Universal Real Estate Stable Coin™ (URESCu™ or CuBit™) is a hedge against inflation. In this segment we will explain how.
Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”
Investopedia defines inflation as “the decline of purchasing power of a currency over time.” One of the biggest drivers of inflation is the monetary supply. When the government puts more money in circulation each unit of currency buys less than it did before. When they take money out of circulation each unit of currency buys more.
Inflation is Confiscation
No less a financial luminary than Alan Greenspan equated inflation with confiscation (see quote above). He made the case that the gold standard protected wealth from inflation. But the gold standard is dead.
Gold protected currency from inflation because it was valuable and in limited quantity. The gold standard put serious limits on the amount of money a government could print. Having a commodity like gold to back a currency made the relationship between inflation and confiscation very clear to everyone.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.
Alan Greenspan, 1966
Commodity and Fiat Currency
When the value of currency was backed by gold it was a “commodity currency.” The value of each US Dollar (USD) was directly correlated to the value of a Troy Ounce of gold. The US Treasury kept supplies of gold in Fort Knox and other locations. The amount they kept in the Treasury was linked to the amount of currency in circulation (the monetary supply).
Inflation is taxation without legislation.
Milton Freedman
Printing more money without increasing the amount of gold made each USD worth less. This primary cause of inflation was easily seen and not well tolerated by the People.
A fiat is an edict. Words in print or spoken. When we dropped the gold standard the USD became worth exactly what the US Government says it is, or what other countries believe it is worth. Today, the sovereign currencies of the leading countries in the world are all fiat currencies. The commodity backing their value is words. Words are never in short supply when politicians are around.
Hedge against inflation: Deficit Spending Feeds Inflation
In 1966 economist and banker Alan Greenspan, who later served for 19 years as Chairman of the Federal Reserve (1987 to 2006), made the case that the departure from the gold standard was to hide the “shabby secret of the welfare statists [that] deficit spending is the confiscation of wealth.” (Greenspan, 1966)
Crypto Stablecoins and Inflation
In the cryptocurrency world, so-called stablecoins typically peg their value to a selected fiat currency. They do this through formulas and buying fiat currency and near-liquid monetary assets such as government debt instruments (e.g., US Treasury Bonds). They back their cryptocurrency with fiat currency reserves. As a result, inflation passes straight through to stablecoin buyers.
Zombie Inflation
In popular fiction zombies shuffle slowly along mindlessly trying to catch you and eat you. They generally don’t move fast, but they are relentless and hard to kill. Inflation is like an economic zombie pursuing your wealth.
A terrifying fact about this economic zombie is that fiat currency is designed to attract it. Governments want inflation for two reasons:
- They can incur debts today and pay them later with money that is worth less. In other words, they ran up a budget deficit of a trillion dollars today. When they pay off that trillion-dollar debt years from now the money they use then has far less buying power than it has today.
- Inflation allows them to take wealth from you without having to use taxes.
It is a way to take people’s wealth from them without having to openly raise taxes. Inflation is the most universal tax of all.
Thomas Sowell
Keeping your wealth in fiat currencies or investments tied to fiat lets inflation zombies eat your wealth one bite at a time.
Zombies Hate CuBit™
Economic zombies don’t like currencies backed by commodities like gold or CuBit™. The value of a commodity-backed currency is as stable as the supply and value of the underlying commodity.
Fiat currencies are backed by an infinite quantity of the commodity of words. We all know that “talk is cheap.”
CuBit™ backs the value of every CuBit™ with real estate. This makes CuBit™ a commodity currency. Its value is protected by the value of the real estate (dirt). When you shift your wealth from fiat currency into CuBit™ you hedge your wealth against the ongoing predation of inflation.
As a commodity, real estate is ideal for backing the value of currency. Science fiction to one side, the supply of dirt is limited to the confines of planet Earth. Habitable and arable dirt has the most stable value. Some dirt spikes in value because of the mineral wealth beneath it.
Every year people come up with new ways to live in places that couldn’t be used before. Still, it is safe to say that they aren’t making any more dirt. They’re just learning better ways to use what we have.
Real Estate Beats Volatility and Inflation
The stable supply of dirt and its well understood value-basis dramatically decreases the volatility of its value. The ever-increasing needs for habitable and arable land keep pushing the value of dirt upward. This steadily increasing demand in the face of a fixed supply increases the value of that supply year after year. In other words, the commodity of dirt beats inflation.
CuBit™ is backed by the value of real estate and it has an innate tendency to be a deflationary currency. When inflation goes up, so does the value of real estate. As a result, the buying power of each CuBit™ increases when the real estate gets more valuable. In contrast, fiat currencies, such as the US Dollar, are deliberately managed to sustain some level of inflation. This means they are designed to decrease your buying power over time.
Conclusion
CuBit™ hates inflation. It is designed to protect the buying power of your stored wealth. The value of each CuBit™ grows along with the value of real estate. Inflation zombies hate CuBit™. They want to eat away at your wealth while you look on helplessly.
Although the design of CuBit™ incorporates inherent protections against volatility and Universal Real Estate Wealth Protection Solutions, LLCTM (UREWPS™, the Company) is committed to support the asset-based valuation of CuBit™ as with any currency there is nothing to prevent speculators from taking unforeseen actions which might cause the price of CuBit™ to vary without reference to the underlying value proposition. The Company cannot prevent and is not responsible for the actions or results of such speculative behaviors.
