worth something because of governments and central banks.
They are based on debts as they are a value to pay for debts.
Central banks and federal reserves constantly create new fiat currencies by making loans and issuing IOU tokens (I owe you).
When you deposit 100$ to the bank, certain percent of your funds will be loaned out and replaced by these IOU-s.
When the loaned money is spent and deposited back into a bank in a different account, they will again take a percentage that is replaced by IOU-s and this is lent again.
In this process they are creating new money. They are increasing the debt and printing currencies to try to compensate and pay for the debt.

Currencies are only worth a price people give them. And so increased amounts of a currency will cause the prices of commodities they can be spent on to increase. This leads to hyper inflation.

Cryptocurrencies on the other hand are different. They are not based on central banks, they are distributed and so they do not have a central point of failure. They are not created to compensate for debt and are owned by individuals.
These currencies can be closer to commodities, more like gold or silver as they can have a limited supply and cannot be infinitely printed.
The value of currencies are always determined by the value people give them.
Cryptocurrencies are backed up by trust in an immutable distributed ledger, which is a lot more safe than putting trust in a government or central bank, as it is more transparent, incorruptible, reliable and efficient compared to government backed currencies.
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For example, with bitcoins the amount of coins coming into existence are not based on the amount of debt, but on the work the miners give to create new blocks on the blockchain and so it is creating new money purely because it exists and not to compensate for debt created by loans.
Systems based on increasing the supply of debt will always fail. Many people call crypto currencies a bubble, which might be right, but it is a distributed bubble that need many needles to pop it while fiat needs only one and that needle is Debt.
The balloon is tied to the needle.
The only thing it needs is the wind to blow.

Give me an upvote or resteem if you like :)

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Perhaps because of steem.

I hope so. Fiat is designed to collapse. Im sure Steem can help to move the air, to blow that balloon toward the needle. :)

Yeah I think we have all the building blocks to do it. Hopefully we can finally start really getting it done. I'll probably start pumping/promoting it tonight.

Interesting topic. Good luck!

You got a 6.83% upvote from @redlambo courtesy of @freaknature! Make sure to use tag #redlambo to be considered for the curation post!