50 Year Long Absence of Gold Standard: The Rising Need of Bitcoin
“It has been 50 years since the Gold Standard as the financial backing has been removed and a trust based financial system is in place throughout the world. The overwhelming debt and rising inflation has ignited a ‘loss of trust’ in the current trust based financial systems and thus raises the demand for cryptocurrencies like Bitcoin to become a means of exchange”.
50 Years without the Gold Standard
On 15th August, 1971 the whole financial system was overturned due to the Nixon Shock and the de facto gold standard system in which currency was pegged to gold came to an end. New financial system was established based on trust. The value of the US Dollar or any currency around the world is now backed by the trust of the Government and nothing else. This gave governments the exclusive power to print as much money as required and when required, with an instrument known as ‘Quantitative Easing’. This trust based financial system is a prey to such serious problems as debt and inflation, and there is no solution in sight whatsoever. This is the very reason that people are losing trust on these trust based systems and eyeing on something that has the solution – “Bitcoin”.
Bitcoin as a Ray of Hope
The biggest problem with the current financial system is that it gives the Governments a power to print as much money when required and this in turn is resulting in the Government’s global debt to rise every minute. It has become a habit for the financial institutions and governments to use the tool of quantitative easing to ensure that the daily obligations of the country are met no matter what cost in terms of debt, the country is paying.
Also, with printing more fiat currency comes the problem of inflation that has been rising at an alarming rate after the coronavirus pandemic. Inflation is expected to rise for a few years and if quantitative easing is not used, the whole financial system will fall apart. With no solutions in sight, the people have started to lose faith and trust in the Governments and their trust based financial system and are looking for something that has the solution for their problems.
Bitcoin did not rise to glory by chance, it was the recession of 2008 that paved the path to create a global currency that solves the problem of increasing debt and inflation and at the same time bring decentralization to finance, which is the root cause for the problems discussed formally. With its limited supply of 21 Million coins, Bitcoin offers a proposition of scarcity like Gold, and at the same time provides a decentralized system that cannot be manipulated and changed. Providing security against frauds and a hedge against inflation, as not even a single coin can be mined after 21 Million coins mined. Also, with its ability to become a store of value and at the same time a medium of exchange, Bitcoin has the power to become a global currency and end the problems of the current financial system.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
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