The fiat system is a ponzi which requires perpetual (and therefore impossible) growth in physical flows. We are facing inflation that is as painful as it is favorable to bitcoin.
Ponzi and growth
There is not a single euro, dollar, yuan or franc in circulation that does not come from a debt. In the fiat system, money is created entirely from debt.
In other words, there would not be a single penny left in circulation if all bank loans were repaid overnight. In fact, there would still be coins and notes left. Cash, however, only represents a very small part of the money supply. About 5%.
The fiat system is a so-called fractional reserve system. That is to say that money is created ex nihilo by banks. Money emerges at the time of loans (especially real estate) and disappears at the time of repayment. Except the interest which pays the bankers.
We therefore constantly pay interest on the entire money supply. As a result, it is necessary to lend a little more each year than the previous year so that everyone is on the same page from an accounting point of view.
This mathematical imperative is due to the fact that the money needed to pay interest is never initially in circulation in the economy. “Money doesn’t make money”, as the precept says. To put it even more clearly, if some manage to repay debt AND interest, mathematically, others will not even be able to repay the principal.
In short, the system requires that we perpetually increase the money supply in order to stand. Otherwise, certain economic actors would not be able to find enough money in the economy to honor their loans. Payment defaults would be an integral part of the system, which is not efficient.
This is how banks maintain a ponzi scheme, because humanity always embraces the most efficient systems.
The problem being that we need enough energy and raw materials to match this constantly increasing money supply, otherwise wages would no longer keep up. However, we live on a finite planet…
Banking and Renaissance
The oldest bank still in operation is Monte dei Paschi. This ancient Italian bank was founded in 1472, in the midst of the Renaissance, a pivotal era in civilization.
Italian city-states such as Florence, Venice and Genoa set the course for modern banking. And in particular the bank of the Florentine Medici family, created in the 14th century, known for its innovative financial practices.
It is the mathematician Luca Pacioli who introduces in his work “Summa de Arithmetica, Geometria, Proportioni et Proportionalita” (1494) the concept of double entry accounting. This revolutionary system involves recording both debits and credits of financial transactions. Letters of credit were also crucial in the development of trade. They are the ancestor of modern credit.
The democratization of banks, combined with the development of merchant marines, made it possible to increase economic activity and prosperity. The Renaissance truly marked the beginning of a new era of maritime exploration and trade. All European powers embarked on ambitious voyages of discovery in search of new, untapped resources. Iconic figures like Christopher Columbus, Vasco da Gama (first sea route to India) and Ferdinand Magellan (first circumnavigation) laid the foundations for globalization.
And when you think about it, it was wind energy combined with credits and maritime insurance from Italian banks that were the major drivers of this economic growth. Not to mention technological breakthroughs like the compass and the rudder.
All this to say that transport and energy are the keystone of economic development and by extension the ability to lend money. One does not go without the other.
Oil and containers
The industrial revolution in the 18th century further increased the transport capacity of the merchant navy. Steamships replaced sailing ships and catalyzed tremendous new growth in world trade.
The advent of steam made shipping more reliable and reduced distances by connecting continents in ways previously unimaginable.
This time, the Great Leap Forward will come from coal energy. Then came the oil which today fuels container ships weighing 100,000 times heavier than Christopher Columbus' caravel.
Today, the merchant navy carries almost all commercially available non-food products. With its two billion tonnes of capacity (compared to a few tens of millions two centuries ago), it provides 80% of international freight.
As told Jean-Marc Jancovici, “without it, you and I could say goodbye to our purchasing power. […] This merchant navy consumes as much oil as world aviation, or nearly 10% of world production. Trucks, which are also an essential link in the economy, consume twice what the merchant marine consumes. »
The great challenge of the decades to come will be to move 300,000 ton sea giants and trucks forward despite the decline in oil production which is much closer than we want to believe. In this regard, watch the United States closely:
Without oil, international trade will be considerably reduced and deglobalization a reality. This will result in shortages of certain products and the inability to make loans without causing inflation.
Without abundant energy, we cannot physically put growth in the face of the monetary ponzi. A ponzi which, once again, is neither good nor bad. It simply needs perpetual growth which, unfortunately, slows down decade after decade.
Bitcoin and the physical limits of growth
Oil is not infinite. We will make electric trucks, but again there are limits.
Copper is the key element in the electrification of our civilization. Demand for this essential metal is expected to rise from 4 to 6% per year over the next eight years.
Production must therefore double by 2035. Knowing that extraction consumes a lot of oil and that the discoveries of new copper deposits are starving…There is therefore some concern to be had from a purely geological point of view. Not to mention the fact that installing small nuclear reactors on 60,000 cargo ships is almost impossible.
The quantity of things transported will inevitably decrease, in turn preventing the growth of physical flows which underpin economic growth.
And by the way, given that half of the trucks transport foodstuffs, it is written in advance that their prices will increase and reduce the borrowing capacity of households. This will result in an explosion of the real estate bubble.
All this to say that inflation is not about to stop. In the absence of an energy miracle and immense discoveries of copper, lithium, etc., growth will decline.
Here is the trend for the old continent:
-Maximum energy import: 2007
-Maximum weight loaded in trucks: 2007
-Maximum number of m2 built per year: 2007
-Maximum disposable income: 2010
What happened in 2007? THE peak conventional oil. Lack of growth in Europe will result in more inflation. As others would say, the thirty glorious years are over. Any good father should now think about protecting his savings.
And what could be better for the average person than to simply choose the only asset that exists in absolutely finite quantity: Bitcoin.
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