The deadly combination of tight capital controls and inflation slowly starve the people’s life savings. Luckily, Bitcoin can help escape from capital destruction. Capital controls are a structure used by governments to restrict, or prevent, the flow of capital out of the country. China, for example, recently tightened regulations on moving money out of the country when faced with a devaluing yuan. Unfortunately, when paired with a penchant for inflating the national currency, capital controls can have a devastating effect on the long-term wealth of the people. The people are forced to use one currency
In much of the developed world, legal tender laws exist, establishing a government-sanctioned medium of exchange.
This means that for the most part the people are relegated by law to the use of a single currency, their earnings tied to its value, whatever that may be.
In a free country, a certain level of global currency competition exists, as citizens have some degree of ability to open accounts in foreign countries and hold other currencies (even though they must still use their country’s currency for economic transactions).
Some countries such as Iceland and China , however, have strict capital controls, restricting the flow of money out of the country. In such countries, citizens are tied to the currency both as a medium of exchange and a store of value. The currency is devalued, devastating life savings
Once citizens are forced into one medium of exchange and store of value, they have no choice but to use it regardless of whatever changes it may undergo.
Governments profit off of this by inflating the currency as an easy way to generate revenue, without either voting to raise taxes or incurring public debt. This “ invisible tax ,” however, still draws funds from the people, as their currency is worth less […]
