The Scary Thing About Holding Fiat

By positivitee | Thoughts and Prayers | 17 Dec 2020

Why holding fiat can be scary


While we celebrate Bitcoin hitting $20,000 again, let's look at the other side of the equation - and that is the US dollar. Why has the USD been so weak against physical assets - gold, silver and also digital currencies like Bitcoin and Ethereum in the last year?

Money Supply

USD M1 Supply Nov 30


To understand why the USD has been so weak relative to assets this past year, let's look at money supply and M1 in particular. M1 money supply refers to money that is very liquid such as cash, checkable deposits, and traveler’s checks.

US M1 Money Supply is currently at $6.543T, which is up from 3.960T a year ago. That's a whopping 65.23% increase in one year! With the Treasury injecting so much liquidity into the system, it is no wonder that asset prices get inflated!

Sucks To Be A Saver

Imagine you have been a prudent saver for the past 30 years. In an instance, the value of the dollars you have saved over the years become worth a lot less compared to financial assets. That's what is so scary about holding fiat - the rules of the game change arbitrarily without having any say in the matter! 

Sure, rules can be changed in crypto as well, but at least there are votes on the matter and where there is disagreement, there will be a fork of the coin and the parties can go forth with their own ideas. Not so in Fiat. 

Anyway, with there bein no sign to a stop of the money printing, it's no wonder that predictions like Bitcoin $400,000 are starting to make their way around the mainstream news.

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Thoughts and Prayers
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