He Lived Through Hyperinflation, Devaluation And Confiscation: This Is His Advice

Tyler Durden's picture

Nearly four months ago, when bitcoin was still languishing in the low $200s, we explained why in the post-Yuan devaluation regime, where all Chinese capital outflows are now scrutizined through a microscope, bitcoin will inevitably see substantial appreciation as the local population scrambles to transfer funds out of China and into more traditional end markets, such as the US, Canada and western Europe, using such still largely unregulated mediums as bitcoin and other digital currencies.

Why not gold?

This is what we said in the beginning of September: "China's propensity for gold is well-known. We would not be surprised to see a surge of gold imports into China, only instead of going to the traditional Commodity Financing Deals we have written extensively about before, where gold is merely a commodity used to fund domestic carry trades, it ends up in domestic households. However, while gold has historically been the best store of value in history and has outlasted every currency known to man, it is problematic when it comes to transferring funds in and out of a nation - it tends to show up quite distinctly on X-rays."

Which is why we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented "forking" with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits.

Two months after we wrote this, bitcoin more than doubled to $500 before retracing some of its recent gains, and has resumed its rise again.

Why? This time the answer is Argentina, where as we reported two days ago, the new president admitted that "there are no more dollars in rhe central bank" which means that the days of the country's capital controls are numbered, and because as Citi said president-elect Macri wants to unify the official and parallel exchange rates (~9.60 and 15.50 ARS/USD, respectively) that will entail a substantial devaluation. Just how overvalued is the peso, you ask? "Grossly."

In other words, another major currency collapse is in store for Argentina, its fourth major one in recent decades.

It also means that as yet another country is about to take currency warfare to the next level, bitcoin is posed for another sharp move higher (even as Chinese demand for the fiat alternative continues to grow).

And since the topic is Argentina's upcoming latest currency collapse, courtesy of Raoul Pal's RealVision, here is an interview by Dan Morehead, Ex-Head of Macro Trading at Tiger Management and now CEO of Bitcoin investment firm Pantera with Wences Casares, an Argentinian Founder of Xapo and one of the pioneers of bitcoin.

Wences, an Argentinian, has seen his family's wealth evaporate not once, not twice but three times due to hyperinflation, devalulation and confiscation and that has led him to bitcoin. His driving philosophy: "There are more people in the world who need a currency they can trust, than there are people in the world who can trust their currency."

More from the person who knows all about currency destruction in the excerpt below...

... and as usual, the full interview can be seen on the RealVision website (which boasts dozens of other interviews with financial luminaries) and where a bitcoin subscription discount is available.

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coinhead's picture
coinhead (not verified) tocointhephrase Nov 27, 2015 7:57 PM

OMFGAWD IT'S BITCOIN ON ZH!!!!!!!

strannick's picture

and the difference between bitcoin and fiat is ?

although Blythe Masters does say we can trust it.

JLee2027's picture

Somebody at ZH must own a load of bitcoin.

Cause a digital currency is a disaster in the making. 

clymer's picture

Which is why any block-chain cypto-currency (and there appears to be more every day) that is actively, provably backed by precious metals will go a long way to solving the problems of both the modern tyrannical state and (their) fiat currenc(ies)

as I wrote 2.5 years ago

http://www.zerohedge.com/news/2013-05-12/visualizing-how-bitcoin-transac...

