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‘Bitcoin Is the Biggest Jailbreak in Human History,’ Says Philosopher Stefan Molyneux

22/02/2021 by Idelto Editor

'Bitcoin Is the Biggest Jailbreak in Human History,' Says Philosopher Stefan Molyneux

On February 19, the Canadian podcaster and Freedomain Radio host, Stefan Molyneux, discussed his thoughts about bitcoin following the crypto asset’s tumultuous rise capturing over a trillion-dollar market valuation. Molyneux’s recent speech describes the liberating potential bitcoin could bring to the masses and how the crypto network has the ability to change humanity for the better.

‘Bitcoin Is a Currency That Serves the People at the Expense of the Parasites’

Just recently the crypto evangelist and philosopher, Stefan Molyneux, spoke about the Bitcoin blockchain in great detail. Molyneux opened his speech by answering a question about BTC and ETH having a hard time scaling. The Freedomain radio host said that it is good to critique, but that people in the crypto space wouldn’t give up so easily.

Molyneux mentioned that bitcoin’s market capitalization just crossed the trillion-dollar milestone and noted that the people who have added that value won’t throw in the towel. He insisted that many crypto proponents have given a decade of their lives toward spreading adoption, and mentioned there are solutions like bitcoin cash (BCH) and the Lightning Network.

“The Bitcoin community is composed of just about the most brilliant, and economically and ideologically motivated human beings on the planet,” Molyneux stresses in his video. “Bet against them at your freaking peril, because Bitcoin is not just an alternative currency, it’s not just a store of value, it’s not just a cool public ledger. Bitcoin is a passionate FU to the powers that be,” Molyneux adds.

'Bitcoin Is the Biggest Jailbreak in Human History,' Says Philosopher Stefan Molyneux
Freedomain Radio philosopher and anarcho-capitalist, Stefan Molyneux.

The Freedomain philosopher continues: “Bitcoin, as I’ve argued publicly in speeches many years ago— Bitcoin is the potential end to war, to end hyperinflation, to end intergenerational debt— Bitcoin is a mission of mercy to the future— Bitcoin is the Jesus to the new conference of the religion of peace called crypto. Bitcoin is the people regaining control over their currency for the first time in the history of the world— Bitcoin is currency democratized, unpolitized, unpredatored.”

Molyneux added:

Bitcoin is a currency that serves the people at the expense of the parasites, rather than the currency which serves the parasites at the expense of the people at the moment. Bitcoin is rescuing your precious labor from being hoovered up endlessly by the invisible vampire mosquitoes of central banking.

Today’s Fiat Currency Is Slavery Tethered to Unborn Generations

The philosopher continues by commending the Bitcoin community and says that the people in crypto are “seriously brilliant.” Beautiful and “deranged people,” he says that are “committed to the future of peace and plenty that Bitcoin could represent.”

'Bitcoin Is the Biggest Jailbreak in Human History,' Says Philosopher Stefan Molyneux

Molyneux further notes that the current fiat currency distributed by the world’s oligarchic bureaucracy is “slavery.”

“What we understand is currency now is slavery. The currency is summoned into existence at the expense of your children’s futures. What you think of as a dollar sign is a slow jugular sucking noose twined and twisted around the necks of your children,” Molyneux reveals.

National debt, Molyneux continues to highlight is “a real human trafficking problem.” You need to understand the Bitcoin space he adds. “The passion that these incredibly brilliant people have brought to bear on the oldest human problem— How do you store a value so that thieving predatory vampiric assholes can’t get their jugular sucking tentacles on it at all times? How do you store value so that you can actually come back to it?” Molyneux asked.

He adds:

Civilization is all about the storing of value. How do you store value? That’s civilization you understand. Bitcoin is about how you store value so that [parasites] can’t get their hands on it. They just can’t. You put your money in the bank, inflation eats it away, you store your meat by the river, the flies lay their eggs in it and you can’t eat it, you got gold coins in Rome, they put all kinds of a bimetallic [crap] into the gold and destroy its value in your hand.

‘The Likes of a Revolution That We Have Never Ever Ever Seen Before in Human History’

Molyneux says that humans are all about storing value and in the evangelist’s opinion, the storage and retention of value is everything in life. “By creating something that can store value outside the state, that is the likes of a revolution that we have never ever ever seen before in human history,” the philosopher insists.

“If shells on some island are the currency,” Molyneux details in an analogy. “Then you need three shells a day to live, and if you get four shells, someone’s gonna take the fourth shell. Then tomorrow you won’t bother to get the fourth shell. You just stick with getting three shells and nothing will ever progress, because nothing can be saved or stored up in value. Nothing ever gets built because everything you build is going to be taken away from you,” he added.

'Bitcoin Is the Biggest Jailbreak in Human History,' Says Philosopher Stefan Molyneux
“Bitcoin is the biggest jailbreak in human history,’ Molyneux’s video highlights.

