Brandon Smith is dead on, warning that cryptocurrencies could well be a Trojan horse for the cashless society, where governments, or a one-world government, and central banks or central bank know every unit of currency you spend. From Smith at alt-market.com:
A fundamental pillar of true free markets is the existence of choice; the availability of options from production to providers to purchase mechanisms without interference from governments or corporate monopolies. Choice means competition, and competition drives progress. Choice can also drive changes within society, for if people know a better or more secure way of doing things exists, why would anyone want to stay trapped within the confines of a limited system? At the very least, people should be allowed to choose economic mechanisms that work best for their particular situation.
This is NOT how our society functions today, and free market do not exist anywhere in modern nations including the US. Whenever I hear someone (usually a socialist) blame free market “capitalism” for the oppressive ailments of the world, I have to laugh. The alliance between governments and corporate monopolies (what Mussolini called national socialism or fascism) makes free markets utterly impossible. What we have today is an amalgamation of socialist economic interference and corporatocracy. Our system is highly restrictive and micro-managed for everyone except the money elites, who do not have to follow the same rules the rest of us do.
The globalist financial powers intend to use what’s not working on a national level on a global scale. What could go wrong? An excellent article from Alasdair Macleod at goldmoney.com:
Global policy planners intend to deliver replacements for both dollar hegemony and fossil fuels. Plans may appear uncoordinated and in their early stages, but these issues are becoming increasingly linked.
A monetary reset incorporating state-sponsored cryptocurrencies will enable exchange controls to be introduced between nations by separating cross-border trade payments from domestic money circulation. The purpose will be to gain greater control over money and to direct its investment into green projects.
The OECD will build on current tax disclosures to make everyone’s income and capital known to governments and therefore readily taxable, money destined to kick-start economic growth. Under the guidance of supranational organisations, governments will redirect investment into green technology. The objective, particularly for Europeans, is to neutralise Russia’s increasing dominance of the global energy market by becoming carbon neutral by 2030.
But perhaps as Robert Burns put it, “the best-laid schemes o’ mice an’ men gang aft agley”. They are based on Keynesian fallacies, but cannot be ignored.
Introduction
There appear to be policy areas being driven by statist responses to events, encouraging global institutions to take on a coordinating role. It means deeper levels of centralised planning by unaccountable bureaucrats. Assuming their plans continue to gain credence, we could end up with a dystopian world where supranational bodies direct individual governments to conform. We are already on this road to perdition. The OECD has coordinated attempts by governments to restrict the freedom of their citizens to avoid taxes by forcing over a hundred jurisdictions to automatically supply information on the financial affairs of every citizen, irrespective of nationality and where they reside.
Money completely free of government is the only money that has a chance of being honest money. From John Stossel at townhall.com:
Source: AP Photo/Susan Walsh
House members summoned Facebook’s Mark Zuckerberg to Washington, D.C., and grilled him — harshly — about his plan to create a new currency, Libra.
“Why should we trust you?!” asked Congressman Mike Doyle.
I liked it when Zuckerberg said, “I actually don’t know if Libra’s going to work, but I believe that it’s important to try new things.”
He was right. That’s very important.
The Libra would make it easier to transfer money anywhere in the world. It also promises stability. Its value would be based on a basket of currencies from different countries, which would protect Libra owners from inflation in any one country.
The Libra cryptocurrency will be, unlike many cryptocurrencies, closely linked to existing currencies. From Ralph Fucetola at mises.org:
Nobel laureate F.A. Hayek was, as he says in the 1990 introduction to his Denationalization of Money: The Argument Refined, one of the chief “gold bugs” of the 20th century. And he reminded us, so long as politicians want to control money, gold-backed currency is essential to protect our liberty from the politics of inflation.
But his concern for money and market reached back to his earlier work, as noted in a number of articles posted in recent years at mises.org. As noted by Nikolay Gertchev:
In a series of five lectures delivered in 1937, and published under the title Monetary Nationalism and International Stability, Hayek offers an in-depth analysis of the main deficiencies of the present-day monetary system. In a nutshell, he identifies two factors that disrupt international economic relations: the fractional reserve commercial banks and the national central banks. The former are the primary source for the international transmission of the business cycles, while the attempts of the latter to correct the imbalances de facto amplify the resulting instability.
n 1975 Hayek eventually gave a lecture entitled “Choice of Currency,” in which he articulated for the first time the provocative demand that the state monopoly on money should be repealed. The publication of the monographs Free Choice in Currency and The Denationalization of Money followed a year later, in which he expanded in greater detail on his ideas on competition between private money issuers. …
What shape would an order reflecting these power-sharing principles take, and how could it emerge? Hayek argues that such an order would take shape if the following liberties were granted:
Private money producers would be free to issue money and enter into currency competition.
