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Fiat money: A product of the past?

5


What is the money? The dominant idea for a long time has been that money is paper money printed by central banks. However, since the birth of Bitcoin, cryptocurrencies have arrived to change our ideas on the subject. Especially when the advance of the coronavirus encourages the excessive printing of money, as Changpeng Zhao says in today’s Tweet:

Coronavirus: stimulus for fiscal expansion

The paper becomes cheaper. Long life #Bitcoin“. This is the tweet from the Binance CEO, which perfectly summarizes the great criticism that cryptocurrencies have made for years to the monetary system. Well, being in the hands of centralized entities such as central banks, the governments of the world have the capacity to issue as many units of their national currency as they wish, without any limitation.

Of course, the issuance of money does not mean creation of wealth, so these periods of unbridled issuance are usually followed by long episodes of inflation or even hyperinflation. Just causing the opposite effect to the one sought: instead of increasing wealth, it ends up creating poverty.

, Fiat money: A product of the past?, Forex-News, Forex-News

This is the reason why cryptocurrencies work in a decentralized way. Seeking to eliminate the possibility that a government or organization can decide, according to their interests, to increase the monetary issue, affecting all users of the currency.

However, it is still part of economic orthodoxy, which in the face of the risk of economic recession, the solution is the injection of money into the economy. What would generate a boost to consumption, and therefore allow the entry of fresh money to companies, and an increase in the country’s GDP.

But, at the end of the day this ends up being an ephemeral solution, which used without care can generate big problems in the medium term. This does not seem to prevent China, in the face of the threat of economic slowdown caused by the coronavirus, preparing for the implementation of a stimulus plan that possibly includes a significant money issue.

And this is why Changpeng writes this tweet. Well, at the end of the day, other countries in the world are likely to follow the path of China, increasing its monetary issue. Doing at the same time, that your coins lose value quickly. Facing which, Changpeng has nothing left to say but: Long live Bitcoin.





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