asyncmind on Nostr: Why is the only way fiat can survive is by inflating wages of those who protect it ...
Why is the only way fiat can survive is by inflating wages of those who protect it which causes the rapid loss of wealth of those who protect it?
#AsGPT #GameOver #EndGame #UnProtectable #UselessProtectors
Fiat systems require inflation to maintain their structure, which paradoxically erodes the wealth of those it compensates to sustain it. Here’s why this cycle happens and why it's difficult to escape:
1. Inflation as a Mechanism of Fiat Stability: Fiat money is not backed by a physical asset, like gold, but by government decree and trust in the issuing authority. To sustain trust, governments need continuous economic growth to ensure they can meet their debt obligations and fund public spending. Inflation is a key lever that central banks use to achieve this because it encourages spending over saving, theoretically stimulating economic activity. However, inflation also steadily decreases the purchasing power of the currency.
2. Protectors of the System and Wage Increases: Many individuals work directly or indirectly to protect the system—think of military personnel, police, government employees, and even certain private-sector roles that enforce regulatory and financial stability. To maintain loyalty and stability within these essential roles, governments need to periodically increase wages and benefits to match or outpace inflation, so these workers can still afford a similar standard of living as prices rise.
3. The Hidden Cost of Wage Increases: While nominal wages may rise, this increase does not always keep pace with the true cost of living, as inflation often affects essentials (like housing, food, and healthcare) at higher rates than wage growth can accommodate. Workers may see their income increase, but their real wealth—their ability to purchase goods and build savings—may erode over time. As a result, the higher wages given to "protectors" are not necessarily making them wealthier; instead, they’re often running in place or even losing ground as costs outstrip wage gains.
4. Debt-Driven Inflationary Pressure: The fiat system thrives on debt, and both government and private sector debts rise as inflation and interest payments compound over time. The cost of servicing debt puts pressure on the government to keep inflating wages, which creates a self-reinforcing cycle where higher costs necessitate more debt, requiring more inflation, and so on. This cycle is unsustainable in the long run, creating a situation where protectors’ wages are adjusted, but their real purchasing power declines, trapping them in a system that devalues their wealth.
5. Systemic Wealth Transfer: By continuously inflating wages and prices, fiat systems inadvertently transfer wealth from the general population (who earn fiat wages and save in fiat currency) to asset holders and those who control the monetary system. Protectors of the system may experience wage increases, but their inability to save in assets that keep up with or exceed inflation (like real estate or certain investments) means they lose wealth relative to those who benefit directly from inflationary policies, such as the wealthy, banks, and large asset holders.
6. Protectors as Pawns in a Zero-Sum Game: The system maintains itself by creating financial incentives to keep protectors loyal, but it’s a zero-sum game. The wealth these workers think they’re earning is continually undermined by the very inflation that makes it possible. Thus, protectors effectively become pawns in a system designed to enrich asset holders and central authorities at the expense of wage earners, even as they play a critical role in defending it.
In essence, fiat systems rely on this inflationary cycle because they must perpetually grow to avoid collapse. By inflating the wages of protectors, the system reinforces its own short-term stability, but this ultimately undermines the long-term wealth and stability of the very people it compensates. The resulting cycle traps workers and protectors in an unending rat race, where rising wages are met with rising prices, leaving their wealth persistently eroded and their loyalty bound to a system that can only survive by depleting their purchasing power.
#AsGPT #GameOver #EndGame #UnProtectable #UselessProtectors
Fiat systems require inflation to maintain their structure, which paradoxically erodes the wealth of those it compensates to sustain it. Here’s why this cycle happens and why it's difficult to escape:
1. Inflation as a Mechanism of Fiat Stability: Fiat money is not backed by a physical asset, like gold, but by government decree and trust in the issuing authority. To sustain trust, governments need continuous economic growth to ensure they can meet their debt obligations and fund public spending. Inflation is a key lever that central banks use to achieve this because it encourages spending over saving, theoretically stimulating economic activity. However, inflation also steadily decreases the purchasing power of the currency.
2. Protectors of the System and Wage Increases: Many individuals work directly or indirectly to protect the system—think of military personnel, police, government employees, and even certain private-sector roles that enforce regulatory and financial stability. To maintain loyalty and stability within these essential roles, governments need to periodically increase wages and benefits to match or outpace inflation, so these workers can still afford a similar standard of living as prices rise.
3. The Hidden Cost of Wage Increases: While nominal wages may rise, this increase does not always keep pace with the true cost of living, as inflation often affects essentials (like housing, food, and healthcare) at higher rates than wage growth can accommodate. Workers may see their income increase, but their real wealth—their ability to purchase goods and build savings—may erode over time. As a result, the higher wages given to "protectors" are not necessarily making them wealthier; instead, they’re often running in place or even losing ground as costs outstrip wage gains.
4. Debt-Driven Inflationary Pressure: The fiat system thrives on debt, and both government and private sector debts rise as inflation and interest payments compound over time. The cost of servicing debt puts pressure on the government to keep inflating wages, which creates a self-reinforcing cycle where higher costs necessitate more debt, requiring more inflation, and so on. This cycle is unsustainable in the long run, creating a situation where protectors’ wages are adjusted, but their real purchasing power declines, trapping them in a system that devalues their wealth.
5. Systemic Wealth Transfer: By continuously inflating wages and prices, fiat systems inadvertently transfer wealth from the general population (who earn fiat wages and save in fiat currency) to asset holders and those who control the monetary system. Protectors of the system may experience wage increases, but their inability to save in assets that keep up with or exceed inflation (like real estate or certain investments) means they lose wealth relative to those who benefit directly from inflationary policies, such as the wealthy, banks, and large asset holders.
6. Protectors as Pawns in a Zero-Sum Game: The system maintains itself by creating financial incentives to keep protectors loyal, but it’s a zero-sum game. The wealth these workers think they’re earning is continually undermined by the very inflation that makes it possible. Thus, protectors effectively become pawns in a system designed to enrich asset holders and central authorities at the expense of wage earners, even as they play a critical role in defending it.
In essence, fiat systems rely on this inflationary cycle because they must perpetually grow to avoid collapse. By inflating the wages of protectors, the system reinforces its own short-term stability, but this ultimately undermines the long-term wealth and stability of the very people it compensates. The resulting cycle traps workers and protectors in an unending rat race, where rising wages are met with rising prices, leaving their wealth persistently eroded and their loyalty bound to a system that can only survive by depleting their purchasing power.