Ukraine’s Ministry of Digital Transformation announced last Friday that it has launched a MetaHistory NFT Museum, a blockchain-based collection of digital images of the Russian invasion of Ukraine.
The Ukrainian government launched a non-fungible-token (NFT) collection to tell the story of Russian ongoing war in which it invaded its neighbour since February 24.
Mykhailo Fedorov, Ukraine’s Vice Prime Minister who also runs the ministry of digital transformation, said that the collection is “like a museum of the Russian-Ukrainian war” that features a series of recent invasion events narrated in non-fungible tokens (NFT) in the form of digital art paired with written reflections.
NFTs are any digital items like GIFs, music, painting, drawing, etc., that are recorded on a Blockchain distributed database. NFTs are immutable, and this means that they cannot be modified or edited once uploaded.
Fedorov said each NFT art would represent a story from the war. Every piece of art would be backed by a reliable news source. “We want it to be cool, good-looking, and it takes time,” he stated. The executive said that minting the artwork in the form of NFTs will help preserve the story of the war while also raising funds for Ukraine.
Artists who want to be featured in the museum are allowed to submit a portfolio with their work. Art directors would then review such work to determine the suitability of a creator’s work. Successful artists will be given a particular historical event to create their work from, and after that, the museum will mint the final product as an NFT on the Ethereum blockchain.
Each NFT will sell for 0.15 Ether or just over $475. The funds will go directly to the Ministry of Digital Transformation’s crypto wallets and be used to facilitate humanitarian aid efforts in Ukraine.
Using Crypto Aid to Purchase Critical Supplies
Early this month, Ukraine announced plans to issue NFTs to fund its armed forces. The country made such an announcement after it recently started receiving an increasing number of crypto donations from individuals, businesses, corporations, and funders willing to support the Kyiv government.
On March 3, Mykhailo Fedorov hinted that the government would soon issue NFTs to help support its military. The government made the move after it cancelled its earlier plans to reward cryptocurrency donors with an airdrop, a free digital token normally used by the crypto community to encourage participation in a project.
Since the war began, Ukraine has received the majority of donations received in cryptocurrency, including Bitcoin and Ether and also raised more substantial sums through conventional means.
Ukraine has already received over $88 million in cryptocurrency donations alone. So far, the country has purchased supplies for its military with its crypto donations, including bulletproof vests, helmets, lunches, and medicines.
The use of crypto assets is being closely watched by global financial regulators amid the war in Ukraine after worry about its use to evade Western sanctions on Russia, according to Reuters.
U.S. and European lawmakers have sent out multiple warnings to digital asset companies asking them to comply with Western financial sanctions imposed on Russia after it invaded Ukraine. However, reports have said that the $1.8 trillion crypto sector has not completely accepted the requests from lawmakers.
Crypto exchanges have turned a blind eye to orders for a cut off of all Russian users, which has given rise to concerns that Russia could use cryptocurrencies as a loophole to navigate around sanctions that have been put upon the country by the United States and Europe, according to a report by Blockchain.News.
David Schwimmer, LSEG’s chief executive officer, said that crypto exchanges are stuck in between either abiding by the philosophy of independence from regulation or supporting the centralised system of global finance – which calls for the requirement of regulation and transparent frameworks.
Another report by Blockchain.News said that Russians with strong social connections, who are under international sanctions for the invasion of Ukraine, have been using cryptocurrencies to launder their wealth.
Crypto watchdog firm Elliptic said that it found millions of crypto addresses connected to criminal activity and 400 digital asset providers who help users buy cryptocurrencies using rubles.
According to Reuters, some crypto exchanges have rejected calls to cut off all Russian users, raising concerns that crypto could be used as a way to circumvent sanctions.
On the flip side, Ukraine has raised more than $100 million in cryptocurrencies after calling for help on social media for donations to aid their military and humanitarian needs in bitcoin and other digital tokens.
“We at the FSB are monitoring the situation, the conflict situation relative to cryptos,” Patrick Armstrong, a member of the Financial Stability Board’s (FSB) secretariat, told a City & Financial conference in London.
Armstrong said that the FSB – which groups financial regulators, central banks and finance ministry officials from the Group of 20 economies – is sharing the information it obtains among its members.
To block potential sanctions loopholes, the European Union issued guidance on March 9 informing companies that sanctions on loans and credits include crypto assets.
Cryptocurrencies undoubtedly came to the rescue when Ukraine called for donations through it as its territories were invaded by Russia almost late last month.
With more than $100 million donated so far, Ukraine’s deputy minister of Digital Transformation, Alex Bornyakov, has detailed how much has been spent out of the donated funds thus far.
Speaking to Bloomberg recently, Bornyakov said as much as $15 million he has used in buying bulletproof vests, 500 helmets and as many as 410,000 lunch packs for the Ukrainian army. Most of these supplies were delivered just past Friday.
The total donations to the Ukrainian war effort came in the form of Bitcoin (BTC), Ethereum (ETH), Polkadot (DOT), Solana (SOL), and Dogecoin (DOGE). Besides these mainstream cryptocurrencies, a number of Non-Fungible Tokens (NFTs) have also been donated to the Ukrainian government, including a Bored Ape Yacht Club (BAYC).
The report has it that some of the military supplies received by the Ukrainian government were paid for in digital currencies, another proof of how well cryptocurrencies can be utilized. However, the government has no plans to sell off the Bored Ape NFT in its wallet. The CryptoPunk #5364 NFT was last sold for 16.2 Ethers, worth over $43,000 in current prices. However, the Bored Ape collection now has a floor price of 97 ETH worth approximately $250,000 in current prices.
“Yes, someone donated us a CryptoPunk, but it’s so hard to sell, we haven’t used it at this point,” Bornyakov said. “We are going to keep it for now. We appreciate every support that people are trying to give. What’s important is people’s awareness. They see what’s going on, and they are trying to help. We will work with NFTs a little bit later. We are focused on things we can deal with right now. There’s no time to figure out how to convert them. Maybe once things settle down, we’ll figure this out.”
With more crypto funds flowing into the Ukrainian government wallet, digital currencies’ decentralized and censorship-free nature was well pronounced throughout this war period.
At least $5 million in Bitcoin (BTC) has been donated to boost the Ukrainian Army since Russia attacked the nation on February 24, according to blockchain analytics firm Elliptic.
A cryptocurrency wallet belonging to Come Back Alive, a Kyiv-based volunteer group, had received 130 BTC from at least 2,200 donations. The funds are being channelled towards supporting Ukraine with military gear, medical supplies, and drones.
Tom Robinson, the chief scientist at Elliptic, noted:
“Cryptocurrency is increasingly being used to crowdfund war, with the tacit approval of governments.”
Russia went on the offensive and invaded Ukraine on February 24 using naval, air, and land forces. Airstrikes have hit various cities and military bases, and the effects have been catastrophic; at least 198 Ukrainians have lost their lives.
Over the past decade, volunteer groups have been at the forefront of aiding Ukraine’s conflicts, as witnessed in the ouster of pro-Russia President Viktor Yanukovych in 2014. These groups receive millions of dollars from private donors through payment apps and bank wires. Nevertheless, Bitcoin is emerging as a crucial alternative funding method.
On February 17, the Ukrainian parliament legalized Bitcoin and cryptocurrencies by unanimously passing the Virtual Assets Law as tension with Russia reached a fever pitch.
Mykhailo Fedorov, the Ukrainian deputy prime minister, viewed the law as a stepping stone towards more crypto investments and stated:
“The new law is an additional opportunity for business development in our country. Foreign and Ukrainian crypto companies will be able to operate legally, and Ukrainians will have convenient and secure access to the global market for virtual assets.”
Therefore, the Bitcoin donations received by the Come Back Alive group are backed by the law.
The price of Tether (USDT) has also been soaring on Ukraine’s Kuna exchange based on the ongoing Russian invasion.
Amid escalating tension with inevitable military conflicts with Russia before the incoming full-blown war, the Ukrainian parliament unanimously voted to legalize Bitcoin and cryptocurrencies by passaging a Virtual Assets law on Feb 17.
The legislation called “Law of Ukraine on Virtual Assets” has been passed with at least 270 votes approval, according to a statement from the Parliament.
The law stipulates the requirements that crypto service providers like exchanges ought to adhere to and the accrued fines in case of violations.
Mykhailo Fedorov, the Ukrainian deputy prime minister, believed that the law would open the nation’s boundaries to crypto companies, given that Ukraine is among the top-5 countries in crypto usage. He noted:
“The new law is an additional opportunity for business development in our country. Foreign and Ukrainian crypto companies will be able to operate legally, and Ukrainians will have convenient and secure access to the global market for virtual assets.”
However, the passage of the bill does not mean the legalization of the adoption with Bitcoin as legal tender. According to Nasdaq.com, citing a report from Bitcoin Magazine, the nation’s financial watchdog, the Securities Commission, will monitor the crypto market and issue permits to service providers.
The passage of the virtual assets law is the country’s second attempt to legalize Bitcoin after the first effort reached a dead end followingPresident Volodymyr Zelensky’s rejection.
The legalization of Bitcoin in the nation comes at a crucial time when tensions with Russia have intensified, given that Russia has marshalled more than 100,000 troops to the border, although Russian claims that have withdrawn some of the troops from the borders.
On the other hand, U.S. President Joe Biden recently noted that Russia was ready to fabricate reasons to invade Ukraine, warning that an attack would emerge in the coming days.
Therefore, volunteer groups and NGOs in Ukraine have been receivingBitcoin donations to support the army with drones, medical supplies, and military gear.
TL;DR – The government has pulled us into the deep waters, financially, to keep us vulnerable. Vulnerable people have the highest time preference, because they have the most future uncertainty. We’ve gone from a society that proudly claims to protect and nurture its most vulnerable populations, to a society that creates them as a matter of course. This is why you find yourself treading water financially. Vulnerable people consume without future regard.
If I were to hazard a guess as to what being a Bitcoiner is about, I’d say it’s about the restoration of order to the monetary system so that we can collectively progress in a more honest and efficient way.