Look ZH, I love how BC uses 256bit PKI with salted hash to regulate and restrict the number of coins mined. I love how buyers and sellers can agree on it as a medium of exchange to work together without 3rd party interference. I get it. But here's the thing that prevents me from biting: it ain't backed by anything. And what the fuck is Keiser talking about when he says there will never be a competitor to bitcoin? Here's a novel idea: Anonymous puts a little time into understanding as much about banking and finance as they understand about scientology. As this understanding spreads between their more entrepreneurial members, say an offshoot, sub group that happens to work in certificate / key store management, they develop a similar algorithm, only they say, "look, we developed a similar model called 'crypto coin' won't just allow this to denominate in fiat that the 'cryptocoin' marketplace will back, we will tie specifically to gold and silver. The algo will ultimately mine 15x more silver colored cryptocoins than th gold colored ones, to represent what exists naturally in the crust of the earth. They then correspondingly create their own exchange (even say a virtual exchange represented by members), collectively owned by all cryptocoin holders. The balance of actual metal in the exchange is verified on a quarterly basis by the top 100 cryptocoin holders to verify that they maintain the same amount of precious metals in the exchange, as there exists cryptocoins in circulation. The crypto coins can then be redeemed in gold and / or silver. The same concept could be applied to oil contracts, shares in organic beef farms, or stock at company xyz. Till I see the next evolution cryptographic digital currency, I will keep hitting the coin shop and stacking.

Intrinsic value is one thing. Tangible value is another. Combining the two is key

Observation: The bitcoin buyers / holders appear to be vitriolic toward those that prefer PM's. Understand that we are on the same side of this argument. Don't lose sight of the bigger picture; that we all now recognize how the monopolized private issuance of currency and credit has led us to this point

crazytechnician's picture

The problem with backing a crypto currency with gold is that creates counterparty risk. You still require a centralised authaurity to confirm the gold actually exists.

OpenThePodBayDoorHAL's picture

The problem with a cryptocurrency based on rewarding anonymous nodes with a handout in return for their processing power is you have no control over them, what version they're using, and what they're doing.

This guy did everything he was supposed to, provided the network processing power...oops except he got the reward without processing *any* transactions, lol:

https://blockchain.info/block/000000000000000006aec698db6d6b44139d11dc7f...

 

crazytechnician's picture

And ? The block shows there was still massive PoW which means the equipment was still actively securing the network. Mining does 2 things: it processes transactions AND it secures the network. Technically some blocks may be empty , that's built into the algorithm.

J S Bach's picture

You can never put your trust in a currency, because it will always be dependent upon men (and thus, their honesty).  No, we need to put our trust back into real MONEY - that is - a vehicle of exchange and inherent value that cannot be manipulated by men.  Currency is necessary, yes... but its foundation must be something REAL.  That is the level of education (not hard to grasp) that must be disseminated to the masses.

Bunga Bunga's picture

Value is just imagination by men. There is no currency defined by physics.

J S Bach's picture

I disagree.  The physical determinant of anything is its quantity in nature.  The rarer something is... the more valuable it is.  This is, of course, a statement of generality, but it usually rings true.  Just my opinion.

crazytechnician's picture

The bitcoin network is now the world's most powerful supercomputer. It is estimated to be alteast 100000 x more powerful than all of the world's other supercomputers *combined* , it is cryptographically secure and distributed across the entire planet so no jurisdiction could ever take control of it - if you could not trust that system - then what could you trust exactly for high speed global payments ?

tc06rtw's picture

Is he the same Señor Wences who used to appear on the Ed Sullivan show?

Stuck on Zero's picture

Getting gold out of China is easy.  Simply pack it in a container marked "toys" and ship it to a fake store in Los Angeles.

philipat's picture

Jamie Dimon says that when Bitcoin becomes a threat to Fiat the Government will ban it. Unfortunately, whilst a total asshole, he is an asshole in a position to understand Government thinking.

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) philipat Nov 27, 2015 11:32 PM

Moore's law makes digital currency a threat to fiat no matter what.  Buh Bye BC.

BadLibertarian's picture

Some governments may try to do that. Some people wanted to ban automobiles when they were first introduced. Thankfully, the US didn't, so a few decades later when we had to go to war, we did so in motor vehicles rather than on horseback.

In a confrontation between tanks and soldiers on horseback, I'll put my money on the tanks every time.

The countries that don't ban digital currencies will be the centers of wealth in the future, and thoses that stick to debt based fiat won't. So if some governments want to speed up their descent into irrelevance and poverty, who am I to advise them otherwise?

e_goldstein's picture

I hope he gets throat cancer...

again.