Molyneux continues: “Imagine… everything you build is going to get taken away. It’s happening [right] now, you understand. Everything you have built is already taken away by unfunded liabilities, national debt, inflation— Everything you build is already taken away. You are just holding it now to have it for a little while to give you the illusion so you can go to work tomorrow.”

Bitcoin Represents a New Financial System That Doesn’t Leverage the Unborn as Collateral

Molyneux says you can have a house. But it’s really not your house. He highlights that you have to pay the government every year to keep it.

“And the government put it in so much debt and you in so much debt, that it’s gonna be owned by some foreign bankster, at some point,” Molyneux’s speech details. “Or the entire currency is going to collapse and society goes back to savage gangs and you lose your house. You pretend you have a house, you pretend you have electricity, you pretend you have a car, you pretend you have everything but you have nothing.”

The Freedomain radio host further says:

You know this 2030 ‘you’ll own nothing and you’ll be happy,’ [that’s the way it is] now. In fact you owe, you don’t own, you owe. You are only allowed to pretend you own something so that you will get up and go to work tomorrow. That’s it man.

Bitcoin has changed this course, Molyneux emphasizes. Bitcoin is the first of its kind that can actually keep parasites away from stealing value he notes. He says that the society we live in today treats babies and the unborn as “collateral.” Bitcoin can bolster a system that does away with such an immoral system.

“If you generally understood how much debt was taken out on your behalf just because you are breathing,” Molyneux notes. “If you genuinely looked at that math, you can find it pretty easy,” he added.

Molyneux’s speech continues for another 20 minutes longer, and news.Bitcoin.com readers can watch the rest of his speech here.

What do you think about Stefan Molyneux’s recent Bitcoin speech? Let us know what you think about this subject in the comments section below.

Filed Under: Anarcho-capitalism, anti-state, Anti-war, Bitcoin, Bitcoin (BTC), Central Banking, cryptocurrency, Currency, debt, Debt Slaves, English, Featured, free markets, freedom, Freedomain Radio, Freedomain.com, Jailbreak, liberty, money, National Debt, News Bitcoin, philosophy, Stefan Molyneux, Voluntaryism

Bitcoin, Debt And Elasticity: A Rebuttal To Michael Green

03/02/2021 by Idelto Editor

In the same way that a year passes through a series of seasons, so too does Bitcoin appear to follow a seasonal trajectory during each halving cycle. 

As we enter Bitcoin Spring, price discovery and growth within this industry will begin to accelerate as Bitcoin begins to draw more interest from people outside of the community. However, growth within the industry is not the only growth to be had. In the same way that the flowers of springtime must contend with weeds, so too must Bitcoiners contend with new rounds of FUD. 

The latest individual of merit to publicly weigh in on Bitcoin is Logica Chief Strategist Michael Green. Green is a wealth of knowledge in the macro sphere and his interviews are always worth a listen, even if you don’t agree with him. That being said, I have a few points of contention with him because I believe he is speaking about Bitcoin from a position of bad faith and not a position of someone who generally wishes to learn and understand.

To begin with, he styles himself as open minded and has said time and again that it is important to listen and understand ideas with which you don’t agree. For example, he will be interviewing, or perhaps has already interviewed, Rohan Grey, which means that the merits of Modern Monetary Theory (MMT) will also be entertained. That is all good and well, however, it also appears clear that the same level of consistency on Green’s part will not be extended to the Bitcoin space. 

This is evidenced by his use of cliche and banal pejoratives to describe bitcoin such as: Bitcoin is a fake system, Bitcoin is trapped in a lie, Bitcoin is a Ponzi, “bit con,” or comparing Bitcoin to Bernie Madoff. And yet, none of these claims are supported by any evidence on his part. Based on the many hours I have spent listening to podcasts of his, I think he would agree that making disparaging remarks prior to presenting evidence is a dangerous path to tread on.

I am not sure whether Green is wading into the space as a form of self-advertisement (his follower count has increased significantly since he began talking about Bitcoin), to protect the current system (himself?) or because he genuinely thinks there is something wrong with Bitcoin.  His true intentions, whatever they may be, are immaterial to this discussion.  

This article is not being written to attack Green’s character but is instead being used to refute some of the claims he made on the “Money MBA Podcast.” The list of his claims against Bitcoin that we will address include the following: money exists to extinguish debt, the inelasticity of Bitcoin is a problem, and Bitcoin disincentivizes risk taking. I would also like to add that, while you read this, it is important to keep in mind that these claims work off of Green’s position that we shouldn’t abandon the current system. This is the same system that Green benefits from despite an increasing number of participants falling by the wayside. One might go on to surmise that there is a hint of self interest behind his positions. 

