Bitcoin's Cultural Significance
Table of Contents
- Bitcoin has the potential to shift the value dynamic of the global economy
- The Bitcoin community has grown tremendously and continues to push Bitcoin forward
- Bitcoin can combat damaging cultural financial trends like loose monetary policy, asset price inflation, and rising consumer and government debt.
Bitcoin Is More Than a Currency
Bitcoin has the potential, and has already begun to transform the global financial system. Not only can Bitcoin transform the technology and mechanics of the economic system, but it can equalize the relationship between governments, individuals, and financial institutions.
The Social Idea of Bitcoin
Bitcoin is a decentralized technology, and its implications are more profound than just another form of currency. First and foremost, Bitcoin is a social idea. In reinventing the financial system, it can also restructure the human value exchange system.
In many countries where inflation is rapidly devaluing the local fiat currency, consumers have turned to bitcoin to provide a more trusted exchange value that cannot be restricted by a central authority.
The government’s decision to print currency negatively affects the spending power of its populations, and the ability of governments to dictate who receives funds, monitor transactions, and determine that value of currency has caused interest in bitcoin to grow.
Bitcoin also appeals to consumers who do not trust the valuation or usage of currency by governments. Indeed, the United States wields significant international influence because many countries utilize the U.S. dollar, and thus can impose sanctions, seizures, and tariffs.
The Bitcoin Community
Many in the Bitcoin community believe that bitcoin’s emergence in the global economy is symbolic of growing awareness that governments do not utilize monetary policy for the best interest of its citizens.
The idea of permissionless, peer-to-peer, censorship-resistant currency has attracted populations around the world who are dissatisfied and distrustful of the authority central governments have to regulate the value of currency and gatekeep the transactions of individuals.
Known collectively as the Bitcoin community, the developers, institutions, and individuals that support and push forward bitcoin expansion and development have been essential to the growing success of Bitcoin as an investment and medium of exchange.
Bitcoin’s Socio-Economic Impact
More than five decades of loose monetary policy in the United States and across the world has helped construct a culture of overconsumption, high time-preference, and malinvestment.
When money is constantly being devalued, ordinary citizens are incentivised to spend money immediately as they earn it, and to save as little as possible. In parallel, artificially low interest rates incentivize more loans and more investment, leading to overproduction, excessive debt, and malinvestment.
As a result of poor monetary policy, global debt and household debt has ballooned, and savings has been discouraged, both at the nation-state level and the family level. This makes economies more fragile and vulnerable to minor shocks or slowdowns.
The Cantillon Effect
Asset price inflation has exacerbated inequality by growing the investments of the rich and eroding the savings of the poor. When money is printed by central banks, it is usually used to buy assets, such as government bonds and corporate bonds or stocks. These purchases drive the prices of these assets up, benefitting the existing owners. However, the introduction of new money to the system devalues existing money held by citizens.
Thus, asset owners benefit while cash holders lose purchasing power and watch their wealth erode. In almost all economies, asset owners are wealthy, while those primarily holding cash are poorer. This inequitable effect of inflation is known as the Cantillon Effect.
All of these effects have damaged society, and Bitcoin will play a significant role in mitigating and reversing these cultural trends by ensuring individuals can save money simply, by curbing excessive debt creation, and by discouraging wanton overconsumption.