This post will discuss the current, visible and highly amusing collapse of our current Central Banking system, the Faustian Bargain these insolvent Central Banks and their fractional reserve High Street minions will have to make with Bitcoin and its blockchain to live a little while longer, and how the bridges will be built between the obsolete centralized ledger system (Banking) and the new decentralized asset ledger system (Bitcoin), that takes us from an impoverished insane world and into an utopia of peaceful abundance and happiness… From Slavery to Liberty in one post…

Central Banking – It Does Exactly What It Says On The Tin

I have discussed extensively in previous posts the trends of Centralization and Decentralization, that we have passed peak Centralization, and that the trend of Decentralization is now firmly (if not yet ostensibly to the untrained eye) entrenched… Central Banking is a centralized financial system and by its very nature acts as a central backstop for its constituent “private” or high street banks… Because the inherent fraud of fractional reserve banking creates an excess of credit that the REAL underlying savings of society cannot sustain, banking creates the Business Cycle of Boom and Bust and sets off a bank run that exposes the naked banking emperors holding only fractional reserves (having printed the rest out of thin air), making them unable to supply the demand of the angry pitchforked hordes who have been defrauded… In a free market banking system these banks would fail, the banker lynched, the bank sold and assets liquidated, and we start from afresh… The banks know this and fear free market forces, so they seek a remedy… They seek State intervention on their behalf… The private banks request a public bank to bail them out if they were to get in trouble that can only be instituted by Government, as the monopolist provider of “Law and Order” over a particular territority and public… Only a State can LEGISLATE a Central Bank into existence and it does so with monopoly control over the money supply (Fiat money and the Laws of Legal Tender), in exchange for centralized control of the economy and its tax revenues (FED came in 1913, Income Tax in 1914)… So let’s strip this down to the bare bones, a cartel of private bankers collude to bail themselves out by also giving themselves (by bribing politicians) centralized monopoly control of the money supply, and abolish private property (money) and replace it with public property (fiat money)… As Lenin put it, the institution of a Central Bank is ninety percent of communising a Nation… Central Banking is de facto Communism, by abolishing competition and introducing us to a phenomenon that can only happen under Central Planning, that of Moral Hazard… The Bankers (Elites) now control the money, and thus the value of the goods and services of everyone that is FORCED to exchange in that money, the general public… This is one hell of a backstop for a previously private and competitive banking system… Now the banks know that if they ever get into trouble, they will be bailed out by somebody else, by other people’s money (taxpayers)… This encourages risk taking and CENTRALIZES risk with a backstop institution, hence Central Banking… From Central Banking you have total control and command of the economy, as the money is intricately and fundamentally connected to all other industries, otherwise said every other industry has to exchange in money which is now centrally controlled… The Bankers that previously had no backstop, now have the entire property and exchange of society as their backstop… Central Banking when you really look and think about it, is an audacious feat of crime and fraud that the bankers pulled off on the rest of us…

Centralizing Risk, Moral Hazard And Diminishing Price Discovery

With a “public” backstop the private banks are now freed from the limits of fractional reserve banking in a competitive market, and so they go wild… Moral Hazard is now pervasive… The banks can now hold less fractional reserves and print even more money and steal even more purchasing power from the people’s goods and services creating ever larger credit booms and ever bigger credit busts, for which you have the whole of the Twentieth Century as your case study… When the credit boom busts and bank runs begin, those private banks that control the Central Bank get bailed out, further centralizing risk and diminishing competitive price discovery… The banks that are not in the cartel that control the Central Bank but who nonetheless get swept up in these boom and busts and also engage in fractional reserve banking won’t get a bailout, and over time get taken over by the private banks that do control the Central Bank, as if further illustration were needed, Central Banking over time centralizes the high street banking system with less and less bigger banks in fewer and fewer hands, further centralizing wealth and control because of Central Bank monopoly, eventually leading to another Central Planning phenomenon, Too Big To Fail Banks…

