I’m pretty sure it was 1971, but it could have been 1972. Anyway, it was in kindergarten and I was 5 years old. Our teachers had established a system to motivate us children to behave well. They had a big board hanging on the wall with all of our names written on it. If you were particularly well-behaved, kind, kind, or courteous, they drew a black dot next to your name. If you misbehaved, you were given a red. Kindergarten was all about following the rules, and its absolute transparency motivated most of us to do our best.
At some point, an additional prize of a small piece of cloth was introduced for very good behavior. From the group’s perspective, it was far more valuable than being in the top spot with a series of sunspots. And it was specific. Prove your elite status even in the sandbox.
Eventually, a trading system was developed among us children. For scraps of fabric, you can get a bucket of sifted sand. If you’re two people, you might get a piece of candy. Suddenly we could trade labor (sifting sand) for status symbols and sweets.
One day, a new teacher arrived. For some reason, she gave out the pieces of cloth more generously. She simply changed the rules governing distribution. Suddenly everyone had candy and they had to spend 4 on a candy instead of 2. Some kids started complaining. The value of the scraps of cloth they had worked so hard to obtain decreased, and they demanded more cloth.
As expected, scraps of fabric were distributed more and more freely. Eventually, anyone could take as much as they wanted. After all, they were lying all over the place. they were worthless. No one wanted them anymore. I couldn’t trade them for anything. And then, when I was just five years old, I experienced a real hyperinflation.
What does this have to do with Bitcoin?
In kindergarten, the rules have just changed. The new teacher wanted to be nice, but we kids whined, and suddenly more and more scraps of cloth were handed out.
Bitcoin rules simply cannot be changed.
Fiat currencies are a completely different story. They have rules too. The problem is that no one can guarantee that these rules are actually followed. Here is an example. The European Central Bank is not allowed to permanently fund governments through bond purchases, yet it brazenly does so without anyone doing or even being able to do anything about it. Who will intervene anyway?
Here’s another example. The Maastricht Treaty’s Stability and Growth Pact stipulates that EU member states’ budget deficits cannot exceed 3% of GDP, with permissible exceptions. However, between 2000 and 2010, stability standards were repeatedly violated without sanctions not only by Greece (11 times), but also by major powers such as Italy (seven times), France (six times), and Germany (five times). times). According to the Maastricht Treaty, there are clear sanctions for countries that illegally fail to comply with deficit limits. However, such sanctions have never been imposed. Not even an attempt was made.
This may be politically expedient and somehow justified, but it shows how difficult it is for us to follow the rules. They’re like New Year’s resolutions that we make with great conviction, but usually don’t last very long. What matters is the result. Currencies inflate and sooner or later become worthless. The US dollar has lost 97% of its value over the past 100 years. The British pound, which originally represented one pound of silver, suffered the same fate. All because more and more new dollars, euros or pounds were created, in other words, printed.
The result is the same. When a piece of cloth becomes worthless, everyone who owns it loses wealth.
This doesn’t happen with Bitcoin. Its rules are fixed and no one can control the system or easily change its rules.
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