Bitctoin is a dream coming true, a decentralized currency that stands in the face of fiat money which is smudged by the bloodshed of wars ignited by the world’s biggest central banks. It is a currency that can be indispensable to people in parts of the world who live under extreme oppressive measures forced by their governments. Bitcoin and the blockchain technology can bring light to people who don’t have access to financial services available to people in first world countries.
Bitcoin is, in my opinion, the most creative financial innovation in the past 500 years. It is an idea that is still unfolding before our eyes and will transform the world to a place that highlights a decentralized concept of economy and creates a brand new denationalized world order.
Central Banks in the Twentieth Century:
A central bank is a central entity whose responsibility is to oversee a country’s monetary system. The responsibilities of a central bank are diverse and include issuing and printing national currency and implementing low inflation rates, currency stability and full employment. The U.S. central banking system is known as the Federal Reserve System and is divided into 12 regional Federal Reserve Banks which are located in major states throughout the USA. The Federal Reserve is supposed to regulate and supervise banks, control interest rates and enforce monetary policy via selling and buying U.S. Treasury bonds.
Central banks jumped on the roles of maintenance of monetary stability as saviors of economic development and guardians of stability of the financial systems in the early years of the twentieth century. Central bankers all around the world weren’t favorably viewed throughout most of the twentieth century. Before World War II, the Gold Standard dominated the financial policy strategies, so central banks didn’t have much space to maneuver the world’s economy.
The interwar years witnessed the spread of the central bank model as hundreds of central banks were being minted all over the globe to alter the world’s financial landscape once and forever. However, the interwar period was dominated by deflation, the Great Depression and re-entrance and exit into the Gold Standard. The most powerful central banks in the world then, the U.S. and British central banks, were downsized when politicians detected the massive failure of these institutions to endorse economic growth and guarantee stability of the price of national currencies.
The central banking financial model led to two revolutions in the twentieth century:
- The first revolution took place during the years that followed World War II. During that period, monetary policy and central banks endorsed fiscal policy which evolved to become the mostly means used to influence financial outcomes. The influence of central banks reached a nadir as they became more or less government-dependant. It was also this period that witnessed the spread of central banks in parts of the developing world which were influenced by the role models of central banks in the industrial world. However, in the developing worlds, central banks were more or less subservient to the policies of the leaders of these countries.
- The second revolution occurred during the Great Inflation that took place in the 1970s and 1980s. This is when governments started legislation of laws that guaranteed independence of central banks in a way that could help lower and stabilize inflation rates. The new sentinel role of central banks in creating economic policies was a prominent expansion in the monetary authority of central banks which was debated by academics during that period. As controlling inflation was seemingly successful in solving some economic problems, inflation targeting spread as a plague all around the world after being introduced by New Zealand in the late 1980s.
On the other hand, following 2008’s global financial crisis, central banks failed to alleviate the collapse of many economies all over the world, so many have started to think that the 21st century must yield innovative changes to the conventional central banking model.
Decentralization and bitcoin could be the Solution to the World’s Economic Crisis:
If the world’s economy has collapsed from top downwards, then reform should better start from below all the way up to the top. Many think, and I am one of them, that central banks are responsible for the financial problems and poverty that infests many parts of the world today.
Friedrich Hayek, who won the Nobel Memorial Prize in Economic Sciences in 1974, also thought that central banks were a major source of the world’s financial problems and he might be the first to think that solving this problem can lie in the use of decentralized currencies. He proposed that banks should issue their own currencies based on their owned assets and as so, various banks’ currencies could compete and the market would then elect the most valuable ones. Of course, Hayek’s ideas were mocked and laughed upon then, but 35 years later, Bitcoin was born to deliver Hayek’s dream into reality.
A decentralized currency would downsize the role of central banks that manipulate exchange rates, interest rates and ignite conflicts all over the world. This is not just a mere theory, it is something that has been tested and has proven to be 100% true. Yes, although bitcoin price has been always criticized for being unstable, no one can deny that bitcoin has created a financial system that has knocked out the US Dollar; in less than 5 years, the value of a single bitcoin is 280 times greater than that of a single USD, so this can never be denied; decentralization is the magical solution to the world’s financial crisis.
Bitcoin is really creating a brand new world that has just started to unfold before our eyes. The blockchain technology can also help man break free from government centralization. Now, people are getting married on the blockchain and even more surprisingly, bitnation has started to issue IDs and legal documents that are documented on the blockchain. So, can bitcoin really change the world and also ignite government decentralization? Share your thoughts on this with us…..