Economic Collapse: Will Cryptocurrency Save The Financial System?

Authored by Federico Pieraccini via The Strategic Culture Foundation,

In the second article of my three part series, I addressed how we got to the current state of this financial chaos. In this last article, I explain where we are heading and how cryptocurrency could be the last chance to create a sustainable economic system.

Where to go from here?

If trust and sustainability were the two conditions that allowed for the transition from physical gold to paper currency, it is from this basis that we must start to analyze where we are going and what effects the next economic crisis could have.

In 2008, confidence in central banks saved the global economy. But as Mario Draghi said, the bazooka of quantitative easing was fired and a second hit during a crisis would have proved ineffective. The reason is complex and must be clearly explained. Most people are paid in a currency deposited in the bank, because that is where one keeps one’s currency, able to withdraw it at any time. But in the event of an economic crisis, priority is given to the banks, whatever remaining liquidity being for the customers. The reason why there was no bank run in 2008, which would have led to the collapse of the global banking system, lies in the trust that ordinary people continued to place in the financial system, courtesy of what the corporate-controlled media told them.

The problem concerns the next financial crisis and how the world population will react. The path already seems to be traced, especially in geopolitical terms. Countries like China and Russia have created their own alternative banking and financial system to escape dollar sanctions; but they have also begun to de-dollarize by accumulating gold and using different payment methods to the US currency. In the same way, the desire to escape from a centrally controlled financial system, and the attendant need to remain anonymous, has produced a technological evolution known as cryptocurrency, much as the need to quickly communicate and globally exchange data in real time produced the Internet. Both evolutions find common roots in the American security services. The Internet stems from a DARPA project, and blockchain was outlined in NSA documents back in 1996.

It is easy to imagine that governments and central banks have been caught flat footed by the birth of the cryptocurrencies, but it would be better not to underestimate nations that have been ruling the world for decades and have their finger on the pulse. Although Washington's aggressive foreign policy has accelerated de-dollarization, one must consider the reason why cryptocurrencies have not been declared illegal.

Let us go back for a moment to the devastating effects of the loss of the gold standard. Looking at a chart, it is easy to see how the start of world debt coincided with the end of the dollar being linked to gold. This has led to an increase in inflation, calmed only by false economic data and a powerful financial manipulation by central banks in collusion with each other. Purchasing power has plummeted and the average person has as a result become impoverished.

When the ordinary person is overwhelmed by debts and sees his purchasing power steadily declining over the years, while continuously being told by the media that the exact opposite is happening, dissatisfaction and frustration increases to a point of passing a tipping point.

In the US in 2008, the burden of the bailout fell on the shoulders of ordinary citizens. Once bitten, twice shy.

People are placing less and less trust in the media and the banks.

From Gold to Money to Crypto.

In this sense, we can perhaps understand why bitcoin and blockchain technology have been able to prosper in complete freedom. It is conceivable that the project reflects an evolving world in which paper money disappears in favor of the digital one. How this transition could take place, and why some nations devoted to de-dollarization will find themselves in a privileged position compared to economies entirely tied to the dollar is a matter open to debate. The possible economic-shift must be considered real and probable for the sustainability of many nations, accompanied by the inevitable technological change and the need to anchor the global economy back to real values. The natural passage is a return to physical gold or to virtual gold, precisely the block chain and the value we bring with it.

We should not underestimate the power of central banks and their plans to invent their own cryptocurrency as a mean to perpetuate their Ponzi scheme.

What will make the main difference in the future is what backs up these virtual currencies.

For example, Russia and China have accumulated many tons of gold and diversified their assets, dumping USD in exchange for tangible goods. A Crypto-Yuan or Ruble will eventually be valued more than an empty crypto-dollar without any counter-value. In a not to long distant future, Yuan and Ruble will be backed with gold or other financial assets like bitcoin while new virtual currencies will continue to perpetuate their empty value as with fiat currency. No surprise that with the next financial crisis, fiat money will pour into gold and crypto market looking for a safe haven from the devaluing dollar.

In the next couple of years we can expect central banks such as those of the US, Europe and Japan develop their own crypto-currency and start pushing conversion from fiat money into their crypto, advancing their project of keeping the system centralized. We should not exclude drastic measures, such as banning non-state-actor cryptos, from governments when central banks start realizing having lost their competitive edge on currency manipulation.

The last straw will be related to US military power trying to enforce the use of USD. In a scenario of steady economic and military decline of power, the US will find itself unable to force certain countries to use their currency, therefore losing its main weapon to create chaos in the world to advance its geopolitical goals. Without the dollar as the main world reserve currency, Washington will be forced to reconcile with the rest of the world, understanding that the unipolar moment is over and the neoliberal hegemonic planes to rule the world are forever gone.

Comments

lester1 Wed, 01/31/2018 - 00:16 Permalink

No. Cryptocurrencies are fucking ponzi schemes! Without new bag holders buying in, the token dies.

