Bitcoin II
If you haven’t read ₿itcoin I, you should. There were a few points there that could have more meat on it and I really failed to make a solid case for “Why is Bitcoin one of the most important inventions (some say discoveries) in the history of mankind?” My goal is to address them in this blog. I’ll try to make up for my omission by outlining how and why Bitcoin will become the world’s reserve currency in the future. The “how” depends more on our political and geopolitical reality, but the “why” is certainly related to Bitcoin’s special characteristics.
I thought of a few different titles for this blog. “Good Morning Vietnam”, because a lot of people are waking up. “Don’t look up” because a comet is on its way to us and, despite all the warnings, we’re seeing how society tends to ignore impending crises and prioritise entertainment and political shenanigans over economic facts. Or “Dead Poets Society”, because I aim to inspire you to think critically about your reality and in an unconventional style encourage you to explore the struggle between conformity and individual sovereignty. That and the fact that I probably overdid it with the book recommendations. I couldn’t find the Carpe Diem message in this piece though, so Bitcoin II it is.
Although I paint a bleak picture of a possible future, I believe not only that we’ll come out of the crisis better, stronger and faster, but also that we may not have to fall as far as pictured. If pressed for probabilities, I give the gloomy scenario a higher probability than a gentler, less painful one.
I’ll mention China a few times. Please read them as if said by Donald Trump. CHINA.
Oversights
In this part I’ll try to address issues that I either left out of my previous blog or that I think I should have expounded but didn’t. It’s also my way of trying to address known challenges and criticisms of Bitcoin.
Regulations
This is a big one isn’t it? Crypto regulations are anachronistic and that will be one of the reasons why they’ll fail in their attempt to subvert and control Bitcoin. Regulators don’t understand Bitcoin and when they finally do, they’ll capitulate. I’ll elaborate further on this point and explain why I believe that the incumbents won’t only fail to regulate effectively, but surrender to Bitcoin. Not without a fight, of course, but they’ll capitulate. They just won’t say they capitulated, but that they won by adopting Bitcoin on their terms. It’ll be the first time they’ll lie to your face.
₿itcoin is bad for the environment
Bitcoin and the environment is a topic I might write a whole blog about. For now I will just say that Bitcoin requires a lot of energy to be secured and that is only going to increase. Energy usage is the main factor that allows us to have the quality of life that we enjoy, and the quality of life is directly related to the quantity of energy consumed. More energy, more quality of life, simple. Yes, but the environment. Like I said, in another blog. In the meantime, if you haven’t read “Save the World” you can start there.
Sovereign Individual
In part I, (is this a series? Maybe a trilogy?) I mentioned a user can easily verify their bitcoin’s authenticity and be sure it’s their bitcoin if they have a bitcoin wallet and the transaction with the bitcoin in their address is buried under 3 blocks or more. I should have said full node rather than just wallet. There are different types of wallets and a full node is the wallet you want to have if you don’t want to rely on third parties.
The scam thing
I didn’t address one of the main concerns most people have about bitcoin. It’s a Ponzi. Or a Multi Level Marketing scheme. The latter is probably because there are many people like me that seem to be very interested in you buying bitcoin. Obviously, they want that so that the price goes up and they get rich.
Two things
First, most that hold bitcoin want its price to go up and go up a lot, otherwise we won’t be able to see what we believe will happen, happen. I speak only for myself here when I tell you that I probably won’t write much about bitcoin when everyone is talking about it. If you’re reading about Bitcoin from me you’re probably reading this written in April 2023 or other blogs written during the bear market.
Second, people that want you to buy a token so that they get rich are not telling you to buy bitcoin, they will tell you how amazing any of the other 1000’s of tokens are.
Squander or make a killing
Let me be clear here, I have in the past and will most surely continue to make some bets on other projects that I believe have a very good chance of succeeding, even if only in price and for a period of at least 3 years. The risks with these bets are so high that after buying the tokens, I immediately think I have lost that money, and I did some times. Because of that, I will never mention them let alone promote them.
