Bitcoin
J.McLaughlin Homepage
Everyone would love to own the whole universe. What limits us mostly are our financial resources and technology. Most of us must consider affordability, whether it is a grocery store, clothing store, home buying, healthcare needs, educational endeavors, or car buying. Whether we buy the store brands groceries, let a perfect dress go, live in a smaller house, try to avoid a visit to a doctor, decide not to take that great course, or drive a small cookie cutter car, it is usually because our incomes and financial resources are limited. Imagine if you have a money printer and there are no counterfeit laws. Can you imagine how much you will print and what you will not buy?
Imagine everyone has that printer. Does it mean that everyone will have everything? Paradoxically, the answer is that all of us will have nothing except what we produce, find, and hunt ourselves. There are many reasons for that dismal outcome.’
First, if you can print money at home, why bother working, creating, inventing, being innovative, entrepreneurial, and even worrying about anything? So, unless you are very passionate about something, most people will stop working immediately. Nothing will be produced, and no services will be available. Minimal products and services that might be available will be so costly in terms of that abundant and cheap money that practically nothing will be sold or bought because, after all, producers and providers will also have that printer. Why should they sell their product or service for worthless money, which they print at home as much as possible? People will be forced to barter whenever possible because of worthlessness and abundance of money. But barter is not very much practical. It is an excruciating and uncertain method of exchange.
Double need and want will be necessary to make any successful swaps. If you have apples to sell and want some clothing, you must find the person who wants to sell clothing for apples. Since there is no media available, you must know a cloth seller who wants to sell it for apples because there is no point in working hard to publish media. Since no remote communication is available, you would never know about the barter opportunities available at a distance. Because no transport is available except for your horse, you cannot go long distances for swaps even if you are lucky and rich enough.
So, life will be hard. People will think of ways to make it easy to swap. Hence, there is this apple farmer who realizes that everyone wants salt. He sells his apples for salt and ends up buying some land and herbal pain medication with it. Other people like that idea, as well. Suddenly, the demand for salt goes high, and more people get involved in mining salt. This makes salt miners relatively wealthy, but nobody cares. They are just happy to have this convenience. The evolution of the medium of exchange improves the production, availability of services, and trade. People start getting wealthier and happier. People start inventing, creating, and innovating. Machines are being produced now, businesses are coming into existence, and companies are hiring workers.
This makes some people more wealthy. Their problem is storing the large quantities of salt they have earned and transporting large quantities for big purchases and sells. These people are now thinking about coming up with a better medium of exchange. Many are proposed and tried. None lasts long because it is either too abundant, does not last long, is too heavy, or does not have enough demand. Gradually, it narrows down to two metals: Gold and Silver. These are scarce, in demand, expensive, and last forever. Because of the high cost and value, you do not even have to store and carry large quantities.
Gold ultimately dominates everything else as a medium of exchange. It revolutionizes business, trade, production, and services. Inventors, creators, innovators, and entrepreneurs rapidly become very rich. People are now far more wealthy and happy than before. They have far more gold in their homes and carry larger quantities with them, which starts getting cumbersome. Also, there are incidences of gold theft from houses, shops, bazaars, and offices. Sometimes, gold is also getting robbed on the streets. People are worried and looking for solutions. A trustworthy goldsmith comes up with a perfect and acceptable solution. He offers his customers a solution. He will have a big, strong vault and trained guards and store gold for a small fee. He will issue receipts for deposits with his stamp and signatures on them. Instead of physical gold, people can carry those receipts and use them for purchases. The receipts are redeemable for gold by the bearer at the time. Redeemable receipts for gold are a very amicable solution and are getting popular rapidly. Soon, goldsmiths everywhere began providing this service. After a while, a goldsmith realizes that he always has lots of gold in the vault while very little is being claimed at any given time.
So, he gets an idea. He starts issuing receipts on interest without any physical gold backing them up. Some other goldsmiths have started doing the same. Soon, people began to notice the rising prices of goods and services. Rumors started circulating that some goldsmiths did not have enough gold to redeem all the receipts they had issued. People started worrying about their deposits. As a result, they begin to redeem their receipts at the shops of goldsmiths with suspicious activity. Ultimately, there was a run. Goldsmiths with fractional reserves quickly went bankrupt, and their assets were auctioned to pay restitution to the losing customers.
Then comes this group of people who assure people that they guarantee everyone’s safety and security for a small tax. Some people accept it; others reject it. This group was powerful and had organized, armed, and trained warriors. People who refused its dominance were either subjugated or forced to migrate. This group also monopolized gold receipts and started issuing enormous quantities. People were back to where they started.