Nevertheless, the important principle here is that we must always be ready to meet challenges coming from outside of the space, which is the purpose of this article. Before we respond to the claims against Bitcoin, we must first challenge Green’s claim about the nature of money itself.

Money Exists To Extinguish Debt

The first point that needs to be addressed is the claim that “money is that which extinguishes debt.” This claim is demonstrably false. The primary reason that money came about was to solve the double coincidence of wants problem. An explanation and example of the double coincidence of wants problem is provided by Vijay Boyapati:

“In the earliest human societies, trade between groups of people occurred through barter. The incredible inefficiencies inherent to barter trade drastically limited the scale and geographical scope at which trade could occur. A major disadvantage with barter based trade is the double coincidence of wants problem. An apple grower may desire trade with a fisherman, for example, but if the fisherman does not desire apples at the same moment, the trade will not take place.”

Money solved this problem by creating a mechanism by which both goods from the example could be priced in a third. This pricing mechanism provided the lubricant that allowed the size and scope of trade to expand. By finding a salable good that all other goods can be priced in, ancient man stumbled upon one of the most important technological innovations, arguably, of all time. Since taking on debt in the first place was rare in ancient times, then how could money, which has been widely adopted and used going back as far as we can decipher, have existed solely for the purpose of extinguishing debt? The answer is clear: Money did not exist to extinguish debt but was instead used to facilitate trade.

Although debt financing has evolved in size and scope over time, it has always existed within the context of a system which used the scarcest goods as money, whether those were bronze, copper, silver or gold. One might be correct in saying the U.S. dollar exists to extinguish debt, but only because we have operated solely under a debt-based monetary system since 1971. Under this system, the bank simply conjures up an asset (dollars) from thin air and loans it into existence, perhaps in the form of a mortgage or car loan. Historically speaking, this is the exception and not the rule. A hard money system has allowed for debt financing as far back as records exist. The only difference is that some form of collateral, usually land, had to be pledged in order for a loan of hard money to be obtained so that the creditor was protected in the case of the borrower’s default.

Debt-based money was used in the 1800s and to great detriment. The onset of numerous banking panics during this century was the direct result of banks increasing the money supply via unbacked banknotes. The way this works is banks would create more banknotes (which are actually just the receipts you would have received after depositing gold at the bank) than they had gold in their vaults, in effect loaning banknotes into existence.

My last comment under this topic that I would like to make is that during his interview with the “Money MBA Podcast,” Green cited the character Wimpy from “Popeye” in order to make his point that money exists to extinguish debt. It must be noted, however, that in the case of Wimpy, he does not have money to begin with and is thus looking for an extension of credit, so I am not exactly sure what Green was driving at there. An extension of credit and money are two separate things. One is an IOU, while the other is not. If Wimpy ever had money, no debt would enter the equation because a straight swap of hamburgers for money would have occured. Money is produced, and behaves, no differently than any other good in an economy and is not debt in and of itself.

Now that we have addressed some key misconceptions about the nature and role of money itself, we are ready to move forward and address some of Green’s arguments against Bitcoin itself.

The Bitcoin Money Supply Is Inelastic and Cannot Expand

The next claim made by Green against Bitcoin is that the money supply of Bitcoin is inelastic and therefore cannot expand, which would be detrimental to the economy. His belief appears to be that the elasticity of money is necessary for growth in a modern economy, despite history indicating to the contrary. To counter his claim, we will need to analyze time periods characterized by both elastic and inelastic money and then focus on the effect that each type of money had on the economic environment.

Periods Of Elastic Money

After the fall of the Roman Republic, and subsequent rise of the Roman Empire, debasement of coins began shortly thereafter with the size and frequency of debasements increasing over time. By the year 241 A.D., the denarius had been diluted to just 48 percent of its original silver content and then, by 274 A.D., contained a meager 5 percent of said silver content. It should come as no surprise that debasement of Roman coins coincided with the decline and collapse of the empire itself. 

The collapse of the western part of the Roman Empire led to a period of time called the Dark Ages, which was a time of economic and political weakness in Europe that lasted for centuries. This entire post-Empire period suffered from the rampant debasement of coins, however, it must be noted that the shorts periods of relief came once inelastic money was introduced, such as Charlamagne’s denier or the Byzantine and Arab gold coins. These short periods marked by the use of inelastic money were also periods of economic growth in an otherwise low-growth era.

In China, paper money had been used to varying degrees, beginning in the 7th century, and was initially backed by copper. As with the evolution of any paper money, its lifecycle passed along these four key phases:

1. A banknote is provided as a receipt for deposits of copper

2. Due to the lightweight nature of the banknote, the banknotes themselves begin to be used as a proxy for money

3. Governments/bankers then begin to issue more banknotes than they have precious metal in the vault

4. Inflation follows which leads to a collapse of the paper currency

In the case of China, the final collapse occurred in 1368, while under the Mongol-led Yuan Dynasty, after a period of high inflation.

