Unemployment

Making Bitcoin Go Viral: Could Endless Printing Trigger a Hyperbitcoinization Event?

26/03/2020 by Idelto Editor

Hyperbitcoinization has been defined as “a state where bitcoin becomes the world’s dominant form of money.” But what actually needs to happen for bitcoin to ‘go viral’? As it turns out, a hyperbitcoinization event may be more likely than many suspect, especially in the current economic climate. However, there’s one big caveat: it requires human action.

Also read: Disney World Economics: How Coronavirus Could Be Used to Justify a Global Financial Reset

Contagious Currency

The current covid-19 panic and pandemonium gripping the world has brought economic issues to the forefront of conversation, as economies across the globe are stunted by government orders to shutdown. Whether this is the best way to contain a contagion is hotly debated, but the paranoia about getting sick has stretched so far as to even touch the safety of paper cash.

Some nations, China and the U.S. among them, have been quarantining and disinfecting physical cash, for fear that it could spread the covid-19 virus. This potential transmission vector is viewed as an important threat, and many businesses across the globe are encouraging customers to use contactless payment systems in lieu of the dirty paper stuff.

There’s even been a buzz in the bitcoin space about this being an argument for crypto adoption. But for bitcoin to catch fire and really spread around the world in viral fashion, a number of factors must be present.

Conditions Necessary for Hyperbitcoinization

In order for “Bitcoin-induced currency demonetization” to take place, three main factors must be present so that a competing money “will rapidly lose value as bitcoin supplants it.”

Loss of Faith in Established Systems: Individuals across the globe are losing jobs and losing trust in their governments, their monetary systems, and in many cases, the broader global economic paradigm itself. Before covid-19 showed up, the world was already in the throes of widespread protest and unrest surrounding corrupt governance and economically unviable situations at a systemic level.

Now states have leveraged coronavirus to justify shutting down innumerable businesses and halting critical industry, many more are asking questions, and some are losing faith in the Modern Monetary Theory magic, which says that you can always “just print more money” when times are hard. The thing is, you can’t “just print more” goods and services. As currencies across the globe lose value, hyperinflation is also not an entirely impossible outcome, meaning dollars could potentially turn into valueless scraps of paper.

Viable Alternatives to Fiat: Bitcoin is permissionless, fast, borderless, low-fee, and decentralized. While the issue of which version of bitcoin would best serve as a global money is debated, the critical fact is that an alternative to government fiat does exist, has active use cases, and is at this point time-tested. It is also hard-capped in supply and looks promising as an inflation-resistant asset.

Further, with governments now in development and research for CDBCs (central bank digital currencies) even so-called “normies” are being primed for understanding how crypto and digital assets work. The corona zeitgeist is one that includes mainstream media buzz about a “digital dollar” and “digital yuan.” This presents a unique window of opportunity for a shift away from fiat currencies.

Open Markets: Of all the prerequisites for hyperbitcoinization, this is arguably the trickiest, and will be dealt with more in-depth at the close of this article. Suffice to say that without the ability for individuals to transact freely and voluntarily no currency — not even national currencies like the yen, dollar, or peso — can be successful.

‘Ideal Money’

Late Nobel Prize Laureate John Nash, an American mathematician known for — among numerous other accolades — being the namesake for game theory’s Nash equilibrium, developed a notion he referred to as Ideal Money.

Ideal Money would be, simply put, a money whose value is not foundationally subject to political special interests and conflicts of interest like the USD, and which is not inherently subject to inflation. Loosely comparing modern economic planners with Bolshevik communists, Nash once wrote:

So there may be an analogy to this as regards those called ‘the Keynesians’ in that while they have claimed to be operating for high and noble objectives of general welfare what is clearly true is that they have made it easier for governments to ‘print money’.

Nash’s words sound hauntingly on target today, as we witness nations like the U.S. create unprecedented amounts of fiat out of thin air, ignoring that eventually, someone must pay the piper.

