Inflation has become a major concern. She does the business of Bitcoin, the ultimate store of value.
Painful inflation in the United States
Inflation has been at almost 40% since 2019. Or 8% per year on average. This is what the Wall Street Journal by doing the accounts for a common basket of food products.
Official figures indicate inflation of only 25% for food. Why such a gap? This is largely because of the “substitution” effect. We wrote about this in our article How much inflation since 2010 ? :
“If the price of red meat increases and consumers decide to replace it with chicken, the typical basket of food products used to calculate inflation changes. The weighting of red meat is falling in favor of chicken. This results in an artificial moderation of inflation.
There is also the quality effect. A computer costs 50 euros in the imaginary world of statistical institutes due to the improvement in performance. The same goes for orange juice containing more synthetic vitamins. »
Here is the evolution of food prices in the United States over the last four years:
It is important to understand that annual inflation of 8% means that prices double after just nine years. In other words, the purchasing power of savings has halved in less than a decade.
Let's say, for example, that you save 10,000 euros at a rate of 3% per year. You will have 13,440 euros after ten years. But if annual inflation was 8% at the same time, your purchasing power has actually fallen by almost 40%…
Of course, salaries are increasing, but not by as much. The average hourly wage in the United States has increased by only 21% over the past four years (+5% per year). Not to mention retirement pensions which are not indexed to inflation.
Fateful inflation and bitcoin
We often hear that central banks are directly responsible for inflation by facilitating debt. However, this is a very quick task.
The fiat system is effectively a ponzi. As we wrote previously in our article Bitcoin vs. Fiat :
“This is how our civilization creates money from debt. A debt with interest that mathematically requires you to go into ever more debt, under penalty of recurring payment defaults. Should we be offended? Probably not. Humanity naturally tends towards the most efficient systems. If history can teach us anything, this is it. »
The problem is that this Ponzian monetary system requires ever more energy to keep its promises. If resources are abundant, then wages can rise faster than inflation. The standard of living increases.
Abundance = Productivity = Machines = Abundant and cheap energy (mainly oil)
The fiat system is neither good nor bad. Above all, he needs more and more energy. Without additional energy, productivity (output per person) and economic growth stop increasing. Wages can no longer keep up with inflation.
The increase in the debt/GDP ratio is a symptom of energy “scarcity”. Shale oil, for example, costs twice as much to come out of the ground as Saudi oil. But oil fuels 95% of global transport. It is the lifeblood of the economy. Without it, there would be much less economic growth and abundance.
Fossil fuels will peak before inevitably declining, causing inflation and ever more debt. In other words, in the absence of an energy miracle (and again, copper, lithium, etc. will be needed), inflation will go from bad to worse. It's a certainty.
Keeping your savings in the form of dollars or euros means taking the full brunt of this inflation. It is only a matter of time before the masses gradually turn to a store of value.
And what's better than Bitcoin, the only thing in the world that exists in absolutely finite quantity, unlike gold, Microsoft shares, works of art, etc.
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