The Once-ler's picture

   
… who’s Ed Sullivan?

OldPhart's picture

"Is he the same Señor Wences who used to appear on the Ed Sullivan show?"

  • Born: Apr 17, 1896 · Peñaranda de Bracamonte, Spain
  • Died: Apr 20, 1999 · New York City, NY
  • Perhaps a grandson.

    As to bitcoin, honestly, I'm too dense to understand it.  Where does one go to actually learn about it and how to store/use/trade in it?

    Not that I'd give up my minor stash of hard currency, but I wouldn't mind an alternative.  However, I'm not putting cash into something I simply don't understand.

    Pseudonymous's picture

    A lot has been written and aggregated at https://en.bitcoin.it/wiki/Main_Page both as overview and in detail. You can start by reading some of the articles under 'Topic central' and go from there.

    Or just do a web search for articles/videos/podcasts, and you will find the topics of interest covered in all sorts of styles and perspectives.

    BadLibertarian's picture

    There are a few good documentaries out there also. Virtual money seems to be a tougher conceptual leap than virtual books, virtual songs, virtual photographs, etc., and some of the most well-known proponents of Bitcoin were skeptical of it when they first encountered it. I was too - putting trust in something you don't yet understand is never a good idea.

    But once it 'clicks' and you start to see past its utility as money and start to see how it can be used to disintermediate all sorts of systems of control that are parasitic to our economy, you may find that you can't stop talking about it!

    Bunga Bunga's picture

    Not true. There are rarer materials with even better properties than e.g. gold, but they are priced much lower. Gold is a cultural thing with long tradition, that makes up a significant part of its value.

    consider me gone's picture

    Then honesty is the most valuable currency.

    LibertarianMenace's picture

    But only COMPETITION can maintain honesty, particularly when it comes to money.

    coinhead's picture
    coinhead (not verified) Bunga Bunga Nov 27, 2015 9:10 PM

    coinhead says what is valuable.  If stupid people don't want to use Bitcoin, and then... stupid people do not get rich... that is fine with coinhead.

    J S Bach's picture

    Bitcoin is just another example of a "currency" based entirely on trust.  There is no inherent value.  This is why it can never be referred to as real "money".  Real money stands alone and carries its value with it.  Bitcoin works fine as long as there is "trust' in its honest valuation.  This kind of medium of exchange will, however, always deteriorate as men find ways to corrupt and misuse its system.

    Kirk2NCC1701's picture

    There isn't an Asset or Currency that is NOT based on 'Trust':

    You show your trust in it when you acquire it, keep it, trade it or sell it.

    So you'll need to use or add some more Attributes, to give your story 'legs'.

    crazytechnician's picture

    All currencies are based on trust. It is trust which gives it value , including gold. As bitcoin proves it can be trusted more and more over time it's value will continue to rise as a reflection of that trust.

    J S Bach's picture

    Guys... you miss the point.  There will always be value in rarity.  This is why pieces of art (one of a kind) and rare coins will ALWAYS be coveted.  They are rare.  Their value has nothing to do with trust.  So, when it comes to currency... for the sake of maximum stability, there must be something of true intrinsic value underlying it.  That's all I'm saying.

    crazytechnician's picture

    In the future certain bitcoiins may carry a premiu. I can easily see the very early mined bitcoins being coveted , the famous 'pizza' bitcoins will definitely be worth more , plus any that have been owned by famous people.

    BTW , there is no such thing as 'intrinsic value' that is a myth , all value is subjective , value is held as a perception in the mind of the beholder , try offering a monkey a banana or a pallet load of gold bullion , see what he chooses - what he 'trusts' and you may get the idea.

