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Cypherpunk Bitstream Hosts Talk Crypto-Anarchy, Dropgangs, and Importance of Real Life Connections

20/01/2020 by Idelto Editor

The Cypherpunk Bitstream podcast is a relatively new program that’s just released its fourth episode. The hosts, known as Frank Braun and The Real Smuggler, are so-called ‘privacy extremists’ and dyed-in-the-wool crypto-anarchists concerned with exposing cypherpunk ethos to a wider audience. Braun and Smuggler took time out recently to discuss their journeys to crypto-anarchy, the benefits of dropgangs for delivery of goods, and what crypto needs to succeed in bringing more economic freedom to more people.

Also read: Iran, Hong Kong, India: Failed Protests Point to Need for Crypto-Anarchy ‘Second Realms’

Journey to Crypto-Anarchy

While it may seem strange for a pair of privacy-extremist cypherpunks to record a podcast that will be shared with the internet at large, Braun and Smuggler have their reasons. After all, nobody pops out of the womb as a cypherpunk, per se, and without meaningful connections and material available to learn, the path to such knowledge would be much more darkly lit. Frank Braun and The Real Smuggler explained recently to news.Bitcoin.com their reasons for starting the Cypherpunk Bitstream podcast, as well as their individual journeys to becoming cypherpunks.

News.Bitcoin.com (BC): What did the philosophical journey to cypherpunk/crypto-anarchist look like for you guys?

Frank Braun (FB): My formal background is in computer science and in university I got interested in Libertarianism and Austrian economics. From there I went to Anarcho-capitalism and wondered how we could get to more freedom in our lifetimes, but I didn’t really connect it with computers at all. At the time I was interested in Seasteading, but didn’t really think I could contribute something meaningful there. Then I moved to Berlin and met Smuggler by accident, who introduced me to the concept of Cryptoanarchy, which totally clicked for me. The rest is history…

Smuggler (SM): It’s been a long journey. Half of it less conscious than one would like to present it in hindsight. It all started with the fascination with computers and communication tech, throw in some inspiring sci-fi, and then of course reading all the techno-libertarian, anarcho-capitalist and crypto-anarchist texts I could get my hands on. Then add thousands of hours of conversation over mailing lists, invisible IRC, and in person to end up where I am now. Makes me wonder where that all will lead in the long run.

BC: Though you both wish to protect your privacy and identities, you mentioned in the first episode of the Cypherpunk Bitstream podcast that there’s also a feeling of wanting to share your knowledge — to help others live more freely outside the purview of the state. Is that why you started the podcast?

FB: Yes, the two of us spent around 10 years discussing a wide variety of topics in the area of Crypto-anarchy, liberty, privacy, etc. and we wanted to bring some of these ideas to more people. We had our fair share of private discussions, but given the depth of some of the topics that didn’t really scale and it sometimes really requires hours of talking to paint the vision sufficiently. Giving talks at conferences, mainly HCPP, was well received, but talks are not that useful for more “visionary” topics.

I think podcasts are a good medium to spread some of these ideas, because they are easy to produce, easy to consume, and, most importantly, just having voice without images/video allows the listener to bring the vision in his imagination to life. I believe that is hugely important, we will work to get to a better future only if this future is enticing.

On Dropgangs and Dead Drops

BC: Your most recent episode focuses on solutions to facilitating free market exchange of illicit goods, such as dead drops and dropgangs. Do you think these methods are going to become more prevalent as the darknet is increasingly surveilled by government agencies?

FB: Not so much because of surveillance of the darknet, although Tor certainly has its problems. I see the future of dropgangs mostly as a product of different market forces: How well does the postal service work for shipping illicit goods (this seems to go down due to better surveillance technology), density of the market (dropgangs work better in larger cities), penalties for getting caught with illicit goods, consumer demand, and how the tech develops (e.g. for drop localization). I think especially in the drug market timely delivery is a huge bonus; in larger cities dropgangs can have fulfillment times of under an hour.

SM: For me the possible application of these methods outside of the “illicit goods” trade is more important. I find it inspiring how people use technology and organizational methods to overcome constraints. The application of anonymous communication, cryptocurrencies, and cheap electronics to solve questions of decentralized logistics is fascinating. With the decentralization logistics, new ways of trade, even for legal goods, become possible. That’s where I think the focus should be. It’s wrangling the physical out of the hands of the state and big corporations, and that’s really a critical field of action.