During the 18th century, France experienced one of history’s most well documented bubbles followed by one of history’s greatest periods of hyperinflation near the end of the century. The Mississippi Bubble occurred in the 1710s and was fueled by the excess creation of bank notes on top of gold deposits, which were then used to buy shares in the Mississippi Company. The inflation of the money supply led to a bubble which subsequently burst, leading to riots. John Law, head of Banque Royale, was eventually forced to flee under cover of night, with his own personal real assets staying behind in an effort to make creditors whole. At the end of the century, during the 1790s, the French had yet to learn their lesson and the assignat was born out of the madness of the French Revolution. 

The assignat was made legal tender and allegedly derived its value from the church lands that had been confiscated by the revolutionaries. Suffice to say, land itself is not a good form of money as it lacks the attributes of portability and divisibility. As is always the case, the value of the assignat, like the paper money experiments that preceded it, was destroyed due to over-issuance. This over-issuance fueled even more chaos, during an already tumultuous time, until Napoleon took control in a coup and restored the country to a more inelastic money (gold).

The Bretton Woods system, established in 1944, was by no means a good system but it at least anchored the dollar to a resource, gold, that mimicked the scarcity of the Earth’s resources.  Prior to the Bretton Woods system, the world had witnessed the destruction of German paper money during the Weimar hyperinflation and after the Bretton Woods system was abolished, the world has seen the destruction of paper currencies such as the Brazilian cruzeiro, Zimbabwean dollar and Venezuelan bolívar. In fact, an individual on Reddit was kind enough to make an infographic of all the elastic currencies throughout history that have been inflated away, many occuring in the 20th century.

Today, countries such as Argentina, Brazil, Turkey and many others watch helplessly as the purchasing power of their elastic currencies is destroyed. Perhaps it should come as no surprise that those are three of the countries that have seen significant growth within the Bitcoin ecosystem.

On an anecdotal note, I have watched a close friend in Brazil benefit enormously from having owned bitcoin while the Brazilian real has continued to depreciate. In fact, though his family’s business has come under difficult times, the family’s allocation to bitcoin has helped them weather the storm while others in their same situation aren’t so lucky. Friends of his who have no interest in the topic of money have since joined in as well and benefitted accordingly.

Lastly, I would like to provide some evidence as to what happens under an elastic money regime courtesy of Pew Research. In 1970, one year before Nixon closed the gold convertibility window, we had the following shares of U.S. aggregate household income by income tier: upper income (29 percent), middle income (62 percent) and lower income (10 percent). 

By 2018, those percentages had changed to record the following: upper income (48 percent), middle income (43 percent) and lower income (9 percent). What this illustrates is that periods of elastic money have a tendency to exacerbate wealth inequality to a significant degree. There are also additional sources of information that substantiate this point, but the key takeaway here is that elasticity of the money supply leads to debasement and debasement is ultimately theft, or in the case above, a transfer of wealth from the poor to the wealthy.

Periods Of Inelastic Money

History has shown that periods of inelastic money were superior to periods of elastic money, whether it was the gold aureus issued by Caesar, the gold solidus used in Byzantium, the florin or ducat of northern Italy, these functioned as early European reserve currencies, or the money used during the time of the international gold standard, beginning in 1871. 

All of the aforementioned periods were some of the most productive periods in human history. From the Renaissance to the Industrial Revolution, the inelasticity of money was the key feature that allowed immense amounts of growth to transpire. The inelasticity of money is important because we operate in a world of scarcity where the goods used as money must mimic this finite nature. Resources such as land, gold, oil, timber and water are finite, so pricing them in an infinite good does not make much sense, philosophically speaking. Furthermore, resources must be expended in order to extract other resources or produce goods. Bitcoin adheres to both of these laws of nature due to its scarcity as well as the need to expend resources to produce it while fiat money does not.

Bitcoin Disincentivizes Risk Taking

The last claim that we will cover in this article is the claim that Bitcoin disincentivizes risk taking. 

As financial markets have evolved, there has been a corresponding proliferation of debt instruments as well. The majority of these developments in debt markets occurred under a hard money system, so the argument that Bitcoin disincentivizes risk taking, ostensibly due to its high value, is false. 

Even though debt wasn’t as common during ancient Greek or Roman times, purchases of land and sea voyages were sometimes financed through debt. Typically, a precious metal was loaned out to the borrower and in exchange the borrower would pledge security, in the form of the land being purchased or even in the form of the sea vessel being used for the voyage itself. Therefore, risk taking was present even under an ancient, hard money system. 

In late medieval times, Florentine banks saw fit to risk a loan to the English king, Edward III, during the Hundred Years’ War. These bankers were ultimately bankrupted when Edward defaulted but nonetheless, this is another example of credit being issued in the form of a hard money good (likely the highly-valued florin, in this case) and risk being taken. The point of these examples is to show that risk taking has only increased with time and that the loans denominated in highly-valued money were not impediments to commerce.

