Money, Currency, and the Perils of Inflation
In today’s world, the financial system often appears to be rigged against the average person. This perception arises from several critical factors that influence the way money, currency, and credit operate in our economy. In this article, we will explore these factors, including the disconnect between money and currency, the manipulation of the time value of money, and the challenges of accessing credit in a credit-driven economy.
Money vs. Currency: The Store of Value Dilemma
To understand why the financial system seems rigged, we must first distinguish between money and currency. Money, traditionally viewed as a store of value, is an asset that maintains its worth over time. Historically, gold exemplified this concept. Gold, as a finite resource, retained its value because its supply couldn’t be artificially inflated.
On the other hand, currency, such as the US dollar, serves as a medium of exchange but tends to lose its value over time due to inflation. The value of currency diminishes as more of it is created by central banks. The ever-increasing supply of currency dilutes its purchasing power, making it a less reliable store of value.
Inflation and the Manipulation of the Time Value of Money
One of the primary reasons the financial system appears rigged is the pervasive issue of inflation. Inflation is the result of central banks continuously injecting more currency into the economy. This practice diminishes the value of currency, eroding people’s savings and purchasing power. Inflation encourages spending rather than saving, as the currency loses value if left idle.
Moreover, central banks have a powerful tool to manipulate the financial landscape: interest rates. By keeping interest rates artificially low, central banks encourage borrowing and discourage saving. The time value of money, which dictates that a dollar today is worth more than a dollar tomorrow, is thus distorted. Savers and conservative investors find it increasingly difficult to grow their wealth through traditional means, such as savings accounts or bonds.
The consequence of this manipulation is that individuals are incentivized to take on more risk to achieve meaningful returns on their investments. This often involves investing in volatile assets like stocks or speculative ventures, contributing to market instability and inequality.
Access to Credit: The Barrier to Financial Growth
In a credit-driven economy, access to credit plays a pivotal role in financial success. However, the availability of credit is not distributed equally. Larger institutions and those in compliance with unofficial financial regulations, such as the Environmental, Social, and Governance (ESG) investment ideology, often have easier access to credit. This creates a significant disadvantage for smaller players and those who do not adhere to certain financial ideologies.
Entities with substantial debts are motivated to cause inflation and control the flow of currency to avoid defaulting on their obligations. This strategy further exacerbates the disconnect between the financial elite and the average person. For ordinary individuals, keeping up with this rigged system means striving to increase their currency inflow and wisely allocating it.
Storing Value: Gold and Bitcoin as Alternatives
To protect their wealth from the devaluation of currency and the manipulation of interest rates, individuals are increasingly turning to alternative assets like gold and Bitcoin. These assets are seen as stores of value that are resistant to inflation and central bank policies.
However, regulations and barriers may make it difficult for average people to access these assets. Governments often impose restrictions on the purchase and ownership of such assets, and the average person may not have the knowledge or means to invest in them effectively.
The Challenge of Increasing Personal Income without Debt
In a system where currency is continuously losing value and access to credit is selective, increasing personal income without taking on debt becomes a significant challenge. Traditional avenues for increasing income, such as savings accounts and low-risk investments, are less attractive due to low interest rates.
This dilemma forces individuals to consider riskier investments, which can lead to financial instability if not managed wisely. Furthermore, as income inequality widens, the average person faces an uphill battle in building wealth and financial security.
The Potential Emergence of New Economies
As the financial system appears increasingly rigged, some proponents argue for a return to a gold standard or the recognition of alternative forms of money as currency. These ideas suggest that a more stable and equitable financial system could emerge by embracing assets with intrinsic value rather than relying solely on fiat currency.
The financial system’s appearance of being rigged against the average person stems from a complex interplay of factors, including the disconnect between money and currency, the manipulation of the time value of money, and the selective access to credit. In this environment, individuals are challenged to protect their wealth, increase their income, and navigate an ever-changing financial landscape.
While assets like gold and Bitcoin offer potential solutions, regulatory barriers and increasing income inequality continue to pose significant hurdles. As we move forward, the debate over the nature of money and the structure of the financial system may intensify, potentially leading to the emergence of new economic paradigms aimed at providing a fairer and more stable financial future for all.