    J S Bach's picture

    CT... Sorry, but I don't look through the lens of a monkey.  I try to view things through the eyes of men.  We are sentient beings with an assumed ability to reason.  To a monkey, a banana is a very valuable piece of matter.  To him, it means its consumption will allow another day of existence.  Men have the foresight to understand that TRADE is essential to their existence.  And trade in our modern world is dependent upon an honest medium of exchange of goods or services.  Yes... "intrinsic value" may be subjective... but in order to have a stable monetary trading system, there HAS to be an underlying knowledge of the bedrock anchor's true value.  Whatever the anchor is (commodities, metals, labor, etc...) it must be something the world agrees is precious.  "Precious" is defined as something rare, unique or otherwise solidly reliable.  This definition is not pretend, but actual.

    SweetDougisaTwat's picture

    Continue with your premise.  Your logic stopped halfway.  What does the world consider precious today?  Go on, you can do it.

     

    PS.  Here is hint: it's not metals.

    BadLibertarian's picture

    Bach, which has more "true intrinsic value," an expensive TI desk calculator or a free app on your phone with many more features?

    Virtualization is what we do. If there's one trend you can count on, it's that once it's possible for us to virtualize something, we will. Because virtualization, done well, leads to increases in efficiency and utility. And this trend predates the digital age, e.g. cars are 'virtual' horses, writing is 'virtual' speech, etc.

    Have you seen that 1990's Radio Shack ad/meme? The one that shows a whole page of physical devices which are now all included in a smart phone running an assortment of 'apps' with far less cost, and far more capability, than that page full of portable CD players, Tandy computers, and video cameras?

    The hurdle that a lot of people (including me) have trouble getting over is that they think 'money' is some special case, but if you really sit down and think about it, I think you'll find that you'll have trouble saying why it deserves to obey different rules from the products that we commonly exchange money for.

    Cryptocurrencies are virtual money and virtual stores of value, but when you see the word 'virtual' instead of mentally translating that as 'fake,' try translating it instead as 'flexible and convenient.'

    The calculator on your phone isn't fake, right? It's just virtual, and it gives you the ability to do things that you couldn't do with the physical analog. In the same way, the money on my phone isn't 'fake' either - it's just virtual and more flexible than the physical cash in my wallet.

    Calculator apps on the iPhone don't need to be 'backed' by physical TI calculators sitting in a vault somewhere, right? So why does a virtual currency need to be 'backed' by anything other than the digital infrastructure on which it runs?

    Currency 'backing' is a trust issue. You trust that an issuing authority isn't debasing the currency by issuing more of it than the equivalent value of precious metal that (once) backed it. Crypto currencies don't require that same sort of trust element, because the evidence of scarcity is within the code as well as the distributed self-interest of the people who run that code to support the network.

    Lord Ariok's picture

    I played Ultima Online back in 1998 and helped develop it. If you don't know what it is then go research MMORPG. I agree BL. It will take time to have the masses catch up with the gamer mentaality. Life itself is a game. In Ultima Online I used a glitch in the game to multiply little stacks of gold bullion 60,000 gold coins every night as servers went down, i.e. a bunch of little pixels that people would buy on eBay etc, online for real cash. Bitcoin can't be duped and that is the inherent beauty of it unlike the games gold or fiat petro dollars out of this air. Had everyone known the hack in the game except me and a few people the developers would have fixed the bug to stop us from duping and if they hadnt and everyone in the game could dupe whatever amount they needed the price on rare items would have sky rocketed. Open you mind to the future of money. I experienced the power of digital currency back in 1998 and made a very good living selling digital currency so others inside the game could buy real estate, horses, food etc.

    BadLibertarian's picture

    Am familiar. I've lived in Austin a few times (where Garriott is pretty well known) and used to play Ultima II and III on the library computer when I was a kid.

    The sort of glitch that you found is a real reason to worry about crypto's - no one can be 100% sure that a similar bug either hasn't yet been found or won't be introduced by a poorly tested patch in the future, but since I know that fiat has an inflation/debasement 'bug' that we can't get rid of, even though we know about it, I'm more comfortable trusting the self-interest of the developers, miners, and users of something like Bitcoin. 