Quixotic
There are a few projects that I don’t think are a scam and are so big that I’d be tempted to put my name behind them, but I’ve been doing this long enough to have seen projects that were in the top 10 or 20 collapse in a matter of hours. I could say that everyone could see that these projects were Ponzi scams, but given the multi billion-dollar valuations, it’s clear that not everyone thought the same. Bitconnect and Terra/Luna are just two examples.
Many crypto projects fail even though they aren’t scams. They’re on the cusp of innovating and creating something completely new, but fail for a variety of reasons. If nothing else, it’s not the right time for that solution. I plan to write about this topic and will elaborate in a future blog.
But it’s a Ponzi
What’s a ponzi? Ponzis are sometimes also called pyramid schemes. Therefore, we’ll look at both types of scams. A Ponzi is a fraudulent investment scheme where you’re lured into investing money with the promise of high returns at little or no risk. The organisers pay themselves and earlier investors with the money invested by later investors. The difference is that in pyramid schemes, investors are expected to recruit new investors and are paid by the newly recruited investors in return. Of course, the organisers are also paid by the new investors (victims), and paid handsomely.
If you don’t understand what Bitcoin is, that can easily lead you to see it as a pyramid scheme or Ponzi. You might be tempted to think that I’m bringing you in as a new investor just like a pyramid scheme. The difference is that I’d only make money from it if I sold my bitcoin, and you won’t get them from me. How can we be sure that it’s not a pyramid scheme? There are a number of things you can acknowledge that should reassure you.
Almost a handful
First, the claim that Bitcoin is a Ponzi is pretty old, but look at who’s buying it. Some of the biggest money managers in the world are allocating to bitcoin and you can be 100% sure they wouldn’t if Bitcoin was a Ponzi scheme. At least not all of them. These people do their due diligence and wouldn’t risk their reputation for what could be a very high ROI.
Second, you can look at the wallets with bitcoin acquired for less than $100. Why are there so many of these wallets with bitcoin that have never been sold? The blockchain is transparent. Every Bitcoin transaction is recorded in the blockchain, a public ledger that is accessible to everyone.
Third, who are the organisers who are getting rich off the scheme? Satoshi’s wallet with more than 1 million coins has never been touched since May 2010. Not a single bitcoin has ever been sold. And Satoshi has as much power over the network as you or I, that is; on its own; none. Unlike a Ponzi scheme, which is centrally controlled by a fraudster, Bitcoin is decentralised, meaning it’s not controlled by one person or organisation.
Fourth, bitcoin’s daily trading volume is now $50 billion. That’s enough volume for anyone to get out and get rich. And this is in a bear market where prices are deflated and retail interest is almost non-existent. Bitcoin has real value; it’s not based on the promise of paying investors a return on their investment. This isn’t to say that many people -; most people?; — don’t buy bitcoin because of its “number go up” technology. People are willing to buy and sell bitcoin for real money, and they can use it to buy goods and services.
Indoctrination
Only a lack of understanding of this technology leads someone to believing Bitcoin is a Ponzi. I mentioned this book in the previous blog, here’s a link to a free version in case you’re interested. “Grokking Bitcoin” by Kalle Rosenbaum
Feature not a bug
I didn’t do a very good job of explaining why bitcoin’s fungibility will prevail and fend off attacks from governments and policy makers. In my defence, I must say that this is no easy task.
As I explained in Part I, fungibility refers to the property of a monetary unit to be interchangeable and indistinguishable from one another. Since bitcoin lives on a blockchain and one of its properties is that it’s open and transparent, anyone can inspect it and see where each unit of bitcoin is and has been.
Chainanalysis
There are blockchain analysis tools that can be used to track the movement of bitcoin from one address to another. This means that if a particular address is associated with illegal activity or a sanctioned person or country, any bitcoin subsequently received from that address could also be flagged as tainted. This could make these coins less desirable to legitimate users who fear being associated with illegal activities.