Central Banking Full Retard – Removing Gold As Base Money

The problem with bailing out private banks is that it costs money (actual savings)… In my previous post I described how gold is the bankers cryptonite… While you still have a link to scarcity (gold) then even the Central Bank is limited in how much credit it can extend to the private banking system, because its base money is scarce and not infinitely printable… Gold is therefore the protector of the general public’s purchasing power, and completely at odds with the Warfare and Welfare State that the Governments (politicians and their legacies) want and needs to extend power over the general public and to bailout the banking system that you also backstop, means that sooner or later you will have to sever that link to scarcity and gold as base money, so that currency (paper and electronic) is now infinite and freely floating deriving its value no longer from the scarcity of gold, but from the abundance (for now) of goods and services of the economy that that Central Bank controls… Unhinged from gold (scarce) backing, price discovery is also severed for a while (44 years and counting) whilst money printing goes unconstrained and full retard… When Richard Nixon closed the Gold Window in 1971 the U.S Government and the U.S. Dollar as the World Reserve Currency defaulted… Big Government and Central Planning signed their own death warrant a long time ago by destroying the market price discovery mechanism for property… It is only since 1971 that we have been drowned in a world of pure Fiat money that has financialized and debased every industry and every part of society, extensively discussed here… These clouds of infinite fiat money have temporarily obscured real price discovery, and we can take a look at the temporary results… The cost of living, the cost of housing, the wages of sportsmen, the stock value of worthless unproductive businesses and companies, are all examples of temporary obscured price discovery and financialization of an economy, and all dictated and set by monetary policy controlled in a secretive institution that the general public has no idea about, run by a communist committee of a handful of central planners… When you look at it critically and dispassionately, Central Banking is an absurd concept that has been with us this last Century…

Unhinging from gold also unhinges credit booms from a solid underlying base… Under traditional fractional reserve banking, gold was the base money and the paper derivatives (paper money) that traded on top became worthless in a physical bank run… But when you cut the link to gold, the Base Money now is Central Bank unlimited printed base money… So the private banks are holding fractional reserves on top of Fiat base money!!! There is no underlying scarcity or price discovery actually done by the market (gold) and this is important to understand… At no time in the last 44 and counting years has there been an intrinsic link to price discovery and scarcity in the world economy, and as a result we have had the Bubble Economy, booming and busting in an ever destabilizing spiral of misery and mis-allocation… When the boom busts “unexpectedly” asset bubbles pop immiserating the banks and the general public alike, but there is no market to mark to (gold)… The debt based system busts until central bankers print the necessary currency out of thin air to arrest the bubbles, thus blowing the next one, every seven years or so like clockwork… From the 1973 Oil Crisis, the 1980 Hard Recession, the 1987 Stock Crash, the 1994 Mexican Peso Crisis, the 2001 Dot Com Bubble, and to the 2008 Bank Bailouts… Before we discuss 2008 in some more detail, I need to take a different tack for a bit to give a different angle and take on Banking, before tying both together in the 2008 debacle…

Banking Is Bookkeeping – Banks As Centralized Ledgers

To have a functioning exchange economy you need money… To enhance the functioning of the monetary system in a time of rising prosperity (Seventeenth and Eighteenth Century) when money becomes more valuable, you need a system of counting and accounting and a specific industry for the money, banking… When taking in the money of savers or lending money out to creditors, you need to keep a track of your incomings and outgoings, so you need ledgers… Ledgers are a historic form of counting going back thousands of years, but for modern banking we go to those shady Black Nobility Elites the Medici’s and the Medici Bank innovation of Double-Entry Bookkeeping… A double book-keeping ledger allows for tracking both debits (deposits) and credits (withdrawals) thoroughly modernizing the previously localized and basic monetary system… So with modern banking you now have a monetary system with paper money as a derivative layer and manifestation of the underlying physical gold under storage, and ledgers that track deposits and withdrawals both issued and controlled by centralized counter-parties, in banks… With a monetary system based on central ledgers (banking) you will inevitably have risk, that of counter-party risk… What is the risk? Trust, privacy and secrecy… The banks keep these ledgers privately and they are not open to public scrutiny, so no-one can really know if they are trustworthy or defrauding their customers… Banking, secrecy, and fraud go hand in hand…

A Central Bank takes this concept one step further… This is a monopoly secretive centralized ledger, controlled by whomever owns the Central Bank, and these Central Banks will fight to the death to resist auditing of any of these ledgers or any other details from the institutions that control the world’s money supply! Again when looking at this situation objectively, Central Banking is absurd beyond belief and it has only survived a Century because of the ignorance of the general public that it fleeces… Once that Central Bank has cut the link to gold, then the monopoly ledger is the only control there is over the issuance of credit (debt), and a ledger that no-one except the owners can see… The only thing that backs pure Fiat money are ledgers and the goods and services exchanged by the general public, and this has held the last 44 years… Let that sink in… Bizzaro…