Though Nash had his own ideas about what might best constitute this so-called ideal, the renowned mathematician did not rule out bitcoin.

In fact, he wrote in his paper Ideal Money: “My personal view is that a practical global money might most favorably evolve through the development first of a few regional currencies of truly good quality. And then the ‘integration’ or ‘coordination’ of those into a global currency would become just a technical problem.” Nash went on:

But the famous classical ‘Gresham’s Law’ also reveals the intrinsic difficulty. Thus ‘good money’ will not naturally supplant and replace ‘bad money’ by a simple Darwinian superiority of competitive species. Rather than that, it must be that the good things are established by the voluntary choice of human agencies.

Human Action: The Final Ingredient

It is interesting that Nash describes “a few regional currencies of truly good quality” coming together someday via technical integration. Could this be an unintended, prescient nod to bitcoin, blockchain, and the various integrations and ideas the crypto space has seen over the years like atomic swaps and network interoperability?

Only time will tell. What is certain, and what Nash notes explicitly in the passage, is that no matter how seemingly fit the conditions, no exodus from the broken world of fiat can happen without voluntary human action.

This is a tricky thing. Those that use bitcoin know its value and utility, but they are limited in some ways as to how they can leverage digital cash due to enforced regulations. Those that don’t know about crypto in a meaningful way remain the unable-to-act majority, presenting a two-faced challenge. Standing in the way of hyperbitcoinization, then, is the obstacle of “going viral” and that of forced censorship. The first obstacle shouldn’t be hard to overcome, on surface view. The second is more daunting.

According to marketing group Outgrow, novelty and “information gaps” play a major role in determining what type of content goes viral online. The group notes:

Researchers have found that a part of our brain actually feels rewarded by novel ideas rather than the familiar. When consumers feel they’ve been led to a new notion or concept, their brains flood their bodies with dopamine.

A lack of desperately sought info — or “information gap” — can also lead to virality, according to the group, when that info is found.

So in this context of the current mass unemployment, crashing stock markets, and an increasingly questionable world reserve currency, emotions, which are another major indicator for virality, are running extremely high. And lo and behold, there is a novel proposed solution which fills the info gap of the “what is good money” question.

Still, there’s something of a catch 22. If the masses aren’t using it, it’s not going to be very useful in a situation like this. If they don’t start, a dire situation like this is bound to perdure, and repeat. Whether in compliance with laws and regulations or otherwise, individual actors have proven bitcoin’s strength by trading regardless, and such use is required to show the world bitcoin’s utility.

From feeding the hungry in Venezuela and South Sudan during a global crisis with borderless BCH, to making money for survival by selling goods peer-to-peer with no middleman or political permission, bitcoin is virtually unconfiscatable. It allows a shift from the broken fiat paradigm if individuals so choose. This core utility is what could ultimately trigger hyperbitcoinization, and what a “digital dollar” can’t hold a candle to. Then there might be a real shot at a peaceful, sound, and sensible global economy.

Do you think hyperbitcoinization is possible? Let us know in the comments section below.

The post Making Bitcoin Go Viral: Could Endless Printing Trigger a Hyperbitcoinization Event? appeared first on Bitcoin News.

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.

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.

More Signs the Next Big Financial Crisis Begins in Germany

03/08/2019 by Idelto Editor

More Signs the Next Big Crisis May Begin in Germany

Germany, the locomotive of Europe’s huge economy, is entering a difficult period, various indicators suggest. And when the Federal Republic sneezes, the Old Continent usually catches a cold. This time, Germany may infect the rest of the world as well. Regulators in the country are busy drafting prohibitions, and now also seem to target cryptocurrencies. A German economic and financial crisis would be a seismic event of global proportions, affecting all markets. The main question now seems to be when it will happen, not if.