Fast forward nearly a half century and Hayek’s call for the denationalization of money seems to be a real possibility, not just a crank libertarian position safely ignored by the monetary authorities.
The coming of the block chain technology and cryptocurrencies certainly suggest that the original post-World War II Bretton Woods “settlement” of the status of money, that gold and US dollars, redeemable in gold, were the basis for international settlements, failed. As have later revisions of the idea. Thus, an era of monetary uncertainty may give rise to possibilities for market-oriented reforms.
Bitcoin, as an example of “virtual gold,” gains its value from the limited number of units of that cryptocurrency and the expense in “mining” more of those units, not unlike real gold. While Bitcoin is the best known of the cryptocurrencies, CoinMarketCap.com lists over a thousand crypto currencies that are traded (though a significant percentage of these are actually ICOs — Initial Crypto Offerings — a way to raise funds for a particular project). Much of the power of the cryptos is that they can be easily, and privately, bought, sold, and exchanged.
Hayek predicted that normal market forces would apply to the goods we use to facilitate exchange (“currencies”) if only governments would get out of the way. In a free market for money he suggested that major financial institutions would sponsor competing currencies, probably defined by “baskets” of commodities. He speculates on how the market would maintain the value and stability of such currencies, far better than any political system of legal tender.
To some degree, this seems to be happening with cryptocurrencies.
And then along comes the 900 pound gorilla. Facebook, with two billion users, has decided to enter the cryptocurrency market with its Libra coin. Since the Libra would be usable as a currency on Facebook itself, the company probably has calculated that it will have a strong competitive advantage over any of the competing currencies.
Ah, but … and here is the rub, the Libra is not a naturally limited good, as Bitcoin is, but can be multiplied to infinity. It is not stabilized by reference to a basket of commodities as Hayek recommended. Rather, it will be defined by a changeable basket of fiat currencies!
That’s right. Facebook and Libra’s cooperating founding organizations (including PayPal, Visa, Uber …) hope to provide a stable cryptocurrency by tying it to a group of government currencies! According to Techcrunch:
A Libra is a unit of the Libra cryptocurrency that’s represented by a three wavy horizontal line unicode character ≋ like the dollar is represented by $. The value of a Libra is meant to stay largely stable, so it’s a good medium of exchange, as merchants can be confident they won’t be paid a Libra today that’s then worth less tomorrow. The Libra’s value is tied to a basket of bank deposits and short-term government securities for a slew of historically stable international currencies, including the dollar, pound, euro, Swiss franc and yen. The Libra Association maintains this basket of assets and can change the balance of its composition if necessary to offset major price fluctuations in any one foreign currency so that the value of a Libra stays consistent.
Well, that’s it. Zuckerberg is no Hayek. And the Libra is no Bitcoin.
Ralph Fucetola, JD, is a retired lawyer (1971–2006), teacher, and writer who offers legal consulting services to the natural-products-and-services market through his website, www.VitaminLawyer.com. He graduated Rutgers University in 1967, B.A. with Distinction, and from Rutgers Law School in 1971. Counsel Fucetola is a trustee of several religious bodies and foundations, including the Natural Solutions Foundation and LifeSpirit Center.
Mark Zuckerberg is not to be trusted. From Michael Krieger at libertyblitzkrieg.com:
ZUCK: yea so if you ever need info about anyone at harvard ZUCK: just ask ZUCK: i have over 4000 emails, pictures, addresses, sns FRIEND: what!? how’d you manage that one? ZUCK: people just submitted it ZUCK: i don’t know why ZUCK: they “trust me” ZUCK: dumb fucks
– Leaked messages sent by Mark Zuckerberg to a friend at Harvard as he was building Facebook
Years ago, Mark Zuckerberg made it clear that he doesn’t think Facebook is a business. “In a lot of ways, Facebook is more like a government than a traditional company,” said Mr. Zuckerberg. “We’re really setting policies.” He has acted consistently as a would-be sovereign power. For example, he is attempting to set up a Supreme Court-style independent tribunal to handle content moderation. And now he is setting up a global currency.
