a source familiar with the matter on Nostr: Metaphor of how we got fiat currency: You check your coat (gold) into the coat check ...
Metaphor of how we got fiat currency:
You check your coat (gold) into the coat check (bank) and get a paper ticket (note or bill).
The coat (gold) is the real thing of value, and the ticket (note) is just a stand-in for it.
If all the coat check (bank) requires to give you back your coat (gold) is the ticket (note), you can transfer the ticket to someone in order to transfer the coat.
Imagine the coat check (bank) starts issuing more tickets than they have coats.
This is inflation.
This allows them to transfer more coats worth of value than they actually possess, but if the people all came and demanded their coats there wouldn't be enough.
To resolve this in a free market, the coat check (bank) would be seized by authorities and the directors made to provide the coats (gold) they had promised - out of first coat check (bank) property and if that's not enough out of their personal property.
Instead, the authorities were cut in on the deal and allow the coat check to operate without providing any coats (gold) at all.
This is fiat currency.
The fiat mindset shuffles currency around without any underlying money. We have claims for money, which in ancient times were actually redeemable for money, but now we are so psyoped we call these defaulted paper claims "money".
Bitcoin gives us a decentralized coat check with more sensible rules. But where are the coats?
You check your coat (gold) into the coat check (bank) and get a paper ticket (note or bill).
The coat (gold) is the real thing of value, and the ticket (note) is just a stand-in for it.
If all the coat check (bank) requires to give you back your coat (gold) is the ticket (note), you can transfer the ticket to someone in order to transfer the coat.
Imagine the coat check (bank) starts issuing more tickets than they have coats.
This is inflation.
This allows them to transfer more coats worth of value than they actually possess, but if the people all came and demanded their coats there wouldn't be enough.
To resolve this in a free market, the coat check (bank) would be seized by authorities and the directors made to provide the coats (gold) they had promised - out of first coat check (bank) property and if that's not enough out of their personal property.
Instead, the authorities were cut in on the deal and allow the coat check to operate without providing any coats (gold) at all.
This is fiat currency.
The fiat mindset shuffles currency around without any underlying money. We have claims for money, which in ancient times were actually redeemable for money, but now we are so psyoped we call these defaulted paper claims "money".
Bitcoin gives us a decentralized coat check with more sensible rules. But where are the coats?