Check your Financial Privilege

I recently read an interesting book called Check Your Financial Privilege- Alex Gladstein.  This started as a series of posts on Bitcoin Magazine. 

You can read some of the articles below.

Check Your Financial Privilege

 UNCOVERING THE HIDDEN COSTS OF THE PETRODOLLAR

FIGHTING MONETARY COLONIALISM WITH OPEN-SOURCE CODE

CAN BITCOIN BE PALESTINE’S CURRENCY OF FREEDOM?

The reason for the book is because they are very long and in depth articles such that many people may not read them on the internet. But if you want to, they are free there. 

Living in the USA it’s very easy to take a US centric view of the world. That view involves a relatively stable currency, at least for the last 40 years. The last time we really saw high inflation was 1982 when it was 6% and the few years before that. Since then it’s been under 5% and some years as low as 1%. Many other countries have not had this privilege. 

In the USA we also have a pretty robust stock market, averaging 9%/year in gains and usually about 6% over inflation.

Because many people are unable to trust their own currency they try to trust the USD to maintain their local purchasing power. This is not always practical as trying to transact in a foreign currency can cause a lot of confusion. Change may also not be available. 

Two countries that I highlight below have had very high inflation over the last year (and years), relative to the USD. Those countries being Argentina and Haiti. They have lost 25% vs USD  for Argentina Peso and 27% for the Hatian Gourde respectively.

Many people complain about Bitcoin’s volatility. For example, if you had bought BTC in the USA 1 year ago you would be down 20% but since these other countries have such high inflation if people in Argentina and Haiti had held BTC instead of their local currency they would have maintained their purchasing power instead of losing 25%.

Even the Euro, which is a relatively stable currency, has only lost 7% relative to BTC over the last year, whereas the USD has lost 20% over the last year. Bitcoin’s performance over the last year relative the the dollar, the strongest currency, which is not widely available, really only highlights the benefits of the dollar being the world reserve currency. 

Compared to many other assets, bitcoin has performed very well, even when measured against the Euro!

This is what is meant when saying we should “Check our Financial Privilege”. A real fear is that perhaps the USA will fall victim to extreme inflation in the future. 

While stocks have historically been an inflation hedge and will likely continue to be the best hedge, the USD as the world reserve currency may have completed its time. The world reserve currency has changed many times in the past. Before WW2 the British Pound was the world reserve currency. Before that it was the Dutch Guilder, which doesn’t exist anymore.

For a very interesting history on that you can read Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail – Ray Dalio.

Here is a short (1 hr) Youtube Video summary of the book, by the author, if you don’t want to read the book.  https://www.youtube.com/watch?v=xguam0TKMw8

In conclusion, when considering if “bitcoin is good for me” you should try to expand your scope a little. While you may not realize the problem of inflation, even low inflation, as it’s been ever present, many people around the world have seen the damage inflation has done and see the potential that bitcoin may provide to hedge against inflation.

USD to BTC –
May 22, 2021 – $37,59610
May 22, 2022 – $29,985.50
20.25% decrease

Hatian Gourde to BTC –
May 22, 2021 – 3,318,494.21
May 22, 2022 – 3,361,197.64
1.29% increase

Argentine Peso to BTC –
May 22, 2021 – 3,541,519.54
May 22, 2022 – 3,549,033.05
0.21% increase

Hatian Gourde to USD
May 22, 2021 – 88.27
May 22, 2022 – 112.09
27% increase

Argentine Peso to USD
May 22, 2021 – 94.20
May 22, 2022 – 118.47
25.7% increase

Euro to USD
May 22, 2021 – $1.22
May 22, 2022 – $1.06
13.1% decrease

Euro to BTC
May 22, 2021 – 30,863.91
May 22, 2022 – 28,415.65
7.93% decrease

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