Loans in general are repaid through careful investments into efficiency-creating technology which frees up capital, allowing repayment of the loan. For example, in the latter decades of the 19th century, John D. Rockefellers’ Standard Oil was able to reduce the prices on its petroleum-based products to one-eighth of their original price. 

This cost efficiency would have no doubt enabled Standard Oil to repay any of its outstanding creditors with ease. It is also no surprise that this efficiency occurred under the inelastic international gold standard previously mentioned. Much to the contrary, debt today is often rolled over and never repaid under our current elastic monetary regime. The mere fact that debt continues to expand should tip people off that the current system is untenable. It is also worth noting that if people would prefer to save in bitcoin rather than lending it out, then perhaps their risk assessment of the economic environment is one where alternatives to holding bitcoin are poor by comparison. This has nothing to do with the monetary unit itself, but with the economy.

Lastly, Green made a comment that those unable to pay their debts were thrown into debtors’ prison, often for indefinite periods of time, according to him. The first thing that needs to be noted is that unpaid debts are a form of theft by the borrower. When people engage in theft of resources under any other circumstance, it is a criminal offence and often leads to prison time.  Should debt be treated differently? If so, how? If anything, the risk for the creditor of not being made whole, in the event of the borrowers default, would be a perfect example of a circumstance that would disincentivize risk taking, rendering the monetary good being lent out as immaterial in this case. In the case of Bitcoin, despite the nascency of the technology, there are already opportunities for lending and borrowing, for example by opening an account through BlockFi, so the claim that Bitcoin disincentivizes risk taking is false.

Conclusion

Over the duration of the podcast, Green went on to make additional comments such as “Bitcoin is unfair,” but as with most of his claims, he did not go through much trouble to explain himself, so the ultimate thinking behind them is unknown to the listener. Additionally, he referred to the stock-to-flow model as “nonsense” but provided no evidence to support that claim either. As someone who enjoys listening to Green outside of Bitcoin, I expected much more. His audiences have a tendency to fawn over him, so it comes as no surprise that his claims were left unchallenged.

As far as providing a solution to the monetary mess we find ourselves in, his response was simply to “vote better.” Again, I expected far more. A quote often ascribed to Einstein provides the best response to Mike’s solution:

“The definition of insanity is doing the same thing over and over again and expecting a different result.”  

There is no need to open a tangential discussion on the topic of democracy within the context of this article, but it is enough to say that if democracy worked so well, then why do places like Argentina, Brazil and Kenya find themselves in a consistent state of dysfunction?

In closing, people struggle with paradigm shifts and understandably so, however, it is my perception that Green is not acting in good faith in these debates, perhaps because Bitcoin does not comport with his worldview or perhaps because he is salty for having missed the boat when the opportunity arose. 

Whatever the case, his use of statist rhetoric to attack Bitcoin undermines any constructive analysis he might otherwise lend to the space. Perhaps Bitcoin threatens his business model, much like Peter Schiff’s, though it is difficult to say. Conjecture aside, I do want to be clear about one thing: Bitcoin critiques are always welcome, but please, do your homework first or at least approach the subject with an open mind. Ultimately, any critiques, whether substantive or not, will only serve to strengthen Bitcoin in the long run.

This is a guest post by Kent Polkinghorne. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The post Bitcoin, Debt And Elasticity: A Rebuttal To Michael Green appeared first on Bitcoin Magazine.

Filed Under: Bitcoin Magazine, debt, elasticity, English, Markets, michael green

Cash Crisis: National Currencies Plunge in the Wake of Coronavirus

24/03/2020 by Idelto Editor

Cash Crisis: National Currencies Plunge up to 25% in the Wake of Coronavirus

Fiat currencies across the globe have experienced sharp declines in the wake of the coronavirus panic, with the Norwegian Krone falling over 30% lately last week. The Mexican peso and Australian dollar trailed close behind over the same period, with multiple fiat currencies also taking a nosedive. Though USD remains strong, some speculate this is due to flight from other markets, and that the bastion of fiat strength might not be able to withstand endless printing and reckless credit creation of QE much longer.

Also read: The Multi Trillion-Dollar Stimulus Package: These Are the US Corporations Begging for Bailouts

‘Unlimited Money’

Announcing an open-ended QE program Monday for unprecedented asset purchasing, the U.S. Federal Reserve has pledged to purchase assets “in the amounts needed,” signaling the beginning of a virtually unlimited easing effort which will include moving into corporate bonds for the first time.

As lockdown orders, enforced business closures and travel bans continue to wreck economies, world currencies are reeling from the massive shock spiked by coronavirus panic and containment measures. The Fed and other central banks of the world may have their eyes on unlimited support, but many fiat currencies are telling a different story.

