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Bitcoin Could End Global Poverty


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“The richer you are, the richer you get, and the poorer you are, the poorer you get, unless something puts that engine in reverse.”

Karen Petrou

We are taught to believe that the central bank acts in our best interest, but in reality it can be one of the biggest drivers of wealth inequality. Let’s explore why.

As the central bank of the United States, the Federal Reserve (the Fed) determines monetary policy, sets interest rates, operates the base payment system and intervenes in the financial markets by controlling the supply of money. But the actions of the Fed to boost or calm financial markets have a direct impact on who benefits and who doesn’t

According to Karen Petrou (Author of Engine of Inequality: The Fed and the Future of Wealth in America and Co-Founder and Managing Partner of Federal Financial Analytics, Inc.), high-income earners put a majority of their wealth in the financial markets (stocks, bonds, etc.). The middle class are homeowners. They’re highly leveraged with a big mortgage and hold their wealth in the form of equity in their home. In contrast, low-income people are renters, often indebted, and living pay check to pay check. At best, they have small amounts of cash saved.

The decisions made by the Fed directly impact which asset classes benefit and which don’t. In effect, the Fed plays God, determining who gets a chance at a prosperous life and who doesn’t. For this reason, Petrou calls the Fed “the engine of wealth inequality.” 

Printing More Money Exacerbates Systemic Poverty

The Fed impacts financial markets in two key ways: by adjusting interest rates and adjusting the money supply. For now, we’ll focus on the latter as we explore its impact on people’s wealth.

“When the Fed ‘prints’ new money, those dollars are sent to banks, and then lended first to the people at the top of the food pyramid, the money pyramid.” 

Natalie Brunell, Journalist, Podcast Host & Educator.

Those at the top of the money pyramid (top investment funds, bankers, big corporations, and wealthy individuals) get first access to new money because they have the resources and connections to do so. They can then invest in assets (like stocks) and get low interest rates and so continue their accumulation of assets. Only after they’ve had their share, does the rest of society get the pie’s leftovers. But by then, prices in the economy may already have increased, punishing low-income earners.

Prices rise because, suddenly, the wealthy have more money to spend and invest, driving demand-led inflation. The Fed’s role in boosting the market effectively helps create, maintain, or inflate asset bubbles. As a result, the net worth of asset-holding citizens (generally high-income earners) grows while the net worth of middle and low-income earners stagnates.

At the same time, more money and spending in the economy eventually weakens the purchasing power of the dollar. Low-income earners living mainly through cash lose the ability to buy the same goods and services they were once able to. Not just that, they lose the ability to save for their future and for their families.

“Every time the Federal Reserve decides to print more money, they are stealing wealth from the bottom 50% of Americans. The rich celebrate the printing of more money because they know they’ll get rich from it, while the poor don’t realize what is happening.”

Anthony Pompliano, Investor at Pomp Investments and Entrepreneur.

As Karen Petrou puts it: “The richer you are, the richer you get, and the poorer you are, the poorer you get, unless something puts that engine in reverse.”

Problem Exacerbated During COVID-19

The systemic creation of wealth and poverty was worsened by the recent and unprecedented COVID-19 pandemic when the Fed printed trillions of dollars to help millions of Americans pay their bills. 

Efforts to keep the U.S. economy afloat during the pandemic saw the money supply increase by 40%. The additional money entered into circulation and began to chase a limited amount of goods and assets in the economy. Before long, we witnessed increasing prices. Low-income earners, who on average live a more cash-based lifestyle, could no longer afford the increased prices. As a result, they fell, and they will continue to fall, deeper into the engine of poverty. 

Bitcoin Reverses the Engine of Poverty

To many, bitcoin is perceived as a carbon gobbling mining machine that serves no tangible purpose. In reality, Bitcoin was designed as a decentralized financial system that aims to be fair, borderless, and free from monetary policy-led inequality.

Bitcoin’s monetary policies were preprogrammed in 2008 by Satoshi Nakamoto (the anonymous founder of Bitcoin). Its monetary policy is such that there are a fixed number of bitcoin that can ever exist. These 21 million bitcoin are steadily mined over time, in regular and predictable fashion. The scarcity in bitcoin’s money supply means it should theoretically retain its value over the long term, making it an attractive option for low-income people wanting to protect their wealth from currency devaluation.

Bitcoin allows low-income people to opt out of the engine of poverty that is the existing financial system and into a monetary system with a restricted supply, no fractional reserve, and no manipulation of monetary policies that benefit one group of people over another.

In addition, bitcoin’s monetary policy is hard-coded, programmed by design, and maintained by user consensus. This ensures a neutral, democratic way of managing monetary supply.

By trusting a freely auditable, programmatic mechanism, and open-source software instead of institutions like the Fed, we remove the elements of human nature like bias, greed, and corruption from our monetary system. We remove one cause of systemic inequality and in return get monetary purification. Purified, hard money that can retain its value in the future which allows each member of society to save and invest. 

The wealth inequalities we see today are not by accident. As Bitcoiners often say, “they’re a feature, not a bug, of the system.” For too long, the Fed has gotten away with creating an engine of inequality because the majority of people don’t understand how the Fed works, how it structures the financial markets (and manipulates them), how monetary policies are set, or how it affects us. Most importantly, they don’t see the hidden force preventing them from saving, investing, and building a significant life for themselves and their families.

That’s why the words of Henry Ford have never rang truer than they do today:

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

With bitcoin, low-income earners have an opportunity to secure the human right to life, prosperity, and freedom for the first time in their lives. Perhaps bitcoin is the revolution that we all needed.

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