Order can be thought of as the arrangement of people or things in relation to each other according to a particular sequence, pattern, or method. The key word here is “particular”. The dollar has no “particular” pattern. It is issued and debased arbitrarily.
As discussed last week, a centralized currency such as the U.S. dollar cannot hold. Moreover, markets run inefficiently on this ever varying unit of monetary measure. All fiat currencies fail because no one can resist the temptation to simultaneously print more money for themselves and debase the holdings of others. Bitcoin however, has unforgeable costliness, and a supply cap of 21,000,000.
Bitcoin’s systematic order looks markedly different from that of the U.S dollar. There is no single point of issuance or failure. The supply is fixed, and everyone can participate in the issuance or validation of new coins, and they wear the energy cost of that participation on their sleeve, or at least in a fairly transparent and calculable manner. On the other hand, the energy cost of U.S. dollars is computationally intractable.
What does progress mean? Progress to my mind means we are able to accrete values and goals with increasing efficiency over longer time scales, as individuals but also collectively. Bitcoin promotes honest value development and goal accretion by rewarding time spent pursuing both. The key words here are “time spent”.
Dollars do not store value long enough to promote the accretion of long-term goals. Dollars incentivize debt and instant gratification.
When you buy Bitcoin, you are buying yourself time later. You are exchanging time now for time later. Conversely when you buy debt-based dollars, you are wagering time later for time now.
Progress means we are able to meet our ends in increasingly efficient ways over time. I make no promises as to what this may look like. Work introduced into a system has no guarantee of yield. But through Bitcoin, the trade made for your time, and the incentive to work and provide maximum value in exchange for it is tremendous. Bitcoin is an incredibly resolute form of money.
Bitcoin is money with purpose. It promotes its own production, and inhibits its own destruction, at the expense of energy and its competitors. Dollars are printed arbitrarily, to no discernible purpose. With dollars, one is always playing with imperfect, incomplete information. Bitcoin is a game of more perfect though incomplete information. This means that knowledge about the fundamental operations of Bitcoin is available to anyone who is interested, although you may compete in the system as a miner, for example, without broadcasting complete information about your strategic business moves, making Bitcoin a game incomplete though fundamentally perfect information.
Efficiency can be thought of as the work performed or energy expended by miners to secure the bitcoin network divided by the monetary savings the network secures. One way to calculate this would be to take the net mining energy expenditure, and divide it by the market cap. The current state of this equation is left as an exercise to the reader, and I challenge you to find or invent a monetary technology that is more efficient.
As a hard store of value, Bitcoin is essentially a monetary battery, with the quirk that inside this battery your buying power has historically increased over time even without the additional input of more Bitcoin, making the system exponentially more efficient, time-wise, than saving in dollars.
So saving in Bitcoin is efficient, and inversely, saving in dollars is deficient. Yes, saving in dollars is counter productive. This is why wealthy people spend time recasting their wealth into objects which they pray will leak value at a slower rate than the dollar.
The whole housing market and stock market are massively inflated bubbles. People turn to them, and other strange assets that simply don’t hold value very efficiently, because they understand that holding value over time in dollars is deficient and costly.
As the adage goes, Bitcoin is the pin. Bitcoin is the most efficient store of value there is. You can choose to ignore it, but you cannot insulate yourself from money that is harder than yours.
Bitcoin will drain the housing market and the stock market of all the monetary energy that is desperately stored there in hiding from the dollar.
Bitcoin, AI or general technological advancement won’t displace jobs anymore than the wheel or the loom did. But this is a discussion for another time.
People adapt, becoming more productive over time through collaboration. Capital accumulation and the successful redeployment of capital should function in such a way as to make work more efficient. Many people in first world countries have more capital, property, and time at their disposal than people living just a century ago would have ever thought possible. Although at the same time, some parts of the world remain basically as they have for centuries, as if isolated at a local technological optimum.
Technological advancement could cripple or destroy a society (Think of nuclear war.) but we tend to perceive the benefits of new technologies as outweighing their anthropic risks (Think of nuclear power.) What is important to remember is that you cannot put the genie, in this case Bitcoin, back in the bottle.
When a new technology is socially proven, its invention cannot be undone, for better or worse. Again, this is a discussion for another time. The takeaway here is that Bitcoin took the innovations of proof-of-work, distributed ledger, issuance halving and difficulty adjustment, and packaged them together in a way that is virtually unstoppable. So Bitcoin as a technology cannot be revoked or uninvented, but it can be improved. Although as it stands Bitcoins is a spreading societal meme, its adoption has historically only grown over time.
Bitcoin is built on leaderless, transparent economic principles that reward both cooperation and competition, and diminish future uncertainty. What is the dollar built on?
What is the dollar built on? This is an exercise to the reader. What energy is expended to secure the U.S. dollar? Remember it is issued by mandate and maintains its place in the world with the threat of and through violence. The dollar is an inherently authoritarian tool.
Dollars are used in America to meet our coincidence of wants because dollars have enjoyed enough longevity for the population to have forgotten they are making a choice to trade for these things.
Do not take dollars for granted as your currency. Think of them as a choice you make. You spent a lifetime working and trading your time for dollars, and in 2020 they created trillions more of them, debasing your savings by at least twenty percent, and that is only one recent example. You’ve chosen to store up all your time, all your purchasing power in U.S. dollars and yet every year they issue more. Your money is losing purchasing power every year.
Going forward, you have a choice. There are no legal repercussions for exiting the U.S. dollar individually. Many would tell you this is the trade of a lifetime.
One particularly American tragedy:
We allocate our time and the capital we have at our disposal to unproductive ends, ends which meet our immediate needs, rather than making low-time-preference, highly-collaborative investments with our bodies, minds and property in order to alleviate future uncertainty.
Delayed gratification is key to a successful life of capital accumulation
Owning capital is a responsibility and not a privilege. In order to become a capitalist, one must first produce something of value to others.
At every moment, successful capitalists must choose to abstain from taking payment to satisfy their own needs, but instead redeploy the capital to further provide value to others through increasingly productive processes.
Bitcoin is the meeting of our ends, the ending of our needs.
I would call this procedure of Bitcoin ending our needs a demonstrative teaching of wants. Over time, hodling has demonstrated to its practitioners the rewards of delaying gratification and adopting a low-time-preference lifestyle.
Your $1,200 stimulus check would be worth around $8,765 today if you’d bought Bitcoin with it in April 2020. Within a year, that same stimulus check held in a bank has lost value, irrevocably.
Your money held in banks is worth less over time. Rather than alleviating future uncertainty, U.S. dollars are its root cause.
Your wealth held in dollars will never regain value to outpace inflation. The value of dollars melts away day after day. Sure, some money is taken off the table when debts are paid to banks, but whenever the central banks issue a loan, they are bringing new currency into existence, and that is all on top of government printing.
There is an insidious misconception that we need inflation to support a growing population. Inflation is a covert, slow form of taxation. It thrives on your time.
So we’ve lost our ability to save effectively through U.S. dollars. We’ve lost our ability to use dollars as an honest unit of account over time. We were born inside a debt trap, a trap set to alleviate our basest desires in exchange for all of our productive energies.
In America, our money teaches us to serve and appease our limbic system first, and America promises in exchange we will be able to finance our dream future through debt.
Delaying acting out our immediate desires, or acting now in anticipation of future wants and needs is thought of as a low-time-preference mindset.
Children often want what they feel they want precisely when they want it. One way the dollar maintains its position of power is by using American consumerism to prey on your limbic system. The dollar does not encourage the deferral of consumption in exchange for future reward. Your ability to alleviate future uncertainty is in direct proportion to the extent to which you are able to stave off immediate desires
The government has drug us into the deep waters, financially, to keep us vulnerable. Vulnerable people have the highest time preference, because they have the most future uncertainty. We’ve gone from a society that proudly claims to protect and nurture its most vulnerable populations, to a society that creates them as a matter of course. This is why you find yourself treading water financially. Vulnerable people consume without future regard.
Invulnerable people hodl Bitcoin.
Selling fear is an effective smoke screen. It is a great filter that keeps people from accumulating enough power to effectively protest the government. Fear keeps one from effectively planning for the future. As you busily prepare yourself for the next pandemic, the next war, the next virtual emergency, the next environmental disaster, you lose sight of your long-terms goals.
Do not pursue what is illusory.
Hodl Bitcoin instead.
Wait but aren’t you selling fear of fiat money and the government?
Bitcoiners do not promote fear of the U.S. dollar. They promote education about it and the freedom of monetary choice. I’m urging you not to trust me. I need you to look into the validity of what I am putting forward for yourself and come to your own conclusions.
At the heart of this country is central banks, and in the heart of the heart of this country, is trust. Which is touching, but poor strategy at best, and a fly-by-night operation of theft that perpetuates oppression and is enforced by violence at worst.
At the heart of Bitcoin is transparency. Don’t trust, verify. Edify. Do your own research. If you need a goal, make your goal to increase your future certainty.
The goal may be to live the longest life allotted to you, in the company of people you care about, doing whatever it is you enjoy.
What does this have to do with Bitcoin?
Bitcoin alleviates monetary future uncertainty insofar as one can. Do you understand?
Bitcoin is dependable. I am not talking about the price. Every operation of Bitcoin is independently verifiable, and unlike the dollar, Bitcoin encourages the self custody of your wealth, which is the strongest form of property ownership. The rules of Bitcoin can change slightly, but rarely, with notice in advance and only when bitcoiners come to a majority consensus, in an open and public way.
Because our time is scarce, it is valuable. We can use it to provide ourselves with means. There is always an alternative, more valuable use of time for us, and that must always be taken into account.
Opportunity cost is the cost of an activity in terms of the forgone alternative one would have engaged in.
Bitcoin is a constant that can define the value of your time and become its organizing principle.
A seller always values a good less than its price, while a buyer values it more.
The goal is not to buy Bitcoin to sell at a later date for an objectively worse asset such as dollars. The goal is to exit U.S. dollars. Period.
What happens to dollars after you’ve traded out of them is irrelevant. They are unconscionably flawed. Holding Bitcoin is owning superior monetary technology. It is the hardest form of money.