Also read: Liquidity Difficulties in China: Second Bank Bail-Out Now Reality

Biggest Drop In a Decade – German Industry Is Hurting

The industrial powerhouse of the Eurozone and the greater European Union is now seeing a significant decline in production – by 2.7% year-on-year in January and 1.9% in April compared to the previous month. Then in May, factory orders declined 2.2% from a month ago and registered an 8.6% annual drop, the biggest in a decade. In the first half of 2019, even beer sales were down 2.7%, according to Destatis, the Federal Statistical Office.

International trade wars and geopolitical uncertainty in the region and beyond are negatively affecting the German economy, which relies heavily on exports. They form almost half of the country’s annual economic output. Germany is Europe’s leading exporter of goods and it ranks third among the largest exporters in the world, after China and the United States.

Several factors have been hurting German exports which registered an annual decrease of 0.5% in April. Demand from China, which is a major market for German products, has been weakening due to slowing growth. U.S. tariffs on steel and aluminum are also a major concern and the Trump administration is now considering whether to impose tariffs on European cars.

Addressing the Bundestag last month, Chancellor Angela Merkel warned of a new global financial crisis as a potential result from a trade war with the U.S. She stressed that tariffs on cars would be much more serious than those on steel. The steepest slide in orders has been in the auto industry. Then there’s the upcoming Brexit divorce Germany has to deal with as well.

Short Working Weeks Are Back

Against this backdrop, a growing number of German companies are reintroducing short-time work schemes, the kind that were implemented during the last global financial crisis to mitigate its impact on industrial enterprises and their workforce. According to a survey conducted by the Munich-based Ifo Institute for Economic Research, 8.5% of the companies in Germany’s manufacturing sector expect to introduce short-time work programs over the next three months.

This is the highest percentage since 2013, Deutsche Welle reported, as last year only 2.6% of industrial entities were considering shorter working weeks for their employees. Germany still has one of the lowest unemployment rates among developed nations. In 2018, only 3.4% of its citizens between 15 and 74 years old had no job. Unemployment in the Euro area remains much higher at 7.9% at the end of December. Shorter working hours are definitely helping keep the indicator as low as possible.

The negative trends forced the nation’s central bank to revise its economic forecast, taking into account the outlook for the global commerce hit hard by the trade disputes between major players on the world scene. Bundesbank now thinks the German economy will grow only around 0.6% this year. The number represents a significant retreat from its previous prediction of 1.6% which was announced in December.

Financial Meltdown Brewing in Europe

The EU as a whole and the Eurozone in particular remain very diverse clubs of nations in terms of economic status. Some countries, particularly from the Southern flank, continue to register double-digit unemployment rates, 18% in Greece for example. While Spain’s economy is doing relatively well, Italy is practically in recession. Rome never managed to overcome its slow growth and a decade after the 2008 crash the Italian economy remains smaller than before the global financial crisis.

In May, a senior adviser to the German government shared with the BBC his fears that another European financial crisis could be brewing. Dr. Lars Feld, a member of the German Council of Economic Experts, singled out Italy. He noted that the country, which has the third largest economy in the single currency area, is struggling to stay out of recession as it has to deal with both a banking crisis that can affect the euro and a very high government debt, which reached a record high 132.2% of GDP in 2018.

A recession in Italy, which is also the world’s eighth largest economy by nominal GDP, sounds bad enough, but a slowdown in Germany would be even more damaging. A full-blown recession in the Federal Republic could definitely trigger a global crisis. Last year, Dr. Feld was one of the first to warn that the largest European economy is slowing down. It actually shrank in the second quarter of this year. But while the government adviser is worried, the executive power in Berlin seems to be in a state of denial.

‘We Are Not in Crisis’ Finance Minister Insists

In a recent interview with Bloomberg, German Finance Minister Olaf Scholz downplayed warnings about the negative outlook for the German economy and revealed that the federal government has no plans to stimulate economic growth. He believes that resolving man-made crises, such as the ongoing trade wars and Brexit, would increase growth rates in 2020, the year many now point to as the start of the next big crash. Insisting that more government spending now would rather lead to inflation than growth, Scholz stated:

We are not in a situation that makes it necessary or wise to act as if we were in a crisis, we are not.