Cash Crisis: National Currencies Plunge in the Wake of Coronavirus

Norwegian Krone and Others Knocked Down by Virus-Plagued Markets

The Norwegian krone has now hit a record low against the U.S. dollar, falling 25% from the end of December, and over 20% in just under two weeks from March 9 to 20. Other currencies have taken the same trajectory in that 11-day time frame, with the Mexican peso and Australian dollar falling 17% and 13% respectively.

In the last two weeks, some major currencies tanked by as much as 20% against the dollar. And currencies have historically had fairly low volatility. British Pound hit the lowest level since 1985. The imported products are going to suddenly get a lot more expensive pic.twitter.com/th91nL0YKm

— Larry Cermak (@lawmaster) March 23, 2020

NZD, GBP, SEK, and other fiat currencies aren’t doing a whole lot better. The British pound has tumbled downward past levels not seen since 1985, falling against the euro.

Quoted in a March 19 report by Bloomberg, European head of currency strategy at Toronto-Dominion Bank, Ned Rumpeltin, opined:

At a minimum, we think there is a strong impulse to liquidate what you can — before you can’t — as London’s trading floors are probably about to be slammed shut before too long.

Fears of circuit breakers and trading suspensions aren’t unwarranted. March has seen stock exchanges across the globe tighten restrictions and adjust trading rules, with a temporary suspension of all trading in the Philippines on March 17, and the NYSE opening yesterday for the first time in 228 years to an empty floor.

But What About the US Dollar?

Amidst all the chaos the U.S. dollar is surging against other world currencies. While the dollar remains strong for now, some are not certain the situation can continue, especially with the unadulterated market intervention happening currently, and talk of humongous stimulus packages. U.S. Democratic Senator Chuck Schumer described his plan for “unemployment on steroids” Sunday:

You lose your job because of this crisis or any other reason, the federal government will pay you your full salary for 4 to 6 months.

[email protected] on Dems’ Coronavirus “stimulus”: “You lose your job because of this crisis OR ANY OTHER REASON, the federal government will pay you your full salary for 4 to 6 months.” pic.twitter.com/pcdr4I6CQY

— Tom Elliott (@tomselliott) March 21, 2020

While many imagine hyperinflation to be a freak economic phenomenon reserved only for non-U.S. countries, An Art Cashin piece from October 15, 2011 notes that “Hyperinflation requires a central bank to willingly commit economic suicide.”

Though Cashin thought this was unlikely for the U.S. almost a decade ago, his descriptions of the hyperinflation in Germany’s Weimar Republic now sound eerily familiar to some:

Things did not go badly instantly. Yes, the deficit soared but much of it was borne by foreign and domestic bond buyers … that means foreign bond buyers said – ‘Hey this is a great nation and this is probably just a speed bump in the economy.’

“When things began to disintegrate, no one dared to take away the punchbowl,” Cashin continues. “They feared shutting off the monetary heroin would lead to riots, civil war, and, worst of all communism. So, realizing that what they were doing was destructive, they kept doing it out of fear that stopping would be even more destructive.”

Cash Crisis: National Currencies Plunge in the Wake of Coronavirus
At the height of the German hyperinflation in November 1923, 1 USD was worth roughly 4,200,000,000,000 German marks.

Future of Fiat Uncertain, as Governments Stave Off Painful Economic Realities

While it’s yet uncertain if such a fate awaits the USD, it is interesting to note the similarities. The Weimar Republic was a product of the first World War’s ravaging, prolonged effects on Germany.

With a war-torn economy that was unable to produce, the answer was to just print more money. Looking at U.S. President Donald Trump’s recent proclamation that he is a “wartime president” and that fighting the Covid-19 virus is now “a war — a different kind of war than we’ve ever had,” it raises suspicion about the forced shutdown of economies currently witnessed. Unemployment rates are expected to skyrocket in coming months. There’s no worries according to the U.S. leader, however, who maintains:

First of all, you never have to default because you print the money, I hate to tell you, OK?

As astute economists are quick to point out, you can print money infinitely, but you cannot print the scarce assets, resources, labor and expertise the money is meant to represent. This is one reason some now are moving value to perceived safer, hard-capped supply assets such as bitcoins or physical gold.

What do you think about the decline of national currencies being witnessed now? Let us know in the comments section below.

The post Cash Crisis: National Currencies Plunge in the Wake of Coronavirus appeared first on Bitcoin News.

