Topic: The difference with Bitcoin (Read 603 times)

When I speak to knowledgeable people about Bitcoin and ask what the advantages are I hear things like: "Bitcoin allows you to send payments digitally with very little fees.", "You can send payments with your phone", "You can use it to send money online anywhere in the world", or variations of the above. To the lay person these may sound like nice features but there are other services out there that do the same things such as, Google Wallet, Isis Mobile Wallet, PayPal, and many more. The average person may think, "So what about Bitcoin? I've been using Isis or PayPal for a while now and it works fine for me."

That may all be true but there is a fundamental difference between these services and Bitcoin and that is the fact that these other services all use traditional money. They are all based on the USD or Euro or whatever fiat currency you're used to. Bitcoin is like these services but it is its own currency. It is sound money.

So why is this important? What is sound money all about? Let me paint a picture for you to explain it (for the lay person).

In 1970 the average US home price was $23,600 (according to US Census.gov). The minimum wage in 1970 was $1.60. If you were making 4 times minimum wage (approximately $60,000 in today's dollars) and saving 20% of your income before taxes (which is a lot and most people cannot afford that much, but for sake of argument here...) it would have taken almost nine years to save up that $23,600. But by then, average home prices were approximately $58,000. You would have only saved half of what was needed to buy that new home.

In 1980 the average home price was $62,900 and min. wage was $3.10. If you made 4 times minimum wage and you could have saved a whopping 20% of your income, it would have taken over 12 years to save up that amount but by then average home prices were around  $117,000. You would have barely saved half of what was necessary.

In 1990 the average home price was $125,000 and min. wage was $5.15. If you made 4 times minimum wage and you could have saved 20% of your income before taxes, it would have taken you over 19 years to save up that amount of money. By the time you had saved up the $125,000 necessary to buy that home, the average home price was about $208,000!

In all of these scenarios, the average person would NEVER be able to save up to buy his own home. The only option was to borrow money. Of course, back then you still had to come up with 20% down. If you somehow had the $4,720 necessary for the down payment, you still would have paid $125 per month (assuming a 7% interest which I discovered was average at the time) and after 30 years you would have ended up paying almost $50,000 for that $23,600 home. It only got worse from there. Don't even get me started on student loans.

Of course, 20% of your income before taxes is a lot of money. Not to mention that taxes continue to get worse every year. In 1970, company pensions were considered the norm and slowly the norm became 401Ks where you had to save even more of your hard earned money for your own retirement, leaving that much less to live on. Pensions are very rare now. Today there is talk about raising minimum wage to as much as $15/hr. over the course of just a few years. If you were to make 4 times that, it would have to be $60/hr. and I really doubt that middle class wages will go up nearly that fast. Most people who used to consider themselves upper-middle, middle, lower middle, will find themselves going down a class level or two to even the lower class, where owning your own home is not even a possibility.

This is the current economic system we live under today and if you were born in 1952 or later (where you would have graduated high school and entered the world on your own in 1970), it is all you know. This is what you consider NORMAL. We are told that owning our homes is a good investment but all it is really is a way of hedging ourselves against this rising cost of living. It almost sounds like a fantasy to think that $10 today could be worth the same and buy roughly the same amount of goods 20 years from now but for many, many years that's the way it was. The dollar was fixed to the price of gold and gold was fixed at $20/oz. Today, we have no idea what our money is really worth or what it will be worth years from now. All we know is that we're supposed to get into as much debt as possible and hope that someday we'll be able to pay it all off. We're told we're supposed to save for our own retirements but we have no idea how much money we'll need to actually live on and for how many years by the time we reach retirement age.

All of the features of Bitcoin are nice and all but what it really comes down to is incorporating all of the other features of digital payments systems and backing them by sound money, free from corruption, inflation, or government manipulation. The sooner we get to a Bitcoin economy, the better.