Germany’s finance minister made these comments right after the European Central Bank indicated its intentions to increase its monetary support for the Eurozone economy in the coming months. Speaking to media in Frankfurt, ECB President Mario Draghi stressed that manufacturing in Germany and elsewhere in Europe may need increased government spending.

In June, the European Central Bank indicated its ultra-low interest rates are likely to remain in place until at least mid-2020, six months longer than the previously stated goal. ECB’s management is also preparing for further cuts that will take interest rates into negative territory. In the Eurozone, they have been going down for seven years and have been at 0% since 2016. More quantitative easing is also on the horizon, which means printing more money.

Such policies would have a hard time winning support from the German coalition government lead by Angela Merkel. Olaf Scholz, who is also her deputy, believes the tax cuts that have been made so far and the infrastructure spending are working fine and additional stimulus would not be a wise idea. In essence, Frankfurt wants to bolster economic growth with QE and negative interest rates, while Berlin sees only rising prices as a result of these measures.

Too Big to Fail

If there’s one thing Germany fears, it’s inflation. Being a leading exporter of high value added, quality products, inflation of the euro would decrease its revenues. And that’s one of the biggest contradictions of the Eurozone as countries like Italy actually need higher inflation so that their exports remain at least price competitive in relation to the German exports.

Berlin has gotten itself, and the rest of Europe, into an almost hopeless situation. The Eurozone is tuned in a way that benefits its largest economy. That, however, leads to the concentration of money in Germany whose banks have been lending it back to the weaker partners in the Eurozone and the EU to sustain them and their markets. Sooner or later, the poor borrowers won’t be able to take any more debt. It’s already happened with Greece, for example.

Germany has become a lender, supplier and consumer that’s too big to fail. A German crisis would surely drag the rest of the Eurozone and hurt the global economy. So now Europe is basically financing Germany through low and subzero interest rates. Things are nearing a point where normal economic logic isn’t part of the equation anymore. Investors are literary paying more and more to lend money to Germany, as Welt business editor Holger Zschaepitz remarked in a tweet this week. Berlin recently sold €2.345 billion of 10-year debt at a record low yield of -0.41%.

Totally absurd: Investors are paying #Germany more and more to lend the country money. Berlin sold €2.345bn of 10y debt at fresh record low yield of -0.41% vs -0.26% at Jul auction. Bid-to-cover rose to 2 from 1.2 at July 10 auction. pic.twitter.com/PHF2tiU5f0

— Holger Zschaepitz (@Schuldensuehner) July 31, 2019

Whatever the German finance minister says and does, there’s a well-grounded feeling that the next big crisis is looming. The troubles of Deutsche Bank, Germany’s largest financial institution and top banking services provider, are proof that something is wrong with the traditional financial system. The fact that central banks bought a record $15.7 billion of gold in the first half of the year and German investors piled into gold-backed exchange traded funds, as Financial Times reported, is a strong indication of efforts to diversify away from fiat currencies.

“In Europe we have a dysfunctional monetary union,” German finance strategy consultant Marc Friedrich told news.Bitcoin.com. “The South suffers with the euro and will never get better within the euro,” the economist emphasized. Friedrich thinks the recession is already coming and believes that in its aftermath a new monetary system will be born, a digital one, in which societies will need decentralized currencies.

Unfortunately, German regulators are making it harder for crypto businesses to operate freely in the Bundesrepublik. Companies from the industry, such as exchanges, payment providers and custodians, will have to apply for a special license from Bafin, the Federal Financial Supervisory Authority. They have to do so by the end of the year with the introduction of new AML rules based on EU’s Fifth Anti-Money Laundering Directive which must be transposed into German law by January 2020.

