2016 Theme #3: The Rise of Independent (non-state) Crypto-Currencies

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 thisCLIME: 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.

view it on YouTube

My new book is #7 in Amazon’s Kindle ebooks > Business & Money > International Economics: A Radically Beneficial World: Automation, Technology and Creating Jobs for All. The Kindle edition is $$9.95 and the print edition is currently discounted to $21.60.

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  • Silverado

    “In effect, today’s wars, bread and circuses, etc. will be paid for in perpetuity by our kids, grandkids and their kids.”

    So this author thinks the dollar is going to last forever??

    • jandr0

      [So this author thinks the dollar is going to last forever??]

      One does not just “pay” in monetary units.

      • Silverado

        You think that debt would be squared away by the debtor paying in some other form of money? I don’t. The debts he’s talking about were issued in dollars and they will have to be paid back in dollars. If the dollar is worth nothing then that debt is…un-collectible and therefore extinct just like in bankruptcy. My mortgage was issued in dollars and by God that’s what they’ll be getting even if that dollar is worth nothing. The market works even when some don’t think it will because the market KNOWS what real money and real wealth really are. And by then some old paper note that used to “good” won’t be worth using for toilet paper and the market ESPECIALLY knows that. And if you don’t, please know that real wealth can’t be printed or folded and is measured with a scale and comes in grams, ounces and kilos. Not govt approved and specially inked paper or worse yet, virtual digits credited to one’s account, based on debt, fraud, lies and illegal and Unconstitutional banking schemes perpetuated by those higher ups both in govt and finance that should (and do) know better.

  • kimyo

    for crypto currencies to be effective, a new, secure operating system / new, secure hardware must be developed. if you’re running microsoft or apple all of your files belong to them. if you’re using an intel/amd processor, likewise.

    it’s way easier for dotgov to seize bitcoins than it was for them to grab the gold.

    • Rick

      “it’s way easier for dotgov to seize bitcoins than it was for them to grab the gold.” This is an assumption. You can keep your bitcoins secure off-line.

  • jadan

    “Keynesian cargo cult” is Smith’s disparagement of those who understand money better than he does. Never give some one a free lunch, is his excuse for being a stingy mean spirited old curmudgeon. But you don’t hear him disparaging the rich who are rich by virtue of the fact that the system gives them the keys to the economy. He just doesn’t trust gov’mint, like every red blooded American laborer/producer/investor. No sir, but some stateless geek spending thousands to run algorithms on his computer farm and create stateless debt money, well now, this is something we can trust. This is real money that can work. Bull, Smith. The people have no protection from the elite but their sovereign government. It’s the failure of government, not money, that’s the problem. No crypto currency is going to protect the public interest. No money that is not created by a transparent public monetary authority and administered in the public interest will survive the demand made on it. If we can’t expect a reasonably just and accountable government at some time in the future, we might as well commit suicide. I’ll send you a gun with return postage, then you can send it back once you’ve used it correctly.

    • animalogic

      Good points, Jadan. The author simply assumes that all Keynesian stimulus will be badly managed. Basically he rejects any role for government. A responsible government ( one can dream….) can stimulate both supply and demand.

      • jandr0

        [A responsible government ( one can dream….) can stimulate both supply and demand. ]

        Dreamer.

    • sufferingsuccatash

      You are correct—what has happened is that government has turned over the economic central planning to a corrupt and criminal class of Wall St. bankers. The creation of money that has occurred to deal with this Great Depression 2.0 has gone to bankers who have allowed it to flow into supporting asset values in stocks and R/E. Government debt is inconsequential. It is private sector debt that is the anchor to economic growth. Government has failed to spend money to put people to work and the market sector (banking/corporation) are disinterested in productivity since the bulk of their money is derived from financial engineering of asset values and debt peonage. Smith uses the Zimb. example as a hyper inflation scenario, but does not explain that the money creation by the government accompanied the confiscation of farmland and the resulting loss of productivity associated with that lands redistribution. The simple answer to all of this is that government should have prosecuted the racketeers and crooks in the banking sector in 2008 and nationalized the banks. And then embarked on a huge public works program while allowing asset prices to find their market value in relation to wages.

    • jandr0

      [Never give some one a free lunch, is his excuse for being a stingy mean spirited old curmudgeon.]

      What a pathetic and false caricature of Smith’s position.

      [But you don’t hear him disparaging the rich who are rich by virtue of the fact that the system gives them the keys to the economy.]

      Probably because you have your hands over your ears while you are loudly singing La-la-lah-la-lah.

      I suggest you actually go read Smith’s writings.

      [No sir, but some stateless geek spending thousands to run algorithms on his computer farm and create stateless debt money, well now, this is something we can trust.]

      Well, sir, that last bit of yours (“something we can trust”) finally has a ring of truth to it.

      [No money that is not created by a transparent public monetary authority and administered in the public interest will survive the demand made on it.]

      Really? Argument by assertion is all that is required? So, tell us about the “transparent public monetary authorities” that “administered in the public interest” in the Weimar Republic, in Zimbabwe, and currently in Venezuela, and how they supposedly caused or are causing an improvement in the public interest.

      [If we can’t expect a reasonably just and accountable government at some time in the future, we might as well commit suicide.]

      Yep. If you expect that, then I suggest suicide is your best bet.

      Taken all together, your “argument” is nothing but a desparate, naive exhortation that “we have to believe in government.”

      In short: Bull, jadan.

    • batsond

      100%

  • Brockland A.T.

    With gold and silver moribund it makes sense that speculators would turn to crypto currencies. That said, why would one willingly embrace an obvious tool of the cashless society movement?