Financial Repression: Solution or Disaster?

Hearing the word of cryptocurrency, perhaps anything we have in mind is a grim room inside an abandoned old factory. A mysterious figure is sitting in the middle of the room monitoring the henchmen: a line of mega computers miners working to create money in the virtual world. And at the same time, the guy sends a short text to somebody else who undergoes a plan to start a massive mass strike and rally in a city. Such an eerie depiction in an era as anti-cryptocurrency measures launched by governments worldwide, in turn, has an indirectly stuck label of not nationalist or even anarchists for its fans. Authorities have considered that the new currency has played an imminent part in money laundering, organized crime payment methods, and terrorism.  All of these have legalized the need to tighten the regulation and surveillance. This negative label is exaggerating since these illegal activities have been around for so long before Satoshi Nakamoto created bitcoin. They might proceed through the traditional banking system, though. 

 

Bloodless repression

Tesla's Elon Musk said that all crypto mining conquests require tremendous electric power. Excessive energy releases carbon emissions into the atmosphere, contributing to severe global warming. The criticism has successfully ravaged Bitcoin & the gang's price for a while. Then, the public realized that the number of so-called 'environment destroyers' crypto miners is about a few percent compared to the total amount of fossil fuel vehicles worldwide. The glorious purpose of cryptocurrency creation is to eliminate the third between two persons in completing any financial transactions. The money transferred will not be deducted to pay intermediary commission and keep the information exchange confidential. Bitcoin becomes the pioneer of an alternative to conventional financial systems that eliminate the third party's role.

Third-party refers to central banks, state banks, and private banks responsible for interceding, monitoring, and verifying the financial transaction's validity. Central banks acquire the highest position between the three since it has the most significant task of issuing, distributing, canceling, suspending, and terminating expired money. At the onset of the COVID-19 pandemic, most countries faced financial difficulties due to restrictions to prevent the virus from spreading. The United States of America, the world's number one economy, is no exception. The Fed (US Federal Reserve) issued trillions of new dollars to buy the US government's bonds through particular commercial banks in the open market (Quantitative Easing/ QE). Central banks in different countries where the outbreak has taken its toll have adopted the same policy.

Why do central banks avoid printing money in unlimited amounts and distribute them among citizens so that poverty doesn't loom among us? Like supply and demand law, abundant goods or services supply in the market will lead to lower prices. It also applies to the money supply. To maintain the stability of national currency against QE consequences, governments urge people to increase consumption for disseminating money to various goods and services suppliers. Hence, we can apprehend why department stores have become the first place open for the public as soon as the pandemic is less deadly, aren't we? High consumption, exceeding goods and services supply, will trigger inflation when goods and services gradually become incredibly expensive within a relatively short period. As mass anxiety, such as outbreaks, natural disasters, wars, or political turmoil, starts to rise, people decide to hold cash in their hands due to their need to feel secure amid uncertainties. They have no choice but to withdraw their money from banks and spend their hard-earned monthly wages to pursue big sales before all their money loses its value the next day.

A difficult choice

You read above a few typical situations that commonly occur when a country decides to undergo financial repression. Financial repression is not that scary, even though the literal meaning of 'repression' is detention, control, and pressure measures. Advanced and developing countries are both familiar enough with this term. There is no legal action or sanctions imposed in response to financial repression. A standard measure is preferred and accepted as the way out of the critical economic situation in many countries. As the name tells us, financial repression sees any actions taken to tighten governments' regulation in the financial sector. When the money pump is exhausted, governments will likely prevent foreign capital influx into the country by decreasing the governments' bond yield. Decreasing benchmark interest rates is also enforced to accommodate those people who must fulfill their responsibility, paying the loan while struggling with endless-like gloomy life.

I believe that ads and news titles occupy your gadget lately are the excellence of domestically produced goods, newly cheap minimalist houses ads, electric cars, high-end devices, a gorgeous tourist destination in a far-away island, to name a few. Such publications are needed to bring forth the public's confidence in consuming goods and services. How if we don't have enough money to own all of these beauties? Let us borrow some money from the banks! We do not need to worry about paying car loans or credit card installment; the loan interest rate is lower these days than 2-3 years earlier, remember? For your information, governments of various states also benefit from it because a lower interest rate decreases the total amount of loans or debts governments must pay in return.

Being in the red or borrowing money is the only escape when all doors are closed for many people. On the one hand, some others might get into loans to expand their business and personal wealth. Nevertheless, a handful of persons gain pride when they settle up their Tesla car installment at the end of the day. Let's not overlook them who got their life fallen apart after debts. Some among them embrace debts as a part of a sophisticated journey to the end of life because they believe debts are supreme sacrifice in the fight to reach every dream. However, we should think twice before borrowing because the peace of your life is at stake. There is no pain living within our means. And choose not to enslaving ourselves to buy a house, car, jewelry, or expensive device, especially when they are beyond our wallet's purchasing power. Choose to become an outcast without luxury and without debts. (dy)