According to information shared on crypto forums, the new regulations are already affecting platforms dealing with cryptocurrencies. For example, Germany is no longer on the list of countries supported by Bitpay, a leading payment processor that allows many businesses outside the industry to accept coins through conversion to fiat.

Of course, direct crypto payments remain a viable alternative. You can process bitcoin cash payments using the Bitcoin Cash Register app for iOS and Android. The simple Point of Sale software developed by Bitcoin.com allows merchants to accept BCH at any retail location. Payments are easy, safe and no account or registration is needed to install and use it.

Do you expect the next financial and economic crisis to begin in Germany? Share your thoughts on the subject in the comments section below.

Images courtesy of Shutterstock, Destatis.

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Meet the Charity ‘eat BCH’ – the P2P Electronic Cash-to-Food System

04/04/2018 by Idelto Editor

Over the past few months of 2018 flying under the radar, there’s a new charity aimed at feeding Venezuelan citizens and their children — a group called ‘eat BCH.’ The group has been getting a lot of bitcoin cash (BCH) donations towards feeding the hungry from within the country’s troubled economy. The donations are proving how perfect a peer-to-peer electronic cash system can be for those in need.

Also read: Markets Update: Cryptocurrency Prices See Some Slight Recovery

‘Eat BCH’ Feeding Venezuelans With Bitcoin Cash

The Venezuelan economy has been suffering from hyperinflation and a turbulent economy which has left ordinary citizen living on the streets hungry and unemployed. The country’s currency, the bolivar, is so worthless individuals don’t even count the cash anymore; they weigh the fiat stacks on a scale. Over the years since Venezuela’s turmoil has continued to worsen, people have noticed the use of cryptocurrencies has been helping citizens in the region. People and groups from all around the world have been donating to Venezuelans in need, and the country’s citizens have been mining cryptocurrencies as well.

Now a new charitable cause called ‘eat BCH’ has been offering help to Venezuelans suffering from difficult economic times. The group has been collecting bitcoin cash donations for the past few months and have been using the funds to purchase food and feed Venezuelans who are in need of assistance. Nearly every single day for over three months the group’s Twitter handle shows pictures of children and adults getting all kinds of food — and it’s all paid for with bitcoin cash. Many of the Venezuelans in the photographs have the biggest smiles on their face showing how grateful they for the food.

The ‘eat BCH’ group also explains how thankful they are for the BCH community at large for promoting economic freedom and helping Venezuelan citizens. The anonymous Twitter-based charity states on March 11:

We have a peer-to-peer electronic cash-to-food system

BCH Donations Making Venezuelan Lives Much Easier

The charity solidifies how bitcoin cash can bypass sanctions, banking blockades, and governments, and turn those funds into food that feeds people. “This whole project has shown not only what it’s possible to do with bitcoin cash but also the generosity of the BCH community as a whole,” ‘eat BCH’ explains to its followers. Many of the pictures ‘eat BCH’ shares show children eating food paid for with BCH, the group handing out food bags, and every Saturday the team delivers food to a Venezuelan nursing home.

On March 24 the charitable group ‘eat BCH’ gave food to a group of women at least one child and explained the donations made their lives much easier. The team states that day:

We delivered some of the food bags to needful mothers in this community today — All of these women have at least one child to take care of. Your BCH donations made their lives much easier — Thank you.

So far the ‘eat BCH’ team has received over eight BCH and has documented every time they went out and fed people. Eight BCH may not seem like a lot of money in areas like the U.S., but even a hundred dollars can feed large groups of people in Venezuela. The BCH community has been thrilled to see bitcoin cash in action feeding people in need from within a country suffering from such a disastrous economic situation. One particular group was searching through the garbage looking for food and thanks to the kind donations stemming from BCH proponents they were fed fresh food that day.

What do you think about the eat BCH charity? Do you think that cryptocurrencies are a great way to promote economic freedom? Let us know what you think about this subject in the comments below.

Images via the @eatBCH Twitter page.

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