I wrote in my own post I’m replying to:
However, in support of Armstrong’s skepticism, I offer the following link to my most recent blog wherein I explained in detail the technology of the various consensus ledgers. And frankly it seems to be impossible to achieve all of the following attributes. Pick any two: scalability, decentralization, security.
Martin Armstrong wrote:
Cryptocurrencies are not a dead end. They are an asset class for now. There are a lot of problems with the technology and it would clearly make the entire economy vulnerable to a crisis in the failure of platforms or the power grid. Goldman Sachs sees the opportunity because of all the fraud. They are looking at stepping in as a **CUSTODIAN **because the integrity of the security behind a cryptocurrency is often questionable.
There’s a solution for transacting when the the power and Internet grid is down. I’m working on a cryptocurrency project which will fix this deficiency.
Specifically we can employ irreproducible payer identity coupled with reputation that can only be restored by restitution after being destroyed by double-spending. This can also be coupled with payer individually committed reserves for restitution. The payees can decide whether to accept such transactions without confirmation on the blockchain. During times of low connectivity, these transactions can be aggregated and batch sent to the blockchain at opportune juncture when in proximity of a HAM radio system which serves as a fault tolerance. Even when the power grid goes down, not all the battery power generated locally (e.g. solar) will go down.
Functioning when the power and Internet grid is down can be orthogonal to the security issue. A well designed cryptocurrency system wouldn’t be less secure when the grid is offline. Whereas, a poorly designed off-chain payment channel system such as the Lightning Networks off-chain plan for Core's fork of Bitcoin (i.e. not the real Bitcoin) would indeed suffer security lapses, because security depends on being able to issue a transaction before the Hash Time Locked Channel (HTLC) times out in some scenarios.
In war, you target the electricity grid as a first objective and then the total economy would collapse as well as the effort to fund a war. During a war, governments have often counterfeited each other’s currency. The British did that with American colonial currency. If they could undermine the confidence and cause hyperinflation, then funding the war effort would collapse. Today, you would do this by hacking and targeting the power grid.
The massive decentralization being fostered by cryptocurrency and blockchains will make such tactics in war more impotent.
Counterfeiting will be implausible. You’d have to attack individual users’ private keys to use their reputations. Implausible to do this on any wide-scale.
In all the high-level meetings I have had about this technological innovation, the single greatest concern is would it make a nation more vulnerable during a war? Can a cyber attack simply paralyze the economy? Keep in mind that only about 4% of the economy takes place in cash. The rest is electronic deposits. Therefore, this threat is NOT limited to cryptocurrencies. It may very well be the next way to win a war. Attack the banking system and you will freeze the ability to fund a war. Don’t think they are not thinking about that right now.
Agreed w.r.t. centralized electronic BS, the Goldman Sachs centralized CUSTODIAN, and the central banks centralized shit are going the way of the Doodoo bird. But cryptocurrency and blockchains that are truly decentralized (if we can achieve that goal), will be impervious to such attacks.
Martin, you’re still acting like a soon to be extinct dinosaur. You lack expertise about the technological field you are commenting on.
Armstrong also wrote:
So there is NO POSSIBLE WAY any government will allow a PRIVATE cryptocurrency to replace a national currency. That will NEVER happen. However, I have previously stated that governments want to ELIMINATE cash for tax reasons. Only about 4% of transactions today are in paper currency, to begin with. The bulk of our monetary system is already digital currency that does not exist. The pitch that cryptocurrency will circumvent central banks and governments is just absurd. You have to separate PRIVATE from PUBLIC. That is the issue against Bitcoin.
The governments haven’t been able to stop gaming currencies. They only succeeded in preventing them from being converted to fiat. Analogously they will not be able to stop cryptocurrency. Because cryptocurrency is global and virtual Internet commerce is moving towards globalization. National fiats are very difficult to use cross border over the Internet. Billions of people do not have a credit card (and besides credit cards suck for rapid microtransactions which cryptocurrency will excel at). And we will be able to onboard the billions by giving away cryptocurrency for free. No need to sign-up for a bank account and no need to have any net worth. Just borrow a used smartphone from your neighbor and you’re now part of the new Internet economy.
We're changing the world very rapidly Martin. You are a dinosaur.
But the sales-pitch that Bitcoin will become the reserve currency, replace central banks, and eliminate national currencies is really way out there.
The de facto reserve currency ASSET aspect is happening as we speak. It will not replace nation-state central banks. Rather the nation-state fiats will float against the Ideal Money of the real (not Core) Bitcoin reserve currency asset. The nations will continue to destroy their monetary systems with socialism and debt, and the international speculators will leverage the Bitcoin reserve asset to bet against national currencies when they’re deemed to be close to a Minsky Moment collapse. The Bitcoin IDEAL MONEY (i.e. controlled by no democratic socialism) will be employed to financially discipline democracies. This is similar to FOFOA’s thesis but he expected the fulcrum to be gold, yet before his death famed game theorist mathematician John Nash explained why gold could not be an IDEAL MONEY.
The FAX machine was invented by the Scottish inventor Alexander Bain who worked on chemical mechanical fax type devices. Back in 1846, he was able to reproduce graphic signs in laboratory experiments. He applied and received a British patent #9745 on May 27, 1843, for his “Electric Printing Telegraph”, but it took more than a 100 years to actually become usable. Yes, you can see the future and no doubt you could envision sending photographs around the world back in 1843. There is just a huge gap between technology and its implementation. Back in the 1960s when integrated circuit chips first appeared, it was obvious we would shrink a computer to fit on a desktop. The problem was trying to figure out what people would do within. Later Microsoft, Lotus, etc., figured out how to use it and the computer age began for the mainstream. We are NOT there yet in cryptocurrencies any time soon.