Filed Under: Cash Crisis, Coronavirus, COVID-19, Crash, debt, economic collapse, English, Fiat, Financial Crisis, Flu, gdp, Government, Hyperinflation, lockdown, money, News, News Bitcoin, Norway, Norwegian Krone, Unemployment, Unemployment Claims

IIF Report Predicts Global Debt Will Reach New All-Time High of $257T in 2020

15/01/2020 by Idelto Editor

IIF Report Predicts Global Debt Will Reach New All-Time High of $257T in 2020

Global debt records were broken in 2019, but that likely won’t be the end of such ominous economic milestones, the Institute of International Finance (IIF) predicts. The number could reach $257 trillion sometime in Q1 2020, according to a recent report by the group. Economies worldwide are struggling to address pressing issues such as stimulation near or below the zero bound, liquidity crisis, and the effects of negative rates on banks and their customers. Some experts believe the world may in fact be gearing up for a financial crisis of frightening proportions.

Also Read: Fed Officials Ponder Funding Hedge Funds and Private Brokers Directly

Global Debt Could Hit $257T Says IIF

According to the IIF, “The global debt-to-GDP ratio hit a new all-time high of over 322% in Q3 2019, with total debt reaching close to $253 trillion.” The pronounced trajectory into the red seems to be continuing unabated. It also appears to the IIF ready to set new records in early 2020, with the institute asserting:

Global debt is set to grow faster in 2020 and is estimated to exceed $257 trillion by the end of Q1 2020, driven mainly by non-financial sector debt.

https://edition.cnn.com/2020/01/13/economy/global-debt-record/index.html

According to the IIF’s Global Debt Monitor report, China leads the way in leverage, racking up the IOUs with a 310% debt-to-GDP ratio. Developed markets such as the U.S., Europe and Japan contribute to over half of the massive global minus sign, though emerging markets have shown a rapid acceleration in recent years. The report notes that most of the debt is non-financial sector in nature, with global government debt on path to pierce $70 trillion itself. As Reuters’ Marc Jones points out in a recent report:

The amount works out at around $32,500 for each of the 7.7 billion people on planet and more than 3.2 times the world’s annual economic output…

“Spurred by low interest rates and loose financial conditions, we estimate that total global debt will exceed $257 trillion in Q1 2020,” the IIF report asserts. It further notes that household debt-to-GDP is reaching record highs in multiple countries, largely in the EU, and that government debt-to-GDP has hit record highs in the U.S. and Australia.

Negative Rates and Unending Stimulation Result in Fewer Remedial Options

As news.Bitcoin.com’s Jamie Redman recently reported, concerns about a global economic bubble are growing, with some predicting a downturn of unprecedented proportions in light of exhausted options. Raphael Bostic, Federal Reserve Bank of Atlanta President, stated this week that “There’s not a lot that we have left to do to stimulate.” U.S. interest rates were chopped three times in the latter part of 2019, and massive printing of new money characterizes an ongoing Hail Mary-type bid to stimulate the economy.

In the EU the zero lower bound (ZLB) on interest rates has long since been broken, but the European Central Bank faces a similar lack of options. While associated publications suggest that as long as there’s confidence in the system, rates can continually go lower and lower, this type of economic “faith” has been broken many times, historically.

The advent of central bank digital currencies further presents the potential for central banks like the ECB to pin negative rates directly to currencies, making it impossible for small-time savers to preserve value by moving money out of banks.

Some interpret the current Shiller PE Ratio to signal a far overvalued stock market, with the ratio climbing back up into dot-com bubble territory. Source: https://www.multpl.com/shiller-pe

The Potential New Bubble and Bitcoin

If current alarming factors such as a potentially overvalued stock market, newly increased limits on home loans, low to negative interest rates, ongoing printing of new money and a soaring global debt continue unabated, a new recession could be on the way.

Economist Robert Shiller recently attributed market confidence to contempt for traditional economic wisdom, writing in a New York Times article: “High animal spirits in the stock market are often associated with the disparagement of traditional authority and expert opinion.” Shiller cited the “Make America Great Again” narrative of the Donald Trump presidency and its contribution to current fearlessness, writing:

The rise of an explicit belief in irrationality like this one is troubling on many levels.

With all this in view, the recurring narrative of decentralized, permissionless cryptocurrencies as hedge against economic uncertainty emerges powerfully once again, even in mainstream media.

I bought #Bitcoin because I don’t want all my savings in dollars. What if my government prints lots of dollars and they become worth… pennies?

But is owning bitcoin really a good idea? @NaomiBrockwell and @PeterSchiff debate: pic.twitter.com/TwEaGiiGSJ

— John Stossel (@JohnStossel) December 15, 2019

With the first month of 2020 already half over, and crypto markets moving dynamically against the uneasy backdrop of a debt-addled world economy, coming months promise to be eventful, if largely uncertain.

What do you think about the current global debt and the state of the global economy? Can bitcoin help people avoid the negative effects of a potential crisis? Let us know in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.


Images courtesy of Shutterstock, fair use.


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The post IIF Report Predicts Global Debt Will Reach New All-Time High of $257T in 2020 appeared first on Bitcoin News.

