Understanding Fiat Base Money and Central Banking

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Fiat base money is a crucial yet often misunderstood component of the financial system. It comprises the liabilities on a central bank's balance sheet, which can greatly illuminate the workings of the monetary system. Traditional fiat base money consists of physical currency, like notes and coins, but today, the more significant portion is made up of bank reserves. Central banks, which typically operate as monopolies, often provide limited transparency about their operations, making it essential for individuals to research and understand the underlying data available on central bank websites. This knowledge helps demystify how central banks influence financial markets, primarily through the purchasing and selling of sovereign bonds, which are their assets. The Federal Reserve, for example, has evolved from holding no bonds to owning about 20% of all U.S. treasury debt, indicating a substantial shift in its asset management strategy over the past century. Understanding these dynamics of base money is vital for grasping the broader economic implications of central banking and monetary policy.

In this episode, Matthew Mežinskis shares insights from his 6 years of research on base money trends, inflation vs. deflation, and the growth of Bitcoin. We delve into historical examples like Kublai Khan, examine the impact of population growth, and explore why central bank actions now face greater scrutiny. Mežinskis also explains why he views CBDCs as mere imitations of Bitcoin's success and sheds light on Bitcoin’s long-term growth potential.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:37 - What "base money" is and its current trends in the global economy.

05:17 - Why people are scrutinizing central banks more now than in past decades.

21:03 - How Bitcoin’s compound annual growth rate compares to traditional assets.

31:15 - The role of population growth in monetary trends.

35:08 - The potential impact of Bitcoin adoption on the global economy.

38:59 - Bitcoin’s supply dynamics during price stability and what that signals for the future.

43:03 - Why Matthew refers to CBDCs as "LARPing" on Bitcoin’s success.

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

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