When did you take your last classes in economics or in currency theory? Let’s review the basics.
At times in the past, tulips were used as currency, sea shells were used, rocks with holes bored into them were used.
All are fiat. All are only worth what people make them worth.
Gold is a currency that also has value as a precious mineral used in jewelry and as an industrial material. But its value as a currency is also fiat. That value is only determined by what people say it is worth.
A dollar is no different from those tulips, sea shells, rocks with holes and gold. As with any currency, more in circulation causes inflation, while less in circulation causes deflation.
Bartering goods for some other goods is the only type of transaction that does not rely on some kind of currency, some type of fiat (e.g., give me 10 eggs for this shovel). And bartering is not practical for 320 million Americans who are purchasing billions of products and services.
How is more or less currency placed into circulation?
1. by printing more or less currency than the amount of currency that is removed from circulation.
2. by increasing or decreasing the amount of debt in the economy.
Electronic currency (cryptocurrency) is no different. Just as those high-tech investors were wrong in 2000 that the U.S. economy was entering a new paradigm where traditional financial measurements no longer mattered, those economists who claim that electronic currency is different from dollars are also wrong. If you make transactions electronically from your bank account, then you already use electronic currency. Changing to bitcoin or some other electronic currency does not change the fact that it is fiat. It only changes the type of currency.
How did Biden and the Democrats cause the high inflation?
1. They added a huge increase of currency into the economy by spending tons more money than they received and then increasing the debt so much. Increased debt (commercial and/or federal) increases the total money supply. Inflation.
2. They caused less supply of oil vs. demand, which increased its price and the price of every product that uses oil for manufacturing (i.e. fertilizer, plastics) and/or transportation. Inflation.
Changing to some new type of currency/fiat will not eradicate either of those problems.
Many modern non-economists like to sing the praises of block chain as the new paradigm for why electronic currencies like bitcoin are so important. But block chain is a technology, not a currency. Those techies are making the same mistake they made in 2000 about that new dot-com paradigm. As seen with FTX and the Twitter revelations, bad guys will figure out how to abuse/exploit any technologies.
The Fed was left with no choice in how to reduce inflation to its 2% target except to increase the price for debt (interest rates) so that less debt by consumers would cause less currency and then less consumption of products. Less consumption leads to recession, with fewer employees needed. Kiplinger (conservative) and Bloomberg (liberal) both predict that GDP will be stagnant in 2023 and that the unemployment rate will be 6 to 7% in 2024, up from 3.7% now. Recession.
All this because Biden/Democrats increased the amount of money in the economy with massive debt spending and implemented impediments to oil production.
Who benefit from inflation? Rich people who own assets (including stocks, oil reserves, real estate) that appreciate in values with inflation. These people who benefit include large donors to political campaigns.
Who suffer from inflation? Average working Americans who lost wage purchasing power.
Sea shells, tulips, rocks with holes, dollars, gold, bitcoin, yuan, rubles, euros. They are all just currency. Fiat.
So which politicians have the discipline/fortitude to only spend as much currency as the amount that is received from government tax revenue? Which ones? Certainly not Biden. Not Democrats. Not RINOs. Not establishment politicians. Not those politicians who just approved a budget with 7,500 earmarks. Not those politicians who are supposed to be guiding us into 2023. So which ones?
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This article was originally published by the WND News Center.
