A dependable monetary system requires source(s) of money, dependable distribution mechanisms, and liquidity management to prevent adverse inflation.
In the US monetary system, the Federal Reserve is the source for all American money. The money is dependably distributed through federal services. Revenue from taxes and the sell of securities are collected to manage liquidity. See the title image to trace the flow of money from the Federal Reserve to the Treasury to the economy, and back to the Treasury and to the Federal Reserve.
The US monetary system creates a continuous flow of money which generates a continuous state of low-grade “prosperity”. This prosperity results in a continuous rise in income inequality because the flow of money increases to nonlinear income, but not to linear income. The increase in income inequality causes the adverse inflation that was the center of the 2024 elections, because the rising inequality results in nonlinear incomes buying up all assets and driving prices, in general, higher and out of reach of the linear incomes.
So how do austerity and bitcoin stop the rising inflation? First, austerity means diminished prosperity which means smaller increases (or even decreases) in nonlinear income which means less increase in income inequality and thus less adverse inflation. Second, bitcoin is a commodity just like gold. As the price of gold or bitcoin rises, no one complains of inflation. So, investors are encouraged to buy bitcoin rather than outbid each other for assets or spend their money into the economy (which would cause inflation).
In other words, the MAGA austerity, just like all conservative austerity in history, slows inflation. Trump’s twist is to manufacture a commodity and then sell it to investors with liquidity problems. The result will be lower inflation, as well as enlarging an investor population that depends upon nonlinear income and will never contemplate dismantling the laws that support the nonlinear income which generates the inflation that we battle during prosperity.