    J S Bach's picture

    Something of REAL value doesn't have any need for "trust".  It is valuable because it is rare.  Why can't people understand this simple premise?  Its "preciousness" is based entirely upon its quantity in nature.

    Yttrium Gold Nitrogen's picture

    I disagree. It's demand and limited supply that give things value. If you have a limited supply of something that no one wants, it will be worthless.

    LibertarianMenace's picture

    Had Marx simply taken a shovel to his back yard, dug a hole, and observe therein how much value he produced through his own labor, he might have actually learned something real about both. And we may have been spared his followers.

    One of the biggest screwups is to go outside of economics, to physics for example, in a futile effort to define intrinsic economic value.

    Sudden Debt's picture

    You should read the article.

    Bitcoin is a currency that works if you want to leave the country.

    1. Most don't want to leave

    2. Most won't be able to leave.

    And when that sinks in, they'll realize that it's crap.

     

    Also, bitcoin is nothing, not even air. And you still need a bank account to withdraw it because when the shit hits the fan, those very few bitcoin tellers worldwide will be gone in a second. Remember, it's a global crisis which you also don't seem to understand.

     

    When the shit hits the fan, you need something you can burry underground untill you can use it. Nothing and nobody will be able to tough it untill you decide.

    Bitcoin? If governments block the sites, it's all gone. If govenrment hack is again, and I say again as they already did it, it's all gone.

    You are part of the number of people who simply don't understand what bitcoin is.

    You think it's an investment that will make you rich... 

    BadLibertarian's picture

    Bitcoin is something - it's an idea based on math. An idea that we don't need permission from anyone to transact with one another securely. In short, it's a better idea about money, expressed in the language of mathematics and cryptography. And if you look to history, good ideas are the things that change the world.

    Taking down Bitcoin isn't as simple as blocking a few web sites. To really take it down, you'd have to shut down the Internet globally and keep it shut down. Any government doing that would be commiting economic and political suicide, and so the chances of all of them doing that are extremely remote. 

    John_Coltrane's picture

    Actually there is a quantity that represents value in physics:  entropy.  Only life can reduce entropy (create order and complexity) but at a cost:  the expenditure of work using energy.  Thus, ultimately, energy enables life.  Even the planet itself reduces entropy by taking in visible photons and because of energy balance returning many more IR photons to space.  This increases the entropy of space at the expense of reducing the entropy of the earth (you know all those multicelled organisms such as plants, animals etc based upon visible sunlight).  Complexity is the end result.  Thus, physics would define the currency of the universe as energy.  And, of course, in the long run the universe will suffer a heat death when we run out of "free" energy.

    BadLibertarian's picture

    Agreed. Though I'd say that gravity creates local entropy reductions as well, and without that boot strap, it would be tough for life to appear without stars or planets.

    Bunga Bunga's picture

    The miners will assure the utility, otherwise their reward would become worthless. If you look at the timestamp, you see that the previous block was mined just 50 seconds before and it was not intention but pure coincidence that the next block was found within such short time.

    coinhead's picture
    coinhead (not verified) crazytechnician Nov 27, 2015 9:15 PM

    ...exactly.  Remember what happened to "Bitgold" or whatever?  Teh moment you "back" a currency they will just blow you up, steal everything or throw you in prison.

    explosivo's picture

    Bingo. Same problem with banking as always. Mr. Bitcoin banker can do fractional reserve banking too. It all comes down to who you can trust.

    TheFutureReset's picture

    Please explain? How could bitcoin be used in a fractional reserve scheme?

    BadLibertarian's picture

    I think he's talking about bitgold, not bitcoin. The only way to use bitcoin that way would be to use it as the reserve and issue loans in a different currency ("LoanCoin"), fractionally backed by bitcoin holdings.

    Rock On Roger's picture

    I think I have never smoked salted hash.

     

    Can you catch a buzz?