Quick overview: why Sound Money Matters
There are volumes of work out there on Sound Money. Rather than rehashing work that’s been done before, I’d just like to start with a historical quote, and a table to illustrate the problem:
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years. These nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.
Notable Inflationary Events since 1900
| Country | Start and End Date | Peak Month and Rate of Inflation |
|---|---|---|
| Germany (Weimar Republic) | October 1921 – September 1923 | August 1922, 129%1 |
| Bolivia | 1970s – 1985 | 1985, 20,000%1 |
| Brazil | January 1985 – Mid-July 1994 | March 1990, 82.39%1 |
| Greece | July 1943 – August 1945 | June 1945, 302%1 |
| Greece (2nd episode) | October 1947 – mid May 1949 | April 1949, 5,070%1 |
| Hungary | January 1920 – January 1920 | January 1920, 56.9%1 |
| Hungary (2nd episode) | August 1922 – December 1923 | November 1923, 29,525%1 |
| Japan | June 1941 – January 1946 | December 1944, 3.0×10^10%1 |
| Japan (2nd episode) | August 1945 – July 1946 | July 1946, 41.9×10^15%1 |
| Philippines | January 1944 – December 1944 | January 1944, 60%1 |
| Peru | January 1989 – September 1990 | August 1990, 397%1 |
| Poland | January 1923 – December 1923 | October 1923, 275%1 |
| Poland (2nd episode) | January 1990 – December 1990 | January 1990, 77.3%1 |
| Soviet Union | January 1922 – December 1924 | January 1924, 787%1 |
| Turkey | January 2018 – June 2023 | March 2022, 60%1 |
| Venezuela | November 2016 – Present | April 2018, 18,000%1 |
If you’re reading this document you’re likely very well versed in why Bitcoin exists and how it works. You’re also probably young enough to not remember the inflationary 1970’s. I do, and I had the uncommon experience of also living in Brasil in the 1980’s while their hyper-inflation was happening, and I remember stores repricing products multiple times a day.
Inflation is a real problem, and if it happens again in the developed world most people will have no defense, and will not even be able to comprehend what’s happening. That is why I’m writing this document, and this is why Sound Money is important.
Sound money Definition
Sound money refers to a stable and reliable form of currency that holds its value over time. It is a monetary system where the money in circulation is not easily manipulated or subject to sudden changes in its purchasing power.In practical terms, sound money means that the value of the money you have today will likely be similar in the future, allowing you to trust that your savings and investments will retain their worth. This stability helps individuals, businesses, and the overall economy plan for the future with confidence.One important aspect of sound money is that it is not easily created or destroyed. When a currency is printed excessively or its supply is increased rapidly, it can lead to inflation. Inflation erodes the purchasing power of money over time, meaning that the same amount of money buys fewer goods and services. Sound money, on the other hand, strives to maintain a steady and controlled supply, reducing the risk of inflation.Another aspect of sound money is that it is typically backed by tangible assets or has a predetermined value. For example, in the past, some currencies were backed by gold or other valuable resources. This provided an intrinsic value to the currency and ensured its stability. Nowadays, many currencies are fiat currencies, meaning they are not backed by a physical asset but rely on the trust and confidence of the people using them.Having sound money is beneficial because it encourages saving, investment, and long-term economic growth. When people can rely on the stability of their money, they are more likely to make wise financial decisions and have confidence in the future. It also helps protect individuals' purchasing power and safeguards against the negative effects of inflation.In summary, sound money refers to a stable and reliable form of currency that holds its value over time. It promotes economic stability, trust, and confidence in the monetary system, benefiting individuals and the overall economy.
Sound Money in History