You will likely see the value of your Bitcoin rise when denominated in dollars over time. Instead of selling your Bitcoin at that time for dollars, ask yourself why the buyer values Bitcoin more than its dollar price. Consider the opportunity cost of this trade. Consider the absolute savings advantage of the buyer.
Financial savvy requires the ability to compare both sides of any trade in your mind at once. I’m not talking about the stock market. I’m talking about the countless trades you make every day with yourself. I’m talking about for what you have traded your time.
Trading time for dollars is an objectively poor strategy. More and more, people are realizing there is a superior asset out there, one that is truly scarce, and relatively easy to acquire. Once you’ve traded your dollars for bitcoin there is no reason to trade them back.
There is always an alternative, more valuable use of time for us, and that must always be taken into account.
With regards to the dollar it’s time to determine the length of your torture, the limits of your endurance, your own fate.
As to the future, if the path we are walking were clear, we’d be on someone else’s. Bitcoin is singular. No one knows how this will play out, but Bitcoin is the best explanation for the way money is so far.
Bitcoin is the black swan. It is spooky action at a distance. Bitcoin is the singularity. It is the event horizon. It is the monetary technology that will subsume and eclipse the rest.
Bitcoin has no incentive to deviate from its initial strategy. For what it does, it has no competition. It is the final settlement layer. Bitcoin is the Nash Equilibrium of sound money.
Between Bitcoin and fiat, there is an extreme contrast of approach to solving the problem of money. People often smooth over these differences by classifying Bitcoin as an investment. Bitcoin is not an investment. Bitcoin is property and money at once. Once you’ve realized Bitcoin as your operating unit of account, there is no reason to ever exchange it for dollars.
The dollar is deliberate noise. Bitcoin is deliverance from noise.
Bitcoin has an opaque definition. You either control a positive sum of Bitcoin, some fraction of 21 million, or you do not. With dollars, there is no such clarity.
On the one hand you count with no more than five fingers, yet with just those five fingers you’ve managed thousands of sums, a lifetime of arithmetic, despite the fact that in actual practice no more than five objects were ever counted. This is Bitcoin.
On the other hand you have fiat, an unlimited series of digits, innumerable dysfunctional fingers, sprouting at all angles like a cancer, in service of nothing.
Any fixed amount of a money will suffice for the world to meet its coincidence of wants.
Bitcoin completely negates the need for violence by incentivizing trade and peaceful cooperation.
I would like to lay out a few of Bitcoin’s operational processes. I know… many of you are very intelligent and grasp Bitcoin well, but there’s a recent upheaval in the core philosophy of Bitcoin. So, if I may, let’s revisit how Bitcoin does what Bitcoin is good at.
Firstly, there are the miners. The much-sought-after laborers of the Bitcoin network. Toiling away, independently seeking that magic hash that will yield the block reward with their many trillions of guesses per second. The keyword here being independently. Are they attacking each other in order to gain any advantage over the others? No. Are they working to erode away the resources or capabilities of their fellow miners in order to gain an advantage? Negative. They are simply putting forth as much effort as each is capable of in order to hopefully find that sweet spot that solves the algorithm of the next block. Bitcoin miners are no more committing violence against each other than the participants in a lottery, or a game of bingo.
Secondly, as the miners are all seeking reward for their independently-driven efforts they are also simultaneously securing the network for every single hodler and speculator that has any amount of wealth secured by the protocol. What does this mean? As the miners drive ever onward in their quest for reward, they are uplifting the entire network by securing it with pure energy— for if there were not an energy cost to attacking the network, it’d be a pretty soft target.
Next, we have the nodes. The accountants of Bitcoin. Toiling away to confirm that each bitcoin is sent and received as it was intended, whilst confirming these transfers with the rest of the network. At the very same time, this is providing an additional layer of security. Constant and consistent triple-entry accounting, providing further assurance that every satoshi is where it should be.
Where is this “violence” that I keep hearing about…?
Bitcoin does not engage in violence. Bitcoin transcends any application-of-force strategy. Thanks to the processes stated above, bitcoin is not only incorruptible and unhackable, but also unseizable (for a detailed look into these functions, I recommend reading this article).
Any amount of effort (force) that can get expended against the network only poses to make Bitcoin (the network, signified by the capitalized B) stronger — by proving the effectiveness of its decentralized security state, confirming the trustworthiness of the accounting, and not to mention the nature of its 100% resistance to seizure — depending upon the security actions taken.
I’ve been saying this ad nauseum on Twitter, so I apologize to my followers for being dragged through the repetitiveness of my recent activity. But this is of the utmost importance in understanding for the newly anointed members of the community.
Bitcoin is an asset that uplifts ALL, regardless of whether friend or foe. Bitcoin does not care about your politics, or my own. Block by block, it protects the flock. We can all rest assured that our funds are protected and free from forceful seizure.
It is through this dynamic that Bitcoin transcends violence – political, physical, or economic in nature. Bitcoin promotes cooperation, and trade becomes the most beneficial path forward —or all parties.
Bitcoin does not use force, it doesn’t need to. Any force that is involved is the force of circumstance by way of the infinite money printer (BRRRRR). All that have come to BTC do so by choice, there is no infringement upon any freedoms.
Bitcoin is the Successor to violence.
This is a guest post by Mike Hobart. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Central banks are a fundamental reality of the modern world, but it was not always so. The Bank of England (BoE) was founded in 1694, the first modern central bank. The BoE was born directly from the monetary overreach of the Stuart monarchs. Their military and political ambitions were constrained by the financial power that they could legally wield. The Bank was the end consequence of a series of questionable acts to get their royal hands on the needed money. In that sense, 1600’s England sounds very much like something that bitcoiners and other Fed-watchers would understand.
This essay makes heavy use of “The History of the Bank of England,” by Andreas Andreades, published in 1909, and available online at.1 Andreades is brilliant for clear explanations of financial actions, and their relations to English historical events. A great deal of economic content seems intent on obfuscating concepts which are not inherently complicated. Or avoiding those concepts entirely. See for example the history on the BoE’s website2, which spends at least as much time discussing buildings and architecture as opposed to actual economic history.
It should be noted that Andreades takes an approving stance toward the Bank, related specifically to its military advantage:
“A very slight study of English history shows the importance of this great institution to the Government and to the English nation. The loans made by the Bank to William III and Queen Anne enabled England to regain that position among European nations which she had to all appearances hopelessly lost. The English Government sought help from the Bank on the eve of all the eighteenth century wars.”3
One really fascinating, but unrelated footnote mentioned by Andreades involves the Bank of Genoa. In 1453, the government became so indebted, that several colonies were ceded as payment, and the Bank acquired its own fleet and army for their defense.4 One shudders to imagine Christine Lagarde at the head of an army.
17th Century Europe And England: Catholics And Protestants At Each Others’ Throats
The early 1600’s were a time of religious and political upheaval in Europe. The Holy Roman Empire was disintegrating, and central Europe descended into the Thirty Years War from 1618-1648. Catholics and Protestants fought brutally for control. Entire cities were burnt to the ground. The 50,000-man army of Albrecht von Wallenstein marauded through the continent, plundering any land they conquered.5,6 Europe would not see this level of widespread war and misery again until 1914.
Britain had its own tumult. The famous Guy Fawkes plot of 1605 was made in retribution for James I’s treatment of Catholics. The prior history and the plot itself are explained quite well at.7
James I and his son, Charles I were the first Stuart monarchs. They ruled from 1603-25 and 1625-49, respectively. Both had a fervent belief in the Divine Right of Kings. Charles, though, would especially collide with the worldly realities of implementing his Godly mission.
From the beginning of his rule, Charles clashed with Parliament. Charles could not raise funds for a desired war with Spain, and Parliament subjected his military plans to close, and deserved, scrutiny. In 1629 Charles dissolved Parliament, and ruled as an absolute monarch for 11 years.8
The only problem with Charles’ action was that Parliament was the body with the legal right to raise taxes. Without Parliament, Charles had to become creative to obtain funds. This took the form of “Ship Money”.
Ship Money was an emergency tax for coastal counties to contribute ships, and later money during times of emergency. With no real emergency at hand, Charles manufactured one. The pretext was that pirates – the “terrorists” of their day – were seizing English ships in the Channel. The following year Ship Money was extended to inland counties as well. This measure finally provoked legal challenges, seeing as how it was, in fact, illegal.9
Into this environment, Charles next lobbed the hand grenade of changing the Scottish prayer book to sound more “traditional” – in other words, more Catholic. This provoked the Scots to raise an army and invade the north of England. They captured Newcastle, and, hilariously, they wouldn’t give it back until Charles paid a ransom.10,11
Charles’ response, and his financial desperation, led to the first steps down the path to banks and later, the Bank of England. He sought loans from Spain, the Pope, and from the City of London. When these did not produce the needed funds, Charles made the time-honored choice of debasement, with a plan to lower the quantity of silver in each coin.12
As could be expected, debasement caused the price level to rise 10%. Charles was at his wit’s end. Finally, he simply seized the merchants’ gold. At the time, English merchants stored their gold in the Tower of London. This hoard was too tempting, economic consequences be damned. The seizure caused an immediate uproar from the merchants. Charles ultimately relented, but not before extorting a sizable loan.13
Charles’ troubles would eventually lead to the English Civil Wars, and his own beheading in 1649. But his seizure of merchant gold would begin the transformation of the financial structure of London. Since gold was no longer safe if stored in the Tower, merchants searched for alternate means of storage. This led to the rise of the goldsmiths.
Following Charles and his Divine Right to seize everyone’s money, the merchants first tried holding their gold themselves. However, after enough previously trustworthy employees made off with their boss’ holdings, the merchants turned to the goldsmiths, who enjoyed an impeccable reputation.