Filed Under: Bitcoin, bubble, CBDC, CBDCs, China, Crash, cryptocurrency, debt, ECB, Economic stimulus, Economics, English, Fed, Global Debt, Global Economy, Government, Housing Crisis, IIF, Markets, Negative Interest Rates, News Bitcoin, NIRP, QE, Quantitive Easing, Regulation, Robert Shiller, Stock Market

Low Interest Rates Provide Precarious Protection Against Crisis, World Bank Warns

10/01/2020 by Idelto Editor

Low Interest Rates Provide Precarious Protection Against Crisis, World Bank Warns

The latest global debt wave is the largest in the past five decades, the World Bank has acknowledged in a new report. The international institution notes that previous waves of broad-based debt accumulation lead to widespread financial crises. Historically low interest rates this time might not be sufficient to avoid the next meltdown.

Also read: Another Bank Run Highlights China’s Brewing Financial Crisis

Largest, Fastest, Broadest Debt Wave

The risk of a new global financial crisis is one of the focal points in the January edition of the World Bank’s Global Economic Prospects report. There have been four waves of debt accumulation in the last 50 years, the institution remarks, but the one that started in 2010 represents the largest, fastest, and most broad-based increase in debt so far.

Low Interest Rates Provide Precarious Protection Against Crisis, World Bank Warns

The bank warns that while current interest rate levels, which have reached historic lows in many countries around the world, are mitigating some of the risks associated with high debt, previous waves of debt accumulation have ended with widespread financial crises. Undoubtedly a warning for governments and central banks that other anti-crisis measures are needed.

While the crypto space maintains significantly higher interest rates than the fiat world, and platforms like Cred allow individuals to earn up to 10% on BTC and BCH holdings, many developed nations have continued to lower their benchmark rates. More than 20 European countries now have 0% interest rates and a few, such as Denmark and Switzerland, have been in negative territory for around five years.

“Policy options to reduce the likelihood of crises and lessen their impact should they materialize include building resilient monetary and fiscal frameworks, instituting robust supervisory and regulatory regimes, and following transparent debt management practices,” the authors of the report insist. World Bank Prospects Group Director Ayhan Kose elaborated:

Low global interest rates provide only a precarious protection against financial crises. The history of past waves of debt accumulation shows that these waves tend to have unhappy endings. In a fragile global environment, policy improvements are critical to minimize the risks associated with the current debt wave.

History Shows Mounting Debt Leads to Crises

Another report published by the World Bank this past December, titled “Global Waves of Debt: Causes and Consequences,” indicated that debt in emerging and developing economies has climbed to a record $55 trillion in 2018. The document contained a study of the four major debt accumulation periods since 1970 and concluded that the debt-to-GDP ratio of developing nations has climbed 54 percentage points since the start of the latest debt buildup a decade ago.

Around half of the national episodes of rapid debt growth in developing countries, which have totaled over 500 since 1970, were accompanied by financial crises that significantly weakened per-capita income and investment, the World Bank noted. “History shows that large debt surges often coincide with financial crises in developing countries, at great cost to the population. Policymakers should act promptly to enhance debt sustainability and reduce exposure to economic shocks,” commented Ceyla Pazarbasioglu, the World Bank Group’s Vice President for Equitable Growth, Finance, and Institutions.

Low Interest Rates Provide Precarious Protection Against Crisis, World Bank Warns

The latest debt wave differs from the previous three, however, in several aspects. The World Bank points out that it involves a simultaneous accumulation in both public and private debt and it’s not limited to one or two regions. Debt is quite high in developing countries; it is twice the nominal level reached in 2007, the institution emphasizes.

A considerable portion of the debt increase has been driven by China. The debt-to-GDP ratio of the People’s Republic has risen 72 points to 255% since 2010. In the past months and years, a liquidity crisis has been brewing as well. The government in Beijing had to bail out several banks due to a credit crunch in the interbank lending market while also trying hard to stimulate lending for its slowing economy and ensure liquidity in its troubled banking sector.

Despite persisting downward risks, the global economy is expected to grow up to 2.5% in 2020. But according to the World Bank, this is likely to happen only if global investment and trade gradually recover from the weak levels observed in 2019. Although growth in emerging and developing economies is projected to reach 4.1% this year, growth among advanced economies is probably going to slow down to 1.4%.

What are your forecasts for the global economic and financial system in 2020? Share your expectations in the comments section below.


Images courtesy of Shutterstock.


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The post Low Interest Rates Provide Precarious Protection Against Crisis, World Bank Warns appeared first on Bitcoin News.

Filed Under: Bank, banking sector, Banks, China, Crisis, debt, Developing Countries, economic growth, Economics, emerging economies, English, Financial Crisis, gdp, growth, interest rates, Measures, meltdown, News Bitcoin, policies, report, Reports, World Bank

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