Governments can use this to their advantage and attempt to confiscate these coins through regulatory means or prevent them from being used in legitimate transactions by blacklisting these bitcoin addresses, thus reducing the fungibility of the entire Bitcoin network.
Then they fight you
There are a number of ways in which the network can protect itself against these attacks:
- By using privacy-enhancing technologies such as coin mixing, coinjoins, and confidential transactions. These technologies disguise the link between transactions, making it harder to track the flow of money and thus maintain bitcoin’s fungibility. However, governments can make these transactions illegal. If that happens, only criminals will use them and law-abiding citizens will no longer be able to conduct private transactions.
- By using second-layer solutions like the Lightning Network, which enables fast, cheap and private transactions without having to record them on the blockchain. We’ll see layers upon layers of the Bitcoin network. This is how decentralised networks grow.
- The free market in which miners operate will ensure that the transactions of sanctioned companies are recorded in the blocks. The miners are in many cases in different jurisdictions that are in no way obliged to follow Chinese sanctions, or American, European or whatever. The Chinese follow the Chinese sanctions but ignore the American and European ones. You get the point. Will users in sanctioned countries have to pay higher fees? Possibly, but not necessarily. If these users have to pay higher fees, then it can be said that the measures are in fact impacting bitcoin’s fungibility.
- If governments destroy bitcoin’s fungibility, they will not be able to use it either. At the moment that’s not a problem, but in the future, it will be.
This issue is so complex and nuanced that I still feel I could have done more here. Destroying bitcoin’s fungibility is definitely a way to destroy Bitcoin, but bitcoiners know that. I believe in the resilience of the Bitcoin network and human ingenuity, but I don’t dismiss the government’s sledgehammer if its hegemony is threatened.
Volatility
Volatility is a feature of the bitcoin price that attracts many tourists, aka day traders, but keeps away many people who would benefit greatly from holding bitcoin, i.e. anyone who doesn’t yet own bitcoin. There are a few reasons why the price is so volatile, but understanding that won’t take away the powerful sensations that volatility will make you feel once you’ve bought and hold some.
Free Market
It’s a free market, that is, there are no forced transactions or conditions on transactions. And it’s global in a way we have never seen before. There’s no other market in the world where anyone, everywhere, can buy the same goods. And it doesn’t even have to be financial instruments. A simple pair of shoes or even a mobile phone, which seems to be ubiquitous, cannot be bought and sold in the same way as bitcoin. It’s a free market where you can trade around the clock, every day of the year, without any circuit breaks or trading halts.
If you’re not responsible enough to be able to operate in a free market where you have to do your own research and due diligence, then you’re probably screaming for the nanny state to regulate it. Free market doesn’t mean that participants can be criminals and not abide by the law. But we could live and prosper harmoniously with no more than one or two dozen laws, not hundreds of thousands, as is the case today.
Market Manipulation
Is there price manipulation? Of course there is. Whenever someone buys or sells, they manipulate the price. When you buy your bitcoin, you’re manipulating the price, except that you’re probably buying so little that the manipulation isn’t noticeable. If someone spends a few million dollars to buy bitcoin, the manipulation will be more noticeable.
Are there people with a lot of money and bitcoin who buy and sell large amounts of the coin to exploit the emotions of the market? Yes, it’s a free market, it’s their money and their bitcoin, and what they do is fraught with risk. Sometimes they make money, sometimes they don’t. Nobody complains when they manipulate the price up, or in other words when they buy. Well, some people actually complain. The incumbents who can see the writing on the wall. But they don’t just complain, they manipulate the market with headlines that try to destroy Bitcoin’s credibility and regulations that try to remove the word “free” from the free market.
Rollercoaster
Volatility will decrease over time. That’s when most people will get in, and that’s fine. They’ll get in because bitcoin gives them the opportunity to really hold their wealth and save in a money that they know cannot be debased at will. The volatility is so high mainly because the price is so low. It only takes a few million dollars to move the market. The higher the price goes, and it’ll go much, much higher, the lower the volatility. So if you want a stable money that doesn’t fluctuate so much in price but continues to increase in value, or at least doesn’t decrease in value, then wait.