What Really Happened in 2008

What really happened in 2008 was the death of the Central Banking system… That might sound hyperbolic or deranged but it it true, and an inevitability of Central Banking… Centralizing risk, trust, moral hazard and price discovery on the ledgers of a Central Bank without any kind of link to scarcity (gold), only an ever increasing popping and bubble blowing credit spree Groundhog Day lead to 2008, when all the murky and secretive credit, leverage, derivatives and shadow banking collateral chains started to break and unleashed a Credit Crunch and Financial Crisis… All these opaque and inaccessible private centralized ledgers on the books of centralized counter-parties holding all these assets, liabilities, fractional reserves, debt and leverage, started collapsing… Even though the link to REAL price discovery was severed with gold, at least there was somewhat of a price discovery market mechanism and price discovery corrections (busts following booms) before 2008… 2008 gave enough of a glimpse of the underlying insolvency of a financial system now only based on physical and electronic ledgers and deriving its sole value against the exchange and property of the general public FORCED to use the currency of insolvent banking… Again the private banks look to their publicly instituted Central Bank to bail them out, and the Central Banks of course oblige as their own future depends on the future of the private banks they control… So the mass bankruptcies in the financial system that should have happened in 2008 didn’t, they were temporarily avoided by driving interest rates to zero (ZIRP) and abolishing price discovery by creating more credit to prop up and capitalize the insolvent banking system… Bailouts are what I would with equate with abolishing mark to market, and the beginning of yet another Central Planning phenomenon, that of Mark to Unicorns… In simple terms you suspend previous accounting rules and create new ones that give the appearance of making an insolvent system, solvent… As the Central Bank keeps all the ledgers in secret anyway, what sounds impossible in a sane world becomes all too easy in the insane financial system that we have today… So the general public (and taxpayers) get to pay for propping up bankrupt banks, giving the banks a few more years to pillage the remaining purchasing power of the money before it collapses for the last time…

With the bailouts in 2008 we reached peak centralization of the system… The Central Bank by suspending the laws of gravity, became the new “market”… Price discovery (by changing accounting rules) was taken from the private banking system (and economic markets that they connected to) and centralized by the Central Bank… The Central Bank controls interest rates, accounting rules, base money, and everything else really… Central Banks became the only remaining price discovery points, and the “markets” now sing to their tune… If you look at the genesis and death of a Centralization trend, then suspending competitive price discovery for Central Bank monopoly “price discovery” is the beginning of the end… The last seven years of a completely Centrally Planned financial “market”, is the last seven years all of us have had to live through…

Zero Interest Rate Policy Killing Banks

The Banking System gave itself one huge bailout in 2008/2009 at the expense of the rest of the economy, and it drove interest rates to zero… It did so for a few reasons: to take additional REAL savings of the productive economy and use it to fund at ZERO more unproductive and zombie insolvent banks companies and industries, to reduce the servicing costs of debt (because in the debt based system of Fiat Central Banking, MOAR debt is all their is), in order to fund more lavish bailouts government spending and totalitarian over-reach to make up for the “aggregate demand” lost in the economy from the previous bust to fund unproductive Keynesian Welfare and Warfare stimulus programmes… In effect lowering Central Bank interest rates allows the debt ponzi (funded by stealing more from the purchasing power of the general public) to continue in order to fund the mis-allocation ponzi one business cycle further… Kicking the can…

