Are Crytpocurrencies The Answer?
Content adapted from this Zerohedge.com article : Source
Authored by Lionel Shriver via The Spectator,
The impulse behind them is revolutionary: to take the control of money away from government...
The craze for cryptocurrency can be explained by a host of factors: the allure of getting rich quick; the attraction of off-the-grid accountancy for malefactors like tax evaders and drug dealers (though Bitcoin is traceable); the glamour of the new. Despite blockchain currencies' wild volatility thus far, I'd still posit that the more underlying attraction is to a reliable store of value. Bitcoin investors may not recognise their motivation as such, but the impulse behind computer-generated currency is revolutionary: to take the production and control of money away from government.
Now that we live in a world of 100 per cent fiat currencies - backed by nothing - governments can print their hearts out, and they do. The rounds of quantitative easing since 2008 - money-printing on Red Bull - may not seem to have produced the inflation many a conservative economist predicted. But they have. Asset bubbles like London and New York property markets, fine art, collectibles, equities - hitting historic highs - and Bitcoin itself are all evidences of inflation. There's too much money in the world right now, sloshing from investment to investment and bloating every bolt hole one can think of to stash with capital (an unholy proportion of which is founded on debt).
Because it costs central banks nothing to turn on the pumps.
What makes the likes of Bitcoin extraordinary is that the currency is limited in quantity, thus functioning more like precious metals. Producing a single Bitcoin requires so much computing power that environmentalists have criticised the process as cataclysmically wasteful of energy. Further, every Bitcoin mined requires more computing power than the one before, meaning that the total coinage in circulation rapidly approaches an absolute mathematical limit.
Contrast that with fiat currencies. The smallest little child knows that keeping your capital in cash is a mug's game. For years central banks have cheerfully informed us that they aim for an inflation rate of 2 per cent. (Mind, at only 3 per cent — which the UK's CPI currently exceeds - inflation will halve the value of your money in a mere 23 years.) The public has grown inured to the notion that a functional economy mysteriously requires their currency to rot like meat. This is a lie. One British pound in 1797 was worth about exactly the same amount in 1914 - bouncing up and down a bit, but averaging no inflation whatsoever for 117 years. The Industrial Revolution would qualify as economically functional. Enlarge the picture, and the pound took 164 years between 1750 and 1914 to roughly halve in value. Yet in the century since the first world war? The pound has plunged to the penny.
The 'almighty dollar' is no different. One dollar today is worth one cent of a century ago. Although classically one primary purpose of a currency is to act as a store of value, modern currencies are no longer intended to do so. The dollar retains its coveted status only because other currencies are corrupting even faster. The only real check on inflation, every other country is also playing the printing-press game, competing over whose money is the more worthless.
The purposeful inflation of fiat currencies, the very measure of which is rigged to underestimate the degradation of a people's savings (imagine, in Britain, that the statistic excludes the cost of housing), amounts to a steady, deliberate usurpation of a nation's wealth, and constitutes the ultimate stealth tax. Deficit-dependent governments love inflation, because they can repay loans of more valuable money with crap money.
I had a ferocious argument with a left-leaning journalist not long ago, who jeered that 'sound money' was a fetish of the rich, to the detriment of the poor. I differed. Although monetary decay favours debtors over savers, these days the wealthy are as apt to rely on debt as the impoverished, and on a much grander scale. Who takes out multi–million-pound mortgages in Kensington? Not the exiled residents of Grenfell Tower.
Especially with today's near-zero interest rates, it is those who have accrued only modest capital who are especially screwed by a currency that evaporates. The rich can afford to play games with their wealth. For the frugal working and middle classes with small savings on which they depend for retirement, not only is it difficult to make gains hand over fist; without putting precious nest eggs at risk of getting smashed — in equities, for example — it is impossible even to keep what they already have.
Government is too self-interested to be trusted to maintain a currency that sustains its value. The blockchain experiment may not be the answer. (Check out Hashgraph - faster, requiring minimal energy, and more capable of scaling up.) But I hope the renegade entrepreneurs keep trying. For on the face of it, any currency that costs nothing to multiply, when its manufacturer actively benefits from running the presses, will inexorably fritter to confetti. Citizens in any income stratum should have a right to expect that a pound in their pocket today will buy a pound's worth of goods or services tomorrow. But apparently that's pie-in-the-sky. What was do-able in 1797 we can't, or won't, do now.
