As parents, my wife and I understand the value of rules. Our job is to guide our kids through their own path of self-discovery, shaping them into the people they are meant to be. Rules provide some guardrails and keep the young ones safe.

“Make sure you look both ways before you cross the street.”

“10 minutes left until all screens are off.”

“Only one junk food snack.”

That being said…… kids have this inherent nature to want to push the boundaries. If these rules were represented by a physical wall, separating what they should do and what they want to do, their goal at times is to scale the wall and see how fast they can run into the forbidden zone until they are reigned back in.

If my wife and I really want our kids to respect our wishes, we need to remain steadfast when exacting and following through on these rules. The more arbitrary and abstract our rules, the more our kids will get away with. The more concrete and firm our rules, the more likely they are to follow them.

But…..

What happens when the rule makers have to abide by their own rules?

At our most basic level, people will undoubtedly act in the way that provides them the most benefit. Our current monetary policy and the entirety of monetary history is a stunning betrayal of repeatedly changing the rules we had previously set in place.

For example, as a society, we have deemed gold to be a scarce desirable asset. This commodity was originally used as a unit of account, but in fair order, it was pretty obvious that carrying around gold in various forms posed many challenges. Gold was then held by certain businesses, and ledgers were created to determine how much gold was being used for purchases without transacting actual physical gold. Later on, the rules were changed again, notes were printed to denote values in gold, allowing money to pass more freely and unencumbered while still maintaining its purchase power over time with its gold backing.

Roll in August 15, 1971.

To maintain the U.S. dominance as a world reserve currency and provide additional velocity to the money supply, the United States jumped off the gold standard, meaning that the U.S. dollar no longer had to be backed by gold in its treasuries. This would allow a higher “velocity” of money, but the value of the dollar would begin its slow inflationary leakage.

Fiat stands for “Let it be done,” or “by decree.”

With the freedom to now create new money with no energy/work input necessary, inflation begins to grow. Pair that with our current mathematically unpayable debt as a nation boasting a 120% Debt to GDP ratio, we are well on our way to collapse.

A study of 775 fiat currencies indicates the average life expectancy of fiat currencies is 27 years, with some taking a month to crash and others surviving for centuries. (Business Insider)

Historically, all attempts at maintaining a fiat currency have failed.

To think somehow “this time is different” is laughable. Our purchasing power has continued to decline since its inception, and inflation kicked into overdrive in the 1970’s.

The failed fiat experiment has played over and over. The United States at some point will suffer the same fate. Maintaining a fiat currency’s value is an uphill climb with no flag plant or celebration at the summit. The only inevitable outcome is a tumble back down the slope.

The rules that apply to our fiat currency and credit-based system are abstract. Arbitrary. Not built upon a foundation of inescapable truth.

That leads us to consider what system, based on truth, is substantial enough to become the base layer of value for our financial system?

Bitcoin has been building for the last 14 years, to become a bridge and escape hatch for our broken fiat system.

We currently hope and are forced to trust our leaders and their fiscal decisions. As with all the previous 774 fiat currency systems, this has led to disastrous results.

You do not need to trust Bitcoin or hope that Bitcoin will act in a way that is in your self-interest. The Bitcoin Network is audited every 10 minutes for accuracy by at least 10,000 different nodes (computers running the Bitcoin software) spread out around the world. The network has never been hacked or tampered with.

In contrast, JP Morgan Chase, one of the larger United States financial institutions alone has 223 violations on record since the year 2000, with fines totaling over 36 Billion Dollars.

Bitcoin has no CEO, CFO, compliance officers, or board of directors.

Bitcoin simply obeys two rules.

Physics and Math.

These rules are not abstract, cannot be altered, and provide a bedrock of stability for the base layer of a new financial system.

Next week, I will dive in-depth into how is it that a computer software protocol is bound by these laws of nature and why that is so crucial to understand.