For a long time, I’ve maintained there’s no doubt the current system/paradigm we live under will collapse under its own weight, but that doesn’t keep me up at night. What keeps me up at night is understanding we still have no idea exactly what will replace it. It could very well be a more decentralized and free world, a world less defined by brute force, grotesque power concentrations and coercion, but it could also very easily go the other way. The coming out party for FacebookCoin (aka Libra) is in my view the first real indication the forces of corporate oligarchy are determined to ensure the new world reflects their vision and is under their control.
Anyone with half a brains knows to beware Zuckerbergs bearing gifts, so the announcement that Facebook is getting into cryptocurrencies should be greeted with immense skepticism. From Tom Luongo at tomluongo.me:
Cryptocurrencies are winning. If you need proof look no further than Facebook’s proposed Libra stablecoin. While the details are scant, the salient point is Libra is another attempt by the current banking establishment to slow the flow into the world of hard money.
In this respect Libra is no different than Ripple or dollar-settled Bitcoin futures contracts. These are products designed to slow the exodus out of the shadow banking system. Ripple is a way to lower foreign exchange fees and off-chain futures settlement is a way to control Bitcoin prices and exacerbate volatility to slow crypto-adoption by so-called normies.
Now we have Facebook and Libra. As Caitlin Long points out in her excellent Forbes’ article, Libra will get major financial players backing it. The goal is to become a standard creator in the vein of the Dow Jones Committee or the IMF since it will determine the basket weighting of Libra.
It won’t, however, be a cryptocurrency in the traditional sense. It won’t have a limited supply, defined inflation rate or any commodity character whatsoever.
Proof-of-work? Phsaw! Every good Friedmanite knows that opportunity cost in creating new monetary units is simply wasted capital!
Only mouth-breathing rubes stuck in the 19th century think that’s important.
Instead Libra’s supply will be regulated just like every other fiat currency, by a central authority. Facebook already wants all your data, whether you’re an account holder or not.
Now they want to control your currency as well.
The Central Bank of Facebook
When you extrapolate out the power of Facebook’s platform to where this coin will be marketed to, emerging markets, Libra is looking for all the world like Facebook’s application into the cartel of price-setting central banks.
Ms. Long even hints at this in her article. In fact it’s her first of six important points about Libra.
1. Facebook’s cryptocurrency will be a powerful force for good in developing countries, which is where Facebook intends to market the product.
Why? Because central banks in developing countries are notorious for their lack of discipline in maintaining the value of their fiat currencies, which too often lose purchasing power. The best example among many is Venezuela, which is experiencing hyperinflation worse than that of Germany after World War I. By providing citizens of developing nations with access to a store-of-value that is more reliable than their government-backed currencies, Facebook’s cryptocurrency will indirectly exert fiscal and monetary discipline on developing nations—which will improve the lives of many people globally.
Leaving aside the fact that much of Venezuela’s hyperinflation stems from the U.S. sanctioning and cutting Venezuela off from the global banking system, she has a strong point.
Governments are terrible at managing the value of their currencies for all the reasons Austrian economists have laid out in painstaking detail for decades.
Think this through for five seconds and you get to the obvious conclusion. Facebook and the Wall St. banks which actually control it are creating a coin to do away with national currencies in the countries most vulnerable to the Fed’s control over the global monetary system.
This is the next step in the quest to create a world currency.
And if the current system’s long-term health is threatened by, oh I don’t know maybe, the implosion of a bunch of SIFI banks like Deutsche Bank sparking a global sovereign debt crisis, then a stablecoin like Libra to replace a discredited dollar/euro/yen/pound makes some perverse sense.
If the plan has always been, as Jim Rickards has been saying for years, that the response to a collapsing monetary system would be national currencies replaced with IMF SDR’s as the reserves of the banking system, then having a ‘cryptocurrency’ Trojan Horse to bait and switch with has to be part of the plan to maintain confidence in the institutions that fomented the crisis in the first place.
And what better platform to do that with than Orwell’s Panopticon itself, Facebook?
… Bitcoin was born out of the extreme fraud of the financial system under Greenspan and Bernanke.
