With the Fed’s Actions Causing the Cantillon Effect, Bitcoin Is Your Last Hope

With the Fed’s Actions Causing the Cantillon Effect, Bitcoin Is Your Last Hope You will realize it sooner or later. Few people understand how money works. Today’s society does everything to keep citizens in the greatest ignorance about money and the economy. The goal of politicians and bankers is that citizens ask themselves as few questions as possible. As long as citizens do not ask questions, it is easy for politicians and bankers to continue making deeply unfair decisions that impoverish the majority of people. Henry Ford had a perfect formula to explain the situation we are still in today: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” If citizens came to understand how money works, there would be a great risk that they would discover the ugly truth about the unfairness of the current system. There is no doubt that a popular revolution would soon break out. The challenge for those at the head of the current system is to ensure that this ignorance lasts as long as possible. The monetary policies conducted by central banks are not neutral One important thing you have to understand is that the way money is used by politicians and bankers is not neutral. The monetary policies decided by the central banks will have considerable effects on the lives of the inhabitants of the Earth. When the Fed decides to print $3 trillion out of thin air in just a few weeks, it will not only affect the citizens of the United States, but also the rest of the world. With its U.S. dollar, the Fed is exporting its inflation, and other central banks end up following the same policy as the Fed. In total, more than 10,000 billion dollars of money has already been printed out of thin air since March 2020. As early as the 18th century, Richard Cantillon, a French banker and philosopher, had studied the perverse effects of this type of monetary policy aimed at creating a lot of money out of thin air and then injecting it into the system. His book “An Essay on Economic Theory” is more topical than ever in 2020 at a time when we are experiencing great monetary inflation. The Cantillon Effect The theory put forward by Richard Cantillon explains that when a state is going to print a lot of money, who will benefit from it will depend on the institutional structure of that state. In the 18th century, when Richard Cantillon wrote his book, he explained that the richer you were and the closer you were to the king, the more you would benefit from the printing of money by the state. On the other hand, the poorer you were and farther away from the king, the more you would be penalized by this printing of money in mass. Richard Cantillon explains in substance that money is not neutral. Thus, the impression of money by a state has distributive consequences that operate through the price system. This general observation was later called “The Cantillon Effect”. In Richard Cantillon’s time, the monetary system was based on gold. In his book, he takes as an example of what happens when a country discovers a new gold mine on its territory. De facto, the amount of gold in that country increases. This increase in the amount of gold not only increases the price, but it also changes who has wealth and who does not. Richard Cantillon writes: “Doubling the quantity of money in a state, the prices of products and merchandise are not always doubled. The river, which runs and winds about in its bed, will not flow with double the speed when the amount of water is doubled.” — Richard Cantillon For Richard Cantillon, the richest people who would benefit from this new gold mine first would spend their money, which would lead to higher prices. In the long term, the money would go to the most disadvantaged people too. However, before that happens, these poor people will have had to pay higher prices because of price inflation. This sudden inflation will have a strong impact on the poorest because of an unequal distribution of purchasing power. Inequalities in wealth would be even more pronounced. The Cantillon Effect in 2020 In 2020, the Cantillon Effect is in full action due to the great monetary inflation we are all experiencing. The actions of the Fed and other central banks have once again demonstrated the relevance of what Richard Cantillon described in his time. As always, the simplest thing is to stick to the numbers. Let’s look at the evolution of the M2 Money Stock, which represents the quantity of U.S. dollar in circulation, over the last few months: M2 Money Stock evolutionSince March 2020, the Fed has increased the M2 Money Stock by +19% to bring it to 18,500 billion dollars. Then, it is interesting to wonder who benefits from all this money printed out of thin air since March 2020. To do so, it is necessary to put into perspective the evolution of the M2 Money Stock with the evolution of its velocity: M2 Money Stock versus Velocity of M2 Money Stock over timeLooking at