By Robby Brookings
The viability of bitcoin is the question on many interested people in the world of finance, politics and technology. Bitcoin exists at an interesting crossroads where the three worlds collide.
If bitcoin were to sustain any amount of viability into even the near future it could be a game changer for the global currency markets and the financial world as a whole. Since bitcoin has a fixed volume that is estimated to be fully in public circulation by the year 2040 it could not be easily manipulated. The price of goods could fluctuate but the supply of bitcoins would not fluctuate.
A good analogy is the US federal government’s ability to run deficits that contribute to their debt and then monetize that debt with money created out of thin air. This practice destroys the value of the currency and it is done on an ad hoc basis. There is no long term plan on when to stop the monetizing of the debt, only loose targets for employment and inflation. So that is the situation where the US dollar finds itself. Bitcoin however is more akin to how individual states inside of the United States are forced to balance their budgets or borrow money by issuing bonds. The bonds need to be paid back on time or it may hurt their ability to receive reasonably priced loans in the future.
If bitcoin where to play a major role in the world, governments and private citizens alike would have to operate within the money supply that is provided. Governments would not have the ability to pay down debt with devalued currency. The value of the currency would be driven solely by the market. Once the entire bitcoin money supply was in circulation there is a decent likelihood that bitcoin could achieve a level of stability. Bitcoin would force any entity whether it be governments or private citizens to think twice before going into debt to live outside of their means. The reason being that currently as the world reserve currency is on a perpetual slope of decreasing value as a result of inflationary policy at the Federal Reserve and US Treasury. When the currency had the ability to go either towards inflation or deflation any borrower runs the risk of being forced to pay back their loan with more expensive money.
The key is that direct manipulation as it exists now would be impossible. The currency markets would be driven solely by wider market forces and not just the latest news out of the Federal Reserve, European Central Bank, Bank of Japan and the Bank of England.
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