BC: What are some future topics you guys are looking to explore?

FB: What needs to be done to have security in the future, digital currencies (DBCs, Scrit), Rulescaping, “Why the Internet is actually broken,” alternative identities (online and offline), prepping (for the end of the world and for the info apocalypse).

SM: I think we’ll also have a few episodes on our specific world view, like how things work, and where we think some trends might lead us. We’ll probably have episodes on the future of warfare and structures of power as well. We like to speculate and just share perspectives.

Beyond Crypto Tribalism, Into What Matters

BC: Looking at the crypto space today, there’s a lot of division surrounding BTC maximalism and accusations that any other coin is shit. What are your thoughts on this current climate of discussion?

FB: I think the current climate of discussion is abysmal, which is also caused by the fact that a lot of interactions these days happen on social media. In fact, I got so annoyed by the apparent tribalism in the crypto space that I wrote a short essay about “Cryptocurrencies as Cyberstatism.”

In a nutshell, I believe that there is way too much infighting and not nearly enough focus on actually building usable solutions for everyday people that would grow the market. One cornerstone of liberty in a cashless society (which is unfortunately where we are heading) will be the widespread availability of untraceable, anonymous digital payments. And currently we are not even close, I just see a lot of talk about hodling and store of value. The end user doesn’t care about any of that, he wants his problems solved.

SM: Maybe I don’t spend enough time on social media, or maybe I just don’t grasp what all the fuzz is about. There are lots of creative and super intelligent people out there that don’t take part in any of these discussions but instead just do their own thing and write code. Those are the people that will matter most in the long run. All else is just a distraction in my opinion.

BC: How can someone interested in crypto-anarchy, networking with other cypherpunks, or setting up their own TAZ (Temporary Autonomous Zone), learn more and move forward into this vision of greater privacy and freedom?

FB: My number one recommendation is to meet likeminded people in the physical world, there is nothing that is more important if you want to build more freedom in your future. We cannot do it alone. Apart from that, reading up on the theory and doing stuff. Just do something and take it from there.

Too many people are waiting for somebody else to free them … Instead, one has to act with all the imperfect knowledge one has, incrementally creating actual liberty for oneself and one’s friends. That comes with effort and cost.

SM: I agree. Building meatspace friendships and taking the time to think things through for oneself, in interaction with others, is crucial. But it may not stop there. Too many people are waiting for somebody else to free them, or they are waiting for the perfect solution that fixes everything. Instead, one has to act with all the imperfect knowledge one has, incrementally creating actual liberty for oneself and one’s friends. That comes with effort and cost.

Government Regulations and Societal Changes

BC: What would you say to people who protest that there must be government regulations on crypto so bad actors don’t abuse the tech?

FB: That’s like pleading to the wolves to not eat the sheep. The government is one of the largest bad actors there is, all the KYC/AML regulation already shows that the government doesn’t have the best interest of the population at heart. More regulation will almost certainly make it worse.

SM: There’s a fundamental mismatch of interests at work. Governments predominantly are in the business of selling the feeling of security and safety to the population. They are deeply conservative, even reactionary, because change challenges this feeling. Change also threatens the design and even the existence of established institutions. Institutions however act like organisms in that they are predominantly interested in securing their own survival.

It is also true that a lot of change is happening, and even more is coming. Technological developments, social and cultural turmoil, and a hundred other things. That change leads to increasing tension between our old understanding of government, safety and security. Sooner or later this tension will break the old. That means that yes, we have to consider abuse of tech as an actual problem. But it also means that we might have to just live with it, or look for very different methods to deal with it than old ideas of regulation.

BC: What’s the most critical issue for pushing crypto forward in 2020?

FB: More widespread availability of privacy coins and/or ways to use more traceable coins in a private fashion and the ability to exchange in and out of these coins. We are already seeing some pushback against privacy coins on the regulatory and exchange side and this might lead to a split: Only traceable coins on regulated exchanges and privacy coins only via cash deals or crypto to crypto on distributed exchanges.