At the same time in the 1640’s, the English Civil Wars were raging, with armies for Parliament and the King ravaging the countryside. Landed gentlemen were similarly seeking a safe haven for their stashes. Hence the goldsmiths found themselves in possession of rather tremendous stores of gold. This presented new business opportunities as well as new temptations.14
The first opportunity was obvious for these smiths of gold. The English Mint was not very precise in its manufacture of English coins, which could vary meaningfully in precious content. The goldsmiths would set aside those coins of heavier weight, and export them to foreign markets for profit.15
But the big money would come in the form of loans. The goldsmiths quickly found that they could charge usurious rates of interest by extending credit to merchants with short-term cash flow issues. Next were property owners, who wished to borrow against future rental cash flows. It shortly followed that almost anyone with a future cash flow could borrow against it.
Loan business was booming, and so the goldsmiths sought to expand their deposit base. During the volatile 1640’s, most depositors were happy enough to have safe storage of their assets. But when things settled down, clients demanded interest. The goldsmiths accommodated them, because of the business expansion that it allowed. And the goldsmiths also introduced a shiny new innovation, withdrawal on demand.
Sometime during this time period, goldsmiths started to be called by a new name, Bankers. They had all the main features of modern banks. They paid interest on deposits, and loaned out at a profit. They allowed on-demand withdrawal. And for the last piece, most of their transactions were conducted with receipts, or goldsmith notes. These notes became so widely accepted that they can be called the first banknotes used in England.16
However, with great power comes the opportunity for corruption. Some goldsmiths chased profits over security and went bust, destroying their customer’s money. Some loaned at illegal rates of interest. And since the goldsmiths were amassing ungodly wealth, resentment and ill will necessarily followed.15,17 But the goldsmith Bankers would take things to a new level when they started lending to the government.
By the 1650’s, the goldsmiths held most peoples’ money on deposit, and their loan business was well established. Then a new customer came calling – Oliver Cromwell. Cromwell ruled England as Lord Protector for most of the short-lived English Republic. And he spent a fair portion of his time putting down uprisings, with a formidable standing army. Just as with Charles I, he needed money to pay his soldiers.
Cromwell entered into loans with the goldsmiths on the same terms as merchants and property owners – borrowing against future cash flows. This meant that the goldsmiths gained a legal claim on tax revenues collected by the government.
This practice would expand as soon as the monarchy was restored with the coronation of Charles II in 1660. A first priority was to disband Cromwell’s army, as it might threaten the authority of the King. However, the army first needed to be paid for their service, and for this, a loan was hastily arranged.18
Charles II was known as “The Merry Monarch”, and his reign was relatively peaceful. However he had expensive tastes, and financing from the goldsmiths was readily available. Hence it became regular practice for public finance: Parliament would approve a tax, and immediately Charles would convene the goldsmiths to discuss loan terms.
This started off reasonably enough. The government would pay 8% interest, and the goldsmiths would make a spread over the 6% paid to their depositors.19 But over time, Charles was lured in by easy financing and the ability to spend beyond his means in the present.
The goldsmiths began to charge higher rates, since the taxes pledged as payment grew further and further distant into the future. Some accounts place the government interest rate at 20-30%, while others claim a more reasonable 12%.20
The goldsmiths profited in this way for a time, however in the end Charles defaulted in the same way as anyone else who gets themselves too far into hock. In 1672 Charles attempted to pause all payments to the goldsmiths for one year. When chaos started to ripple through the English economy, a plan was created that was in effect a restructuring. Interest payments were lowered and paused for 6 months, and Charles later granted a yearly rent on some of his land holdings.21
Finally in 1683, all payments to the goldsmiths stopped. Negotiations carried on for 20+ years, and the goldsmiths finally recovered a fraction of their principal.22 In this way, Charles II effectively did the same as his father, Charles I – he appropriated the wealth of his citizens. He just did it in a far more underhanded way.
William Of Orange And The Formation Of The Bank Of England
Following Charles II’s death in 1685, England went through another period of instability. James II took over the throne, and made several moves to Catholicize England. This provoked tremendous resistance, and several Whig and Tory opponents took the extraordinary step to invite William of Orange from the Netherlands to come and take the throne. William was married to English royalty, and he himself was a grandson of Charles I, so there was some claim of royal heritage.23
In 1688, William amassed an impressive fleet, and made the first successful sea invasion of the British Isles since 1066. When William was crowned as King and gained his new country however, he found that the English government was kind of a fixer-upper. Yearly revenues were £1.7MM, of which £1.1MM was immediately spoken for, to pay for a military that was badly in need of repair.24
This was a severe problem. Louis XIV of France was aggressively Catholic, and ambitious, seeking to expand his territory through an ongoing series of wars. William’s chief goal was to counter Louis. New money was needed, and it would not come from the goldsmiths. Parliament didn’t trust William yet, and as such, they only voted in annual taxes that needed to be renewed regularly.
A series of new taxes were introduced, as well as a lottery. By 1694 the government budget had tripled, to £5MM. Such was the cost of proper nation-state competition with France. All the new taxes, however, still produced a shortfall, and the government was in need of £1.2MM.25 There was urgency to find the needed money, because of the ongoing military needs.
For the £1.2MM, a new corporation was proposed, “The Governor and Company of the Bank of England”. Shares in the corporation would be sold to the general public. From this capital, a loan would be made to the government at 8% interest.26
Importantly, the Bank was conceived as a fractional reserve institution. In describing the Bank, early advocate William Paterson says: “… if the proprietors of the Bank can circulate their own fundation of twelve hundred thousand pounds without having more than two or three hundred thousand pounds lying dead at one time with another, this Bank will be in effect as nine hundred thousand pounds or a million of fresh money brought into the nation.”27 Thus money creation was seen as a virtue and as an economic stimulant.
The Bank was heatedly debated, with many opposing arguments:28
The Government would become excessively powerful with this ever-flowing source of funding.
The Bank would continuously grow until it controlled the commercial sector.
Because of the high rate of interest, people would simply put money into the Bank rather than investing in trade and industry.
The Bank would favor certain merchants, who would then have an unfair advantage over their competitors.
Although these arguments have a degree of resonance in the modern world, the Bank was approved by a highly divided Parliament. Passage was in doubt until the last moment, but the Bank passed because of time pressure, the need for money, and the war with Louis.
Despite the doubts expressed by Parliament, shares in the new Bank were successful, and sold out within a very short time. With these shares, a fundamentally new financial product had been created – “the perpetual debt”. Government debt was held as a long-term asset which generated interest. If the holder wanted to recover his principal, then he would simply sell his paper to another investor.
The pre-history of the Bank shows that, at every step, its path was laid by government over-reach and the war machine. Charles I needed money for war, and took several illegal steps to get it, which led to the rise of the goldsmiths. Charles II lived beyond his means, and ultimately appropriated the wealth of his citizens by defaulting on loans owed to the goldsmith. And William needed money to be able to successfully compete with France in the geopolitical arena.
Recalling The Sovereign Individual, it can be seen that central banks are a necessary tool for governments to harness the resources of society for the war machine and nation-state competition – to “increase the returns of violence”.
Bitcoin is the opt-out from this perpetual, tiresome cycle of government theft. Self-sovereign bitcoiners will reduce the pool of resources that governments can harness by force. Geographic mobility will organically give rise to a worldwide community of free men and women innovating and competing peacefully. As we stay humble and stack sats, we will fundamentally alter the landscape of money and power, and point toward a breathtaking future.
This is a guest post by Wilbrrr Wrong. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
What do Saddam Hussein and Bitcoin have in common? According to the government, they both have ties to terrorism. In reality, both threaten the United States dollar (USD) and its global hegemony.
“One man’s terrorist is another man’s freedom fighter.” — Gerald Seymour
Throughout this article, we are going to peel back the layers of inflationary monetary policy to be able to answer these three questions:
1. Why does the Federal Reserve target inflation?
2. What do the military and counter-terrorism have to do with protecting the inflation narrative?
3. How come bitcoin sees such strong opposition from certain individuals within the government?
Before we can answer these questions thoroughly, we must take a step back and delve into the world of money. This will give us the building blocks to better examine why the government does what it does. To do so, we must first ask the question: What is money?
The broad definition of money tends to revolve around “an economy’s generally accepted and recognized medium of exchange that is used to facilitate trade for goods and services.” In layman’s terms, money is the store of value intermediary between transactions. If money did not exist, trade would become significantly more challenging. A trade would require both parties to have the exact goods that each other needs. For example, John is a fisherman and Michelle is a carpenter. What’s to say Michelle needs fish at the same time that John needs a table? Additionally, how much fish is this table worth?
Money allows individuals to swap resources or services for a store of value, regardless of whether we have an immediate use for it. This has allowed our civilization to expand and grow much more efficiently than it otherwise would have, as both domestic and international trade becomes almost impossible without money.
For the average person, there are two methods to obtain money:
1. We must expend time and energy in return for money (e.g.., work, labor, services).
2. We must trade goods or resources in return for money. However, to obtain these goods or resources, we must have previously expended time and energy.
Therefore, in both scenarios, to obtain money, we must expend time and energy. With this, we can conclude:
Money = Time + Energy
With this simple equation in mind, we can better understand the inner workings of the monetary system.
Our Monetary System
Our economy operates on a centralized monetary system, where at the top we have the Federal Reserve (the Fed). The role of the Fed is to regulate the U.S. monetary and financial system through monetary policy. This gives the Fed the ability to control the money supply. This ultimately influences whether we are in an inflationary or deflationary environment, regardless of what should naturally occur.
Although the Fed was created as a private entity, we don’t have to look much further than the board of governors to realize that it is just an extension of the government. The board of governors, which guides decision-making, is at the heart of the Federal Reserve and is a government agency. Therefore, although the Fed appears to be independent and impartial, the government has a significant influence over the Fed’s decision-making and, subsequently, monetary policy direction.