Aggry
The last point on “oversights” has to do with money and how it retains its value. In Part I I mentioned a number of different monies throughout history, but I didn’t mention the African beads, better known as slave beads. The story of this money not only shows how scarcity is of the utmost importance but is also the reason why Africa is the poorest continent in the world and is still in debt today, especially to financial institutions and countries in Europe and North America. Alex Gladstein (@gladstein) is the Chief Strategy Officer at the Human Rights Foundation. Alex is a must follow in my opinion and has recently touched on the issue of Africa’s debt.
https://twitter.com/Breedlove22/status/1644778151879544832?s=20
The above is from an interview with Robert Breedlove (@Breedlove22) another follow for education on Bitcoin related insights.
https://www.youtube.com/watch?v=ec90Ks0CSvI&list=LL&index=9
Why
The world needs a global, unique currency. There are a number of reasons why we need it, and I’ll mention some of them. The problem is that that doesn’t matter. We aren’t governed by well-meaning people who make decisions based on what we need, but on what they want. And what they want and what we need are two different things, sometimes antagonistic. Nevertheless, our needs carry a lot of weight due to the sheer number of us.
The power of 1
A global, single currency would mean: Bye bye Forex and currency conversion fees. It would mean:
- Lower transaction costs: Transactions outside your country’s borders would no longer incur conversion fees.
- No more exchange rate volatility: If you do business internationally, you know what I’m talking about. There would be no more exchange rate fluctuations, which would allow economic agents to forecast and manage their business transactions properly.
- Increased economic efficiency: You don’t have to keep exchanging and converting currencies.
- Greater financial stability: A global currency could help reduce currency-related financial crises and improve overall financial stability.
- Increased trade: A single currency could boost international trade by removing barriers to cross-border transactions.
- Increased economic growth: The greater efficiency and stability offered by a global currency would promote economic growth and development.
- Greater global economic integration: A global currency would promote greater economic integration and cooperation between nations.
- Improved economic equality: A single currency could help reduce economic disparities between countries and promote greater economic equality worldwide.
But why is it not being introduced if it’s so beneficial to all? The reason is quite simple. Who would control it? No country would cede control of its money to another nation.
No bang for buck
But we have a world reserve currency. What is it and why do we have it? It’s a currency that is widely accepted and held in large quantities by governments and institutions around the world. It’s used as a means of payment for international transactions and is often considered a store of value, at least compared to other currencies.
Today the dollar is the world’s reserve currency; in the past there were many others. If you want to understand why it’s the dollar today and not, for example, the British pound sterling, look up why the dollar is also referred to as “petrodollar”. When the US defaulted on its obligations and stopped backing the dollar with gold, the “petrodollar system” was introduced to ensure that they could continue to export its inflation to the rest of the world.
Counterfeit
Another interesting fact you may not know is that there are many trillions of dollars created outside the US that aren’t subject to US banking regulations or reserve requirements. The quantity of these dollars isn’t known. They’re commonly referred to as Eurodollars because that is where they originated, although they’re now used all over the world.
I wouldn’t be surprised if there are more Eurodollars in existence than Euros. After spending 15 minutes on the ECB’s website, I was quickly able to find the market cap of the Euro Tether stablecoin, but not the most recent total issuance of Euros.
If you do a search to find out how many Euros there are in existence today, you’ll find that every source of information will let you know very quickly how many notes and coins there is but completely ignores the other 97% that exist only in digital form. It’s worrying that that was the case with every link I looked into. According to ChatGPT there were 16.5 trillion euros in circulation as of September 2021. I asked where it got this information and learned that this information is actually on the ECB’s website, I just couldn’t find it. Although these dollars aren’t part of a country’s official money supply, as they aren’t issued by a central bank, they still increase the total amount of money in existence.
