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Bitcoin can change everything: brief history of interest, inflation

Interest is a subject with a very eventful history that works today hand in the hand with inflation to control the world's major economies. The history of interest is as old as that of money, but recently digital currencies have begun to add a major wrinkle.

Once humans coined the currency to facilitate trade, it became common for the cereal grains for which it was traded and, therefore, should have similar that is, increase with time. All this was good and good as long as the currencies had the intrinsic value of the metals from which they were then struck.

Religious Influences

Meanwhile, various religions were emerging and moralizing clerics variously deemed the charge of interest. He has been described by his detractors as "usurious" and generally immoral; today, wear and tear is applied only at excessive interest rates. The principle of the imposition of ordinary, non-abusive interests is commonly accepted

Other religions, devoid of scruples rather than interests, have in fact been granted a monopoly in the banking sector from which the current monoliths developed. Alongside these massive banks, the economies that depend on them continue to grow as well. Today, interest is considered an indispensable element of the bank.

Something of Nothing

It remains that the interest is only one way to create "wealth" from scratch. And the interest is naturally inflationary: it is often clearly visible that the rates practiced by the central banks generally correspond to their local inflation rates, inflation being the essential factor of accessibility. any long – term loan whose monetary value declines rapidly

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This is an important point: long – term loans such as mortgages are generally affordable because the l '. inflation will eventually exhaust the "real" cost of the monthly payment. A monthly payment of $ 1,000 today will be a lot less, in real terms, in 20 years. As long as you can afford your current mortgage payment, it should be easier to pay over time.

A recent peculiarity of the banking system (after the 2008 accident) was the reduction of interest rates to around zero. by the innocent "quantitative easing". This innocent term actually masked the wholesale printing of money, replacing the one generated by interest, to support the perceived values ​​of the stock market while supporting continued inflation at relatively low levels.

Importance for cryptocurrencies

What does this mean for digital currencies, which, unlike currency fiat, does not have any rate of return? Underlying interest? If someone wants to lend Bitcoin or another currency to someone else, it is between the lender and the borrower.

However, the nature of cryptocurrency is that, overall, its value is steadily increasing because it is finite. resource – it can not be created willy-nilly by a central bank. Another way of looking at it is this: as fiat money loses value due to inflation, digital currencies become more valuable than fiat currencies.

This principle makes it difficult to justify the receipt of a crypto. When a deflationary asset (cryptocurrency) is sold to buy an inflationary asset (fiat money), it becomes much harder to buy back the digital currency that you originally sold. We've all heard stories of people selling Bitcoin a year or two ago to buy mundane items, to regret it later. This implies that any cryptocurrency loan will eventually become unapproachable, with or without attached interest.

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We will never forget that because true cryptocurrencies are strictly finite, they are deflationary by definition. This forces a whole new paradigm for humanity, demanding a totally new vision of what we call the economy, and how we will react to a system where the interest is absent.

Written by Roger Toms.