News broke past week of plans by Tunisia and Afghanistan to issue their respective sovereign bonds in Bitcoin. While there was no major hype around the news release, it underscores the importance of Bitcoin as a very important store of value asset going forward. It also brings to fore our argument that there is a transition into a very different economy occurring in our very eyes.h
Nation states are beginning to
It seems that what we have discussed, analyzed and
highlighted severally on this blog is beginning to dawn on certain nation
states- The fact that our current, debt based economic model is dying. In fact,
its demise started over forty years ago when the world’s economy was moved off
sound money by the Richard Nixon administration (Richard Nixon was a former US
president). He decoupled the dollar from gold, the dollar became a free
floating fiat currency not tethered to any substance of intrinsic value and of
limited supply- The restrain that constrained central bankers from turning on the
currency printing presses was gone. The printing of “money” into oblivion
began. The effect of this lack of restrain in monetary policy has resulted in
the everything bubble:
- Excessive valuation of stocks across the world
- Astronomical increase in prices of stocks the
- Huge increases in prices of arts and other
- All markets attaining astronomical valuations
(the derivative markets alone is worth over $1,200 trillion)
As the central bankers printed the “money”, the monies found assets into which to flow. The “money” we carry today as a medium of exchange is only so because some government declared it to be. They are forced upon us to use. It wasn’t long ago that money competed in the market place for adoption.
It wasn’t too long ago…….
As early as the 19th century, in certain states in the United States, various banks issued their own monies. The issuance of these monies wasn’t centrally planned. The money issued was real money as they were paper receipts of gold stored in the banks’ vaults. Each paper dollar was receipt money as they could redeem their worth in gold on demand. There was healthy competition amongst banks to issue sound money. The more sound a bank’s money was, the easier it was for that money to gain popular acceptance and adoption. As in all human endeavor, some “smart” bankers tried to game the system. They gradually began to fractionate the reserves of gold that they held by issuing more paper receipts than gold reserves that they held. Starting from a low fraction of 2:1. The higher the fraction a bank could issue, the more paper “money” they could issue. The more “money” they had, the more loans they could make with the extra “monies”. This was done with the belief that not everyone would want to claim their gold with their receipt monies at the same time.
As some of these banks fractionalized their gold reserves and made money in the process, the desire to make more money caused some of these banks to keep pushing the limits of this process until some banks had fractional reserve ration 1:10. With time, some of these banks began to fail. During this same period, banks that maintained restrained in the management of their reserves and either completely avoided fractional reserve lending or did it just to a modest ration prospered and thrived. This era was one of prosperity and economic expansion for the young country. This era continued until the outbreak of the civil war. As in all wars, the government needed extra money that was not available to fund the war. As all governments do when they need money- they debauch the people’s money. In this case the US government issued a fiat currency called THE CONTINENTAL. Since it was a fiat currency not backed by gold or any or any other asset of limited supply- the government printed it out to the point that it became useless and no one wanted to accept it as a medium of exchange. In fact, in those days, there was a saying which goes thus- “as useless as the continental”
Its happening again today…… the simple truth is, the average Joe/Jane doesn’t understand a thing about money. He/she doesn’t know where its from, how its created etc. the average individual doesn’t understand the difference between fiat currency and sound money. This ignorance plays well into the hands of governments and central bankers. Our various currencies today have been debauched. As this debt continues to pile on, it is the masses of the people that will pay for it in the form of inflation and reduction of the purchasing power of their currencies. Interest rates in the developed economies of this world have been on an all-time low for the past 10 years since the financial crises of 2008. The Federal Reserve bank of the United States tried to bring interest rates to normal in late2018 but as the financial markets tumbled following its decision to raise interest rates, it quickly reversed itself. Bottom line is, this current economic model cant last for too long. There’s an evolving deflationary, non-centralized model evolving. The decentralized blockchain technology model that has ushered in an era of sound money economics once again. The old order will slowly die out. It will and is already bleeding into the new and great wealth transfers will happen. You need to know how to start this journey into the DECENTRALIZED BLOCKCHAIN TECHNOLOGY world. The transition has already started. Have you started your own transition?
If you would like to know how to begin to get involved and invest in decentralized blockchain startups, bitcoin and other cryptocurrencies click here
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