Inflation, the World’s Regular Monies and Cryptos

No matter what country you are, no matter how rising or ebbing the value of your money is, there is a fact that is not talked about enough: the grand world’s monies are together ever experiencing a marginal decrease in their purchasing powers; you do not even need to be an economist to know this, unless of course you do not really understand the economists’ terms I deployed here, but it is okay, you’d get what I’m trying to say as this conversation goes on. But first, let me give some insights into the terms used here. By marginal inflation, I’m trying to say it may look like your country’s money is enjoying some growth in value, but placed overtime, your money is only growing on the shortrun, on the longrun, your money is ebbing. This problem is not just about one country—developed, developing or underdeveloped, it is rather about the whole world. What a certain currency of a country can purchase in the same country some 10 years ago is not the same thing it can purchase now; there is decrease in purchasing power of every money everywhere around the world. In Nigeria, what #100 can purchase today is far lesser than what it could purchase some 10 years ago. To countries that are enjoying the good economies and their monies are becoming costlier in par with the monies of other countries, if placed overtime, it would be obvious that their monies are only getting costlier, but the purchasing power of the monies is decreasing even in the country that owns them. But what is the implication of this deflating purchasing powers of all monies across the world on cryptos, let’s have this talk.

Although, the basic reason for inventing cryptocurrencies is to decentralize monies and remove the influence of institutions and authorities from monies (so to say). This would mean that we are trying to globalize money (make the world spend the same money), we are trying to let the market factors be the true definer of the value of money, and we are trying to convert more regular money to crypto till regular monies go extinct. These establish that as long as the regular monies exist, they must have some kind of definitive relationship with cryptos, and this relationship could be direct or inverse (talking about the value of the two). But place the purchasing powers of the regular monies and cryptos overtime knowing that the purchasing power of the regular monies decreases on the longrun, can the purchasing power of cryptos have a direct relationship with the purchasing power of the regular monies? Or can it have an inverse relationship with same? Direct relationship is when they both wave alike (eg. the purchasing power of cryptos decreases or increases suit as that of the regular monies decreases or increases on the longrun), and inverse relationship is when they wave in different directions (eg. the purchasing power of cryptos increases as that of the regular monies decreases on the longrun, or vice versa). To answer the question I asked, I know the media and the crypto elites want to make you believe otherwise, but sorry to burst your bubble, the purchasing power of cryptos on the longrun cannot dance differently from how the purchasing power of the regular monies has been dancing since the inception of monies. As the purchasing power of regular monies is ever decreasing, that of cryptos is decreasing too, but no one is talking about that because we want you to notice only the increase in the value of cryptos par time. But then, value can increase while the purchasing power keeps decreasing. This is in fact the case usually.

However, because the purchasing power of cryptos is doing the same thing the purchasing power of the regular monies is doing on the longrun, that doesn’t mean cryptos are no good store of value, they are, and would always be. What it means is that no matter what money we are spending, no matter what the value of the money is at any time, the purchasing power of the money would keep decreasing, and this is not the blame of the money, but that is how every economy is designed; the markets keep existing because the value of their products must keep increasing—more money must follow any product at any point in time. When lesser money follows a product, the product is losing its value or going extinct. So it is normal that what certain money can buy now is lesser than what it could buy 10 years ago, and would be greater than what it can buy in the next 10 years. Don’t let purchasing power define your faith in the future of crypto; crypto would do what it is meant to do no matter what its purchasing power is.

About Olusegun Peters

  • Olusegun Peters is a businessman, a politician and a scholar. He is passionate about impacting as many people as possible one person at a time. Read more about Olusegun here

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