Considering the Fed’s role in regulating the U.S. monetary system, one could conclude that it would strive for the USD to maintain sound money characteristics. However, since the introduction of the Fed, the idea of sound money has slowly but surely been undermined and destroyed, with a complete break occurring when the U.S. departed from the gold standard in 1971. Rather than the dollar being somewhat backed by gold, it is now backed by debt. Therefore, it becomes relatively easy for the U.S. to expand the money supply.1 The Fed uses four key levers to control the money supply:
a) Open Market Operations (OMO): The Fed has the ability to purchase short-term treasury bonds from the open market. In doing so, the commercial banks who sell these treasury bonds receive payment in the form of increased bank reserves. This serves two purposes. First, this artificial demand for short-term treasuries decreases short-term interest rates. Secondly, with increased bank reserves and lower short-term rates, commercial banks tend to lend more freely. This results in an increase in the money supply since banks operate on a fractional reserve system, whereby they only need to hold a fraction (generally 10%) of their total deposits/loans in reserves. Therefore, a $1 increase in reserves can result in a $10 increase to the money supply.2
b) Quantitative Easing (QE): QE is usually only reserved for times of economic stress, otherwise it is very similar to OMO. The main difference is that with QE, the Fed targets long-term, instead of short-term, treasury bonds. This causes an artificial suppression of longer-term interest rates, as well as a potential increase in the money supply.
c) Discount Rate: The Fed has the ability to adjust the discount rate. By lowering the discount/interest rate that commercial banks have to pay on short-term loans, the Fed makes borrowing more favorable and, as borrowing increases, so does the money supply. As explained above, banks do not have to have 100% collateral-backed loans. Therefore, any loan created has the potential to cause an increase in the money supply.
d) Modifying Reserve Requirements: The Fed has the ability to modify reserve requirements. This modification refers to the amount of reserves a bank must hold against deposits in bank accounts. By lowering the reserve requirements, banks have the ability to create more loans, which can result in an increase in the overall money supply.
In all four examples, when a dollar is created through monetary expansion, it is backed by nothing but a liability. Therefore, an increase in the money supply is either an expansion of the Fed’s balance sheet or a liability on behalf of the bank that has lent out the money.
In addition to the many levers the Fed has in its arsenal, the Fed openly targets a 2% year-over-year inflation rate. “The Federal Open Market Committee (FOMC) judges that inflation of 2 percent over the longer run, as measured by the annual change in the price index for personal consumption expenditures, is most consistent with the Fed’s mandate for maximum employment and price stability.”3 In layman’s terms, the Fed seeks to achieve a 2% annual increase in the price of goods and services alongside maximum employment and price stability.
If we intuitively think about what the Fed is saying, something doesn’t seem to add up. First, it doesn’t make sense that the Fed is targeting stable prices. We live in a world where we constantly strive to get more for less by increasing efficiency and productivity. For instance:
● Cars were invented to reduce time spent traveling.
● Mass production was introduced to reduce the cost of goods to the consumer.
● The internet was born to aid communication and increase information-sharing and consumption.
● Spotify was created to consolidate music into one easy-to-access space.
● Netflix was founded to allow anyone access to movies without having to travel to the movie store.
And the list goes on. At no point has human ingenuity been used to get less for more, with the exception of inflation targeting.
Although it is possible to see prices rise (natural inflation) through structural demographic changes or supply-and-demand imbalances, prices tend to fall in the long run. However, by targeting inflation, the Fed is actively aiming for a steady increase in prices over time. They are able to achieve this through monetary expansion, which creates a slow decay in the purchasing power of the currency and, in turn, an increase in the cost of goods, services and assets. This is not natural. Instead, as technology advances and we see increased productivity, prices should naturally decline, and the currency should strengthen, allowing us to buy more for less.
Additionally, is unemployment such a bad thing? With a strengthening currency and decreasing cost of goods and services, the cost of living should also decline. In turn, we should be able to work less with a greater output. This ultimately allows us to achieve a higher standard of living. Under this lens, unemployment may not be the bad egg it is made out to be. Instead, we should view decreasing prices alongside reduced work hours and a slow increase in unemployment as a potential sign of a healthy, happy economy. So, what are the effects of inflation, and who is it benefiting?
What Are The Effects Of Inflation?
As explained above, the Fed, through its arsenal of tools, has the ability to influence the money supply with the goal of hitting specific inflation targets. However, this targeting comes at a cost. As mentioned above, monetary expansion to reach inflation targets negatively affects purchasing power, causing an increase in the cost of goods, services and assets. However, as this destruction of purchasing power occurs incrementally over time, it can be difficult for the average person to grasp inflation’s adverse effects. Irrespective of the societal and economic impacts,* the four main monetary side effects of inflation are:
1. Dilution: Creating more dollars backed by debt does not add value to the economy. Instead, it dilutes the currency that is already in circulation. For example, if a pizza is cut into four slices, doubling the money supply would not be equivalent to doubling the amount of pizza. Instead, it would be equivalent to cutting those four slices in half to create eight slices. We have not gained any additional pizza. We just have more slices.
2. Interest: As explained above, to increase the money supply, a liability must be created. When this is done, there has to be interest paid on this liability. For example, when the Fed increases bank reserves for commercial banks, it pays interest on excess reserves (IOER). Therefore, in addition to the dilution of the currency, a liability with interest payments is created. Not only has inflation diluted our existing currency, we now have to divert productive capacity to pay down debt plus interest.
3. Loss of Accurate Measurement: Currently, we measure assets, wealth, goods, services, income and so on in dollars. The challenge with using the USD as a medium of measurement is that, as inflationary monetary policy destroys purchasing power, we see a change in the value of the dollar. This inadvertently inhibits our ability to use the USD as an accurate measuring stick. The USD would be a great form of measurement if its supply was stable and consistent. However, this is unfortunately not the case. Using the dollar as a medium of measurement is like trying to build a house using a ruler, where the measurements on the ruler keep changing unexpectedly and unpredictably. I doubt the house would be structurally sound.
4. Distortion of Economic Indicators: The USD is a crucial indicator for economic decision-making. However, by performing inflationary monetary policy and masking economic stress through monetary expansion, we hinder our ability to obtain insightful economic information when analyzing the USD. Consequently, we are impeding the economy from error-correcting accurately and, in turn, hampering its ability to adapt, evolve and innovate effectively.
* For a more detailed breakdown of societal and economic impacts of inflation, check out “When More Isn’t Better: Inflation in the 21st Century.”4
With these side effects of inflation in mind, it can be difficult to look favorably at inflation. Additionally, it makes us question that if our dollar’s purchasing power is slowly decaying over time, is an increase in wealth in dollar terms all that it is made out to be? One way to view the reality of our situation is to change the medium of measurement. For instance, below is a chart of the S&P 500 versus the S&P 500 divided by the Fed’s balance sheet. This alternate measurement takes into account monetary expansion rather than just relying on the dollar.
As we can see, the 175%+ growth in the S&P 500 over the last 12 years is, in reality, more likely a significant loss when we account for monetary expansion. However, it should be noted that many of these dollars created on the Fed’s balance sheet may never reach the public domain, and, therefore, it is difficult to determine the exact impact on the purchasing power of the dollar. This may mean the loss is not as drastic as -65%; however, the difference is still a far cry from negligible.
Why Does The Federal Reserve Target Inflation?
If we distill everything up to this point, it can be tough to understand why the Fed would target inflation when it has such adverse side effects. However, if we dig into the two main benefactors of inflationary monetary policy, we can better understand why we see such policies.
As the Fed implements inflationary monetary policy, the general population and businesses start to spend and borrow, causing an increase in debt consumption. With an increase in debt, we see money supply expansion and a reduction in purchasing power. Usually, with increased demand for borrowing, we would see a rise in interest rates. However, as previously mentioned, the Fed has a couple of tools in its arsenal that allows it to suppress interest rates. Additionally, by working alongside the U.S. Treasury, the U.S. is able to implement what is called financial repression.
A concept introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon, financial repression is the suppression of interest rates below that of inflation, which allows the government to borrow money at extremely low rates to fund operations.6 This greatly benefits debtors and is disadvantageous to creditors, aligning with the fact that the US is the largest debtor nation with a total government debt of $28.1 trillion.7
This suppression of interest rates is not natural and allows the treasury to obtain capital to fund operations through the issuance of treasury bonds at rates below that of inflation. This indirectly passes on the cost of borrowing onto the creditor, which, in this case, ends up being the economy. In essence, financial repression is a stealth tax on its currency holders in two ways:
1. When the Fed artificially suppresses interest rates, it negatively impacts savers (e.g., pension plans, savings accounts, fixed-income investments). Under normal interest rate environments, savers would be rewarded in the form of reasonable interest rates (i.e., they would get significantly more return on their capital). Instead, savers are punished with suppressed interest rates and this difference in performance is passed onto the government to fund its debt.
2. To suppress interest rates and drive inflation, the government has to perform OMO, QE and other inflationary monetary policies. In all three instances, we see an increase in monetary expansion. This monetary expansion causes a destruction of purchasing power, which directly impacts savers and fixed-income investors, while benefiting the debtors as it reduces their debt burden.
You may wonder why someone would ever lend money at interest rates below that of inflation. Unfortunately, this is not something that the population has much say over. The government puts such measures in place as:
● Reserve requirements. For example, international bank regulatory standards (Basel III) encourage banks to hold government debt by giving it preferential treatment for satisfying capital requirements.
● The capping of interest rates to prevent interest rates from rising above certain levels (i.e., yield curve control8).
● Increased regulation of capital movement between countries. This restricts capital from flowing out of the U.S. to more favorable options.
These tactics and regulations ensure the continual flow of capital into treasury bonds, allowing the government constant access to cash to fund operations and direct it to wherever they feel necessary.
Overall, the government benefits in two ways from inflation and, more specifically, financial repression.
Through inflationary monetary policy and financial repression, the government no longer has to act in the best interest of its population. This is because it is able to fund itself regardless of whether or not it collects enough capital to fund operations through taxation. It is able to fund itself in the following ways:
a) The U.S. treasury issues government bonds to obtain capital to fund its operations. Under normal operations, commercial banks and other entities purchase these bonds and, in return, collect the interest on the money lent to the government. However, through OMO and QE, the Fed can purchase these treasuries off the commercial banks. So, in effect, the government is funding itself by issuing and selling treasury bonds to itself and using the big commercial banks as intermediaries.9
b) Through financial repression’s stealth tax, the government is able to borrow capital at rates below that of inflation, forcing the borrowing costs to be passed onto the creditor. Ultimately, this reduces the government’s debt burden and allows it to fund itself without explicitly taxing its population.