SM: Increasing the focus of cryptocurrencies for payments, preserving privacy and fungibility, decentralized secure person-to-person exchange methods. In the longer run we also have to rebalance our understanding of trust and the limits of trustless designs.

What do you think about Braun and Smuggler’s thoughts on implementing crypto-anarchy? Let us know in the comments section below.

Image credits: Shutterstock, fair use.

Did you know you can buy and sell BCH privately using our noncustodial, peer-to-peer Local Bitcoin Cash trading platform? The Local.Bitcoin.com marketplace has thousands of participants from all around the world trading BCH right now. And if you need a bitcoin wallet to securely store your coins, you can download one from us here.

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‘High Level’ Crypto Experts to Advise OECD

19/01/2020 by Idelto Editor

Crypto Experts Join OECD 'High Level' Advisory Board

The Organisation for Economic Cooperation and Development, an intergovernmental body with 36 member countries, has formed “a high-level expert group” which includes executives from the crypto industry. They will provide advice in helping develop international blockchain policy principles.

Also read: Regulatory Roundup: EU-Wide Crypto Regulations, New Rules in Europe, US, Asia

‘High-Level Expert Group’ Formed

The Organisation for Economic Cooperation and Development (OECD) announced this week that it has formed “a high-level expert group,” also known as the Blockchain Expert Policy Advisory Board (BEPAB). The organization described that the group’s primary goal is “to provide advice on its work on blockchain and other distributed ledger technologies; this will include the development of high-level blockchain policy principles.”

The intergovernmental organization currently has 36 member countries, with the European Commission participating in its work. Members engage with OECD experts and delegations from other countries; they are part of the council that oversees the organization’s work.

Yoichi Iida is the deputy director-general for G7/G20 relationship of the Japanese Ministry of Internal Affairs and Communications. The incoming chairman of the OECD’s Committee on Digital Economy Policy (CDEP) explained:

The BEPAB’s geographic diversity is critical to the development of international blockchain policy principles.

According to the announcement, this high-level expert group consists of 45 governments and representatives from the European Commission, the private sector, industry bodies, and civil society groups. The current list of members shows that there are 93 experts on the board in total.

Among members of the expert group from the crypto and blockchain sector are executives from the Libra Association, Facebook’s Calibra, Aidtech, Bitfury, BITT, Blockchangers, Block.one, Consensys, Everledger, Etoro, Infrachain, Iobuilders, Maker Foundation, Outlier Ventures, R3, Ripple, and SALT.

Other members include officials from the European Parliament and government agencies of various countries, including the U.S., Egypt, Japan, Germany, Spain, South Korea, Sweden, and the U.K. Representatives from a number of central banks, blockchain associations, academic institutions, and industry bodies are also members.

OECD’s Blockchain Work

The OECD has acted as a strategic advisor to the G20 and has been working closely with the International Monetary Fund (IMF) on national growth strategies and other policies. The organization has been developing blockchain policies over the past six years. Its work “includes research and analysis on financial consumer protection and financial education issues raised by ‘crypto-assets,’ the potential for the technology to support due diligence requirements in global supply chains, improving corporate governance mechanisms such as proxy voting, and the use of blockchain as a digital enabler of sustainable infrastructure,” its website describes.

The formation of the expert group follows the establishment of the OECD Blockchain Policy Centre in 2018. The center provides resources for policymakers and supports blockchain work by the organization’s Committee on Financial Markets (CMF) and Committee on Digital Economy Policy. Among other initiatives, the OECD also hosts Global Blockchain Policy Forums. The third one will take place in Paris from Sept. 30 to Oct. 1. Last year’s forum attracted 1,600 participants and 200 speakers.

Aerdt Houben, Director of Financial Markets at De Nederlandsche Bank and Chair of the CMF, commented:

We are engaging with a diverse group of experts and innovators in developing principles to guide governments and industry in pursuit of viable blockchain innovation and adoption.

The OECD has published a number of crypto and blockchain-related reports such as one released on Friday entitled “The Tokenisation of Assets and Potential Implications for Financial Markets.”

What do you think of the OECD forming an expert group with representatives from crypto and blockchain companies? 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 and the OECD.

