Read Aloud the Text Content

This audio was created by Woord's Text to Speech service by content creators from all around the world.

Text Content or SSML code:

After the Roman Empire's precious metal monetary network crumbled to price inflation, the coinage system would be reformed into a system known as tetrarchy that gave Roman officials the ability to tax and institute a standardized value per coin without modifying the weight or constituents of the coin itself. This system would go on to operate for much of medieval and pre-modern Europe before paper money tied to commodities became prevalent. Metallic Standard. If we traverse the Atlantic ocean to North America, A bimetallic standard relying primarily on silver (silver was more abundant at the time) would be adopted by the United States around 1792 after becoming an independent sovereign nation in 1776 and creating the first national paper currency in 1789. Given paper currency has distinct advantages when it comes to facilitating economic activity compared to coins/bars—easier to transport, easier to count, and easier to validate—the bimetallic standard would be the start of a monetary network where paper currency, the United States Dollar (USD) for example, would be pegged to silver and/or gold reserves. In other words, a gold standard would convert fiat money into gold on demand, which would restrict the amount of fiat money in circulation to a multiple of the central banks’ gold reserves. More specifically, if the ratio was set to 15:1, then there could only be $15 for every one ounce of gold in reserves. In addition to the minimum ratio, international trade would be settled in gold and free imports/exports of gold would be permitted. It wasn’t until around 1900 that a majority of major nations including the United States would move to the gold standard. Beginning in 1913, the United States ratified the Federal Reserve Act of 1913 creating a central bank to manage the nation's money supply, and in 1934 the federal reserve (Fed) used this authority to revalue gold from $20.67/oz to $35/oz in face off with the effects of the great depression. As any person or institution could convert existing gold holdings into more U.S dollars, the dollar immediately shed its value. That would be like a car dealership selling a car at $20,000 and offering to buy it back for $35,000. Fiat Standard. Frustrated over the state of the global monetary system tied to gold, powerful western nations agreed to convene on the issue in 1944 resulting in the construction of the Bretton Woods Agreement, which would be the framework for the world’s currency markets until 1971 and established the international monetary fund (IMF). Within the Bretton Woods system, all national currencies were valued in relation to the U.S. dollar becoming the dominant reserve currency; the U.S. dollar would be tied to gold ensuring that currency could be converted to gold at $35 an ounce. 1971 would mark the year when the U.S. money supply would no longer be tied to any commodity and the exclusive operation of the fiat standard as the U.S. monetary system would begin. President Richard Nixon would remove the gold standard because of concerns that inflation would cause a gold run, liquidating the supply of gold and creating another economic crisis. The significant increase in global dollar supply was a result of military expenditures, foreign aid, and unbalanced payments. With the fiat system, U.S. citizens must trust in the “full faith and credit” of the U.S. government to pay back its debts and not hyperinflate the currency supply. Unfortunately, United States debt and inflation levels began to burgeon following the 2008 financial crisis and the 2020 pandemic, placing the U.S. monetary system in a precarious state. This is evidenced by the U.S. debt being 60% of the total U.S. GDP in 2008 and an unsustainable 135% in 2021. With annual federal spending almost double the amount of annual federal tax revenues, the U.S. government is forced to raise the debt limit and issue new debt in the form of treasuries and bonds—paying old debt with new debt. Exacerbating the issue, the financing of U.S. government programs is being propped up by the Fed as external entities, such as individuals, corporations, and foreign governments, are not buying as much U.S. debt. The Fed’s balance sheet demonstrates this by doubling long-term U.S. treasuries and bonds held from $2 trillion in 2019 to $5.4 trillion in September 2021. The treasuries held by the Fed are being bought using newly “printed” USD that the Fed, itself, generated. To give a sense of how much money has been injected into the economy, the M2 money supply (the sum of currency held by the public including savings) has nearly tripled since 2008 from $7.5 trillion to $20 Trillion. By increasing the money supply and delaying any default by the U.S. Government, purchasing power of the U.S. dollar plummeted 85% since 1971 and 25% since 2008, leaving the most impoverished Americans—those who do not own real assets like equities, real estate, or bitcoin that appreciate against the dollar—with less even during a time when scientific advances have created new technologies that result in economic efficiencies. The alternative to the status quo would be to cut spending towards Medicare, Social Security, and defense spending in order to appropriate more tax revenue towards debt. The tradeoff here is many citizens may not receive social security payments, healthcare operations will not be covered for many elderly, and the country will be more vulnerable to attacks from external actors. Of course, a default by the U.S. would mean the same outcomes as above accompanied with a warlike scenario with countries that own our debt, a stock market collapse, and possible bankruptcy for individual and institutional holders of U.S. government debt. The U.S. government will eventually roll out a central bank digital currency (CBDC), and as a citizen, you will have to choose between a centralized monetary network that will fail if the government fails or a decentralized monetary network in Bitcoin that cannot fail. Regardless, the state of the federal government’s finances will remain doomed without a tenable solution. There is another solution that doesn’t involve cutting spending though. Bitcoin Standard. The Fed should buy bitcoin with those overheated money printers and transition to a bitcoin standard that makes bitcoin the national reserve asset; they should act on this before other governments do to starve off an inevitable economic collapse. With this valuable asset backing government operations, the U.S. might just be able to pay down its debt and avoid a fight for survival as the most powerful and wealthiest nation on earth. Bitcoin should be broken into two components: the network and the token. The Bitcoin network is a vibrant ecosystem of programmers, validators, miners, investors, transactors, merchants, private companies, and public companies that work to colonize cyberspace. The network operates according to several network laws, like physical laws that govern our universe, known as the Bitcoin protocols. These protocols establish an effective base layer that functions as the foundation for the evolving network. Participants have unfettered freedom to build up the infrastructure around this final settlement layer and create untold value that can reach unimaginable heights. The other component, the bitcoin token, is digital property native to the Bitcoin network. In 2014, for purposes of the United States, the Internal Revenue Service (IRS) classified bitcoin as “property” allowing for taxes to be collected after the sale of bitcoin for cash, the exchange of bitcoin for a different cryptocurrency or digital asset, or the use of bitcoin in a transaction. Given the nature of a bitcoin token, it will coexist alongside fiat or any future Central Bank Digital Currency (CBDC). Bitcoin is a better store of wealth than fiat, real estate, equities, or bonds in that it is not at risk of inflation, property taxes, finding a buyer, maintenance costs, or concerns of impairment. Reaching a valuation of $1 trillion faster than any company ever did previously is a strong indicator of its ability to store wealth. The difference between life or death for many around the world, a central authority cannot slow or prevent a bitcoin transaction nor can wealth stored on the Bitcoin network be confiscated. If you live somewhere without property rights or have a local currency that loses significant value over time, you now have secured property to protect your wealth. Every wealthy person as time goes by will want to buy and own digital property, storing for generations to give to their kids’ kids. We even see large public companies spearheading this by replacing large cash positions with bitcoin. With the U.S. regulatory environment recognizing Bitcoin as digital property, some bold CEOs—such as Michael Saylor, Elon Musk, and Jack Dorsey—have taken the initiative to add the asset to their balance sheet. MicroStrategy Incorporated, led by Michael Saylor, has made various bulk purchases of bitcoin, accumulating a total of 105,085 as of June 2021. The investment strategy is to replace a depreciating asset like cash, as well as, raise long-term debt at favorable interest rates to maximize bitcoin purchases with the expectation the value of Bitcoin will rise in the future as adoption persists and U.S. monetary policy continues to inflate the money supply.