LETTER #24: IT'S COLLAPSING SINCE 1971.
The inflation you see today is the result of decades long manipulation of money.
For those who don’t know, the dollar - before 1971 - used to be backed by gold and all other currencies used to be backed by the dollar at a fixed rate.
This means that America couldn’t print more dollars than the gold reserves they had and other nations had to keep the dollar reserves to back their currency. The problem was that other nations had to trust America that it won’t print more dollars than the gold reserves they had.
That trust began to erode as America decided to fund the war in Vietnam and Korea in the second half of the 20th century.
All the countries whose currency was backed by the dollar began to worry and started to convert their dollar reserves into gold. America due to the funding of war had printed a lot more dollars than the gold they had in their reserves. Therefore, it was impossible to convert all the dollars in existence into gold.
On 15th August 1971, them-US president Nixon appeared on the national TV and declared, “I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets.” America basically betrayed all the nations which trusted him with their gold.
Then began the era of fiat money. A money that is backed by…… nothing.
It gave governments the power to print as much of their currency as they want without worrying about the gold or any other asset reserves. The mainstream narrative back then was that it will benefit everyone.
The point they were missing was that printing money has consequences and they are much worse than anyone can possibly imagine. Printing money out of thin air that isn’t backed by anything benefits only those who print it ( we call them central bankers and the gov. officials ) at the expense of those who use it ( citizens like you and me ).
Printing money comes with a cost and that cost is inflation. Printing leads to inflation, which leads to loss of trust in currency, which leads to the ultimate collapse of that currency. I am pretty sure that you have heard your grandparents/parents say that back then inflation used not be as big of an issue as it is today.
And they are right. Here’s the cost of living in 1971:
Today, if I am not wrong, $25,000 only makes about the down payment of a house. That’s how badly the value of currencies around the world is collapsing.
The US government alone printed 40% of the entire dollars in existence during the past two years. This may not sound real, but it is.
All the gov. around the world printed ton of money during the past two years and the average citizen is paying the price for it today. You simply can’t print trillions of dollars, keep interest rates at zero, and expect no inflation in return.
Rising cost of everything is an inevitable result of decades long monetary printing. Every politician who has the power to print money, does so. In case of America, Bush did it, Obama did it, Trump did it, and now Biden is doing it. But saying it’s the fault of the current government is not a sensible thing.
Changing the governments in control can never fix the problem of inflation as long as we keep using the same currency as today because the new government will do the exact same things the previous one did…… which is printing more money.
“What’s the solution?”, you ask.
The only solution is to use the money that no one can print. Yes, it’s as simple as it sounds.
What comes to your mind?
Gold?
Unfortunately, No. Because given enough time and energy, gold can be mined upto infinity.
Bitcoin is the only money in the history of mankind that no one can print more of. It’s prefectly scarce money. Capped at 21 million. No one can print more than this amount.
FINAL THOUGHT….
Don’t accept everyhting the media tells you as truth. Be a critical thinker.