Hey Jesstechies
Technology has reshaped our world and is now firmly part of our daily lives; we use it to better so many parts of our lives, education, transport, trading, communication, and so much more. Technology not only works when we want it to, but it also works all the time, it never stops and only seems to get better.
In a healthy and functioning economy, people are always looking for ways to do things easier, so these talented guys and girls called entrepreneurs think to themselves, hey I have an idea on how to do things better and they start a business.
They try to offer customers better service at lower prices. If a business has healthy fat margins for doing something, you bet your ass some other business owners are going to come in and compete and thus drive margins down. Goods become even cheaper and better as they fight for customers money.
Business is about making things, cheaper, better and faster, always have, always will.
Technology drives runaway deflation
In the past entrepreneurial gains in the deflation was limited to their hours of labour, but now with the help of technology and AI, ideas can come to life in new ways. Services can run 24/7, and all companies are trying to do is make that technology, faster, cheaper and better, and you best believe they are going to get it right.
So what's that got to do with inflation and the fisher effect?
As the world becomes cheaper, better and faster, governments try to derail this and "smooth" out the transition through fiat money. Instead of everyone realising the gains of deflation, they obliterate their currencies through deficit spending and inflation.
This means deflationary gains only go to those with assets and not those who live and work for cash. It's deflationary apartheid, and they shift wealth we all should share into the hands of the few.
Now back to the fisher effect
What is the Fisher Effect
The international Fisher effect is a hypothesis in international finance that suggests differences in nominal interest rates reflect expected changes in the spot exchange rate between countries.
Yeah, yeah, yeah but what does that mean?
We've been taught when you save money you get paid interest; the interest is then used to beat inflation and give you a return on your purchasing power.
Now with the debt crisis, we have around the world, and artificially low-interest rates and crazy money printing the fisher effect is entirely in effect in a negative way.
Let's take my nation of South Africa, it's said our core inflation is around 4.2% which is a load of rubbish, its probably closer to 10 but let's give them 4.2, shall we.
Since I am only getting 1.9% interest on my savings at the bank, I effectively lose 2.3% of my purchasing power each year.
Inflationary monetary policy is breaking under the weight of technological deflation and that's why things are not making sense and why fundamentals of investing don't matter anymore in the traditional financial sector.
A one-trick pony vs a rapidly expanding world
As technology gobbles up the labour market, takes away jobs, gives us more free time, drives down costs of production, it means it becomes harder to pay off debt. To service the debt that companies, governments and individuals have, they require inflation to meet these nominal numbers they are obligated to pay.
Debt doesn't care about purchasing power, only the nominal realisation that it is paid off, thus debt doesn't matter, you can hyperinflate it away.
So as technology continues to improve, governments will continue to fight that deflation with inflation, and they're going to lose. Eventually, we will hit hyperinflation status its only a matter of time.
If you think governments and economic policy and beat technology, then go long fiat currency, by all means, I'll gladly take your gains by going long BTC.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
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