The winner takes it all
But why do we need a world reserve currency? That follows from the fact that it exists. It becomes more difficult for two different countries to do business if they have to choose between their two currencies, because each country wants to use its own currency and avoid that of the other. This happens because each government knows what whoever is in power can do with their currency at any time. Two main factors influence the value of a currency: the productivity of the economic area where that currency is produced and the monetary policy that manages that currency. The more productive the society and the more responsible the monetary policy, the more valuable the currency is, especially compared to other less productive and less responsible societies in terms of monetary policy. A winner inevitably emerges, even if through trickery, like deals with the Saudis. And everyone loves a winner.
Corn
We’ll see bitcoin become the currency most accepted and held in significant quantities by governments and institutions. This is because of its scarcity and store of value properties. Because of its decentralisation, accessibility and security. The fact that it’s borderless and has low transaction fees (there’s quite a bit to say about this, so we’ll go into more detail in part III ). Bitcoin is going through a monetisation process. It’s a new and innovative asset class that has the potential to disrupt traditional finance. As such, it’s the subject of much speculation and volatility, but it’ll become increasingly accepted as a means of payment by merchants and businesses around the world.
Chivo
There’s one country where bitcoin is already legal tender. El Salvador, in 2021, passed legislation that stated “every economic agent must accept Bitcoin as payment when offered to him by whoever acquires a good or service”. This might sound like nothing much. El Salvador is a minuscule country in Central America with a GDP of less than $30 billion. But it’s the first piece of the domino. Once that experiment is proven successful and El Salvador starts growing in a conspicuous way, many others will follow. First gradually, then suddenly. Let me plug Parker Lewis’s blog, “Gradually, Then Suddenly” Parker writes about Bitcoin in a way that I aspire to. He does it in such a thoughtful and eloquent way with detailed analysis and insights that I can’t recommend it highly enough.
So why is Bitcoin going to become a world reserve currency? Because we will need it badly.
How
Fibbing
I’ve told you before that the world is falling to pieces. But they don’t want you to know that. That’s why they keep trying to confuse you when it comes to financial matters. There are processes in the plumbing of the financial world that even the professionals in the financial markets don’t understand. How are we supposed to understand them in order to understand what is going on? It’s difficult enough to grasp the differences between stocks, shares and equities. Bonds, loans, credit, promissory notes. How are we supposed to understand repo facilities and reverse repo facilities, overnight loans, credit default swaps, collateralised debt obligations and so on. It’s not that you’re not supposed to know about them, it’s that you’re knowingly kept from understanding their implications.
Gaslighting and kicking the can down the road prevent most people from understanding what’s going on and even enquiring about it. But the road is a cul-de-sac, and there’s no way to turn around and go back, not now even less when we reach the end of the road.
History lesson
We’re living in the fourth turning, the transition of power from one demographic to another. You can check that Wikipedia link or buy the book which is in my category of must read. There’s a revolution brewing and you can bury your head in the sand and knowingly or not support the lies, or fight for yours and your kids rights to the truth.
The Nobel laureate Aleksandr Solzhenitsyn wrote in 1974 Russia, “Live Not by Lies” before being exiled to the west, a piece which is now becoming more and more relevant in the west.
“… And thus, overcoming our temerity, let each man choose: Will he remain a witting servant of the lies (needless to say, not due to natural predisposition, but in order to provide a living for the family, to rear the children in the spirit of lies!), or has the time come for him to stand straight as an honest man…”
Doomsayer
I’m not talking of impending doom because fear sells. I’m talking about it because:
Hyperinflation
In 18 months, the USA has printed roughly 40% of all the money it has printed in over 100 years. And the federal reserve is a private unregulated entity, let’s not ignore that. It’s not Federal and has no reserves. Maybe that’s why it’s commonly referred to as the Fed.
You know what happened to Germany when they started printing the Papiermark at this rate, right? They did that to pay for WWI costs and that same action was possibly the main reason why Hitler got to power bringing us WWII. Wars would not last as long as they can now last if governments had to pay for them solely from our taxes. So they rob us another way — Inflation. Fiat funded states killed so many people in the 20th century alone that there’s a word for it — Democide.
