Bitcoin is Bad
Deflationary currencies could likely leave you unemployed
Once upon a time, there was a magical kingdom where the currency was a rare and precious stone called a “Bitcoin.” The kingdom was blessed with abundant resources and a thriving economy, but the ruling class, known as the “miners,” controlled the supply of the precious stones. They hoarded the stones, only releasing a limited amount into circulation each year.
As the kingdom grew and the population increased, more and more people desired the stones to conduct trade and commerce. However, the miners refused to increase the supply, claiming that the stones’ scarcity increased their value and maintained the kingdom’s economic stability.
But this scarcity had a negative impact on the kingdom’s citizens. As demand for the stones outpaced supply, prices for goods and services skyrocketed, leaving many unable to afford the necessities of life.
The citizens found themselves trapped in a cycle of poverty, unable to climb the social ladder and achieve economic mobility.
This is the reality of a deflationary economy, where the limited supply of currency stunts economic growth and limits social mobility. Bitcoin, with its finite supply of 21 million coins, is the perfect example of a deflationary currency. And while proponents of Bitcoin argue that its scarcity maintains its value, the reality is that it limits the potential for economic expansion and stunts social mobility.
As economist Milton Friedman once said, “Inflation is taxation without legislation.”
In a deflationary economy, the value of currency increases as the supply decreases, resulting in a transfer of wealth from those who hold the currency to those who do not.
In the case of Bitcoin, this transfer of wealth occurs from the general population to the small group of miners and early adopters who control a significant portion of the coins in circulation.
Furthermore, the deflationary nature of Bitcoin makes it an ineffective medium of exchange. As the value of the currency increases, people are incentivized to hold onto it rather than spend it. This leads to a decrease in consumer spending, a crucial component of economic growth.
As economist Paul Krugman points out, “Deflation is in almost all cases a side effect of a collapse of aggregate demand…And collapsing aggregate demand is the textbook story of what happens when a modern economy turns down.”
The limited supply of Bitcoin also limits the potential for job creation and economic expansion. Businesses are unable to expand and hire more workers due to the high cost of goods and services, resulting in a stagnant job market. This lack of job creation and economic mobility traps individuals in low-paying jobs, further exacerbating income inequality.
In contrast, an inflationary economy, where the supply of currency increases, encourages economic growth and social mobility.
As economist John Maynard Keynes stated, “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
An inflationary economy stimulates demand by decreasing the purchasing power of currency, encouraging consumers to spend and businesses to expand and hire more workers. It also allows for adjustments in the economy by allowing prices to adjust, as opposed to wages which are more rigid.
This results in a more dynamic economy with greater opportunities for individuals to achieve economic mobility.
While the idea of a scarce and valuable currency may seem appealing, the reality is that the deflationary nature of Bitcoin and other similar currencies limit economic expansion and stunt social mobility. As the kingdom in our allegory illustrates, the hoarding of a scarce resource by a small group can lead to a cycle of poverty for the majority of citizens.
It is important to recognize that a truly stable and equitable economy is one that encourages growth and allows for adjustments in prices, wages and expansion. The deflationary nature of Bitcoin and other similar currencies fails to meet these criteria and instead creates a stagnant economy that benefits only a small group of individuals at the expense of the majority.
In conclusion, while the scarcity and value of Bitcoin may seem like a positive aspect, the reality is that it harms the economy and the individuals living within it. The deflationary nature of Bitcoin limits economic expansion, stunts social mobility and traps individuals in a cycle of poverty.
It is important for individuals, governments and businesses to recognize the potential negative effects of such currencies and instead invest in inflationary currencies and policies that encourage growth and social mobility for all.
Full Discosure — This is an argument for argument sakes, since I believe in bitcoin, I must write an argument at least twice as strong against it, I couldn’t, then I am not educated enough to believe in Bitcoin to start with.