It's true that cryptocurrencies aren’t yet widely adopted as currencies. But you’re delusional to compare it to the FAX machine. The network effects weren’t available in the 1800s, i.e. not everyone had a phone with sufficient BAUD capability to make it viable and the cost of manufacturing them was too high.
You should instead compare the rise of cryptocurrency to other phenomenons which have leveraged the network effects of the Computer Revolution and the Internet Revolution. For example, I mentioned to you Martin before the rise of the smartphone which took place over only two decades. One decade has already transpired since the launch of Bitcoin.
In another decade or so, cryptocurrency as currency will be quite widespread at least for virtual activity such as Internet games and social media commerce. Brick-and-mortar will be slower to come to cryptocurrencies, but the virtual economy is growing much faster than the withering physical economy.
Can the economy move to purely electronic currency? The answer is NO – not yet. We may still be looking at that well AFTER 2032. India and Sweden have found it impossible to get away from paper money. There is a large segment of the population that do not bank no less own a computer or even a smart phone. The EU passed a law calling it everyone has a “right” to have a bank account, which was really a step to try to move closer to an electronic currency. You are looking at the basic requirement of a generational shift. As the older generation dies out, money will become completely digital, newspapers will see their last print, and paper books may be found only in a museum. Things always change – but not as fast as people think. The DOT.COM Bubble was all about the rage of how the internet would replace stores. The prices got ahead of the reality. Eventually, the technology changes the system. But it always takes time. Eventually, new higher were made and a more solid market emerged – with TIME!
Yes we need time, but not as much time as you may think.
The reserve currency asset status with over a $5 trillion market cap will be solidified before 2032. And the currency usage will be extensive not long after 2032.
I know of no profession who bought into the whole Bitcoin nonsense of how it would replace the dollar, end central banks, and start a new age all within a matter of months. The professionals just laughed because they know such a change takes decades not months.
You’re just jealous because we bought Bitcoin at $2 and $10. Lol.
He also wrote:
The Fed has been shrinking its balance sheet and believe it or not, there has been growing a SHORTAGE of dollars contrary to those who keep saying the world is awash with dollars so buy gold, cryptocurrencies, or whatever.
I can’t carry $1 million of dollars on a plane, nor can I protect it from government capital controls if I keep the dollars in a bank.
Sorry but the evidence is very clear that Bitcoin is also breaking out of its downtrend, aligning with the short-dollar vortex bull market in the dollar and North American stock markets.
Compare the chart of the NASDAQ and Bitcoin that you posted in the second blog of yours I cited above. Clearly Bitcoin will shoot up to another higher ATH, as did the NASDAQ but on a much more accelerated schedule because the Internet revolution is maturing and network effects are well developed.
Subject: How Bitcoin fits into Armstrong's correct thesis of a coming monetary reset
Armstrong is documenting how Turkey’s economic (confidence) crisis and Trump’s attempt to use tariffs to offset the drop in FOREX relative to the ongoing and accelerating strong dollar short vortex, is going to lead to a monetary reset. And that need for a monetary reset is going to drive Bitcoin to reserve currency status and a market cap of ~$21 trillion by 2032. Note this stress is driving alliances for another war at least in the Middle East.
Erdogan is shifting to Russia already. He will abandon the West all to retain power. Turkey was the critical lynch-pin for emerging markets. Many foolish banks ran to buy Turkey’s debt because they could earn 20% interest. The currency has fallen 25% in two days. We are looking at European banks taking major losses on Turkish debt. Trump has to stop his trade war. This is now about undermining the fabric of the global economy. Welcome to the beginning of the crisis that will end only with a monetary reset in the years ahead.
Turkey has little hope of coming out of this in one piece. The pretend President-Dictator, Tayyip Erdogan, has come out and denied on Saturday that Turkey is in a currency crisis. Exactly how he can even say that is shocking. Nevertheless, he called a 25% drop in the currency a plunge that is just ‘fluctuations’ that have nothing to do with economic fundamentals. He blamed the United States calling the collapse in the currency ‘missiles’ of an economic war waged against Turkey. Trump in raising the tariffs against Turkey is understandable since the currency declined and that would make their exports cheaper. However, he is stepping in the wrong direction here for the collapse in the currency reflects the collapse in the CONFIDENCE with regard to Erdogan.
We are looking at the usual response of a dictator in trouble. Blame someone else and that is ALWAYS external. What comes next is a break with the West and an alignment with the East.
The Turkish President Recep Tayyip Erdogan’s economic policy is a disaster. This is reflected by his plea for Turkish citizens to search under their mattress for foreign banknotes and gold to convert into domestic currency. It has been his economic policies and dictatorship that is driving Turkey into an economic collapse. Of course, the only way to support the lira at this stage requires a change in government. That is unlikely on any voluntary basis. Meanwhile, President Donald Trump responded to the collapse in the Turkish lira by announcing a doubling of tariffs on steel and aluminum. His logic is that the collapse in the lira would allow them to sell steel and aluminum at cheaper prices. But the logic fails as Turkey in moving into hyperinflation and the economy is just collapsing.
Subject: Collapse of nation-states and Bitcoin driving us to a world government
Remember I had explained that Bitcoin undermines nation-states with jurisdictional arbitrage and this will eventually drive us to a world government:
This collapse of nation-states which Armstrong is lamenting, is actually entirely necessary to promote greater cooperation between humans. Remember the West won the agricultural and industrial age revolutions because it defeated patriarchy and tribalism (and deployed arable land for feeding horses for travel, not for feeding the maximum number of humans and using human porters for travel as they did in China):
I (as username X) explained why strict patriarchy is negentropic on anything but a tribal scale:
(search for 'Steppe' in the second blog to find X's comments)