Why Bitcoin Can't Replace the US Dollar (Fiat)

Can Bitcoin / cryptocurrencies replace the US dollar / US government and fiat currencies? Can Bitcoin be the revolution that takes down the fraud that is central / commercial banks worldwide? Have they finally gone too far with zero interest rate policies and quantitative easing? Probably, but believe it or not, that is besides the point. Bitcoin is not capable of implementing even some of the most basic functions of monetary policy.

For one, Bitcoin isn't even inflationary (well, it won't be in the long-term), which would be unhealthy for the economies it supports (especially for those driven by consumption). In addition, credit in a Bitcoin based economy would be rather difficult. Monetary policy helps alleviate both credit crunches and overheated economies through influencing interest rates.
While such actions have been controversial, they have worked well for us (literally US) over time and has helped create some of the wealthiest nations in the world by bolstering GDP by encouraging spending when it is slow and decreasing probability of the economy overheating.

Bitcoin would have to lose its function as a store of value to become a true currency that encouraged spending, in which case it would no longer really be an investment anyway. Instead, Bitcoin should operate as an alternative to traditional payment channels and fiat currencies for remittances and general business transactions for those who "opt-in." There is plenty of market share here and it is realistic.

Disagree with me? Feel free to share in the comments! Also let me know your thoughts on the idea of more controversial videos like this one. I love debate, so I think I'll be making them regardless. Thanks for watching!

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[CryptoInvestor]

Everyone - getting tons of comments, lots of them criticism, some nice ones. I read them all. I'll likely do a follow-up video for this at some point in future, but not going to throw it together haphazardly. I will likely write an article along with it (which forces me to cite all my sources) and also present the other side of the argument more fairly. Continue on commenting, it helps give new ideas for that video. I appreciate ALL of the feedback everyone, even the trolls.

[WerexZenok]

>"this system worked very well for us"
>20 trillion of debt

[Gussaxon]

It cant replace fiat currencies Crypto currencies are still valued in $'s. Its a massive flaw.

[dylanrathbun]

You lost me when you said employers will give more money to employees.

[CryptoInvestor]

EDIT: Loving the comments everyone! These are far more constructive than I expected and I am enjoying reading the arguments both for and against inflation / credit driven economies. Keep it coming!

I hope you all enjoyed the video - bit more controversial this time. I would love your feedback if you like these types of videos that go a bit into the "dark" side that many people who cover cryptocurrencies refuse to go to mainly because the masses riot any opinion that can be considered even partially "FUD."

I have a number of other controversial topics in mind too which I'll likely be delving into in the future. And don't worry, I got a big idea in mind for a very bullish article / video combination for Bitcoin as well. As usual, likes / comments / subs go a long way to supporting the channel (seriously). Thanks for watching.

[CoachShawStudio]

Rising prices "encourages" consumer spending ??? ... I must be too old to understand that logic, having experienced an economy where rent/mortgage costs did not exceed 1/5 of an individual's income, food costs even less; the majority of individual's income was free for savings & recreational spending ... I wish everyone would have had the same opportunity to experience those "old days"

[FH]

You don't need inflation to have healthy economy. Once people save enough, they will spend. Spending money they don't have is not necessary.

[bilthon]

People don't need to be incentivized to spend. We NEED to consume things, we need food and water for starters. You cannot possibly save all your income and still manage to survive. And when basic necessities are fulfilled we still have a desire to maintain and/or improve things around us, so the assumption that we need 2% inflation to stimulate this is just false.

[MrThaiLuan]

I remember as a kid, in Vietnam, there US currency was used as a store of value because people had no faith in the Vietnamese currency due to the instability of the economy and the inability of the government to guarantee stability. The US currency was and still is being used as everyday-money for normal exchanges of goods and services in the US... So a currency can be used as a store of value AND as normal exchange for value.

[tento]

The problem is that Bitcoins "value" comes from the promise that it will replace fiat, the moment you take that away bitcoin has nothing to stand by.

[maxavail]

All this is a huge misunderstanding. Bitcoin is currently going through the store of value phase of its life but that's only due to its being gradually adopted by the masses, process which inevitably turns it into a rare and desirable, thus increasingly expensive asset. Once adoption reaches its critical mass, bitcoin will return to what it was always meant to be: a currency.
And why do you need fiat inflation when you can create unlimited number of satoshis by dividing bitcoins indefinitely ? This alone can accommodate the need for any amount of credit on the market, while ensuring the purchasing power of the coin never goes down.

[awuun]

“The probability of some black swan event happening is so low”

2 years later: “oh hey Bill, can you put on your mask when you go outside? Also don’t forget to get your money out of fiat currencies!”

[jnby]

I don't agree or maybe I dont understand what you're saying about inflation. If you have a job that pays you $12 an hour and inflation gos up your job keeps paying you $12 an hour which is now worth less the company will raise the price of their product, fire people and replace them with robots to save money. You still get paid the same amount but now you struggle to pay for everyday things like gas and groceries. you're also not going to be spending money you don't have money to spend so you save everything and only buy what's necessary.

[xxChacaronXX]

I don't understand the top left of that spending loop 3:07 ... Rising prices should discourage people spending... no?

[cashflowmagi]

Bitcoin will scale overtime just like how internet grows. Credit can still be in the system as bonds with an dapp. Where the market decide to fund whichever project that is beneficial.

[Krath]

Didn't seem controversial to me. I read somewhere that Bitcoin has a theoretical transactions processing limit of like 3 transactions/sec and I'm pretty sure that couldnt even service the volume of Ebay or Paypal, much less Amazon, Visa, or the entire US economy. In my crystal ball I do see many specialized blockchains that will become ubiquitous in our society. Take internet-of-things concepts where when you buy a device you encrypt it with your personal private key and all these devices exist in their own blockchain and opensource, allowing for data-mining, analysis, and improvements without even the suspicion of being able to compromise anyone's security or privacy (Think Roomba's or Tivo's where people would want to analyze usage but you wouldn't want them to have any of your personal info like the layout of your house, or your love of Dancing With The Stars). Also there are alot of very smart people working on making cryptographic blockchains more scalable with things like sharding and proof of stake, maybe not whole world economy, but more than just a little or alot of network growth to look forward to IMO.

[christianchellis]

It would just be great to have A society where the value of the money is not controlled by beaureucrats. It’s controlled by no one.

[esepelisa]

I think you have a good point here. Very well explained too.
Thanks !

[khalilsabri]

finally someone in the space who understands that inflation is important in order to stimulate the economy, i just remember someone who said that : "people who believe that bitcoin will become a currency are either too naive or too optimistic", thank you for the video, im subscribing !!

[tomfromtartu]

I agree that bitcoin cannot replace national fiats, there are far better ones for everyday transactions. Even ETH and LTC.
Have an inflationary cryptocurrency to have the benefits of inflation. Or a government crypto. Let's say - miners get the transaction and network maintenance fees instead of banks, but all the new coins minted according to predetermined schedule, just land in the 1st wallet - the state owned wallet, but to access those, you need many people to agree on it. Or you can issue some temporary tokens like government bonds to pump out cash in dire need of investment. Also credit and loan can shift from central and private banks to public crowdfunding. Want to raise money for buying apartment or starting a venture? Crowdfund it. Smart contracts help to make sure that you are paying as you promised with the interest you promised. And even if some rich guy put in 95% and 50 guys the rest of the 5%, it can even be done so that each participant has 1 vote to decide what to do if the loan is not being paid off in correct schedule.