Reduction in the Deflationary Effects of Debt
The government has spent more than it has made through taxation and other forms of income in 19 out of the last 21 years.10 Since it has been running such huge deficits to fund operations, it has accumulated a vast amount of debt. As the debt burden grows, so does the deflationary pressure. Financial repression via monetary expansion and the lowering of rates allows the Fed to reduce the deflationary effects of debt.
When the government implements an inflationary monetary policy, the second biggest benefactor is the banks. As explained above, under our fractional reserve banking system, banks do not need to be fully collateralized (i.e., they only need to have a portion of their liabilities in reserves). When the Fed lowers interest rates, we see an increase in demand for borrowing. With this increased demand, banks are able to expand the money supply by increasing the number of loans they create. In turn, they profit as they collect interest on these loans. Where it gets confusing is that this money did not exist on the bank’s balance sheet prior to the loan being created.11 When a new loan is created, the money supply expands as new money is created to facilitate the loan. It is important to highlight that most of the money in our economy is created this way and not, as most people assume, by Jerome Powell at the Fed hitting the print button.
Additionally, when the Fed performs measures such as QE, this gives the banks greater reserves to create more loans, allowing greater expansion of the money supply.12 Essentially, banks today, under the fractional reserve system, are able to create revenue from lending money that they never had in the first place. They are creating money out of thin air, and so, just like the government, they, too, are benefiting by diluting the currency.
You may be wondering, why are the banks given so much power? The banks are the government’s means of dispersing capital into the economy. When the Fed lowers interest rates, it is the banks that create loans and disseminate capital, which aids productive capacity, allowing further capitalization of the economy by the government in the form of inflation. In short, banks play a pivotal role in the government’s ability to capitalize off its population and the currency holders.
However, disbursement of capital isn’t the only benefit banks give to the government. The financial sector is one of the largest contributors to political campaigns and lobbying. During the 2020 election, Wall Street banks and financial services spent $2.9 billion in lobbying and contributions.13 Therefore, not only do the banks aid in the disbursement of newly created capital, but they also provide a substantial income stream for politicians. It is for these two reasons that the banks are given so much power.
Additionally, if we’ve learned anything from U.S. politics, it is that lobbying has a considerable impact on regulation and the legislative process.14 By lobbying, banks can influence legislation to ensure regulation is put in place, protecting their position within the financial system (e.g., strict anti-competition regulation, which reduces competitors).
From everything we have discussed, it is evident that the government no longer needs to act in the best interest of its population to receive funding (e.g., income tax, sales tax, corporate tax). It can effectively fund itself through hidden taxation in the form of monetary expansion or financial repression without its population or the currency holder’s consent. This is why the government consistently pushes the inflation narrative and continues to target increased economic productivity. The more productive a country is, the more demand there is for that country’s goods, services and currency. This increased demand leads to a strengthening of the currency. The stronger the currency, the greater the amount of monetary expansion that can be performed before its population starts to feel the adverse effects.
However, inflation is a double-edged sword. Although the government and the banks benefit immensely from inflation, alongside inflation comes debt. As mentioned previously, whenever the money supply increases so does the debt burden. This creates a negative feedback loop whereby to service the debt, more money has to be printed. This further impacts the currency holders in two ways:
1. In order for the government to continue to fund itself and keep the deflationary pressures at bay, it must further expand the money supply. This continual expansion destroys the purchasing power of the currency.
2. As the debt burden increases, the house of cards that is the financial system becomes ever more unstable. When interest rates do inevitably rise, the consequences will be catastrophic (such as that of the Asian debt crisis or Japan’s lost decade), and it is nearly always the public which pays the price as losses are usually socialized.
Unfortunately, this doesn’t seem to stop the government from continuing to do anything it can to ensure that the inflation narrative continues.
Let us delve deeper into this nonconsensual taxation through monetary policy. We know from above that money = time + energy. Therefore, as inflation creates a loss in purchasing power — and financial oppression is the suppression of interest rates and the transfer of borrowing costs onto the creditor — and if this has been done without the consent of the currency holders, then this is theft of their time and energy. Although it has been banned since 1865, inflation under this light sounds eerily similar to slavery, which is also the theft of time and money.
Slavery is when an entity benefits off of someone else’s time and energy, at their expense and without their consent. It doesn’t matter whether or not the person knows. The government prefers to use the term “inflation” as it hides their underlying intent and allows them to appear to be doing what is best for the population.
This claim of slavery may sound asinine. However, in 1862, a confidential letter, circulated by English capitalists among American bankers, aptly described a monetary system uncannily similar to the monetary system we use today. The letter is below:
“Slavery is likely to be abolished by the war power, and chattel slavery destroyed. This I and my European friends are in favor of, for slavery is but the owning of labor and carries with it the care of the laborer, while the European plan, led on by England, is capital control of labor by controlling wages. THIS CAN BE DONE BY CONTROLLING THE MONEY. The great debt that capitalists will see to it is made out of the war must be used as a measure to control the volume of money; to accomplish this the bonds must be used as a banking basis.” — Charles Hazard, Hazard Circular, 186215
It is apparent that long before the current monetary system came to be, the immense control someone could wield, if they had authority over money, was well known. For if you control the monetary system, you control the economy, or as Mayer Amschel Rothschild famously said, “Permit me to issue and control the money of a nation, and I care not who makes its laws.”
Robert Breedlove explores this further with his insightful article, “Masters and Slaves of Money,” where he compares monetary expansion and its equivalent in labor hours worked.16 Ultimately, he concluded that the expansion of the M2 money supply between 1981–2020, divided by the U.S. average hourly (assuming that the average U.S. worker works 2,000 hours per year) equates to the U.S. running 11.7 million people for 40 years straight. He then expands further, “Time stolen by The Fed since 1981 is 341% more per year than the trans-Atlantic slave trade. With 23.4B hours stolen annually, The Fed could (in theory) build 2.3 Great Pyramids each year. In terms of absolute human time stolen per year, fiat currency is the largest pyramid scheme and institution of slavery in human history.”
“None are more hopelessly enslaved than those who falsely believe they are free.” — Johann Wolfgang von Goethe
If every other ordinary individual and business has to add value to society to earn money to pay its bills and operate, why shouldn’t the government? Regardless of whether or not one would classify inflation and financial oppression as slavery, most would agree that having the ability to fund oneself removes true supply and demand and, therefore, entitles the holder of that power to act in their own self-interest as opposed to the interests of others. Additionally, when that self-funding comes at the expense of the population, it can become a slippery slope to detrimental authoritarian regimes.
For example, a monopoly corporation in a small town has overarching control of its people as it is the primary source of jobs for the community. It can, therefore, create hardship through layoffs or boost morale through hiring and wage increases. This control over employment and wages cultivates conformity and prevents people from speaking out in fear of losing their jobs or being ostracized from the community. Along this same vein, any entity that controls the money supply can create economic hardship with a restriction of capital or the illusion of economic prosperity through monetary expansion. This allows for population control since, when the population starts to gain independence, or the entity’s power is infringed upon, they can create economic hardship through a monetary contraction. Alternatively, they can give the illusion of economic prosperity via monetary expansion, which additionally aids the facade that they are doing what’s best for the population and thus rebuilds the population’s confidence. At no point is the entity required to offer legitimate value to society.
To clarify, as long as the government is offering a service that provides value to its population and uses proceeds from taxation with the population’s interests at heart, taxation under traditional measures such as income tax, sales tax and corporate tax is by no means theft. Instead, taxes are a necessary part of the economy as it is through taxation that the government can obtain capital to operate and survive.
Where taxation issues arise is when we have financial oppression and inflationary monetary policy in addition to traditional taxation. In this scenario, not only are we paying tax in the form of income tax, sales tax and corporate tax, to name a few, but we are subject to currency debasement and supporting the government’s debt burden without our consent. This is effectively double taxation and allows the government to fund itself without having to offer a beneficial service to its population.
It is fair to play devil’s advocate and recognize that this information can be construed in a multitude of ways. In this instance, it may have been skewed to paint the government in a negative light. Additionally, one could argue that there are benefits to inflation such as:
● allowing the government to obtain capital to fund social, medical, welfare programs, and so on;
● providing capital to the economy, which can aid economic growth;
● giving the Fed the ability to dampen economic stress; and
● reducing the deflationary effects of debt.
These are fair points, so let’s dig deeper to see if the government has kept its population’s interests at heart. The old adage, “do not listen to what they say, look at what they do” seems appropriate.17
Below is a table that looks at government spending directed toward mental health and drug addiction in relation to government spending directed toward counter-terrorism. It then compares the total deaths and the dollars spent per death. As we can see, if the government was concerned about the well-being of its people, we would assume that they would direct spending toward the areas which need it most. Unfortunately, this does not seem to be the case. Additionally, if we look at the military versus healthcare spending, the U.S. spends 450% more on the military than healthcare.18
Why Might The Government Be Spending So Much On Counter-Terrorism And The Military?
Before we can understand why the government spends so much on its military and counter-terrorism, we must first dig into the USD and its world reserve currency status.
Prior to 1971, the USD operated on the Bretton Woods system, a sort of gold standard. Under Bretton Woods, many foreign countries agreed to maintain a fixed exchange rate between their currencies and the dollar. In return, the U.S. agreed that every dollar in circulation was backed by and could be exchanged for its weight in gold. This agreement is what gave the USD value. However, in 1971, the U.S. dropped the Bretton Woods system and transitioned to the fiat standard, which we use today. The difference is that, instead of the dollar being backed by gold, it is now backed by nothing but debt. Internationally, this decision was not well received, and over the coming years, the dollar struggled.20 The U.S. urgently had to find a way to maintain its reserve currency status as the dollar was now under threat.