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Russia’s New Prime Minister Has an Opinion of Cryptocurrencies

17/01/2020 by Idelto Editor

Russia’s New Prime Minister Has His Opinion on Cryptocurrencies

The Russian Federation has a new prime minister, Mikhail Mishustin, with a track record of statements regarding cryptocurrencies and an affection for digitalization. A stated goal of his government will be to turn the country into a digital platform “for the people.” Time will tell, however, whether his plan encompasses the legal use of decentralized digital currencies.

Also read: Direct Democracy Party to Solve Issues With Crypto Rights in Russia

Russian President to Lose Powers, After Putin

Mishustin was appointed head of the Russian government shortly after his nomination this week and the resignation of Dmitry Medvedev’s cabinet. Medvedev, a long-term political ally of Vladimir Putin, is leaving the post after the Russian president announced a constitutional reform during his annual address to the Federal Assembly this past Wednesday.

Russia’s New Prime Minister Has an Opinion of Cryptocurrencies — Vladimir Putin during his address to the Federal Assembly

The changes will give the State Duma, the lower house of Russia’s parliament, more powers and limit those of the president after Putin’s fourth and last term ends in 2024. While the current head of state presently chooses the Russian premier, in the future lawmakers will take the responsibility to select and appoint a candidate and all of their ministers.

The amendments are expected to pass public discussions and eventually be approved in a referendum. Some Russian media reports suggest that Medvedev is leaving because he failed to agree with Putin on the reforms. In his resignation announcement, he noted that when the changes take effect, they will shift the general balance of power in Moscow, saying:

It is obvious that we as the government of the Russian Federation should provide the president of our country with the opportunity to make all the necessary decisions.

According to the Kommersant business daily, Medvedev favored a scenario in which the presidential institution and the government merge, thus giving the president full executive power. Quoting an anonymous source close to the Kremlin, the independent TV channel Dozhd reported that he proposed establishing the post of vice-president and that he might’ve wanted it for himself. Medvedev has now been appointed deputy head of the Russian Security Council under Putin.

What Does This Mean for Cryptocurrencies?

The proposed constitutional amendments can be interpreted differently. Supporters would say they will bring democratization with the Duma, the collective organ of power, gaining more influence in Russia’s internal affairs. Critics fear, however, that these have been designed to allow Vladimir Putin to maintain control even after his last presidential term expires by becoming prime minister again, for example.

Until that happens, the revamped composition of the government can bring other changes to the country, including some that concern the crypto space. At a meeting with members of the parliamentary group of the ruling United Russia party before his appointment, Mikhail Mishustin said he wanted to get on with the “Digital Economy” national project and declared:

The state should undoubtedly be a digital platform created for the people.

Before his appointment as prime minister, Mishustin served as director of the Federal Tax Service (FTS) for 10 years and has been credited with the digitalization of Russia’s tax system. Now he says his first urgent task is to “seriously engage in institutional reforms” and introduce “the most modern information technology.” With a PhD in economics and professional background in IT, he might well be the right person to lead the charge towards achieving these goals.

As the head of the Russian tax agency, Mishustin has made comments about cryptocurrencies on multiple occasions, crypto news outlet Forklog reminded. Nobody trusted paper money when it was introduced into circulation and it had to be backed with the gold reserves of central banks, he noted in 2017 pondering on the moneyness of cryptos. He also made it clear he viewed digital currencies as financial instruments and thought they should be taxed as such.

In February 2019, Mikhail Mishustin spoke in favor of regulating the crypto industry in Russia, stressing that the government has to deal with cryptocurrencies and other forms of payment which the state, in his words, doesn’t notice. Also during his administration, the FTS accepted registering crypto investments as part of a company’s capital, as news.Bitcoin.com reported. And while other institutions like the Central Bank of Russia view bitcoin as an illegal money surrogate, 13% tax on crypto-related incomes is nevertheless due to Mishustin’s administration.

So far, the State Duma has incorporated the concept of “digital rights” that relates to tokens into national law through amendments to the country’s civil code. It also adopted a “crowdfunding law” which entered into force in the beginning of this year. But a key bill, the law “On Digital Financial Assets” which was voted on first reading in the spring of 2018, is yet to be adopted. Earlier this week, the Chairman of the parliamentary Financial Market Committee, Anatoly Aksakov, stated that this is “99.9%” going to happen during the spring session of the Duma.