They used leverage ratcheted up post-Y2K to levels which could only be supported through legislative fiat to wall off capital fleeing the system.
And the response was a group of folks applied the teachings of Austrian Economics and Ludwig von Mises’ Regression Theorem to create a digital asset which became more resistant to fraud the more it was adopted.
The result was Bitcoin.
Bitcoin was a catastrophic mutation. A thing born out of necessity to free human beings from a central issuing authority of new monetary units. That relationship needs to be broken if we are going to free ourselves from the cycle of tyranny of the few at the expense of the many
In short, Government ineptitude and/or fundamental evil created Bitcoin.
This is the essence of what Ms. Long talked about around the same time as that post in her Mises Weekend talk “Will Blockchain Free Us from Wall St.”
It’s a wonderful talk that focuses on the domestic reasons why the dollar is yet to collapse and why Bitcoin provides the framework in which we can craft money that isn’t controlled by a central issuing authority.
This is the key point that she mentions but doesn’t emphasize in her talk. For the first time in history we have been presented the option to choose money whose new units are not subject to the whims and corruption of humans.
That’s set by math. And math both determines the rate of inflation and the rate of trust developed by the money itself. This continues to be Bitcoin’s biggest advantage as long as the economic incentives to maintain the network remain positive and are not perverted.
A Farewell to Kings
It means no philosopher kings deciding the rate of inflation or deflation. It means minimizing rent-seeking behavior. It means an end to counterfeiting as we have experienced in the past.
But as I said earlier, things like off-chain settled futures contracts create ‘Paper Bitcoins’ which suppress its exchange rate versus the U.S. dollar. They are an attempt at counterfeiting through through leverage. So are stablecoins like Tether, if not managed properly and, don’t kid yourself, Libra.
Facebook and Wall St. are banking on Facebook’s pervasiveness to drive mass adoption to build an adjunct to the existing financial system which slows the growth of the real cryptocurrency marketplace.
They value blockchain to lower costs and replace antiquated clearing systems of increasingly opaque ledgers, as Ms. Long points out in her talk. But they still want to retain control over the value of the money itself and what that money represents.
They want to retain the system of perverse incentives they have created which rolls up the wealth of the world to them.
Which is Ms. Long’s conclusion in her recent article:
6.Facebook’s cryptocurrency will turn out, in the end, to be a Trojan horse that benefits Bitcoin.
During a period of monetary upheaval, one in which the faith in the Institutional Order tends towards zero, there will be a fundamental shift away from public-issued money as trusted media of exchange.
If Martin Armstrong is correct and we are approaching the end of a mega-cycle in Public trust and a massive shift in consciousness to Private assets as stores of wealth, then it again makes sense for the powers that be, those I like to call The Davos Crowd to create a private-in-name-only “cryptocurrency” to co-opt that shift and remain in control.
But it also means that these same people, who have fed at this trough for so long, aren’t any more capable of managing it successfully than they were the dollar and the euro.
So we really do have little to fear from Facebook and Libra in the long run, because as we know from the Trojan Rabbit, it came back to land squarely on their heads.
A lot of decrepit institutions are scheduled for extinction, including central banks. From Tom Luongo at tomlouongo.me:
There’s something about the timing of this Bitcoin rally that should have your attention. It’s happening in the wake of President Trump’s big push to remake the world economy along his lines.
It’s also happening as central banks stand exposed as having no answers for the continued deflation and collapse of money velocity a decade of QE and zero-bound (or negative) interest rates were supposed to cure.
Trump’s Trade and Tariff War will not solve this. He won’t address the real problems but rather blame China. And now he’s putting upward pressure on Bitcoin while the yuan is under serious pressure.
Because while Trump is out tweeting this morning about how bad it will be for China, he’s also moving to label anyone with a trade surplus with the U.S. a ‘currency manipulator.’
So, there is no escaping Trump’s ignorance on trade. And now he’s trapped.
So much for “trade wars are easy to win.”
Now that the trade war is in full flower because Trump doesn’t get basic economics things will get worse from here.
The major capital markets stare on in disbelief, hoping for a last minute miracle in China trade talks. They’ve priced in Trump folding at the last minute and he hasn’t done so. The big markets resist big moves because of both deep liquidity pools and investor normalcy bias.
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