Is Bitcoin the Last Hope of the Financial World?
2 More Banks are In a Critical Condition
The Global Bank Financial Crisis is still going on. A number of major banks’ conditions have become worse over the past several years, and also the condition of 2 more banks appears to be getting worse as well.
1st Bank
The CDS (Credit Default Swap) of the European Deutsche Bank is continuously increasing and now it has broken the peak as well. Due to the increase in CDS, the stock of the bank is continuously falling. After covid, most of the bank’s stocks went above all-time highs but this bank’s stock could not show a good recovery even after covid.
2nd Bank
The CDS of Charles Schwab Corporation Bank ( SCHW ) has also reached an all-time high. SCHW has lost more than 30% of its stock value due to continuous losses.
CDS
Whenever someone lends money to someone, then every who lends money is afraid that if the person does not repay money or defaults, then all the money will be in danger. To avoid this situation, the regulators created an insurance policy to secure interest and money. This security policy is called CDS (Credit Default Swap).
This insurance policy is declared by banks, regulators, and lending firms. With this, the investment of the lender is insured.
Insure
A continuous increase in CDS is not a good sign for the bank. Those who give money on loans take insurance policies. Borrowed funds are secured by an insurance policy. But the bank does not give the insurance policy for free, for this, it charges a premium every month. As long as the policy is still in effect with the lender, if a default occurs, the bank will get all of the loaned funds and interest. Even if there isn’t a default during this period, you’ll still need to pay the insurance policy’s monthly premiums.
This year, the state of these 2 banks may appear to be getting worse due to the high CDS rate.
Burden
To save all of these banks, the FED will use its authority to print more money. The Central Bank has the right to print money in order to bail out banks, but the burden will be borne by the general public in the form of inflation. When the flow of money will increase in the market, the value of money will start falling and the storm of inflation will come again.
The government prints money with the intention that it only be circulated within its own economy and should not be used outside of it. If more money is invested in cryptocurrency, the crypto market will benefit the most from this.
Control
Every day we work to earn money, and the government deducts taxes from it. Every country has its own tax rate. For example, suppose we made $10000 each month and paid $1000 in tax at a rate of 10%. We will spend $9,000 on ourselves, but we will be taxed wherever we spend this money. We pay taxes on everything we buy, including cars, services, and food.
We pay taxes so that we can get security, good education for our children, good medical services, and other benefits. In such a circumstance, if the value of the currency falls, inflation increases, financial crises occur, banks collapse, and many other problems arise, then even more problems will surely come.
The country benefits most from taxes, but there are numerous issues that must be resolved first. Even after charging us fees for their services, the bank continues to use fractional reserves. This is unacceptable, and laws regarding it must be strictly enforced; otherwise, more banks will fail in the future owing to their incompetence, and the entire burden will fall on common people.
Money is just a piece of paper. The value given to this piece of paper by the government has been accepted by all of us. The value of the good or service is also set by the fiat money issued by the government. With the value of this paper, we buy essential things. But this money is not controlled by the people, it is by the government. If the government wants, it can cancel these notes tomorrow itself.
Fiat
Everyone is accepting this fiat currency, no one has any problem. Looking back at the history of fiat currency, its value has been declining over time. Financial crises have occurred several times in the past, but in order to avoid future financial crises, there should be money that no one can control, no one can print new money, and no one can hide.
This thought inspired the creation of Bitcoin. If a country, such as El Salvador, declares bitcoin to be its national currency, they won’t be able to issue new bitcoins. Additionally, they won’t be able to freeze or cancel any funds.
To prevent such a financial crisis, the country and its currency must be evaluated separately; only then will a solution be found.
Simpson
There was a Simpsons episode where the price of bitcoin was pictured as infinite. Several Simson episodes have shown an event that has come true in the real world. Perhaps this is a clue that bitcoin is the country’s final resort for avoiding financial troubles.
As we can see right now, more and more people are trusting bitcoin. I’m not sure whether people are believing in bitcoin because they want to or they don’t have any other options, because as we can see, banks are failing in their responsibilities.
Tax
The problem of black money arises when people think, why they should pay taxes when they have earned all of their money through hard work. Hence, in order to prevent money from being seen by the government, people will find a way to hide it.
When people do not reveal how much money they have and how they earned it, this is how black money forms. Due to that flow of the money decrease in the market and more problems come in front of the government to resolve these problem Government either increase the interest rate or issue more money.
In the coming times, the world will have only 2 options:
- The government should invent a new currency similar to bitcoin.
- Accept Bitcoin
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Disclaimer
This is not Financial Advice. This article is meant only for educational purposes. I am just sharing my thoughts and analysis based on my many years of experience.