Why Does Inflation Happens ?

April 15, 2022

Darko Simunovski

Tokenpaddock.com content is written in English. Translations into other languages are automated and there may be minor text errors.

Choose Language: 

We believe that today’s economy is based on principles that are not supported by nature, it is centralized and takes away the power of the individuals.
First of all, it must be understood that this inherited economy is based on debt and inflation.

Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of goods and services in the economy over some period of time. The rise in the general level of prices, means that a unit of currency effectively buys less than it did before.
The Great Depression was a severe worldwide economic depression that took place

After the period of “Great Depression” (that lasted one decade from 1929 to 1939) and World War 2, in 1944 a new monetary system was imposed and the creation of IMF (International Monetary Fund) and World Bank. In Bretton Woods era, the USD currency was bond with the gold (1oz of gold was bond with $35) and the rest of the world had USD as currency reserve. In that period, certain amount of gold had to be kept on deposit as a guarantee of the value of the US dollar put into circulation. It is not surprise that ’50s and ’60s were the only period (in modern human history) that had real economical progress. In 1971 USA decided to leave the golden standard and money become fiat currency.

the time of great depression historical photo

Since the end of golden standard in 1971 and until today, the central banks with the government can decide to issue more banknotes (money supply) than the real budget (GDP) can afford, with no restrictions whatsoever. In most cases of high inflation, the reason is that there is too much money in circulation. So that being said, it means money comes of a “thin air” and that’s why they are called FIAT CURRENCY. The term “fiat” is a Latin word that is often translated as “it shall be” or “let it be done” or faith. Thus fiat currencies only have value because the government maintains that value, but there is no utility to money in itself.

Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a gold backing it.

The foundation of today’s banking system was set in the 17th century! The (method) system of FRACTIONAL RESERVES BANKING was established. The purpose of such a system was implemented to stimulate the economy and to expand customer deposits in banks.
This means that banks should keep only one tenth of the deposit funds.
For example, if the bank receives $100 as a deposit, it keeps $10 as a deposit, and the rest can be used for lending, or giving credit to another person and companies, thus creating more DEBT.
This means that banks lend from non-existent money and still profit from transactions and interest rates.

Fractional Reserve Banking

In 2007 another global Financial Crisis happened driven from bad central economical policies. Housing price bubble was one of the reasons, because banks encouraged millions of people to borrow beyond their means to buy homes they couldn’t afford. Another main reason for the economical crash was that banks and subprime lenders kept up the pace by selling their mortgages on the secondary market in order to free up money to grant more mortgages.

Today there is almost every country with a high inflation rate and wherever the crisis deepens so does the interest in cryptocurrencies to preserve the true value of our savings.

The energy crisis will deepen, and thus inflation will increase, but the value of the crypto market will continue to grow.
As a result of the sanctions imposed on Russia, the whole world is feeling the negative economic consequences.
Due to the exclusion from SWIFT banking system, they are so desperate in finding ways for revenue from delivered energy like gas or oil, that they added Bitcoin as payment option.

SWIFT system doesn’t transfer money, it only gives information of transaction and it can approve or deny any transaction, the real transfer of money are made by the banks.

Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a member-owned cooperative providing secure messaging for international transfers of money between participating banks. Since 1973 SWIFTnet messaging system lets banks share information about financial transactions.

The survival of the state depends on domestic production, and MONETARY and FISCAL policies are crucial for the living standards of the people in the country. Monetary policy refers to the actions of a central bank to influence a nation’s money supply, influences the employment situation and manages inflation, while on the other hand Fiscal policy manages two main areas like taxation and government spending.
Prices rise when the government prints too much money in supply, high inflation rates the currency is debasing and increases the cost of living.

It is obvious that the society of the 17th century and today, are totally different in every way and it is quite natural to have an evolution in the way of life, so it is quite normal to have changes in our view of the economy and our perception of money.

Thus, in November 2008 Bitcoin whitepaper was presented, marking the new era of Economy. Cryptocurrencies, such as Bitcoin, have emerged over the past decade as a challenge to the inflationary nature of fiat currencies.

Bitcoin whitepaper

Bitcoin and other cryptocurrencies gave new perspective and opportunity for every individual on planet earth, with the emerging of the new technology and finance, humanity was given a new realm of reality, a chance for real prosperity.
Cryptocurrencies with the decentralized Blockchain gave everyone in the world an equal opportunity to have access to finance and to manage their own assets without any intermediary whatsoever.
Cryptocurrencies are deflationary by nature due to their specifications, the profits are distributed among all participants in the network. Just with the holding of a digital asset, you own part of the network.
Today most of the cryptocurrencies are decentralized, they do not have a central authority, group or any entity that has full control of the network. Also there are cryptocurrencies that are very centralized, and the only reason they are in class of crypto is because they use encryption for transferring data like XRP or STELLAR.

Education is necessary in order to understand the features of any digital asset. It’s that direction that www.tokenpaddock.com will continue to function in that direction to educate everyone through our website content and educational courses/workshops where you can learn everything about crypto including practical DeFi trading.

High inflation is the guarantor of the success of Bitcoin and the crypto market.
Cryptocurrencies have proven to be essential for human freedom, and the biggest test to date has been in war.
Refugees from Ukraine learned overnight to transfer their finances to cryptocurrencies, while Russians were forced to learn about decentralized finances to save some of their savings due to restrictions.
It is for these reasons that it is essential for each individual to understand the basic fundamentals and to be educated so that they can enjoy all the benefits.

This situation proved another use-case of cryptocurrencies, even in time of war and economical restrictions, Crypto turn up to be the best way to transact value without censorship.

I am confident that the value of the crypto market will continue to increase, and in the meantime, we will encounter all kinds of regulations in the world in order to impose a central power on the crypto market ecosystem.
My prediction is that the crypto will hit new ATH records this year. It is likely that in 2 or 3 years the capital of gold will be exceeded, which is over 12.3 trillion US dollars. In time, the example of El Salvador for Bitcoin as legal tender and national reserves currency will be followed by other counties, and at some point in future, it will be established globally as a new norm standard.

DISCLAIMER: Content of this website references an option and is for information purpose only. It is not intended to be investment advice. Seek a licensed professional for investment advice.

Changing crypto to cash or vice versa for only 1.5%!

Be part of the crypto community and connect with like-minded people to exchange knowledge and experience.

Crypto Dive In
brings you closer to the world of cryptocurrencies!

???? The first digital crypto exchange in Macedonia

???? Buy and hold Bitcoin and other cryptocurrencies

???? Converting your crypto to currencies and vice versa

???? Physical or Virtual Card for purchases – ApplePay & GooglePay

???? Withdraw cash from select ATMs – NO FEES

???? Instant transfer of euros to over 180 countries – NO COMMISSION

???? From any location with just your mobile phone


Place your ads here:


3 Months/120€


Join Our Newsletter

Get the latest news in crypto world, analysis and more. We promise we wont spam.

Recent Posts