What kind of changes do you expect in Russia’s policy towards cryptocurrencies after the latest political developments in Moscow? Share your thoughts in the comments section below.

Images courtesy of Shutterstock, Kremlin.ru.

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The post Russia’s New Prime Minister Has an Opinion of Cryptocurrencies appeared first on Bitcoin News.

Unnecessary Evil: How Government Regulations Kill Crypto Startups and Encourage Crime

16/01/2020 by Idelto Editor

Thanks to the EU’s most recent money laundering directive, a small business called Post-a-coin, which sold cute postcards pre-loaded with tiny amounts of bitcoin, is being forced to shut down. Meanwhile, the most heinous criminals in history are continuing to facilitate violence, trafficking and laundering of cash with impunity.

Also Read: Why the Counter Economy Is Necessary to Bitcoin’s Survival as a Disruptive Currency

Who’s the Real Criminal?

Pablo Escobar. El Chapo. ISIS. These are some of the infamous names that come to mind when people mention crimes like money laundering, terrorism, and drug trafficking. With such unethical actors in the world, it seems necessary to have regulations in place to stem the violence.

This is especially applicable to the crypto space, where transfer of funds can be easy, borderless and basically anonymous. Contrary to popular misconception, however, when it comes to lives lost or harmed, dollar signs, and promotion of scams, it’s actually governments, policymakers, and banks that are the biggest culprits. Small businesses and ethical actors suffer greatly under common false presumptions — especially the misguided belief that without centralized government regulation, crime cannot be stopped.

A deeper look into such infamous monsters as Escobar, and terrorist organizations like ISIS, reveals a shocking commonality: they always work by way of corruption within nation states and banking systems to achieve their unparalleled-in-scope criminal feats. According to Escobar, who himself was a politician for a short period, the business of trafficking is:

Simple – you bribe someone here, you bribe someone there, and you pay a friendly banker to help you bring the money back.

As for ISIS, a group needing to launder money for terrorist purposes, some of their most effective weaponry has been acquired as a result of quiet deals by big governments in support of opposition groups in Syria.

As Newsweek reported in 2018, “These sales were reportedly made possible through deals between Eastern European members of the EU, as well as the U.S. and Saudi Arabia, both of whom ‘supplied most of this material without authorization, apparently to Syrian opposition forces’ … Supplies of material into the Syrian conflict from foreign parties—notably the United States and Saudi Arabia—have indirectly allowed IS to obtain substantial quantities of anti-armor ammunition.”

Like the statist “war on drugs” demonstrably creates and sustains violent black markets, so the U.S. military industrial complex has created its own market, but this time, for terror. The Capones, Escobars, and El Chapos of the world are incentivized to participate in uber-lucrative illegal drug trades. The radicalized Muslim whose family has just been blown to bits by a U.S. drone is incentivized to acquire weapons. In both cases — drugs and weapons trafficking — the U.S. government has been happy to provide, on multiple occasions.

The Biggest Money Launderers of All Time

Measured in dollars, even big-time independent criminals can’t hold a candle to corrupt governments and the banks they support. Worse, these whitelisted bad actors are hardly held accountable for their crimes. Whether it’s 15,000 kilos of coke on a JP Morgan ship, Wachovia Bank scrubbing a dirty $380 billion clean for Mexican drug cartels, or the so-called “Troika Laundromat’s” multi-bank $8.8 billion dollar operation, state-connected financial institutions, corporations and lobbyists often get a mere slap on the wrist when busted, and can continue to do business with the respect of the public.

The above are just a tiny cross section of examples constituting a legalized black market whose scope is almost unfathomable for its breadth and depth. Taken all together, the aggregate crime facilitated by such official and well-respected institutions makes even Escobar’s massive empire look like little more than a Columbian ant hill. The $70 million per day, or about $25.5 billion per year, the Medellin cartel was said to be bringing in at the height of its operations, pales in comparison to a massive $2 trillion a year said to be laundered through traditional banking institutions. None of this is to mention the biggest financial criminals, terrorists, launderers, and counterfeiters of them all — governments themselves, and their central banks.

