Economic inequality is a highly debatable topic, yet it is frequently misunderstood.
Economic inequality refers to “income inequality distribution” and “wealth inequality distribution”.
What Is Income Inequality?
According to investopedia, Income inequality is an extreme concentration of wealth or income in the hands of a small percentage of a population. It has been described as the gap between the richest and the rest.
When we speak about economic inequality in this article we are speaking about countries with democratic systems because those with totalitarian regimes are equally poor except their leaders and oligarchs.
Yet when speaking about income inequality in democratic countries usually the blame is on factors like the labor market, education, growth in technology creates more income gap, economic neoliberalism, globalization, race, gender, etc.
But there is another factor that affects the income distribution on the first place and it is the inflationary monetary system we have.
But what is inflation?
According to Wikipedia: In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.
Basically, our fiat monetary system is designed in a way that enriches the wealthy more while impoverishing the poor more.
Of course, someone can argue with this thesis, saying that in this monetary system all the players are equal and the same rules apply to the rich and the poor, so why would the inflation be a cause of economic inequality?
The answer is simple because not the same rules apply to the rich and the poor.
To explain why we need to take an example:
Let say Bob works 40 hours a week and at the end of the month he gets $2,500. He has 3 children and after removing taxes and expenses he is able to save $200. After a year he has in his saving account $2,400 and after 5 years he will be able to have accumulated in his saving account $12,000.
Being able to save just a small amount monthly Bod decides to leave the money in cash instead of investing it, but without an adjusted wage contracts after a while Bob is not able anymore to save the same amount anymore because of the inflation rate increase and at some point he may need to spend from his savings to maintain the same lifestyle.
This is an example of why people feel that they can never get ahead.
But why did inflation has such a big impact on Bobs ability to save money? Like Bob millions of people work with contracts that are unadjusted annually for inflation rates. While Bob’s wage is table his purchasing power decreases.
On the other side, while Bob is being stolen systematically, the already wealthy people are benefiting from inflation.
Inflation is the main cause why real asset prices constantly go up and the wealthy are those who hold such assets, like real estates for example.
This is why the inflationary Fiat system helps the increase of the income inequality gap.
Before 1968 the U.S. had the gold standard which prevented the money printing without gold back up, but then they decided to break the gold standard. This gave the government the ability to manipulate the economy and the result was levels of inequality never seen before.
So how can Bitcoin reduce economic inequality?
Bitcoin is a decentralized currency with a limited supply. Emission of new coins is halved every few years. What bitcoin simply does is removing inflation. The bitcoin monetary system is transparent, based on open source software code and immune from any government intervention that might print easy money.
If bitcoin takes over the world becoming a global currency, it would have a big impact of reducing the economic inequality and we would see for the first time people under the average income levels starting to see a rise in their purchasing power.
Bitcoin might be the best way to reduce economic inequality. This doesn’t mean that education, labor equality, etc are less important, but bitcoin attacks the problem from the source, making possible the change of the monetary system bringing back the sound money.