this graph, we realize that the velocity of the M2 Money Stock has collapsed since March 2020. This velocity is 1.125 for the first time since at least the 1940s. For those who don’t know what the M2 Money Stock velocity is, here is the definition that is given by the Fed: “Velocity is a ratio of nominal GDP to a measure of the money supply (M1 or M2). It can be thought of as the rate of turnover in the money supply — that is, the number of times one dollar is used to purchase final goods and services included in GDP.” Concretely, the velocity of the M2 Money Stock is the speed at which money passes from hand to hand. The higher the velocity, the more dynamic the economy. Seeing the velocity of the M2 Money Stock drop to its lowest level in over 70 years is therefore a very bad sign for the United States. Fed-printed money has remained in the hands of a minority This means that the trillions of dollars that have just been injected into the American economy by the Fed have remained in the hands of an extreme minority of the population. This minority, as you know well, made the headlines throughout the summer of 2020. They are the ultra-rich. You could see Jeff Bezos making the headlines by becoming the first man with a personal fortune of over $200 billion in the heart of August 2020. You’ve also seen Elon Musk climb all summer long in the ranking of the richest people on the planet to be now close to $100 billion. In front of him is Mark Zuckerberg whose fortune has reached 110 billion dollars. The money injected by the Fed to support the American economy has resulted in a gigantic Tech bubble in the stock market that benefits all these ultra-rich. The poorest people who would have needed help the most in the face of the devastating effects of this coronavirus pandemic saw nothing happen except for a $1,200 stimulus check sent by the U.S. government in April 2020. A meager consolation prize for people living in extreme poverty. The poorest people are doubly penalized by the actions of the Federal Reserve The worst of it is that these people will see what they own devalued even more in the coming months. Indeed, their wealth is mostly in cash. The U.S. dollar will be further devalued because of this great monetary inflation. As a reminder, the U.S. dollar has already lost more than 85% of its value since 1971 and the establishment of the current monetary and financial system. A double negative effect that will make life even more difficult in the months and years to come. More and more people are opening their eyes to the unfairness of this system. It is often in moments as difficult as those we are going through in 2020 that the truth jumps out to those who suffer most from the flaws of a system. The question that many are now asking is this: What are my alternatives for leaving the vicious circle in which the current system locks me up? Bitcoin is the only alternative to leave this vicious circle Until 2008, you had no credible alternative. Luckily, Satoshi Nakamoto invented Bitcoin, which has been running continuously since January 3, 2009. Bitcoin is a system that belongs to all its users. It is a democracy that works for the good of all. No human can decide to increase the supply of Bitcoin and devaluing what everyone owns. The supply of Bitcoin is limited to 21 million units no matter what happens. The monetary policy of Bitcoin is written in the Bitcoin source code. It is inevitable. It is also predictable since the issuance schedule for new Bitcoins is known in advance until all the BTC are issued by 2140. This is protective because you are guaranteed that 1 Bitcoin purchased in 2020 will represent 1 Bitcoin out of 21 million in 2050. Bitcoin protects you against the trend of human to corruption. This is essential in an uncertain world like ours. Besides, Bitcoin gives you full ownership of what you buy in BTC. As long as you have the private keys associated with your Bitcoins, no one can confiscate them from you or prevent you from using them. Again, this is a guarantee that the current system cannot give you. Bitcoin meets the great need that is emerging in 2020: the need to protect its wealth over time in a way that is resistant to censorship. Conclusion By buying Bitcoin, you will demonstrate your willingness to vote peacefully against the current system by choosing the best alternative available to you. With a fixed supply and a demand that will explode in the coming years, the Bitcoin price will rise sharply in the years to come. Those who will have left the current monetary and financial system through Bitcoin will be able to avoid the Cantillon Effect that the Fed’s actions only reinforce. As such, Bitcoin is a true antidote to the Cantillon Effect. A unique opportunity offered by Satoshi Nakamoto to all the inhabitants of the Earth to hope for a better world in the future. It is up to you to educate yourself properly to determine whether or not you want to seize this opportunity for your future.