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It's no secret how the world's economy works - it's a balance of supply a demand. Little money is bad; a lot of money is bad; but it's always necessary to print more so that a dollar will buy what it did yesterday, adjusted for inflation.
It's no secret how the world's economy works - it's a balance of supply a demand. Little money is bad; a lot of money is bad; but it's always necessary to print more so that a dollar will buy what it did yesterday, adjusted for inflation. And the Earth's population needs more and more money everyday.
However, not everyone understands what a country's debt means. Debt to whom? And what is the “debt ceiling” that was raised today?
One thing is clear: printing more money whenever the supply runs out isn't a bad solution. The world's population increases, and it requires more and more money to serve the needs of this growing consumer population. People consume more, live longer, have children and so on. While the dollar remains the global reserve currency, every new child on Earth will need to reprint a little more money, something we see every time the U.S. Congress raises the debt threshold or the Fed announces a program of quantitative easing.
So how is this connected with the exchange rate of Bitcoin?
Here’s how: bitcoin price increases every time governments print money. This is the final result, as Bitcoin is not tied to the cost of goods and its purchasing power is not limited by anything. A year ago it was possible to buy US$1,000 with a bitcoin, now it’s about US$300. Tomorrow US$100 or US$10,000 may be possible, but seen from the long term, bitcoin grows each time someone prints money.
Can we say whether bitcoin will grow faster or slower than gold? Yes.
Bitcoin will grow faster than gold, since there is a lot of gold on Earth and gold jewelry constitutes over 50% of the gold market and has a fixed price in dollars. That piece of gold cannot start costing twice as much tomorrow as it does today. This would trigger an immediate reform of the gold jewelry market, and the price would be 'stuck' for the duration of this reform.
Meanwhile, the 'goods-for-bitcoin' market is almost nonexistent. All products exist for dollars; bitcoin is a bargaining chip. What each bitcoin can be equal to in terms of dollars is decided by the market.
Just as company shares rise when new money is issued, bitcoin will also grow. The appetite for risk which appears on the market when new units of currency are issued will be absorbed by intelligent investors in stocks, raw materials and, of course, the most liquid and independent store of value - bitcoins.
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