2016 Theme #3: The Rise Of Independent (Non-State) Crypto-Currencies

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

This week I am addressing themes I see playing out in 2016.

A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.

We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.

The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies--money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don't require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.

This doesn't just open the possibility of escaping the debt-serfdom of central and private banks--it opens the door to an entire global economy that's free of the inequality and concentration of wealth and power that is the only possible output of central bank created and distributed money.

Max Keiser and Stacy Herbert and I discuss these possibilities in The Keiser Report: Radically Beneficial World (25:43)...

 

Recall that central bank money is borrowed into existence, which means interest must be paid until the money is extinguished by the payment of debt.

In effect, today's wars, bread and circuses, etc. will be paid for in perpetuity by our kids, grandkids and their kids. This is debt-serfdom. The only possible output of borrowing money into existence is debt-serfdom.

Debt jubilees, no matter how well-intended, simply maintain the system of bank-issued money and debt-serfdom: dialing back the debt load from impossible to bearable does nothing but continue financial feudalism.

Just printing money and distributing it to the unemployed and working poor (known as QE for the people) also doesn't change anything structurally: printing money without increasing the production of goods and services just means the flood of new money will chase the existing pool of goods and services, generating runaway inflation (see Zimbabwe, Venezuela, et al.)

The Keynesian Cargo Cult's fetish is "demand"--meaning the "demand" created by having money in your pocket. The Keynesian Cargo Cult wrongly assumes that this "demand" will magically generate more goods and services.

If this were true, then there would be no inflation when governments such as Zimbabwe print money with abandon: this new "demand" would magically generate more goods and services.

But this Keynesian assumption is flat-out wrong. In reality, printing and distributing money does not guarantee a corresponding expansion of productive goods and services. The "magic" is misleading fantasy; the actual mechanism is much more complex than mere "demand."

The second fatal flaw in the Keynesian Cargo Cult's "solution" of printing and distributing "free money" is the money ends up funding worthless or even destructive uses: bridges to nowhere, ghost cities, needless MRI tests, worthless college degrees, and so on, in essentially limitless mal-investment and waste.

I propose instead that new crypto-currency money only be created when goods and services that are scarce in real-world communities are produced. I call this CLIME: the Community Labor Integrated Money Economy, and I describe how it works in my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.

This is the unsustainable world of bank/state issued money: crushing debt loads across the globe. This is debt-serfdom on a planetary scale.

Debt serfdom is no longer the only option - A Radically Beneficial World beckons.

 

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Thu, 01/07/2016 - 01:43 | 7009327 mrees999
mrees999's picture

Rather than believe Jamie - find out why the educated people find wonder and reason to trust in the invention of the blockchain aka trust machine. Then wonder what will be able to overcome first mover advantage can overpower the network effect bitcoin Blockchain which now is more powerful than the top 500 supercomputers in the world combined.

 

Times 25,000 and growing.  

 

 

Trust is the new commodity. How much are you willing to pay?

Thu, 01/07/2016 - 03:07 | 7009328 mrees999
mrees999's picture

 


Thu, 01/07/2016 - 03:08 | 7009330 mrees999
mrees999's picture

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Wed, 01/06/2016 - 22:18 | 7008605 BaghdadBob
BaghdadBob's picture

On the contrary, I'm more and more convinced that Satoshi is a benevolent Alien that's been watching this sorry excuse for a sentient species jam itself in the ass for far too long and he's given us this new form of money to see if we're collectively smart enough to take it on board and use it, or ridicule and ignore it. If it's the latter then I expect he/she will say to themselves "Well, I gave the stupid fuckers a choice, let them enjoy their slavery".

Thu, 01/07/2016 - 00:11 | 7009089 zibrus
zibrus's picture

Honestly Baghdad, that is the most credible satoshi creation myth I have heard (plus i like the alien myth stories).  The real question is " if we're collectively smart enough to take it on board and use it, or ridicule and ignore it". Very good question.

