Bitcoin can revive economy ...OK…. but how ?
So what is recession?
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock. This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale natural or anthropogenic disaster (e.g. a pandemic). The government manages the money supply available to spend or invest. During the recession the natural tendencies for government is to Print more paper notes. By doing so the government is trying to increase the the supply of money as the demand for money increases. The down side of over printing the notes is that the currency becomes fragile and its value of the currency is degraded that results in hyper inflation. Meaning buying the same product or services from the past will be more costlier in comparison to when there was no inflation. The question how is how will bitcoin do in a recession? Again the counter question could be can bitcoin help with the recession? And even if it has all the right tools to support the recession how it is going to happen. There are a lot of questions around bitcoin when it comes to recession.
What is Hyperinflation ?
In economics, hyperinflation is very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies, often the US Dollar. Prices typically remain stable in terms of other relatively stable currencies.
So when does a banking system fail ?
A large contribution to the recession was the closure and suspension of thousands of banks across the country. Financial institutions failed for several reasons, including unregulated lending procedures, confidence in the Gold standard, consumer confidence in future economics, and agricultural defaults on outstanding loans. With these compounding issues the banking system struggled to keep up with the public's increasing demand for cash withdrawals. This overall decreased the money supply and forced the banks to result to short sale (real estate) and liquidation of existing loans. In the race to liquidate assets the banking system began to fail on a wide scale. In November 1930 the first major banking crisis began with over 800 banks closing their doors by January 1931. By October 1931 over 2100 banks were suspended with the highest suspension rate recorded in the St. Louis Federal Reserve District, with 2 out of every 5 banks suspended. The economy as a whole experienced a massive reduction in banking footholds across the country amounting to more than nine thousand closed banks by 1933
Bitcoin can revive economy...More examples...
Pramod Dhakal is a Tech entrepreneur at heart, a natural leader, an Agile practitioner, and a Digital Transformation provoker. He has spent over a decade implementing various large-scale transformation initiatives in large multinational organizations. He is an author and contributor at Hitechies largely in the technology space. Pramod is an active investor in cryptocurrencies and he is extremely positive about the future of the decentralized digital economy.