I’m anti-war but I’m no Nobel Peace Prize Laureate.
https://www.youtube.com/watch?v=EEJhKtUXUgQ&list=LL&index=16
The western societies will hyperinflate, there’s no ifs and buts, it’s only a question of how soon.
Cronyism
Businesses that lobby governments are not allowed to fail. Bailouts are anti free market and thus against freedom. If we can’t choose what we want and what we don’t want through the markets then we’re not free people.
Capitalism has not been given a chance to prove itself right or wrong. Any country that imposes sanctions of any kind, or offers any subsidies at all, has a centrally controlled monetary policy, or bails out any struggling business, isn’t a capitalist society, it’s cronyism or socialism. The free market has a word in its name that sends a shiver down the spine of anyone with a bit of power: free.
The Cantillon effect will continue its relentless incentivisation of inflationary policies.
Spoil
Our society is corrupted because we reward the unproductive class instead of the productive class. And I’m referring to Western society here, not the obvious examples of Russia or China. Just look at the size of their governments.
Is it possible to become insanely rich as an entrepreneur? Yes, at least in most parts of the civilised world. But it’s much easier if you go into politics. To become rich as an entrepreneur, you have to offer something that people value so much that they’ll will part with their hard-earned money to acquire what you offer. This isn’t easy to create and as difficult to maintain, it requires a lot of hard work. But politicians with miserable wages become very rich in a few years without producing anything.
The government has no competition for their services. They have no incentive to provide a better service. Even the few productive workers in the public sector aren’t as productive as in the private sector. Someone very wealthy once said, “Show me the incentive, I’ll show you the outcome.” Charlie Munger knows the rules of the game he’s playing.
CBDCs
Central Bank Digital Currencies are being developed by almost every country in the world. Bitcoin is useless, it’s backed by nothing, it’s only used by criminals. But let’s use the technology to develop our own shitcoin backed by guns. Bitcoin is backed by bitcoin, just like gold is backed by gold. That and a lot of energy.
There’s a reason why you’re no longer allowed to buy some things with cash only, otherwise you’re breaking the law. Do you know the cash limits in your country? You might just be a criminal if you bought a used car with cash. The reason is to control you. And CBDCs allow for unprecedented control; just ask the Chinese. They’ll track you and suppress dissent with such efficiency that the current Canadian government must daydream of introducing them within their mandate.
They will be able to control your spending based on the carbon print of your consumption — payment declined, you travelled all your allocated miles for this quarter.
They will make you spend all your money and prevent any savings. This month’s UBI has an expiration date of DD/MM/YY. Go consume and be a good citizen. But we’re declining this transaction because it’s the third bottle of wine in three days. Don’t even dream of eating a grass fed steak. And if you still earn your money by being productive, fear not, you’ll have an interest rate of -3% after 2 months in balance that goes down to -10% after 6 months.
Dystopia
Do you know what’s really disturbing? That we’ll ask for it, as if in a Brave New World as imagined by Aldous Huxley. We’ll crave technological conveniences that numb our senses and instil a false sense of security and pleasure. We’ll lose our individuality and conform to the lies. Or we’ll rebel.
China
Everybody knows we import most things from China. Electronics, steel, forced lockdowns, toys, chemicals… Why wouldn’t we import mass surveillance, including financial and communications. Wechat just like they do.
In the west we have 50 cent, in China they have Tencent. Well, I guess we have Tencent in the west as well, but anyway.
Remember what happened in Canada when the truckers protest caused a lot of inconvenience and made their government the laughingstock of the world? Well, if you don’t remember, ask any Canadian that contributed to the truckers convoy protest what happened to them. I tell you, it smells like China. And what were they protesting about? To stop the mandated Covid vaccines. Not the vaccines mind you, just the mandated part. The same vaccines that Switzerland just announced are not recommended, at least not in Switzerland.