Thu, 01/07/2016 - 05:10 | 7009638 Youri Carma
Youri Carma's picture
Marc Faber: “With the exception of those that held Bitcoins, the performance of all asset classes has been poor. The Fed has created an atmosphere where the future return on assets whether it’s stocks or bonds or art will be poorer.” http://www.zerohedge.com/news/2016-01-06/china-has-colossal-credit-bubble-and-no-one-knows-how-it-will-unwind-marc-faber-warn
Wed, 01/06/2016 - 20:15 | 7007837 MrNosey
MrNosey's picture

As supplied by your friendly local Central Bank....do people really believe that these 'currencies' are organic in origin.

They will transfer straight onto that RFID chip implant very nicely, so form an orderly queue!

Some under-reported real news your government (Mafiosi) do not want you to see, because they facilitated it......

http://beforeitsnews.com/global-unrest/2016/01/1000-depraved-migrants-ra...

 

 

 

Wed, 01/06/2016 - 22:18 | 7008603 zibrus
zibrus's picture

MrNosey...

 

It's too late. We have to use our technology to fight them. We can track them too with the same stupid chips they'll have to have in order to transact on our (the peoples) bitcoin network.

Wed, 01/06/2016 - 20:12 | 7007838 401K of Dooom
401K of Dooom's picture

Time for me to get that new Alienware box to process those long algorithms!

Wed, 01/06/2016 - 22:19 | 7008611 zibrus
zibrus's picture

Better for running VR simulations using Oculus or whatever comes next in its place.

 

https://www.oculus.com/en-us/oculus-ready-pcs/

Wed, 01/06/2016 - 20:15 | 7007849 Government need...
Government needs you to pay taxes's picture

I'm highly skeptical of this concept.  What's to prevent a cryto-currency from being a huge scam?  How do you settle disputes with the currency provider that is NOT domiciled in your nation?  Are there tangible assets that back the crypto-currency?  And if yes, what due diligence could one perform to get comfortable?  I just cant at this point take it seriously.

Wed, 01/06/2016 - 20:23 | 7007899 knukles
knukles's picture

Not only that which is an excellent point... but all the promoters continue to speak of the security features .... especially the block chain
Well, one more time, nothing on-line or even prepherially connected to the net is secure.
While not directly regarding such but nonetheless instructive ....

http://phys.org/news/2015-12-quantum-cryptography-vulnerable-hacking.html

Wed, 01/06/2016 - 20:50 | 7008056 The Most Intere...
The Most Interesting Frog in the World's picture

Nothing can protect you from the creator pocketing units right from the start.  Who to trust, the government, or some dude that created a cybercoin?  For me, it's a toss up.

Wed, 01/06/2016 - 21:00 | 7008121 logicalman
logicalman's picture

How do you flip a BitCoin?

Thu, 01/07/2016 - 06:57 | 7009788 BoingBoing
BoingBoing's picture

This is one of the most untrue statements here.

In order to move bitcoins, you need to have the private key.

The person who invented the system does not have access to my private key any more than you do.

Wed, 01/06/2016 - 22:22 | 7008630 zibrus
zibrus's picture

Government need (to go to jail)

 

The bitcoin network is secure. What you are talking about is third-party issues. You don't want to store your bitcoins in a third-party (like coinbase). You use coinbase to transfer usd fiat into bitcoin... then you move your bitcoin into bitcoin network wallets. If you're really paranoid you store it 'cold' or in a computer than never touches the internet... or if you aren't afraid of water or fires you store it as a 'paper wallet'. Google the terms you will be amazed.

Thu, 01/07/2016 - 00:18 | 7009109 Bunga Bunga
Bunga Bunga's picture

Currency providers will become decentralized too, which minimizes the risk getting scammed, because a single person cannot abuse his power. Ask yourself the question: What is gold backed by? By the cost to produce it. Same for bitcoin. It is backed by the cost to secure the network (hashing power). Just install a wallet software (e.g. breadwallet, mycelium, electrum) and ask some friedly bitcoiner to send you some satoshis. Then you can play around with it in order to get comfortable.

Wed, 01/06/2016 - 20:20 | 7007878 OutaTime43
OutaTime43's picture

Bitcoin is great until the power shuts down.  Anyone exchanging real currency for these digital tulips deserve to lose it all.

