Bitcoin: The End of Money as We Know It
We spend much of our lives chasing money to make a living and accomplish our dreams, but at the same time, it can be an instrument of destruction because it drives many to steal, lie, cheat, and even murder. It’s definitely true that money is a catalyst for the best and worst human endeavors.
There are some who want to get rid of it– burn all the money and replace it with digital currency. Bitcoin was invented in secret and then given as a gift to the world because it breaks every government’s grip on the money supply. It’s both a miracle worker and a wrecking ball.
Currency allows us to express transactional value between people. Early in history, humans learned how to trade outside their tribes and in so doing created commodity money. What made commodity money special is that it had to be scarce, recognizable, divisible, fungible, and portable. Eventually, coins were introduced and they worked as long as people trusted that the king or emperor wasn’t cheating on the metal content. At the same time, it meant that an authority controlled the supply. Then came paper money, which first started out as IOUs for when people needed to trade with merchants in other countries. The paper meant that the coins were there to back it up.
Then more and more private paper money printed by merchants and bankers began to circulate. This rivaled the crown’s coins and the power to control and issue money began slipping away from the rulers.
For centuries European countries focused on waging war on each other to rule the world and governments wanted to finance those wars. They then came up with the idea of government bonds and so sovereign debt and deficit spending were born. For instance, in 1694 the Bank of England was established to fund a war against France.
The story of money includes the story of wars.
The value of cash is slowly withering away, though. The US dollar is now worth about $0.04 and that is a direct result of government control. The same banks that caused the recent financial crisis were given the power to create money.
Ever heard of fractional reserve banking? It explains a lot. Find out more now.