In my first article for the Cointelegraph I tried to explain the value of Bitcoin to citizens of countries that practice capital controls, which are usually countries with less economic development.
A day later, I read an article where the president of the Central Bank of Brazil exposes his lack of understanding and appreciation about digital currency, which could be such a boon to citizens of my native country, Brazil.
I believe that the best way to explain it is through practical examples, so I will summarize my experience with the legal tender currency of my country.
I was born in 1981, during the decade of hyperinflation in Brazil, I remember that it was normal to see the supermarkets crowded during the first week of the month. This is because on payday, everybody groceries for the entire month since prices were changed every day, sometimes more than once a day.
Our money lost value every minute, while the government’s printing machine worked at a frenetic pace.
During more than 10 years of hyperinflation, several leaders sitting in the chair of the Finance Minister or the President of the Central Bank tried to reduce or minimize inflation. They didn’t do it the hard way, and the way that might have worked, by cutting government spending. Instead, these men had pipe dreams, coming up with economic plans they thought were most miraculous.
One of these pie-in-the-sky plans definitively marked the Brazilian people. During the government of President Fernando Collor, the Minister of Finance, Zelia Cardoso de Mello, confiscated all the money that Brazilians kept in banks. The idea was simple: without money there would be no demand for products, so inflation would be controlled.
Obviously this didn’t work to save the economy, but it did devastate many Brazilians. Some, like my grandfather, relied on their life savings to pay for their medical care. These people were badly hurt.
What does history teach us?
Second, inhabitants of countries that have already experienced economic chaos know how valuable it is to have assets that cannot be confiscated overnight. Today we have examples such as Venezuela, and a few years ago, Argentina.
There is a popular saying in Brazil that a dog that has been bitten by a snake is afraid of a sausage. In America, you might say “once bitten, twice shy.” Those who have lived through hyperinflation can really understand the value of a deflationary currency.
That’s why we love Bitcoin, and why most of the central bankers hate it. Deep down they are envious, even fearful, of Bitcoin’s economic model. Bitcoin has achieved what is impossible for them, the creation of the first truly deflationary currency that’s free from the mismanagement of governments.