Wed, 01/06/2016 - 22:25 | 7008641 zibrus
zibrus's picture

If all the power shuts down world wide, gold and silver won't do much good either.

 

No one here is saying sell your food and water preps and buy bitcoin. In fact, most of us bitcoiners have food, water, lead, toilet paper, etc.

 

The network is global the entire world would have to shut down (all solar panel rigs, all satellite networks all underground power systems). You want mad max? bitcoin will be as worthless as gold in those situations.

Wed, 01/06/2016 - 20:25 | 7007910 I AM SULLY
I AM SULLY's picture

As a computer scientist bitcoin makes me laugh ... complexity has a numeric value? (in our world, complexity means you fucked up the algorithm)

As a historian I think it is really, really, cute that people believe "electricity to charge your phone" is a "given".

(or that anyone will trade food, medicine, water, for "nothing" except a phantasm)

But it is cute.

Wed, 01/06/2016 - 22:49 | 7008650 zibrus
zibrus's picture

As a mathematician and engineer, I think bitcoin is elegant. It's just a new paradigm in economics and there will always be people who don't understand it or take it seriously (motor car, aeroplane).

 

BTW, have read through the theoretical paper discussing how bitcoin actually works? The Math is elegant. Google search "bitcoin whitepaper" for starters.

Wed, 01/06/2016 - 23:11 | 7008869 Charming Anarchist
Charming Anarchist's picture

Who cares?

Online gaming sites like PokerStars can issue their own currency tomorrow. I do not see the big deal in crypto currencies.

Thu, 01/07/2016 - 00:26 | 7009135 Bunga Bunga
Bunga Bunga's picture

Everyone can issue his own crypto currency, that is all open source and freely available. Hundreds have tried this but most failed. The problem is you need to build up the supporting infrastructure and try to get on par with bitcoin quickly (while bitcoin is extending its own infrastucture constantly, one billion $ VC capital alone has been already poured into it). Then you might have a chance. Good luck.

Wed, 01/06/2016 - 20:27 | 7007920 I AM SULLY
I AM SULLY's picture

The silver I own has physical properties that allow it to be used as an anti-biotic with relatively simple preparation.

(not so much bitcoin)

(no amount of "prep" turns bitcoin into anything other than bitcoin)

(just saying)

Wed, 01/06/2016 - 21:00 | 7008123 The Most Intere...
The Most Interesting Frog in the World's picture

Bitcoin bugs talk like fiat is a confidence game when Bitcoin is THE ultimate confidence game.

Wed, 01/06/2016 - 21:10 | 7008156 I AM SULLY
I AM SULLY's picture

1. I keep under $1000 in the bank.

2. I buy physical metals - mainly silver maple leafs.

3. I do stock pile "some" vodka (I hate vodka - but I know that a lot of cheap vodka could be worth a lot too)

4. Considering filling a plastic container with feminine hygeine products.

5. I'm going to start buying more wine that I can store too.

I'm not really "against" bitcoin, I just don't believe we're heading towards a future where bitcoin functions.

Wed, 01/06/2016 - 22:51 | 7008677 zibrus
zibrus's picture

Family, Food, Friends, Silver, Gold, Lead (jacketed with copper), Lead delivery systems, knowledge on how to farm or survive, Bitcoin.  Most pro-bitcoiners and ZH's like me, have all of these things.

 

Look "I am sully". Bitcoin is just one way to diversify and protect yourself from what is coming.

 

Don't forget toilet paper, cigarettes, and booooz, of course (much more trade-able in your Mad Max wet dream scenario).

Wed, 01/06/2016 - 23:25 | 7008920 BadLibertarian
BadLibertarian's picture

"I'm not really "against" bitcoin, I just don't believe we're heading towards a future where bitcoin functions."

There's nothing wrong with that, and I believe that's a possibility. But I also believe that Bitcoin may be exactly the lifeboat that our global financial "Titanic" needs - and so it may be the only thing that can save us from the kind of future you and I are both concerned about.

If you've given up hope, then there's no reason for you to have any interest in Bitcoin. But if you still think that humans have a chance, and we might just be clever enough to navigate this phase change from the industrial to the digital world and all of the displacement and tumult that entails, then Bitcoin starts making a lot of sense.