Hilariously, even the Bank of England is now considering generating its own digital currency - which Mark Carney would prefer to use only for transfers between central banks, but which many of the governor's colleagues would like to market directly to consumers. I say 'hilariously', because a Bank of England Bitcoin would be linked to the value of the pound. Great. Can't wait.
Imagine a secure international cryptocurrency whose steady value was not subjected to deliberate, systematic decay, whose supply was strictly limited, whose coin was universally accepted, and whose production was beyond the control of the state. Even if the investment couldn't be expected to appreciate in the slightest, I'd put my every last farthing in such a currency in a heartbeat.
Great article. Lionel Shriver wrote a fabulous book called The Mandibles that is well worth reading. It describes a dystopian future that occurs in the U.S. after the dollar loses its status as the world's reserve currency, and how that impacts a (formerly) wealthy family. I highly recommend it. I got the recommendation to read the book from Jim Rickards, who said he was going to write Ms. Shriver a letter, I guess to discuss some sort of collaboration between them.
What currency do they start using in the book, Gold, barter? I will add it to my reading list thanks
The gold gets seized by the government early in the story. I don't want to reveal too much, but I think you will love the ending. I couldn't put the book down when I started reading it.
What the hell: I'll give it a try. Thanks for the recommendation.
If you have a Libertarian bent, I think you'll really enjoy it. If you're a Progressive Democrat, the book will quickly piss you off if not enrage you.
Heh: a lot like #cryptocurrency itself.
I would say so!
Just read the review on The Mandibles. Looks hilarious in a dark kind of way.
Definitely going to add this to my list of books to read, thanks!
I appreciate your comments
With a world of inflation that seems assured by the constant money printing bitcoin only has to hold its purchasing power and it will be beating the pants off fiat. Although every day the transaction fees are not brought down makes the alt coin market far more attractive. I haven't used bitcoin since the fees went up
Blockchain 2.0 is here ( ETH, Neo, QTUM) but wait for Blockchain 3.0 ( EOS, Cardano). I think in the next year, BTC and ETH will have to do some spectacular things, if they want to be relevant. Although BTC is the king, people start realizing, that ALTS are better.
BTC has one thing going for it that Wall Street loves...liquidity.
And right now, Wall Street is the elephant in the room.
This actually works to BTC's advantage since it gives it time to get its act together. Plus, all that money is bound to lure in entrepreneurs and other developers.
Yes, we are already seeing the "money effect". The best blockchain technologies are still not born, so buckle up.
Governments and countries have a problem, how to control new currencies.
I believe that it's just a transition from paper money to money in digital codes. Bitcoin is much more valuable than dollars and other paper money, because it has its final number, it can not be printed in more than 21 million. At one point taxes will be levied on all electronic currencies, but now it's a great time to invest in Bitcoin and become rich overnight.
Everything has its advantage, but for all of us now, we have the advantage of living in a new era that changes the future. Thank you for exellent information @zer0hedge
It's interesting how slowly over time they keep trying (and succeeding) to take our money away. With inflation it seems like we are making more, but we are making less. Crypto is absolutley the answer, but we have to make sure it succeeds and watch out for foul play still. There is huge potential here to take this control of money and move it back towards giving people power over the value of their currency. Where everything is transparent and we can see the shenanigans and respond. NIce post!
Inflation is a hidden tax in which the purchasing power of the people is decreased, while the purchasing power of the government is increased. The current financial system seems to have become a race to the bottom for countries and their fiat currencies. It seems like crypto has become the answer to this system that we live in.
It has worked for over 100 years....and people keep falling for it.
Inflation benefits the banksters...not the average person. Sure, if you have a payment on an asset, it is better for it to increase in value rather than decrease. Of course, as we know with cars, people keep buying them in spite of the fact that they go down in value from the second you leave the lot.
People are catching onto the game. Sadly, for the banksters, in spite of their trillions in printing, they still cant get inflation. The challenge for them is that when deflation takes hold of assets, defaults go up. That is exactly what happened in the housing collapse in the US...the price of homes plummeted and people stopped paying. This led to bank failures and total economic collapse.
