1.8 Understanding Inflation

Inflation is commonly described as "rising prices," but this is misleading. Prices don't rise on their own — the value of money falls because more of it is being created.

When central banks print new money (quantitative easing), they don't create new wealth. They redistribute existing wealth from currency holders to whoever receives the newly printed money first — typically governments, banks, and large institutions.

This is known as the Cantillon Effect. Those closest to the money printer benefit at the expense of ordinary savers and wage earners, whose income rises slower than prices.

In countries with extreme money printing — Venezuela, Zimbabwe, Argentina — hyperinflation has destroyed entire economies and wiped out life savings overnight.

Bitcoin offers an exit from this system. Its monetary policy is transparent, predictable, and cannot be manipulated. Every four years, the issuance rate is cut in half (the halving), making Bitcoin progressively scarcer over time.