Through the middle of the 1970s, the U.S. found a way, through bilateral agreements with Saudi Arabia (the largest Organization of the Petroleum Exporting Countries, or OPEC, oil producer at the time) to influence OPEC to standardize the trade of oil, ensuring transactions were facilitated in USD.21 The petrodollar was born.22
Two benefits the U.S. has over every other country:
World Reserve Currency: Since the USD holds the global reserve currency status, most trade is made in USD. With this being the case, there is a vast amount of USD-denominated debt as countries have to obtain dollars to fund global trade operations. This constant demand for dollars to maintain/pay down USD-denominated debt and trade results in an artificial strengthening of the USD.
The petrodollar: This agreement with OPEC in the 1970s, ensuring that most oil trade was now priced in dollars, has provided tremendous benefits to the U.S. With oil being the preeminent global energy source, the need for oil is immense. Just like the world reserve status, the OPEC agreement has created a universal artificial demand for dollars, strengthening the dollar. Additionally, there is one other huge advantage the U.S. has over other countries. As oil is the preeminent global energy source, not only does the U.S. have a considerable influence over the price of oil, the U.S. can now purchase oil through the printing of dollars. These petrodollars are then recycled back into the U.S. via the sale of U.S. Treasury bonds to petrodollar nations. Ultimately, this allows the U.S. to fund itself. This system is called petrodollar recycling.
With both the petrodollar and the world reserve currency, the U.S. benefits greatly as there is this constant demand for dollars resulting in a strengthening of the currency. The U.S. government can then capitalize off this increased currency strength through monetary expansion and fund its operations. This grants the U.S. an extraordinary advantage over any other competing country as it can fund itself at the expense of another country. Any government which wants to compete globally is at the whim of the U.S. First, they have to obtain USD to purchase oil and trade. To do so, they must sell their currency in exchange for USD, which tends to devalue their currency. Second, the U.S. can capitalize off this USD currency holder through monetary policy by expanding the money supply for its own benefit. Ultimately, not only has the competing country had to devalue its currency in the purchasing of dollars, it now holds dollars that can be devalued for the benefit of the U.S.
What Do The Military And Counter-Terrorism Have To Do With Protecting The Inflation Narrative?
As I am sure it is now apparent, the purpose of the military and counter-terrorism is not to protect the people of the U.S. The military and counter-terrorism are there to aid the U.S. in its global hegemony and protect the government from any people or entities that infringe on its ability to capitalize off its currency holders.
Therefore, the best way to protect the U.S.’ global positioning is to fund the military and counter-terrorism. This will ensure global control and allow the U.S. to continue to push the inflation narrative. This explains the imbalance between mental health/drug addiction spending and counter-terrorism in the chart above. It also explains the significant imbalance when we look at global military expenditure, where globally, the U.S. has the highest military spending budget. The U.S. spends 308% more than China, which is in second place, and more than the subsequent 10 countries combined.
If the U.S. were to lose its monopoly on oil trade, we would see a significant drop in demand for the USD. This would most likely threaten its reserve currency status. If this were to play out, the U.S. could no longer capitalize off its global positioning, and it most definitely couldn’t expand the money supply to the same extent, without major repercussions and destruction of the USD’s purchasing power. Just to drive the point home one more time, this is why the U.S. is so highly incentivized to protect the petrodollar. The petrodollar helps ensure global reserve currency status, hugely enhancing its ability to continue legal theft/slavery through monetary expansion.
Where Does This Military Spending Go?
With the positioning of the USD, it is clear that they are incentivized to challenge anyone who attempts to interfere with their power. With this in mind, let’s dig into how and where exactly the U.S. directs their immense global authority and military power.
Although, first, we must detour so that we understand how the U.S. accrues power. This will allow us to understand why the U.S. does what it does when it comes to the military, a coup d’état (removal and seizure of a government and its powers), revolutions, and more.
The U.S. tends to operate in a three stage process when it comes to maintaining and growing their global powerhouse:24
1. Economic Hitmen: The big conglomerates and corporations within the U.S. send economic hitmen (EHM) into developing nations with large energy reserves. The goal is to “altruistically” offer to lend these nations money and help develop and build energy infrastructure, allowing these nations to capitalize off their natural resources. These proposals are usually under the pretense that the country will prosper and see an increase in living standards. However, there is an ulterior motive to these “altruistic” loans. EHM will overemphasize the returns of these energy projects, encouraging the targeted nations to take on significantly more debt than they’re able to support. These nations will struggle and eventually default under the debt burden. As a consolation, these U.S.-backed corporations will offer to take control of the natural resources, military and/or political decision-making capacity. If they succeed, the U.S. will expand its global resources and power (we see China pursuing a similar path with their Belt and Road initiative25). If not, they move onto stage two.
2. Jackals: When these indebted nations refuse to play ball, the Jackals move in. These are CIA-sanctioned entities in charge of staging coups, revolutions, murder, abductions and assassinations.26 Examples of this are the coup against Chile’s President Salvador Allende,27 the coup against Brazil’s President João Goulart,28 and the coup to overthrow Iran’s Premier, Mohammad Mosaddeq,29 all supported by the CIA. To the average person, these events seem like domestic unrest, although when we dig deeper, there tends to be more sinister underpinnings. Usually, these events ensure that the U.S. can continue to capitalize on the nation’s resources or its global positioning.
3. Military: Finally, if all else fails, the U.S. military moves in. The goal is to use brute force to ensure that the U.S. can continue to operate in its monopolistic ways. Military intervention is a way for the U.S. to wipe clean the current political party and put in place someone who aligns with U.S. foreign policy. Proposals for military movement tend to be under the facade of humanitarianism or counter-terrorism. This quickly gains the backing of the general population, the congressmen and the politicians and ensures that the U.S. can continue running its global powerhouse at the expense of the global population.
Within these three stages, the U.S. is able to enforce its authority globally and ensure that foreign nations comply. This may seem outlandish; however, all we need to do is watch the daily news to see global events such as these occur, time and time again. The following are examples of U.S. intervention.
Fact: Iraq is in fifth place for largest known oil reserves, with 8.7% of the total known global reserves.30
In October 2000, Saddam Hussein announced that Iraq was going to transition to selling oil in euros. By February 2003, they had sold 3.3 billion barrels of oil, totaling 26 billion euros.31 In March 2003, the U.S., along with the U.K., invaded Iraq and overthrew Saddam. Three months later, Iraq was back to selling in dollars.
The U.S. has claimed they invaded Iraq to promote human rights as they had deep ties to terrorists such as al-Qaeda and held weapons of mass destruction (WMD). However, as there have never been any verified links between Saddam and al-Qaeda, nor any evidence supporting WMDs in Iraq, it looks more likely that their intention was to protect the petrodollar.32
Fact:- Venezuela has the largest known oil reserves, with 18.2% of the total known global reserves.33
Since Hugo Chávez was elected president of Venezuela in 1999, he consistently threatened that Venezuela would stop selling oil to the U.S.34 In addition, Chávez regularly talked about raising oil prices, taxes and royalties so that Venezuelans could benefit from oil revenue instead of the U.S.35 Chávez did not believe that oil prices should be suppressed and that due to increasing oil demand, there was room for increased prices. However, an increase in oil prices will only benefit the oil producers, ultimately hurting the oil importers (i.e., the U.S.). Chávez aimed to use excess revenue generated by increased oil prices, taxes and royalties to be reinvested into various South American countries in a bid to increase the prosperity of Venezuela and other South American countries.
In April 2002, President Chávez was removed from office in a coup supported by the U.S. government.36 He was then forcefully asked to resign. After he was removed from office, he was kidnapped and finally replaced by Pedro Carmona, the head of Venezuela’s business confederation, Fedecámaras. This event was followed by mass protests by the Venezuelan people and certain army sectors until Chávez was returned and reinstated as president. Although there were many threats up to Chávez’s death, the U.S. was never cut off from Venezuelan oil.
Fact: Libya is home to Africa’s largest oil reserves and is in ninth place for largest known oil reserves, with 2.9% of the total known global reserves.37
In 2009, Muammar Gaddafi proposed the idea of the gold dinar to the states of the African continent, a currency backed by gold and facilitated by the transition from selling oil in dollars to selling oil for gold.38 The gold dinar would be a way to divert oil revenues toward state-controlled funds and away from the U.S.
In October 2011, a NATO airstrike targeting Gaddafi loyalists forced him and his inner circle to flee. While fleeing, he was captured by Misrata-based militias and ultimately executed.39 As expected, with Gaddafi’s death also came the death of the gold dinar. Today, the majority of Libyan oil is priced in dollars.
Again, U.S. intervention reasoning was under the pretence of humanitarian interventionism. However, not only could human rights foundations not find any evidence to support this, in 2015, Wikileaks released a U.S. Department of State document emailed to Hillary Clinton in March 2011, which detailed that Gaddafi’s government held 143 tonnes of gold intended for the establishment of the gold dinar.40 The U.S. knew about Gaddafi’s plans for the gold dinar.41 Therefore, what seems more likely is that they recognized that the petrodollar was under threat of attack, and they needed to react.
With the U.S. displaying a lot of concern for human rights and terrorism, one must find it strange that they haven’t chosen to take on:
● Saudi Arabia: There have been links between Saudi Arabia and terrorism, including connections between the Saudi Royal Family and al-Qaeda.42 There has even been evidence showing that the country’s crown prince, Mohammed bin Salman, directly approved the murder of Washington Post columnist, Jamal Khashoggi.43 However, neither Presidents Trump nor Biden have shown any intent to go after Saudi Arabia.
