Vlog 194: Where does the money come from? Crypto currencies vs. Fiat currencies.
Every once in a while I like to make this video.
In the video, I try to explain the difference in how money is created.
Cryptocurrencies vs. Fiat currencies (USD, euro, yen).
For me, the biggest difference is that:
Fiat money is created with a promise of work in the future in the form of a loan with interest (debt).
and
Cryptocurrencies are created with work (that is already done) and no debt. (the work is content creation on Steemit for instance or computer calculations with Bitcoin.)
Both are currencies but I prefer the latter.
Example:
If you want to buy a house and go to the bank for a loan. The bank looks at your potential future earnings and bases the amount of the loan on that. (let's say $250,000).
Now comes the magic that still so little people realize.
The bank then 'creates' this $250,000 out of nowhere 'thin air' and gives it to you and also tells you that the interest on the loan is 5%.
You buy a house with this money.
Now, you have to go out into the physical world and create real value there (a job for instance) to pay back the loan that was created with no work.
The funny thing is though that if you fail to repay the loan for whatever reason the bank then becomes the owner of the house that you bought. (even though they never did anything except create a loan with no work).
For some reason, we all believe this is normal and the way things are. But it isn't normal at all.
Yet, there was never an alternative to fiat money because truth be told fiat money is really handy.
It's nice to have a means of exchange that is the same for everyone. It makes transactions so much easier.
But luckily with blockchain and cryptocurrencies, there is a good alternative for the first time in history.
I talk about it more in my vlogs
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We give the coin value
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In the crypto world people buy Bitcoin first with Fiat and then trade it with other #cryptocurrency then they traded with it until it grows.
@exyle
Mark what a SIMPLE but fabulous way you described our current FIAT System so that many may OPEN Their EYES and see the Cruel Deception in Life that the BANKSTERS Thwart onto the People...........I am so Grateful for being here early with the Crypto's.
You made great info thanks a lot man good job 👍
Great explaination @exyle ..I strongly believe that the age for trading value through fiat currencies is almost over, next generation must and will be based on blockchains and crytocurrencies. Tokens issued from the blockchains deemed as currency of value will certainly replace fiat currency.
@exyle yeh, this is right. in this sense, we can rid off from interest rate which is ruining the life of people and creating different classes.and creating a big gap between rich and poor.
Great post. Any currency is all about trust that it has value. Crypto currencies have all elements that make them good currencies - but they are easily treatable and thus they have to offer something special ( like Steem) or they have to be big and old like bitcoin.
A lot of people don't even question the existing monetary system which totally blows me away. A debt based system means that somebody will be worse off since wealth transfer goes directly to those who already have capital without doing any work. Besides, debt based system means we will always need more and more money to finance capital, leading to inflation. The current system has so much limitation, in my opinion.
Great post and explanation. Debt that is created can never be paid back, for example the debt that US government have. The fiat currencies are based only on trust. Since former US President Richard Nixon removed the "gold standard", US Dollar does not have any value, specially after all this printed money.
Yes @bloomberg215, You do get "IT"........Constant Debt to pay back the Debt that can NEVER be Paid Back......
According to my experience, people tend to avoid big changes and stick with what they already know even if they are not satisfied (it begins with jobs, relations and goes to social system government,...).
All depends on the next generation which system do they choose.
It seems like globalization and digitization is unstoppable and maybe blockchian technology will become a big part of the future.
Exactly , You said it correctly. Future is all about crypto. Even some Banks have started their own altcoins. People are getting more into crypto day by day.
You are absolutely right in your judgment about the Fiat and the Crypto-currency, all that was previously done in the turnover of fiat money was a game in one gate and the winner in this game was in any case the banks and financial structures that were engaged in the turnover of Fiat. I agree with you about crypto-currencies, everything is different, here everyone can lead a turn and be a member of the blockchain! Thank you Mark and keep us informed of what's happening!
The debt in fiat is designed to make banks a lot of money of people's hard work. If you take a loan for, let's say 30 years, you will spend months of your life working for the bank basically.