What about the Online Streaming Act or Bill C-11, again in Canada? An Orwelian censorship imposing bill that tries to put to shame Chinese totalitarianism. The same Chinese that are rumoured to have helped in some way the current government’s election.
In the US, the Patriot act and the Restrict act are trojan horses brought to you to solve a problem they created or exaggerated. These are no longer imperceptible, baby steps. They feel empowered enough to make these bold changes to the law. Changes that take away your liberties. Don’t even look at SB 5599, if you don’t want to lose all hope in humanity. And this is in what they call, the freer country in the world.
More Chinese imports
What about the 15 minute cities that are starting to become fashionable because they’re so good for the environment? Well maybe not as fashionable as they would like since they’re starting to rename them “liveable neighbourhoods”. They will sell it to you as an environmental measure that not only helps the planet but also turns these zones into more livable, sustainable, and resilient urban environments.
How it starts
https://twitter.com/Janebon34813396/status/1646209814186410028?s=20
https://twitter.com/betterworld_24/status/1644433903652859922?s=20
https://twitter.com/songpinganq/status/1646313111098630144?s=20
Where it’s going
Forget about the potential for gentrification, the impact on people with disabilities and everyone that has to go to work outside those zones. Forget all that and worry about what they don’t mention when selling the dream. The part where you will require permission to leave your designated sector, and will be fined if you don’t get permission. A Chinese import, for your own good. Call me a conspiracy theorist, but I have seen worse already.
The wheels are turning
No one likes to be bullied. Once you grow enough to make it stop you will make it stop. It might involve moving to a different place, or join a gang that will protect you, or join a martial arts dojo. You will do whatever needs to be done. Most of the time, most of the people.
The BRICS nations are countering the G7 and countering what the IMF and World Bank is doing. Their economic growth has been outstanding, they represent a higher % of the world’s GDP as of March 2023 compared to the G7, and they are mainly trading in the Chinese yuan as of recently.
The OPEC cartel is not playing ball with the USA and doesn’t want the price of their oil to come down. They just announced a decrease in production to counter the measures being taken by the Fed to crush demand. This means that demand will decrease but supply will also decrease meaning prices will remain at somewhat similar levels.
Shoot in the foot
The Fed is coming to the realisation that they have no real control over what’s happening with the dollar or any power to control inflation. Expect inflation to continue its ascending trajectory because the Fed is not able to squash it before it destroys the hand that feeds them. The Fed only option is to raise rates, pivoting is throwing in the towel. The monetary homogeneity is heating up, and it looks like the BRICS nations have now gone from being defensive to being the aggressors.
The problem of a world reserve currency being controlled by one nation remains. If it changes from the dollar to the Chinese yuan; it won’t; it’s the same shit, different day. There’s only one available option for sovereign countries that want to hold a secure store of value. You might not like it…
Mystery novel
What we saw happening with financial institutions in 2008 is starting to happen to sovereign countries in this decade. What we’re seeing today in the banking system was a capital offence a few decades ago — the fractional reserve system. And some say, J. F. Kennedy was killed because of his stance on the Federal Reserve. On June 4, 1963, a virtually unknown Presidential decree, Executive Order 11110, was signed by President John Fitzgerald Kennedy with the intention to strip the Federal Reserve Bank of its power to loan money to the United States Federal Government at interest. With the stroke of a pen, President Kennedy declared that the privately owned Federal Reserve Bank would soon be out of business. On November 22nd 1963, he was killed.
At its peak in April 2022, the Fed held more than $6.25 trillion in U.S. government debt, with more than $600 billion just in interest payments per year. The USA GDP is circa $23 trillion and its total debt is roughly $31 trillion. Kicking the can down the road will only exacerbate this situation rapidly.
Illuminate
If the Fed stops raising interest rates and pivots, inflation takes hold and continues its rampant move up, prices will go through the roof (aren’t they going through the roof yet, you ask). If the Fed continues its current approach of increasing interest rates to crush demand and lower inflation, sovereign countries will feel the pain almost as much as we do. The only difference is that they can print new money to pay their debt, leading to further devaluation of your money. Will they squash inflation though? Computer says no.