Specifically for the insolvent private banking system post 2008, ZIRP (Zero Interest Rate Policy) has allowed them to take the savings (deposits) of the general public for no return in interest whatsoever, has allowed them to service their own debt and losses pile following the 2008 crash at near ZERO, and their capacity to lend and charge interest on debt is unhindered… What’s not to love? Well there’s the regulations, and the capital requirements, and the general cost of compliance of Banking in wake of the crash… Even though they only pay a few peanuts in interest to the general public on their deposits for REAL goods and services, low interest rates and a still somewhat competitive lending market between private banks means that bank profits from debt are reduced… Add to that the general deleveraging among the general public where debt levels have become saturated with people not seeming to want to take additional debt, and has forced the banks into all types of rigging activities of markets (LIBOR, Gold, Forex etc etc) just to stay alive, which has kept the bonuses and the champagne flowing but has resulted in diminishing NIMs (Net Interest Margins)… What this basically means is that banks have suffered a compression in the profit margins between interest on deposits and loans, or in even simpler parlance, they cannot make money anymore out of traditional banking (borrowing short and lending long)… Central Bank policies of driving interest rates to zero have driven the banking profit margins to zero, starving them of the profits needed to operate, pay shareholders to justify their bloated stock values, and to position themselves better for the next inevitable bust, ans the reason why we are currently seeing the mass layoffs of staff and cutting back of operations as they fight for survival… While the tide of liquidity printed by Central Banks since 2008/9 has covered up the insolvency of the private banks, that tide will at some point go out again (in the next bust) and the Emperors will be shown to be naked once more, though this time way more naked than 2008 before Central Bank intervention…

Central Banks Cannot Exist Without Private Banks

In 2008 the Central Banks bailed out the banks… All risk and debt has been secured on the secretive and made up private ledgers of shadowy institutions that the general public is unaware of, and so all price discovery is dictated by that Central Bank… If price discovery was abolished in 1971 with cutting the link to the scarcity of gold, then 2008 obliterated any vestige of price discovery in the market, as it was usurped by the hubristic Central Planners… The current Fiat financial system and its colossal debt rests on the ledgers of Central Banks… But now ask the question what backs Central Banks balance sheets? The answer is the value of the goods and services and property of the general public, i.e Central Banking is dependent on other people’s money (goods and services)… You will say that they have other reserves, gold being the prime one… I would say this is true for the East (China, Russia) who could back their Fiat currencies with reserves of gold… I would say that this is however generally not the case in the West, whose Central Banks have driven the paper price of gold to absurd levels to mask the rising loss of faith and trust that a rising gold price would signal, while selling their own reserves of physical gold to the East for these absurd levels just to keep the Central Banking ponzi functioning for a few more years… The East get low physical prices for the gold reserves that will back their new currencies, again just one more absurdity of the modern world… So leave out the East and concentrate on the West… They do not have (generally) the gold reserves to back a new currency, so the only backstop for the Central Banks is the economy that they control through monopoly issue of currency… A loss of trust in the currency leading to hyperinflation would extinguish the colossal debt in the banking system, but they can do it only once, and the consequences of hyperinflation would be horrific for the Western World… The hyperinflation of generations of Fiat currency savings in the banking system would extinguish the debt, but that banking system could never function again without SCARCITY and value to base a new currency and financial system upon…

So the banks cannot exist in their current form without Central Bank bailouts, but the Central Banks also cannot survive either in the long term (after hyperinflation) without some form of new revenues to keep them alive and “solvent” which they could only get from the private banks they control and profit from… Modern banks cannot exist without Central Banks, but Central Banks (outside of one off debt write off of hyperinflation, the 100% tax) cannot exist without banks either… So where will the revenues of the banks come from to keep alive the Fiat ponzi that died in 2008 that currently survives only by faith and floating on the value of the the currency that the general public are forced to exchange in??? The economy is spluttering and will soon fall off a cliff because of the crushing debt already in the private economy and the increasingly punishing taxation and inflation printed by Central Banks to bailout the Centrally Planned economy… Growth is diminishing not growing (outside of “Econometrics”) as the REAL economy bumps up against the limits of debt, remember the public sector can spend like a drunken sailor by stealing the wealth from the productivity of the private sector, but the private sector depends on REAL production to service debt… In simpler terms, you can print money but you cannot print trade… So the REAL economy of indebted serfs cannot create the revenues to keep the banks, and in turn the Central Banks, alive in the short or long run… So where do the revenues come from???