 

Plus, how can you run a business accepting crypto when the price fluctuates 5-10% a day?? Thats insane. You wouldn't stay in business!

The_merovingian overbet Wed, 01/31/2018 - 04:33 Permalink

As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties:
- boring grey in colour
- not a good conductor of electricity
- not particularly strong, but not ductile or easily malleable either
- not useful for any practical or ornamental purpose

and one special, magical property:
- can be transported over a communications channel

If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it.

Maybe it could get an initial value circularly as you've suggested, by people foreseeing its potential usefulness for exchange.  (I would definitely want some)  Maybe collectors, any random reason could spark it.

I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value.  But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something.

(I'm using the word scarce here to only mean limited potential supply)

 

-Satoshi Nakamoto 2010

In reply to by overbet

Fireman The_merovingian Wed, 01/31/2018 - 06:43 Permalink

Bitcoin is more than a bubble, it is a Psy Op to herd the gullible sheeple to their electronic meadow for the final fleecing and the end of freedom as we know it. "Greed is god", to paraphrase Gordon Lizard in the Wall St sewer and Potemkin Village (idiot) USSAN "economy" of war and fraud by the Zero 1% and nobody knows that better than a Rothschild wolf shepherding his flock of fools to their electronic doom and their inevitable slaughter. Buy more Blipcoin$ by all means! The banksters love it. First the Blip and then the chip! They see this as their last real chance (apart from blowing up the planet) to hold onto their "exorbitant privilege" and free lunch; the evil Saudi Mercan IOU Pentacon Protection Racket petroscrip fiat filth, euphemistically known as the USSAN dollah.

Is everybody in, the show is about to begin.

Contrary to the usual hubris and arrogance of Western banksters and so-called €conomist$ the future of money is being decided by those countries that actually have physical reserves and resources and the military power to control them. For Russia and China "reserves and resources" does not mean the unpayable debt that so-called Western capitalists imagine "wealth" to be as they continue to impoverish their hostage nations with their anti capitalist cant that has turned the so called Western "democracies" into impoverished welfare ruins over run by Soros' migrant hordes to distract the masses from the real enemy among them. One gets it or one doesn't as the case may be but the Anglozionazi centric world is already a thing of the past.

That future does not include a "global reserve currency" style Fedcon slash Blipcoin owned by the money changers and globally imposed as the Pentacon Kissinger Saudi Mercan IOU petroscrip toilet paper dollah was, whatever about being imposed on USSAN and Europeon debt slaves only too happy to exist in their cashless, electronic gulags "all watched over by machines of loving grace" as they jab their electro thingies In lieu of using a brain to "purchase" their Latte dumbass I'm a moron five buck starschmucks zio piss "coffee". In a world of NSA slash CIA hacking gone mad, run as these criminal enterprises are by murderous thugs and sociopaths, how the hell can an unknown App like Blipcoin suddenly be "wealth" and how in God's name can gold be purged from human DNA after 3000 years functioning as real money simply because the shamanic Satanic banksters in the West and the Pedophile Politburo in Natostan ghetto Brussels no longer have any and the brain dead Millennials with their prosthetic blinking plastic gizmo brains, never managed to grasp what in fact real money is? The simple answer is that actual physical money such as gold can't be purged and replaced with fiat or blips or BS and try as the globo mob might it won't get purged and in the end when the electricity inevitably goes out the surviving Millennials will wake up and go belly up when their "survival" Apps no longer bring home the bacon.

Shlomo Satoshi say big tank from refuge of his Bitcon Temple. May the Blip be with you, o smartphoner!

What can go wrong....will!

In reply to by The_merovingian

Bendromeda Strain Fireman Wed, 01/31/2018 - 07:15 Permalink

tldr - but green nonetheless. Let us unpack this statement by the Great Satoshi:

Maybe it could get an initial value circularly as you've suggested, by people foreseeing its potential usefulness for exchange.  (I would definitely want some)  Maybe collectors, any random reason could spark it.

Initial value circularly? His own thesis doesn't propose an unlimited number of boring gray metals that transmit - only one. Well guess what? If I want to transport REAL WEALTH I can buy the current fastest flavor of the month coin that is available in fantasy bug out locale and sell it upon arrival. No need for waiting upon vultures to strip out their inflated cut. If you aren't bugging out then the whole mind exercise is moot, and he describes nothing more than greater fool speculation.

In reply to by Fireman

overbet lester1 Wed, 01/31/2018 - 01:03 Permalink

No. Cryptocurrencies are fucking ponzi schemes! Without new bag holders buying in, the token dies.

They're very new of course wider adoption is needed but those aren't bag holders those are trailblazers that have been and will cintinue to be rewarded.

Plus, how can you run a business accepting crypto when the price fluctuates 5-10% a day?? Thats insane. You wouldn't stay in business!

