People follow the Bitcoin development and wonder wether is’t a Ponzi Scheme or not. I follow the USD and wonder whether it’s a Ponzi Scehem or not.
The amount of Currency you have represents your purchasing power. The economy is full with things that we need (and sometime not really need) this is wealth. Wealth is owned by people, or entities, usually using a social tool that is called Law. In order to measure wealth we use another tool which is called Money.
Most wealth is not very liquid. If you take all the Currency in an economy you are likely to be able to purchase about 5% of the wealth. It’s a rule of thumb. About 5% of the economy exchanges hands on a frequent basis, the other 95% is owned by the same people or entities for a long time.
Think about a huge private company. It is not really tradable. You can’t really take Currency and buy part of this company. It’s not traded on any stock exchange. It’s part of the 95%. Think about Google shares, some of them are easily tradable on NASDQ, this is part of the 5%.
You can’t trade sugar with a Google share. You need a tool to facilitate it, this is Money. So all the Dollars in the world can buy probably 5% of the US economy. It’s a rule of thumb. What happens when there is more and more Currency in the system, can you buy more than 5% of the economy? Nope! This is exactly the tricky point, if you produce more Currency nothing happens to wealth, wealth is the same. Currency is not wealth, it’s a tool to exchange wealth between people and in its entirety represents by and large the ability to purchase about 5% of the economy. (If Money is Language and Currency is Cords, then sometime if you just talk and talk and talk it doesn’t really help to communicate better it’s just adding more words to the same message… it’s like printing Currency. More things to represent the same purchasing power to buy 5% of the economy, the economy hasn’t changed!).
To make it simple, if there are $5 is the economy, each Dollar can buy 1% of the economy. If there are $10 in the economy each Dollar can buy only 0.5% of the economy (5% / 10 = 0.5%) if there are 100$ in the economy every Dollar can buy 0.05% of the economy (5% / 100 = 0.05%). So if you have 1$ at first you could have bought 1% of the economy, then only 0.5% of the economy, and then only 0.05% of the economy. Got it? If the government prints more Currency, you are worse off! You should not hold Dollars.
But it takes time to take effect. All these Dollars are owned by Chinese, Banks, and the minute they will realise the Dollar is a bout to collapse they will buy assets like crazy, prices will rise, and your Dollars will buy less. But don’t worry, they can’t buy everything, told you, all the Dollars in the world can buy only about 5% of the Dollar economy, i.e. the US.
So is the Dollar the real Ponzi Scheme? Without getting into much of a definition effort, I would’t advise to hold all your wealth as Currency. Better stick to real assets, like gold, houses, shares in companies, or even Bticoins, they will maintain their purchasing power even if the government will print gazillion Dollars. A house is a house is a house.
Eleven Thirty PM 