Hello Bitcoin

The one dazzlingly bright spot in an otherwise miserable last six years, has been the emergence of Bitcoin… I have written extensively in other posts about what Bitcoin is, so I will keep it brief here… In keeping with the Banking theme of this post, I will take this angle when describing Bitcoin… Bitcoin is a blockchain which is also known as a ledger, exactly like a bank has a ledger… To transact on the Bitcoin ledger, you have to use the internal currency of Bitcoin, bitcoins… You have a maximum cap of twenty one million bitcoins which cannot be printed by anyone, but can only be mined into existence by a tremendous amount of computing power… Unlike banks who hold private secretive ledgers and Central Banks who hold “public” (in reality private) secretive ledgers, Bitcoin is an open source public ledger that anyone can connect to for safe and secure storage and transfer of digital and soon physical property… While the current financial system is a private centralized asset ledger system the Bitcoin blockchain is a decentralized asset ledger… The Bitcoin ledger like the Banks uses a currency to transfer wealth and account for it on the ledger, but the bitcoin currency unlike the banks is not issued centrally by anyone, it is mined into existence as a result of the functioning of the blockchain to compensate the miners for doing the banks job… And unlike the banking system that has legal privilege, and monopoly Legal Tender Laws, bitcoin is a currency you CHOOSE to use not one you are forced to use… Bitcoin is a voluntary ledger while Fiat is a coercive ledger… All the local, regional, national banking systems of the world and their numerous private secret ledgers and their hundreds of currencies that create the Forex Industry and the fat fees that the banks make out of trying to shift wealth around a fraudulent fragmented archaic infrastucture, Bitcoin the ledger, and bitcoin the one world currency, do for free… Now think of the cost of Banking and how much it hoovers up in the cost of a functioning economy, and now do it for free! While Banking is the essence of modern Debt Serfdom, Bitcoin is the essence of Liberty…

The Bitcoin economy has grown from zero to $5 Billion (expressed in dollars) and has an increasingly sophisticated universe of infrastucture that underpins it, not to mention the incredible talent and ingenuity of coders, programmers, core development, venture capital and startups in various applications, and (slowly) increasing merchant and consumer adoption in the last 2 year backdrop of a declining currency… Strip it down to bare bones and Bitcoin is a public ledger and resource (like the internet) that eliminates centralized ledgers (banks) and legal counter-parties (Law and Government)… Even still the Bitcoin Ecosystem (the economy that transacts on the Bitcoin ledger) is tiny and miniscule compared to the vastly inferior Fiat World Economy (the economy that transacts on Fiat banking ledgers), that is enforced upon the general public by Governments and their guns and tax authorities and due to the ignorance of the masses (through Public Education and Media)… What we have in short is two economies, one a vibrant young upstart of breathtaking and beautiful simplicity that is still virtually unknown, and an archaic visibly and hilariously bankrupt and insolvent legacy economy, that survives only by ignorance and coercion… How do you connect these two ecosystems?

Exchanges Connect Fiat to Bitcoin

To move wealth from the Fiat Economy to the Bitcoin Ecosystem, you need exchanges that allow exchange of bitcoins for dollars, or euros, or pounds or yen… There are now numerous Fiat to Bitcoin exchanges all over world, but the big problem is regulation of the space… With Banks under increased regulation and compliance costs themselves, not to mention the recent hilarious fearmongering waged against Bitcoin for money laundering and funding terrorism (anyone with functioning brain neurons would immediately recognize that real crime is done in U.S. dollars), they have so far avoided directly engaging with the Bitcoin economy… However some very interesting things have been happening the last few months… If you follow the news wires as I do on Twitter, you should be noticing some pretty obvious things… Central Banks are obviously in a bind and boxed in with nowhere to go except devalue their currencies and export their deflation ultimately to the U.S. with the Yellen Fed toying with a twenty five basis point interest rate hike which will strengthen the dollar in the final deflation before the crack up boom… Bitcoin is seriously on the up for myriad reasons and is increasingly gaining in mainstream discussion of currency and a new decentralized method of storage and asset transfer in numerous industries (Banking, Accounting, Insurance, Legal)… But what is happening in the world of the Banks? Two notable trends, both of which are set to accelerate and align in my opinion in the next six to twelve months… The first is plunging trading fees, ongoing job layoffs,  and serious downscaling of operations in the Banking Sector due to the Net Interest Margin compression and increased costs of compliance and regulations created by Central Bank ZIRP/NIRP and the 2008 Banking Bailouts… The second is the blossoming love affair between the legacy banking institutions (Banks, Card Processors, and Remittance Companies) in the last few months, and the Bitcoin space… I could cite an extensive list to back this up, but just google Bitcoin and Banking or search through Coindesk.com website for bank related articles, and you will find many… The obvious question you should be asking is why now?

Why Are The Banks All Over Bitcoin?