You can minimize this risk now. Why wonuldnt you expect to see companies start popping up willing to buy this risk? Again it's new but it's not going anywhere. Right now you put part of the risk on the buyer via fees

In reply to by lester1

BigJim oljw00 Wed, 01/31/2018 - 06:50 Permalink

I can't say I have great in depth knowledge of how crypto-currencies "work", by which I mean: I've never bothered examining a chunk of blockchain data in a hex editor and stepped though each field and mapped out how all the data fits together, but then, even if I had - and I'll bet you haven't, either - that wouldn't necessarily give me much more insight into whether BTC or any other particular crypto would continue to attract speculator interest, which is all that's (currently) driving these moonshots. And it is speculation, because these "currencies" aren't currently being used (much) as media of exchange.

 

What I can say, is that judging from what other people around here have averred, transactions in BTC are too slow for it to be used as an everyday currency, and, as the block chain continues to grow with every single transaction, unlikely to get any faster.

Maybe one of BTC's competitors will win out in this regard. The problem is, there appear to be hundreds of them. You can make the argument that there are hundreds of fiat currencies, too, but that's a poor rebuttal as each fiat has an intrinsic value arising from citizens willing to exchange goods and services for them so they can discharge their governments' demands for tax.

 

Gold and silver, despite being dogs from an investment point of view (since their peak in 2011 at any rate) at least have intrinsic value beyond their possible monetary use, and are unique in the sense that they're atomic elements, which are themselves finite in number.

 

The same cannot be said of Rare Maff. Rare Maffs - somewhat ironically - be not remotely unique at all. To paraphrase the infamous Mathman,  "that shit's everywhere! Costs $5 to dig out of the numbersphere!"

In reply to by oljw00

ConnectingTheDots heavens-door Wed, 01/31/2018 - 10:39 Permalink

Unfortunately, I believe that "heavens-door" is correct.

It is my belief that crypto currencies are a trojan horse designed to lull the sheep into comfort and acceptance of digital currencies in preparation for the eventual elimination of cash.

The TPTB will create an economic crisis to force the issue and the sheep will demand that "something" be done, and TPTB will oblige.

Once cash is eliminated, the rulers of the world will have us exactly where they want us, under total surveillance where EVERYTHING you but or sell is recorded somewhere, and of course since you have no choice, the bankers charge any fee they want for every transaction.

In the end it will not matter whether the crypto is gold backed or not, with digital currencies only, you will be under the total control of the bankers.

So when thinking of cryto-currencies, you need to be thinking about the war on cash at the same time.

In reply to by heavens-door

GodSpeed_00 Wed, 01/31/2018 - 00:16 Permalink

When it comes to money, it DOES NOT MATTER who or what it is backed by. What matters most is who controls the supply. This is why DECENTRALIZED crypto with a limited supply does not need to be backed by anything.

BigJim Citxmech Wed, 01/31/2018 - 07:07 Permalink

More to the point, how would crypto be "backed" - meaning, strictly limited in issuance and redeemable for specie on demand - by gold or silver in the first place? Isn't the whole point of a crypto that it is virtual and untethered from a centralised authority acting as custodian or guarantor or source of value?

 

How would a gold backed "crypto" work exactly? The nearest thing I can think of is an updated version of the old  "free" banking regime (such as existed in Scotland from 1716 to 1845), but with the competing currencies (redeemable for specie on demand from competing issuing institutions) being exchanged electronically rather than by paper.

That would be pretty cool, and better than the current system, but would still require a physical, trusted (audited and government regulated?) counterparty and I doubt it's anything like what people mean when they bang on about a crypto being "backed" by gold.

In reply to by Citxmech

Scipio Africanuz JibjeResearch Wed, 01/31/2018 - 03:40 Permalink

They did not fall, they were abandoned because some folks wanted to circumvent God's law that "by the sweat of your brows, shall you eat", simple.

Gold is the policeman that keeps you honest, and compels you to be industrious, enterprising, and productive. Don't blame gold for doing its duty superbly, blame the "free lunchers".

In reply to by JibjeResearch

CHX13 JibjeResearch Wed, 01/31/2018 - 04:06 Permalink

They fell because of weakness and greed of mankind, aka the fiat money pushers and the ruling elites. Governments love overspending and thus hate gold, which ultimately just reveals the financial misdeeds, sins, mal-investments, overspending and the fraud that fiat-debt currencies are. 

"Gold is my archenemy" - Paul Volker. 

In reply to by JibjeResearch

GodSpeed_00 wattie Sat, 02/03/2018 - 14:33 Permalink

Why does anyone need a crypto "backed by gold or silver" when the amount of a decentralized crypto has a max supply that can't be increased? If you go with a crypto backed by gold then it will be centralized by some authority who holds the gold. You will be in the same position as we are in now with dollars, first "backed by gold" now backed by nothing but the large central authority runs the system. Too much power to trust with someone. Decentralized crypto is trustless, this is the most important thing.

What is gold "backed by"? Nothing. The use cases for gold are small and even in those cases only a minuscule amount of gold is needed so the price does not justify the utility.

In reply to by wattie