There are several misconceptions about the world of Bitcoin and digital currency, which is a fact no one will deny. But at the same time, a lot of these misconceptions stem forth from a lack of understanding how the monetary system works. Especially for people who feel safe to have their money “backed” by banks, the reality is vastly different from what they assume to be true. No one will bail out Bitcoin during financial duress, simply because there is no such thing as a bail-out in traditional finance either. The money we all use is a mere illusion.
The Financial System You Know Is A Charade
Unlike what most people assume, the financial system we know and use this very day is nothing but a charade and an illusion. The concept of money is just a creation by some people several hundred years ago and has absolutely no intrinsic value whatsoever. Plenty of people assume their paper bills and physical coins have some value, but in reality, they are worth nothing.
Granted, the money we use is denominated in a particular value, which is widely accepted to pay for goods and services. If that money has no value, how come we can use it to pay for products and services? The answer to that question is simple: because the illusion is created that we must use this form of transferring value between people. Don’t be mistaken in thinking that paper money and coins have always been a part of society, as it has taken a very long time until people started using it.
In fact, the moment paper money and coins were invented, was the same day when we stopped being a free market society altogether. Once people start to tell others they have to use this new form of finance – decreed by a King, or under pressure from the clergy in those days – there is no other option than to obey. After all, if people didn’t adopt this system back then, they would starve to death.
Fast forward to today, and very little has changed on the surface. We are all slaves of the financial system, trusting banks with our money – even though they can’t be trusted – and no one is looking for alternatives. Or that was the case until industries like FinTech and digital currencies like Bitcoin came to fruition. While there are still far too many people turning a blind eye to the enslavement of traditional finance, more voices are speaking up in favor of alternative solutions.
Illusion of Boosting the European Economy
Even in these times of financial volatility, the banks are not too worried about their position. If they go bankrupt, the European Central Bank and Draghi will bail them out. Again. For the umpteenth time. But how can they create additional money if it has to be backed by the same number of tangible assets? Once again, the answer is simple: paper bills and coins are not backed by anything, and most banks can’t even offer deposit guarantees anymore.
To put this into simpler terms: imagine you have three chickens and are forced to sell or trade. You are left with two chickens, a male and a female. Imagine they mate, and produce offspring. That third chicken will bring added value to you, but it will also come at a cost. Feeding three chickens is more expensive, although the end value might outweigh the costs.
What the European Central Bank does is growing an extra chicken out of two existing chickens without an increase in cost. In fact, they will take the existing supply of food, and mix it up with water, to make it appear larger. In the end, all this move does is water down the value of the existing supply of food – it is of inferior quality now and worth far less – while creating the illusion of there being a larger supply. Needless to say, this illusion is what most people see, but they don’t give it a second thought as to how it came to be.
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