Thu, 01/07/2016 - 00:24 | 7009131 natty light
natty light's picture

Yeah right, and you can't make beer with a Shakespeare sonnet: what's your point. 

Wed, 01/06/2016 - 20:31 | 7007921 yellensNIRPles
yellensNIRPles's picture

First, this article fails to mention the Chicago or Austrian schools of economics among other lesser known theorists, so there's that. The assumption that Keynes is the only dickhead in the room is pretty silly and makes the article foolish right off the bat.

Second, there is no scenario in which a non-CB issued currency is allowed to exist without boots through your motherfucking front door. Long term, they will use force to shut that shit down if neccessary. The BIS, IMF and Federal Reserve among others will fuck your day up. Bet on it.

Bitcoin and all the rest are so horribly vulnerable it is unreal. All they have to do is make it illegal. Need proof? What happens when they call someone a terrorist? Right. So anyone who uses it is now an economic terrorist.

The end.

P.S. The only reason it is allowed to exist at all right now is because it still takes real US currency to buy Bitcoins, so even if you are trading out of the system and nuking your fiat to buy into Bitcoin, the money you used to buy Bitcoin in the first place still winds up back in the system. What, you think someone is giving Bitcoin away for free and not using the fiat currency they sold it to you for in the first place? At this time drug users and conspiracy theorists just simply don't pose that big of a threat to them. Yet.

 

Wed, 01/06/2016 - 22:33 | 7008692 zibrus
zibrus's picture

Second, there is no scenario in which a non-CB issued currency is allowed to exist without boots through your motherfucking front door.

 

Bring... it... on...

 

Yellens, you have not been following how much business is now transacted purely in bitcoins (like cash).

Thu, 01/07/2016 - 03:12 | 7009495 Urban Redneck
Urban Redneck's picture

You missed a failure...

When CHS writes, "Recall that central bank money is borrowed into existence" he exposes himself as an Exceptionally uninformed 'Murican with a very limited perspective on global finance and BIS membership...

As long the national currency is FIAT, TPTB don't actually care whether it is debt based and country (or more accurately it's Central Bank) can join the club...

Wed, 01/06/2016 - 20:32 | 7007952 I AM SULLY
I AM SULLY's picture

Want a cheap investment for teotwawki? - Rural King has a pistol crossbow (I've tested extensively) for 15 bucks.

It is accurate, capable of taking down small game - which is all you'll have in the cities. And at 25-30 feet the arrows will easily crack the sternum or the brain.

Any who - I bought 8 of them, have them stock piled in my closet.

https://www.youtube.com/watch?v=EC0sn7JmrY8

Wed, 01/06/2016 - 21:02 | 7008133 logicalman
logicalman's picture

A decent slingshot with 3/8in steel ball would be a bad thing to be on the wrong end of too.

Wed, 01/06/2016 - 21:04 | 7008143 I AM SULLY
I AM SULLY's picture

That's another cheap prepper item.

Wed, 01/06/2016 - 22:35 | 7008704 zibrus
zibrus's picture

Sounds like you are rooting for a Mad Max collapse. Some of us more sane people are trying to 'soft land' the system by providing an alternative money system that doesn't involve zombie-Apocalypse situations.

 

That being said I do also stock crossbows.

Wed, 01/06/2016 - 20:43 | 7008008 RaceToTheBottom
RaceToTheBottom's picture

Bitcoin as a store of value does not interest me, but as a transactional medium, maybe.  

I would use it to get something of value like gold or art outside the country without government intervention.  Spend maybe a few hours with my assets in a bitcoin like hockum.  

That is why Jaimey dickhead doesn't like it.  He would lose his monopoly.

Wed, 01/06/2016 - 20:45 | 7008029 Barnaby
Barnaby's picture

Good example. I bought a signed Joan Cornella painting with B, and it cost half what fiat would. So I bought four signed prints too!

Wed, 01/06/2016 - 20:56 | 7008099 The Most Intere...
The Most Interesting Frog in the World's picture

Gee whiz we should all run out and get sum dat bitcoin so we can all be wich - especially if we are buying shit from morons!