The situation is only getting worse as more falls under the laws of information technology, which ends up being deflationary.
Even today, the banksters are pumping close to $200B a month around the world just to keep things rolling. They created a mess and now are trying to hold it together.
I foresee them failing.
I know that the rounds of quantitative easing since 2008 - money-printing on Red Bull - may not seem to have produced the inflation many a conservative economist predicted. But they have. Asset bubbles like London and New York property markets, fine art, collectibles, equities - hitting historic highs - and Bitcoin itself are all evidences of inflation. There's too much money in the world right now, sloshing from investment to investment and bloating every bolt hole one can think of to stash with capital .
Inflation in the US is 2.1% ( I am not saying that this is the truth, but this is what they claim). So this is pretty well, if we think of how much money actually was printed. As far as for the asset bubble, I wouldn't pick New York and London in perticular.
They just hit 2% after years of pumping.....that ought to tell everyone something.
The US Fed put $13T in the banks' vaults in addition to the other easing programs. With that amount of pumping, the inflation rate should have been double digits...it wasnt.
Well, after QE1 I could explain this to myself - when the crisis happened, we were already in deflationary situation. After QE2, the central banks were operating through open market operations, this is how they control inflation.
Still, 2 % is a bit unbeliavable for me, it doesn't make much sense.
It is the digital world, a new world, the world is calling for new technologies and new methods of processing
Recently I noticed that everyone who works in the web draws any encrypted digital currency. This is the best way for me to make a quick profit. Now I know people have spent much more than $ 100,000 and have more than $ 2 million in just a few weeks.
But there must be a lot of risk. Everyone knows that I am in a big fluctuation market. At any moment you may lose all your assets. You must always take precautions.
I am currently working only in steeem. I like this very much. I am very satisfied with the trading
Good luck to all. Thank you for the valuable information. I appreciate your great effort
@zer0hedge
Yeah sure I'm also the best steemet that's very special
@zer0hedge...present in the every where in the world the crypto craze is running ..if a group of peoples sit around in a moment definitely they raise a topic about the bitcoin and other cryptocurrencies..the whole thing of this craze comes because only the sudden raise of bitcoin in 2 months back before that most of the peoples dont know about the crypto..after the sudden raise the fever spreaded arround the world and based in the craze day by day new coins will also comes and trade in the coin market.. already in some countries they are anoncing they want to convert their econimical budjet into crypto..and some countries said that cryptocurrency is a best choice for middle class peoples to invest money in it and get huge profits of maximum chances...i hope that may be in future only the crypto coin will have a more value compared to the gold and silver..that high much craze will be spreaded around the world..thank you for sharing this nice article with us bro.....
Yes it's well there are now so many opportunities in the market even in currencies do not have projects the world is trying to exploit the opportunity for me to make a lot of money
But this will not last for the words of my words will fall most of them will remain only the strongest
I think that cryptocurrancies are the answer to our financial system if not for us then definatly for our children. As the article stated if you need more money then governments just print it making it virtually worthless. I remember seeing pictures of people trying to buy a loaf of bread with a wheelbarrow full of notes as so many had been printed they had no real value.
Governments will not like the new technology because they cannot control it, they will have limited input which makes it money for the people.
I really hope the Bank of England don't produce their own Bitcoin as it will be worthless, then again they have given us plastic Monopoly money so guess there won't be much difference.
Let me say that "Money printing on red bull" is if we put it softly. I imagine it more like Money-printing on Steroids, drugs and double dose of adrenaline to the heart.
The model of Bitcoin is brilliant, Milton Friedman predicted it in 1999, so sooner or later something will take over as the new financial system. Let's hope it won't be a rigged one (like the current). Also we should note that the path to decentralization is far ahead and multiple improvements have to be made, for it to be a sustainable one.
We will be free !
@ervinneb, I agree with you. This space is still in its infancy. However, there are numerous infrastructure-based projects that aim to improve the usage of cryptocurrency. I liken these projects to the internet protocols that were built to make the internet easy to use for people. Protocols, such as DNS, helped increase the rate of adoption of the internet. I know that there will eventually be protocols that do the same for crypto. It's only a matter of time. I'll give it 20 years.