The Banks know something is up… They must know the economy is drowning in debt just by the fact that they are dying with all the risk (and profits) shouldered by their master having made them essentially redundant and zombie institutions by ZIRP and NIRP… The only thing they see is this Bitcoin thing, but they hate Bitcoin of course cause it’s used for drugs and guns and crime in general (no irony here), but they have also heard of this thing called the blockchain that if utilized properly can transform their failing and unprofitable business models… They also imagine that they can control and regulate and essentially jump on to blockchain technology, or at worst if that doesn’t work they can utilize their own blockchains thus giving banking a new lease of life (as J P Morgan has tried and failed so far)… The Banks haven’t yet figured out that the blockchain is the ledger and bitcoin is the currency… They have yet to figure out that bitcoins do all their jobs (for no fees) on an infinitely scalable decentralized ledger that doesn’t use counter-parties (banks)… They are struggling and straining to get their minds around the ledger and currency that will replace them… But the Bankers see one thing, promise… And where they see promise, they sniff money and profits and survival…

The Faustian Bargain

After a convoluted and long winded discussion of the vagaries of Banking (but to try and give a comprehensive and thorough explanation of the bankers Gordian Knot I felt I needed the words), we now come to the Faustian Pact the banks will have to strike to survive a while longer… They will have to allow access from their Bankrupt Fiat Ecosystem into the Bitcoin Ecosystem… The Regulation of Bitcoin by banks or Central Banks is a fiction! They cannot control the issue of something that they cannot control, otherwise stated only the Bitcoin miners can MINE not print bitcoins into existence, they cannot be conjured by bankers… They cannot either control where these bitcoins travel on the Bitcoin network as they are dependent on the Public and Private Keys (think of a bank account as a corollary) that are the sovereign property of their owners from behind whichever laptop/smartphone he/she is operating, so freezing of funds or assets and confiscation is impossible… The bankers cannot control any aspect of the Bitcoin blockchain save one, their connection to it… This is a CRITICALLY IMPORTANT point to understand, when the bankers or their government lapdogs threaten to “regulate” or “ban” Bitcoin, what they really mean is they decide how easy it is for the capital and wealth from the decrepit decaying Fiat Ecosystem of Fractional Reserve and Central Banking, to move to the vibrant expanding utility and intrinsic scarcity of the Bitcoin Ecosystem… “Banning” Bitcoin basically means that they legislate Bitcoin out of the Fiat system, but Bitcoin doesn’t go away and connecting to Bitcoin to trade directly (cutting out the Fiat system altogether) on the network is as easy as an application download on a smartphone or laptop… So no they can’t ban Bitcoin, and they can’t control it either, it is a fully open sourced network of code, algorythms, cryptography and maths that cannot controlled by anybody but can be fully utilized, supported and exploited by anyone with an internet connection… So will the bankers sign the bargain?

Why The Bankers Sign The Bargain, They Need The Fees

Just to quickly recap the Bankers are being boiled alive by ZIRP policies which as an amusing reminder was the last gasp desperate act of insolvent banks bailed out by the Central Banks in 2008, starving the banks of the necessary fees and profits to rebuild their insolvent balance sheets… In the last mad days of a centrally planned economy, the mother (central banking) is poisoning the children (banks) by trying to keep them alive… When banking dies so does Central Banking, after all the only reason a Central Bank exists is as a backstop for the banks… The banks, central banks and centralized government warfare and welfare will all collapse together, but the banks (of course controlled by the Central Banks) can stay alive a while longer, by building the necessary bridges required to bridge between the Fiat Ecosystem and the Bitcoin Ecosystem… These bridges can only be built from the Fiat side, that is by their control of Legislation over the wealth of the global population that is compelled to exchange in Fiat currencies… And for building these bridges the banks get to charge their tolls on the wealth of people crossing over… The banks will be able to charge whatever fees they desire, which in a competitive system of private banks allowing access into Bitcoin will mean the fees will be competitive and you would expect to go lower as more wealth crosses… But to be clear they can only charge fees once, when moving from Fiat to Bitcoin, and that is the end of their control upon that wealth… Once that wealth has entered the Bitcoin network it cannot be controlled by the Fiat System… Likewise if you converted bitcoins back into dollars and euros and pounds and yen, you would be charged fees and you would be subject to the old capital controls and archaic infrastructure of the Fiat system…