Is it starting to look a bit more probable that we will need apolitical money that will allow us to say no to this system of financial enslavement? That will allow us to save for the future? To spend on what we want, not on what they want us to? To be free to say what we think without fear of being declined our next grocery shopping?
Parrot
Two quotes to give the final touches on what I want to say. What would I do without these quotes? Don’t think I would be able to write this blog, that’s what.
Henry Ford said “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.” And yet, we’re in such a worse place than what we were then.
And Friedrich A. Hayek, who shared the 1974 Nobel Memorial Prize in Economic Sciences, said “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.” Bitcoin.
Implosion
Governments will destroy their economy, and when one of those countries is the US and the world reserve currency, everyone suffers. If you’re European, you might be inclined to think that we have a more responsible monetary policy. That’s just not the case, and we dance to the American tune. Granted the ECB is a public institution and subject to regulatory oversight but it’s independent in its monetary policy decision-making if we agree that it’s not impervious to what the Fed decides and does. That said, EU public debt as % of GDP is lower and its inflation is lower as well.
But when it comes to productivity, with the exception of Ireland and another couple of nordic countries, we’re falling below the USA as well. As a whole, the European Union falls short of the USA in terms of productivity, not by a large margin, but it does. But it’s not just in productivity. GDP per capita and unemployment are worse in Europe than the US, and most of all, in innovation we just can’t compare. The main reason why we fall so short in terms of innovation is because the EU keeps imposing restrictions and rules that are anti innovation to the point of being obnoxious to our entrepreneurial spirit.
Cronyism, corruption and hyperinflation will accelerate their demise. Control through programmable money and Orwellian surveillance of communications and movements on top of that will lead to a revolution. It won’t be pretty. Most will suffer and most will fight because they won’t have a chance not to. On the other side, we will have a better, stronger, faster humanity and money.
Fix the money, fix the world
Bitcoiners are sovereign individuals. This blog is a fest of reading suggestions but there you go, “The Sovereign Individual” by William Rees-Mogg and James Dale Davidson is yet again another must read in my books.
One government attacks Bitcoin and it becomes more valuable to another government. Who goes first? Not the clever ones, playing to win. And that’s one of the reasons why Bitcoin is part of your reality. The time to kill it has passed, when they were laughing at it. Now it’s like hydra, that grows its heads and morphs to survive making it almost impossible to kill. Decentralised finance is a beast we could only dream of until recently, now “we/they” must face the consequences of it being real.
Value flows to scarcity. It’s not just us, the people, that need and seek the value of scarcity. Any rational actor; and that includes governments; will seek refuge in the scarcity and decentralisation of Bitcoin. For governments, the decentralisation of Bitcoin will become the only way to hold real value in a sovereign way. No longer do they need to keep their gold in the Central Bank of England, or any other, to find out they can’t actually take hold of it when they want to.
Opt out
And we now have a way of saying no to financial enslavement. Up to now, governments could blatantly rob us through inflation because we didn’t have a way to avoid it, we didn’t have a way out. Yes, you could invest in the stock market or real estate but why does a dentist need to take risk and understand the financial markets just to keep her wealth safe from debasement? And sure, you could always try to get dollars if you’re in another part of the world with a hyperinflating currency. It would probably be illegal but that never stopped us, when our survival is at stake. But if the dollar is hyperinflating, where do you run to?
I rest my case
If you don’t want to believe that a reality that comprehends most of the scenarios I laid out is a possibility, then I probably failed to make a reasonable case for bitcoin to become a world reserve currency. If you accept that at least some of things will be tried and tested, then I think you should now be more aligned with that possibility. I think things will get worse before they get better, but I could just be wrong.
If you’re enjoying these blogs on Bitcoin head here for the third installment.
Conclusion
Buy ₿itcoin.
