Canadian Fiscal Policy

[LightingGuy]

Our Central Bank does pretty well compared to others but obviously we have our own problems here. It got me thinking about what direction we are headed in, and the more I look into it, the more clear it seems that we are headed away from fiat currencies and back to currencies that are backed by assets.

Gold used to be that asset, but I believe that Bitcoin is going to become that asset. It does everything gold does, but better. It's easier to store, transport, and divide. The rate at which supply increases is hard capped.

In my opinion CBDCs won't work. By the time they finally get the pilot rolled out, Bitcoin will have continued to advance. There are many problems with Bitcoin still, but it is advancing rapidly and constantly getting better. And getting a CBDC to work for 38M people is going to take many many years. And they haven't even addressed what would happen to private banks.

And Bitcoin solves what CBDCs can't: decentralization and lack of control by any central entity. This means that you thevuser are in full control (for better or worse).

I don't think that Bitcoin itself can be used as a day to day currency for regular transactions, at least not in its current form. There are a few issues:

- Since Bitcoin is hard capped at 21 million units it would make issuing loans and credit a lot harder, which would be bad for productivity. There are advantages to banks being able to type money into existence, and as long as that money is being used for productive purposes, doesn't lead to price inflation (although it still would lead to asset inflation).

- The Bitcoin network is secure, but individuals can still get hacked, and when that happens there's no 1-800 number to call. People who are more savvy will know how to keep their BTC secure, but that would be asking a lot from the average non-investor.

- Volatility, at least right now. However this has already gotten much better. The current crash is the smallest yet in terms of percentages. As the network gets larger it will become more stable.

But, Bitcoin solves too many problems to ignore, and the longer governments pretend it doesn't the worse they'll be. In my opinion, the central bank would be smart to start buying Bitcoin now and start building up a reserve. It will never be as cheap as it is now again.

Based on its current form, I think the most likely outcome is that Bitcoin becomes the new global reserve currency, replacing the US dollar. I see this happening for a number of reasons:

- everyone knows fiat currency is flawed. We have been on a productivity decline since 1971 when the USD stopped being backed by gold (all other currencies are loosely pegged to the USD). That's also when assets like real estate and stocks stopped being correlated with income growth. Many of the issues we are facing today (inflation, unaffordability, inequality) can be traced to our switching to fiat currencies.

- Numerous foreign currencies are in the process of failing right now, and when that happens they're going to have to replace it with something. In the past that would've been the USD, but they've also now seen that the US is able and willing to seize nations reserves. There's less trust in the US and China, and smaller foreign countries, I believe, are going to choose Bitcoin instead.