Irony Is Beautful

Imagine the Fiat Ecosystem as a self contained bubble consisting of however many hundreds of trillions or quadrillions in Human wealth on the private secretive ledgers of a frankly hilariously out dated and near defunct fractional reserve and central banking system, and Bitcoin as another self contained bubble of approximately $5 Billion (expressed in Fiat for comparison) in Human wealth on an open source transparent decentralized public ledger with an internal scarce currency whose maximum cap is twenty one million units… It should be pretty clear which Ecosystem is healthiest, which holds most promise and utility and property rights and all the rest of it, and which one is visibly dying and totally unfit for twenty first century life… I contend that in order to survive a few more months and years the banks will build and allow transit of this enormous amount of wealth by building the bridges and charging the tolls for their monopoly over their bridges, which is nothing less than what you would expect… Now here is why irony is beautiful… By allowing the wealth to flow from the huge quadrillions of dollars Fiat bubble into the five billion dollar tiny miniscule Bitcoin bubble, one bubble (Fiat) deflates slowly on its way to collapse and increasing redundancy, while the other bubble (Bitcoin) inflates as the wealth is pumped into an intrinsically scarce currency (bitcoins) with a twenty one million unit maximum cap… While you wouldn’t notice a hundred billion dollars moving out of Fiat, you would most certainly notice a hundred billion dollars entering Bitcoin, it would send the market cap up twenty fold but more importantly for you, your purchasing power in bitcoins would increase twenty fold!!! I just said your purchasing power would increase twenty fold on a hundred billion dollars entering the Bitcoin ledger, never mind a trillion or hundred trillion or quadrillion… Do you think a merchant or a consumer would prefer a currency that is rapidly gaining in purchasing power or one which is declining in purchasing power? A twenty fold increase in your purchasing would allow you to buy twenty times more stuff from merchants all over the world, who would then spend their bitcoins on twenty times more stuff of other merchants, and so on… The more wealth that moves from Fiat to Bitcoin, the lower the purchasing power of Fiat currencies go, and the higher the purchasing power of bitcoins go enticing further advantages for consumers and merchants and increasing mass adoption of a superior and beneficial financial system for the general public… We have in two distinct ecosystems a feedback loop whereas declining utility (purchasing power) of insolvent Fiat currencies translates into increasing utility and scarcity of bitcoins on the Bitcoin network, and as I explained in a previous post free market private monies (no Central Banks) will create deflation or an increase in purchasing power over time, leading to an increase in standards of living for the whole of society… Just to illustrate further this scarcity of money concept before I conclude this long post, I’ll include a quote from another previous post, and I quote,

“So let’s do a quick thought experiment; let’s imagine the world population tomorrow switched from using national fiat currencies, to using Bitcoin… The Gross Domestic Product (total value of goods and services exchanged) of the globe today in U.S dollar terms is approximately $70 Trillion ($70,000,000,000,000), so convert that into a potential figure for the Bitcoin ecosystem… There are and can only ever be 21 million (21,000,000) Bitcoins (units of currency), so let’s take that maximum cap and divide 21 million by $70 Trillion… The figure you will get is $3, 333,333.33, three and a third million dollars each, per Bitcoin… Do I need to repeat that? That is one year’s Gross Domestic Product, add another year and a Bitcoin trading today for just over two hundred dollars would be worth six and a half million dollars… That would translate to an annual fifty percent deflation, otherwise stated your purchasing power DOUBLED in one year… Another year’s GDP would increase your purchasing power by another THIRD, and so on… This does not include any other property, only goods and services exchanged in Bitcoin… Just think about that…

In analogy, think of a currency (money) as a bucket into which you pour water, and think of this water as the goods and services of a productive economy… The water (goods and services) will always be the same, flowing maybe slower or faster, but still flowing into the bucket as any and all Human Action is the creation of wealth… This bucket would over time fill as the standards of living increased for everybody, in other words use of scarce stable money (gold) creating deflation for all… Now here come the central bankers and drill a big hole in the bottom of the bucket covertly, from whence the water is siphoned off by counterfeiting Elites to fund Wars, Welfare and the Centrally Planned corrupted distorted destruction of society; by using Fiat currency you are really funding your own destruction… The water in the bucket drops as more is siphoned off and as society gets ever poorer, until there is no more water, and at that point when the bucket is empty, we collapse; you cannot consume what has not been produced… The Bitcoin bucket has no hole… The more water you pour in, the more the water rises in the bucket as standards of living increase, until that bucket overfloweth for everyone… An intrinsically scarce currency, whether physical OR digital, will increase the living standards of the whole of society, which means less time working and more time at home with the ones you love, which is what life should be about…” End Quote…

