Robert Kiyosaki, in his book “Fake: Fake Money, Fake Teachers, and Fake Assets,” talks about the problems that the current monetary system causes and how other alternatives such as Bitcoin allow people to have greater control of their assets. Robert Kiyosaki mentions that there are 3 types of money: Gold, which he considers as the “money of God” since its origin dates back thousands of years before man, then mentions that cryptocurrencies (of prestige) such as Bitcoin is the “People’s money” as it is backed by blockchain technology, which is not controlled by a company or government as well as being limited, and finally there is Fiat money, which is considered as “government money “Or” financial system “which is controlled by said bodies and can be created in an unlimited way.
How is FIAT money or government money created?
As we mentioned in previous articles, FIAT money is part of the current monetary system, which creates money in two ways: through open market operations and through commercial and central bank money. In the case of money issued by open market operations, the central bank authority must make the decision to “increase or decrease” the amount of money in the economy; usually, it is decided to “increase” the amount of money, since that this allows the government of the day to provide temporary welfare to the population, despite generating possible economic crises in the future.
After deciding to increase the money in the economy, the central bank decides to offer an amount of money through an auction; the central bank calls this auction to the commercial banks (which have accounts in the said bank) and informs of the amount of money that will be auctioned and the conditions of said auction.
In the case of money issued by commercial banks, the central bank circulates a certain amount of legal money in the form of notes and coins; the banking system (through commercial banks), when granting loans to users, makes that legal money multiply. It is important to note that all commercial banks have central bank money (since they have an account with the central bank), which can be loaned to other people, businesses, or companies, turning it into “commercial money.”
Although the support rate varies in each country, we can say that a commercial bank can lend approx on average with a dollar of “central bank” money up to $ 10 to other people, businesses, or companies (in some cases, it may be more), this “extra” money is called “business money.” Currently, a large percentage of that money (97%) constitutes the support of a country’s economy, while the remaining percentage (3%) comprises physical money.
Consequences of FIAT money
The problem is that this scheme is subject to the decisions of the current rulers or the International Monetary Fund (IMF). Every time money is created, the currency is devalued, and savers lose while debtors win; this system is based on an economy based on debt, which means that economic growth only occurs by creating more debt. This scheme is responsible for the different financial crises, such as the mortgage crisis that occurred in 2007 and then the global financial crisis that occurred in 2008; these crises resulted in the acceleration of inflation in many countries involved, decreasing the value of money in people’s hands, which inevitably impacted their savings and their purchasing power in general.
Bitcoin appears, people’s money
Faced with the financial crises mentioned and the different problems of the current system, several alternatives appear, among which Bitcoin stands out, a cryptocurrency created by Satoshi Nakamoto, which is based on blockchain technology, and does not depend on any bank or government, thus which gives users absolute control of their money, in this way Bitcoin becomes a mechanism to stop the voluntary inflation of fiat money or FIAT, which is controlled by banks. In the case of Bitcoin, its supply is far from being manipulated since its emission is set at 21 million BTC, which would end up being mined in the year 2140.
Unlike governments and central banks with Fiat money, no entity can issue more Bitcoins than those already programmed in the Bitcoin blockchain. And it is that each Bitcoin earned by the miners is a direct reward for the work done and belongs to a pre-established program. This new scheme reduces the power and control that banks and governments have over people’s assets and gives end users greater control and autonomy over their own money, which is not achieved with the government or central bank’s FIAT money.
Who can be trusted?
In his book, Robert Kiyosaki poses a fascinating question, who to trust the most? In the government of the day (or next governments of the day) … or in the blockchain network? This is an interesting question, especially if one considers that economic policies at the government level are constantly changing; for example, today, a country may have a stable government, but tomorrow another more radical government may come or authoritarian concerning the economic part.
Cooperate or compete?
Only the future will tell us if these systems will cooperate, subsist together, or eventually, one system will end up displacing the other. However, we can see how recognized cryptocurrencies (such as Bitcoin) are gradually following the pattern of all the new technologies that were adopted and later became obvious truths: first, they were ridiculed, then they are attacked, later they are adopted, and finally, they are taken as a new “obvious truth” or something essential.
What do you think about this topic? Do you think that Bitcoin is really people’s money?
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