Counterfeiters Succeed, Crypto Small Businesses Are Destroyed

“Last summer I started a sideproject. Post-a-Coin,” writes Netherlands-based web developer Bèr Kessels in a recent blog post. “A simple and straightforward idea, really: you can buy high quality postcards with Bitcoin preloaded to give as a gift … I envisioned it as a small side-project: a tiny company that makes some revenue to keep itself running, but which, above all, helps to put bitcoin into more hands.”

Thanks to the effects of the EU’s fifth anti-money laundering directive (AMLD5), however, Kessels laments, ending with a sarcastic dig:

This autumn, I decided to stop rolling it out. To kill it off. The reason is the draconian Dutch implementation of the European AMLD5 directive, which is certainly going to solve the ‘rampant problem with money laundering with cryptocurrencies /s’.

Though the author reassures that they are not against laws and regulations designed to keep people safe and prevent theft, child trafficking, and financial crimes, they note that the implementation of AMLD5 by the Dutch government makes it impossible for a tiny crypto businesses to even operate.

Kessels, who doesn’t want to be a huge company, can’t afford the licensing fees, and doesn’t have anything close to a board of directors, is out of luck. “I really liked the idea of Post-a-Coin. But with such laws coming to place, the Dutch government forces me to close my company. Before I’m legally required to apply for registration at the Central Bank, I’ll close down the shop. Another startup killed by bureaucrats trying to control a niche with rules and laws.”

Small businesses are suffering under unreasonably strict crypto regulations.

Kessels is far from alone. Popular U.K.-based crypto payments provider Bottle Pay had to board up its windows last month thanks to the new legislation, and mining pool Simplecoin, along with interactive crypto faucet Chopcoin, have both met similar fates in recent months. In sickening fashion, small, hardworking crypto startups are seeing their dreams crushed, while too-big-too-fail state policymakers and banks have a heyday siphoning value from the cryptoconomy via parasitic regulation. Even where small businesses wish to be compliant, they’re rendered unable to do, and then punished for it by being forced to close. While massive financial crimes, such as laundering and counterfeiting, are being committed every day by the state.

Current paper money is printed in massive amounts, and is made to look like paper money that was once backed by gold.

Fiat money such as the U.S. dollar is no longer backed by anything but a violent usage mandate. It’s printed freely, excessively, and irresponsibly by governments worldwide as global debt balloons to new all-time highs. The savings of the poor and rich alike are devalued while the state attempts to incapacitate the efficacy of sounder alternatives like bitcoin. It is not hyperbole to say that the biggest counterfeiters, money launderers, and violent criminals on the planet are the individuals called “the government.”

Decentralized Order

The above is where the conversation ends for most, and that is truly tragic. To imagine that financial order is not possible without a monolithic system of centralized violence (“stop your crypto business or armed agents will pay you a visit”) should be a definition of insanity. Instead, it’s become the dominant cultural hallucination. Arguments regarding the assumed horrors of the lack of a violent ruling class (anarchy) are easily refuted when viewed through a rational, economic, and ethical lens.

Defense against theft and violence is of course necessary, and can be done privately in decentralized fashion, as explained in one possible form by the video above. Order based on the universal, objective reality of individual self-ownership, functioning via decentralized social “nodes,” can calculate demands and needs of a society with much greater accuracy and efficiency than any monolithic system ever could. Similarly, the centralized financial authorities of today struggle — and with great cost to human life — to accurately and efficiently read economic signals thanks to their ridiculous size and out-of-touch, out-of-date protocols.

Every day, billions of people get along perfectly fine. There aren’t cops or compliance agencies on every corner, and the whole world hasn’t exploded yet. If anything, it’s our everyday lives where the most peace and rational order exists. It’s state-related affairs that are the bloodiest, most corrupt, and repulsively cruel. This seems highly unnecessary, to say the least. The arbitrary assignment of supposed greater rights to small groups of human beings called government is no different than saying one’s neighbor is “God” and has the magical right to shut down someone’s yard sale by wielding an axe.

What are your thoughts on the state’s moves to regulate crypto startups? Let us know in the comments section below.

Op-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not 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 information in this Op-ed article.

Images courtesy of Shutterstock, fair use.

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

15/01/2020 by Idelto Editor

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.

Images courtesy of Shutterstock, fair use.

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