THE REAL REASON BITCOIN IS SO DANGEROUS AND EVEN LIBRA

in #bitcoin5 years ago

THIS IS HUGE
Most people know that in the current Fiat Monetary System (in the most basic explanation) whenever someone makes a loan from the bank, that money is created out of thin air. (Almost the entire loan is created out of thin air) Theoretically this NEW money dilutes the existing money and all money world wide should be worth a little less. Unfortunately it doesn't dilute immediately because the world takes some time to adjust to this. IN SHORT. When the banks print money out of thin air the value of existing money should drop immediately (inflation) BUT it doesn't. It doesn't because you can still buy something tomorrow at the same price as today while millions of new loans (new money) are being printed today.
The reason for the delay is caused by the VELOCITY OF MONEY.
Velocity of money.png

The problem is that the people who created this new money can spend it immediately and buy stuff with it. Those people can become so rich that maybe they own everything by now.

WHAT IF all the vendors in the world knows exactly when and how much new money is created. They can work out percentage wise how much the new money would "dilute" the old money and adjust there price accordingly.
That could mean that inflation could happen without waiting for velocity to take its time. SO it takes away the spending power of the new money and therefor eliminates the need for it.

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