Yesterday I was listening to one of the episodes in The Rich Dad podcast on the future on Bitcoins.
One of the moot points discussed in the episode was Gresham’s Law which simply states the following
Bad money drives out good money in circulation
In my previous post I talked about US printing dollars and printing into the market. This is essentially bad money coming into the system. The optics around may look like bailout package, but it is very bad economics.
Come think of it, when Gmail launched, it was available to signup only through referrals. Getting a Gmail account in 2004s was a really prized possession. The Gmail accounts were scarce and value of it was more. Today when it is freely available, value of getting Gmail account is not something to talk about.
Same way if Government’s pump money they are essentially devaluing the currency and people who have money in banks, deposits and bonds are actually losing the money because the intrinsic value of the money is eroding. So we are staring at a two pronged issue here(a) Inflation (b) Currency deflation due to oversupply. So essentially the value of $1M in your hand which you feel good for a retired life today will fast erode in value just by you doing nothing.
Coming back to the podcast it was a great conversation between Robert Kiyosaki and Robert Breedlove.
Some of the predictions coming out of that podcasts are mind-blowing.
In 2031 — price of Bitcoin would $12.5M per coin (which as per today’s value would be $1M). Inflation by 2031 would have eroded value of $12.5M to $1M
In 2031 — US is going to be $500T economy
By 2031 — lot of currencies are going to collapse and merge into USD. Today countries like Zimbabwe, Venezuela, Argentina are going through upheaval, and their Governments are printing money and making the problem worse.
Bad money is not just about government printed excess, in India we have problem of fake currency too which can drive up prices, black economy and ruin the economy if not checked.
And another thought provoking fact from the podcast is if Government’s start printing money, eventually it will lead to crisis in terms of war (before WW-II, Germany printed money to keep buying arms and eventually lead to the war). In 1780s France had lopsided policy of printing money which led to the French Revolution.
