This blog is by no means a push to make you run blindly into investing. The main aim is to educate and be informative about the economic environment in order to enable ourselves to make sound investing decisions.
Investing can be very risky if you go in blindly without understanding the economic environment as well as your investments. So lets first invest in Financial education to build the correct base before you go on a shopping spree.
History of Primitive money:The tale of the Rai stones on Yap island and how money loses its value.
The Rai stones used as money were large circular disks with a hole in the middle that weighed up to 4 metric tons. Their beauty and rarity made them desirable, but procuring them was a labourous process of quarrying and shipping with rafts and canoes. Some rocks required hundreds of people to transport. No matter how desirable these stones were it was not easy to inflate the supply and hence a very valuable and a successful form of money.
Unfortunately this changed in 1871, when an Irish American arrived at the shores of Yap and was trying to trade coconuts but didn’t have the currency the Yap people would accept. As a solution to his problem, he went to Hong Kong and procured a large boat of explosives to enable him quarry the large Rai stones. Suddenly there were too many stones available and it became unwise for the Rai people to use these stones as a store of value across time.
Moral of the story is that, for a good to maintain its value it is necessary that the supply does not increase drastically during the time of holding. The difficulty of producing new monetary units determines the hardness and value of money, while easy money is money whose supply can be easily increased in large amounts, which leads to loss of value over time. History tells us that we are currently at risk of devalueing our currencies due to the current excess printing that is taking place.
Why do some economists believe that BITCOIN is the Money of tomorrow and the best store of value going forward?
Bitcoin is a new invention of the Digital Age
-It is scarce-only 21 Million
-It has no owner
-No authority can decide on its fate
-It is owned by the crowd, its users
-Bitcoin is a currency without government
-It is the first organic currency.
-Its existence is an insurance policy that reminds governments that currency is no longer their monopoly
Below is a quick chart describing the traits of money comparing Bitcoin, Gold and Fiat( another word for government money that we are currently using). You will notice on this chart that Bitcoin is dominating in fulfilling the key traits of Money. An in depth deep dive of Bitcoin will follow as you familiarize yourself with the topic.