Wed, 01/06/2016 - 22:39 | 7008733 zibrus
zibrus's picture

RaceToTheBottom,

 

Thanks for some sanity on this situation. If you have extra capital, by all means store it safely in physical long lasting assets like gold, silver, whatever.

 

Sell your gold in USA, buy bitcoin.... travel to Belize or Costa Rico, or whatever. Find a local bitcoin distributer. Sell you bitcoin for local fiat and buy gold! Bam, you just broke the metal scanners. Bitcoin isn't supposed to be a store of value (although it will be once universally adopted and transaction volume is high enough especially due to it's exponentially decreasing production).

Wed, 01/06/2016 - 20:46 | 7008037 The Most Intere...
The Most Interesting Frog in the World's picture

I'm all for a free market in currencies.  People can use whatever they want as far as I am concerned.  So, how about the Chuckie E Cheese's Coin?

Wed, 01/06/2016 - 21:42 | 7008165 Goldilocks
Goldilocks's picture

Unique value...

+Ga6Kg134Z+SECiVd/wO0y6D+j300VF7V/meKb4raaSdxsE9ptG3d+RnIaFp7UiCks3o
4pNpTFRSL9Pv/DJ+eDJz6pcFI4AYThPiLaqw7b5+VdN670yiV7BaNVO+HxhULtF9yyC4
P+zwgxDNcpVUZvX0tEIHRP1UyV4ydGUNbjrNLwvrF2fb1Wwmu3qex3NGSWnc2pbA5445
MOJOlK3dKXaqv28UpdMrjQGLhj3ZX0T902C6wPRQRcI421REto8GKaC6dGWGnyQrlfg3
DhXs490euzkQB5Wg+zmZXg1obNC4HHqsZ05rVp32aRJB4LxzvwdwT7sMV+0D4H3v4r34

Thu, 01/07/2016 - 00:31 | 7009146 Bunga Bunga
Bunga Bunga's picture

Looks like you are still in the extremely emotional phase.

Wed, 01/06/2016 - 21:09 | 7008175 TwoHoot
TwoHoot's picture

Whether by decree, debt or blockchain, money won't produce a single head of cabbage.

We are so preoccupied with MONEY we forget that ONLY real, useful goods and services have value. Produce something useful and whatever passes for money at the time will come your way.

Wed, 01/06/2016 - 21:40 | 7008354 Counterbalance
Counterbalance's picture

The Bitcoin comments here are becoming increasingly asinine.

There is great utility in competing currencies in a voluntary free-market of money.

Bitcoin is the internet of money.

Bitcoin may not survive, but blockchain technology is here and will change the world. 

Adapt or die.

 

Wed, 01/06/2016 - 21:51 | 7008402 surf@jm
surf@jm's picture

World war three will occur, when an independent currency, which everybody switches to, tells the Bilderburgs, and their cronies, that we will give them some, at a million to one ratio for their present assets........LMAO!.......

But, on second thought.....we don`t want your fiat monopoly money......go away.....

Wed, 01/06/2016 - 22:06 | 7008519 Golden Phoenix
Golden Phoenix's picture

One could predict the comments before scrolling down.

 

The USD, from $1 to .04 in a few generations = GOOD!

Apple, from 133 to 100 in the past year = GOOD!

Bitcoin, from $177 to $437 in the past year = BAD!

 

People who buy things whose value goes down = SMART!

People who buy things whose value goes up = STUPID!

 

'Buy a stock that goes up. If it don't go up don't buy it' - Will Rogers

It's that simple. And that difficult.

Wed, 01/06/2016 - 23:45 | 7008987 Anopheles
Anopheles's picture

Bitcoin in the past 2 years from $1200 to $400.  

 

 

Thu, 01/07/2016 - 03:09 | 7009486 Equinox
Equinox's picture

Bitcoin in the past 4 years, went from $4.50 to $450

 

Thu, 01/07/2016 - 04:04 | 7009559 BaghdadBob
BaghdadBob's picture

Bitcoin in the last 5 years from $1 to $400.

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