Instead, whenever Saudi Arabian oil is under threat, the U.S. supports them. Why does the U.S. not want to take action? As explained above, the U.S. and Saudi Arabia have a deep bilateral relationship where the U.S. is not incentivized to go on the offense. Instead, the U.S. will do whatever it takes to protect the Saudis. Saudi Arabia has agreed to sell its oil in dollars, and, in return, the U.S. has agreed to give them access to U.S. arms and military protection. Saudi Arabia supplies the U.S. with a third of its oil, and between 2015–2019, Saudi Arabia alone purchased a quarter of all U.S. arms exports.44
● North Korea: In 2014, the Human Rights in North Korea Report by the United Nations Commission of Inquiry concluded that “the government committed crimes against humanity, including extermination, murder, enslavement, torture, imprisonment, rape, and other forms of sexual violence, and forced abortion.”45 Additionally, North Korea has publicly stated that it has WMDs.46 The U.S. could easily build a solid humanitarian case to infiltrate North Korea, as it did with Gaddafi. However, just like Saudi Arabia, the U.S. shows no signs of intervening. One reason the U.S. may be disinterested could be that North Korea has no proven oil reserves and, therefore, does not pose a threat to the U.S.47
As should now be evident, “do not listen to what they say, look at what they do” can give us a great deal of insight into the government’s agenda.48 We can now more easily understand why the U.S. seems significantly more interested in directing its government spending and military efforts toward protecting the petrodollar and its world reserve status than protecting human rights and the people of the U.S. Until we see a shift away from centralized monetary systems, this will, unfortunately, continue to happen.
Behind The Altruistic Curtain
Although we may never be able to answer with certainty why the U.S. went to war with Hussein and Gaddafi or chose to support the coup against Chávez, we can gain a great deal of information from their approach. Do you think it would be easier for the president to rally Congress and the general public under the altruistic premise that
● the U.S. needs to go to war on humanitarian and anti-terrorism grounds to defend its people
or, under the more legitimate rationale,
● to protect the petrodollar and its world reserve currency status, ensuring that the U.S. can continue to capitalize off its population and foreign currency holders.
Unfortunately, the former seems most likely. Hussein, Gaddafi and Chávez were directly attacking the petrodollar and the ability of the U.S. to capitalize off its currency holders. The most effective way for the U.S. to challenge them is to use its incredible global power to create a narrative relating to humanitarian/terrorism grounds, painting the so-called enemy in a negative light. This will ensure the backing of Congress and the American public, and with this backing and support, they can do what’s needed under the pretense of humanitarian interventionism/terrorism.
This misleading humanitarian/terroristic war narrative will continue as long as the petrodollar exists. In the eyes of the U.S., any threat on the petrodollar warrants a response, and no narrative supports the response better than altruism or defending one’s country. The U.S. will do anything to ensure its position is not encroached upon as a loss of the petrodollar or world reserve currency status would severely impact the U.S. and its ability to capitalize off its currency holders. This is why we see so much funding being directed toward counter-terrorism and the military, even though there is empirical evidence showing that military spending is detrimental to economic productivity and growth.49 The dollar depends on a strong military, and the military depends on a strong dollar.50 Without either, the U.S. is unable to continue its inflationary narrative.
Where Does Bitcoin Stand In All Of This?
*This piece is not so much about Bitcoin and its benefits but rather about how the U.S. operates and why Bitcoin is under threat. Therefore, I won’t go into too much detail about Bitcoin’s well-known benefits. For more information on the benefits of Bitcoin, check out: https://bitcoinmagazine.com/culture/bitcoin-illusion-of-reality.
Bitcoin has the potential to give power to individuals, capitalize off stranded energy, increase economic productivity and boost innovation.51 We could, therefore, assume that this new exponentially growing technology would be adopted with open arms. However, although we have seen incredible adoption from certain areas of the general population and forward-thinking individuals, this is not true for the government. Like Hussein, Gaddafi and Chávez, bitcoin directly threatens governments’ ability to capitalize off its currency holders. If bitcoin were to become adopted as the world reserve currency, it would be a significant threat to the U.S. and its ability to operate an inflationary monetary policy for these three reasons:
1. Fixed Supply: For the first time in history, bitcoin offers an accurate measuring stick with which to view the world. As bitcoin cannot be manipulated, it will always maintain a 21 million coin supply cap. Therefore, bitcoin offers the potential to give accurate insight into supply-and-demand information. As we know, when we hit periods of economic stress, we are given feedback in the form of economic indicators (e.g., interest rates, equity prices, GDP). When we inflate the money supply to capitalize off the currency holders or dampen the underlying economic stress, we distort these economic indicators as we mask true supply and demand. This prevents the economy from accurately error-correcting.
Bitcoin, due to its lack of manipulation, does not allow any entity to capitalize off its currency holders or for the masking of stress through inflation. Instead, governments must offer value to society and solve underlying economic issues directly. This would allow one to see the world as it really is instead of one distorted by monetary expansion. With this in mind, bitcoin would expose the inflationary narrative for what it is, a way for the government to self-fund and capitalize off its currency holders.
Additionally, as individuals, we want our economic productivity to benefit us and those around us. With bitcoin, this increased productivity would accrue in the form of increased currency strength, which would allow the holders, rather than the government, to benefit. This is the case for the USD when they extract this increased productivity through inflation.
2. Decentralized: Bitcoin is a monetary system governed by rules, not rulers.52 No single entity has authority or control over bitcoin. With bitcoin’s decentralized nature, it doesn’t matter whether you are the president, an unbanked asylum seeker or a private doctor. Everybody has to play by the same rules. This would prevent influential figures from controlling monetary policy at the expense of the currency holders.
3. Self-Custody: Bitcoin is the first asset that allows the holder the ability to self-custody easily and securely. Doing so transfers power from the government and the third parties that custody our assets to the currency holders. This ensures that governments, banks and corporations act as service providers with their population and customers best interests at heart, rather than the overbearing, controlling entities that they are today.
How Come Bitcoin Sees Such Strong Opposition From Certain Individuals Within The Government?
Although Bitcoin is a technology that offers excellent benefits, we can see from the three benefits detailed above that bitcoin is at great odds with the current structure of our economy. Bitcoin directly impacts the government’s ability to capitalize off its population and currency holders as it undermines the U.S. and its currency monopoly. Therefore, it is evident why we see such opposition within the government.
Even after many rigorous studies disproving all major false narratives, bitcoin still regularly comes under fire. One study by the ex-deputy director of the CIA concluded that “the broad generalizations about the use of Bitcoin in illicit finance are significantly overstated.”53 Since 2016, only around 0.5% of bitcoin’s total transaction volume has been used for illicit activity. In comparison, within traditional finance illicit activity makes up between 2–4% of GDP. This is a stark difference to how Bitcoin is portrayed in the media, yet we continue to see misleading statements such as that by U.S. Treasury Secretary Janet Yellen,”I see the promise of these new technologies, but I also see the reality: Cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism.” It appears that the people in power are not interested in the truth. Instead, they are set on constructing the most damning narratives so that bitcoin is deemed detrimental to the economy in the eyes of the public.
Therefore, it does not matter that bitcoin is trying to solve financial oppression through monetary inclusion and equality. Bitcoin directly interferes with the government’s agenda by allowing individuals to opt out of inflation taxation, and so for this reason alone, bitcoin is portrayed as a threat to the U.S.
One may argue, why do we need bitcoin? Or, why not put someone in power who wants what’s best for the people? It is evident from history that people inherently want to protect their bloodline, wealth and power in society. Therefore, anyone in charge of a currency will usually end up abusing their power, and if the present person in power doesn’t, it’s just a matter of time before one will. Bitcoin removes this monetary temptation and creates an even playing field for all. Without temptation, political figures can focus on what’s best for society instead of what benefits them. Additionally, bitcoin allows the currency holders to have a say in monetary policy and ensure that any change is up to general consensus instead of those in power.
“If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.” — James Madison, Federalist Paper No. 51
Many decades ago, Milton Friedman famously said, “There’s no such thing as a free lunch.” Those words still hold true today. As shown below, no nation in history has ever maintained its global hegemony indefinitely (this is known as the Triffin paradox).54 As the global reserve currency, the U.S. cannot maintain its reserve currency status, grow its manufacturing base and preserve its sovereignty.
With the U.S. directing all its energy and resources into protecting the petrodollar in order to maintain its reserve currency status, we inevitably see sacrifices when it comes to healthcare, infrastructure and domestic manufacturing. In time, these sacrifices will end up being the demise of the U.S. and its global hegemony. It will then become clear that its attacks on bitcoin and other entities that infringed on the government’s ability to capitalize off its currency holders were just the U.S.’ desperate final attempts to defend its global positioning.
However, until this day comes, bitcoin will most likely continue to be seen as a threat by the US. Therefore, it does not matter that bitcoin may be one of the most ingenious and economically productive inventions to date, or that it has an incredible ability to channel human ingenuity, transfer power and spur on the construction of a true decentralized free-market capitalist system. While the U.S. holds its global hegemony, bitcoin interferes with its ability to self-fund and push its inflationary narrative. Therefore, under the lens of the government, bitcoin does not aid economic productivity and, just like Hussein and Gaddafi, will be tarnished by the people in power and be positioned as a threat to society. As an advocate for equality and an investor in bitcoin, this attack on bitcoin can be disheartening. However, we must keep in mind:
a) The powers that be are incentivized to prevent the adoption of bitcoin as it impacts their ability to self-fund and continue their inflationary narrative. However, they cannot maintain this hegemony indefinitely.
b) Bitcoin paves the way for a new paradigm in monetary inclusion, equality and reduced financial oppression. It concurrently brings increased economic productivity, as it channels ingenuity and encourages innovation.
c) Bitcoin is a monetary system governed by rules, not rulers.56
Considering these points, one can more easily look through the fear, uncertainty and doubt (FUD) and advocate for a world of equality, where the population’s best interests are at heart and where decision-making is by consensus rather than power.
We should not let a fear of the U.S. and its overbearing nature dictate our decision to demand global monetary equality. Instead, we should embrace it. Let this fear be the fuel that stokes the fire of change. Bitcoin is attempting to transfer many millennia of centralized power through currency to the people. Of course, there will be hurdles, and, of course, there will be pushback, but that’s a small price to pay on the road toward freedom and equality.
Just like China, the Netherlands and the U.K., which all succumb to the Triffin paradox, so, too, will the U.S. But as with any global change in reserve currency comes opportunity, which brings up the important question: Who will pick up the mantle?
“I predict future happiness for Americans, if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” — Thomas Jefferson
This is a guest post by Sebastian Bunney. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
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54 Smith, Tim. “How The Triffin Dilemma Affects Currencies.” Investopedia, June 25, 2019,