Conclusion

The trend of Decentralization was first entrenched at the beginning of the Nineties with the advent of the public internet that decentralized information leading to the decentralization of trade (internet and trade), and which would eventually inevitably lead to the decentralization of currency as a medium of exchange for decentralized trade and information (internet + trade + currency)… The decentralization trend really accelerated in 2009 with the invention of Bitcoin, a decentralized asset ledger and currency, that could be traded freely without fees and centralized controls (Banking) and was really destined to end the slavery of the current financial system… You can debate whether Bitcoin is controlled opposition created by the same Elites that hope to funnel wealth into a cashless system that they then have total control of, but you should really concentrate on the invention of the blockchain itself, of which Bitcoin is only one… If the Elites are really behind Bitcoin then you just switch to another blockchain and currency network, but you cannot kill the idea or the invention of Blockchain Technology, as the invention that changes the world and our whole concept of property ownership now that it has created a financial system that doesn’t require counter-parties (Banking and Law/Government)… So whether it is Bitcoin sooner or another superior blockchain later, the decentralization of currency and property ownership is INEVITABLE, and will happen certainly in the next five to ten years and in my opinion a lot sooner than that… Decentralization is inevitable…

The Banking collapse of 2008 was the culmination of a thirty seven year batshit mad experiment when the global financial system became unhinged and unshackled from the stability and scarcity of gold, and unleashed the magic powers of unlimited credit creation to fund wars, welfare and complete centrally planned society in which we are currently imprisoned… The Banks died in 2008 but were kept on life support by the Central Banks which have in the intervening years taken on all risk of “market” operations, destroyed all price discovery by abolishing mark to market, and manipulating every aspect of everyone’s lives by driving interest rates to ZERO to service the ever increasing debt on the system, with all these bailouts and unproductive investment as only central planning can perpetuate, being stolen from the purchasing power of the Fiat currencies that the general public are FORCED to use… The same ZIRP/NIRP interest rate policies are currently killing high street banking who are increasingly unable to profit from Net Interest Margins and increasingly unable to operate without massive layoffs and capital expenditure reductions, and have left the banks drowning in their insolvency before the next inevitable and final crash of this communist financial system… The one glimmer of hope for the banks, and the reason why the banks, card processors and remittance companies are all over Bitcoin and Blockchain Technology is because they think this is their saviour… Beware of temporary saviours… The banks do not yet understand that Bitcoin will make them obsolete, but do see its potential for streamlining financial systems and eliminating costs while generating desperately needed fees… So in my opinion those banks and Central Banks that are smart will sign the Faustian Bargain that allows light touch regulation of the exchange between Fiat and Bitcoin, and allows the banks to build the bridges on which the wealth will travel from the legacy Fiat system to the blooming Bitcoin Ecosystem… So expect a lot more in the next few weeks and months on the increasing embrace by the banks of Bitcoin and its blockchain… Their short term future will depend on it soon enough…

The difference between a Fiat money system of slavery theft and coercion and an abundant paradise of increasing scarce and valuable money (and freedom), is which currency you use to buy and sell your labour, goods and services… The Fiat system derives its value from the masses, while Bitcoin currently derives its value from speculative trading, and a very small user base that understands and appreciates its importance for the future and is front running the rest of humanity… Bitcoin although a speck of the size of Fiat, is the vastly superior and beneficial system for the general public, who are still completely unaware… Why? Because of education and ignorance… The Elites have a monopoly over Education (and Media) for a reason, so they can keep you ignorant of economics, money, and how Central Banks steal the value of your money and steal your life from you through debt… So changing the world is only a matter of education, which is why I write these posts exclusively on Economics and money… Once you understand money, then you understand the Game that can be played with money… The solution to slavery is easy, it is through education and the voluntary adoption of a different financial system… When enough people see it, then everything changes… Now we wait for the Central Banks to crash the system again, which will bring money and finance and competing currencies to the mainstream again…

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