“It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford “What I recommend is relentless propaganda all day, every day. Pump. Pump. Pump. You were born to shill, do it... there is no bad news for Bitcoin. There has never ever been anything bad for Bitcoin. It’s all good for Bitcoin…. It means that all public-facing propaganda, anything you’re broadcasting, should be relentlessly positive because there’s no bad news for Bitcoin. There’s only good news for Bitcoin.”
Terrific piece. I think there is a significant misunderstanding (even amongst the informed) about fiat currency vs precious metal-backed currency vs crypto currency (in which I don't speculate or invest).
The reason central banking (fiat) currency is a scourge is that it is created out of debt (i.e., it is loaned into existence with an interest component to it), not that it is not backed by gold. If I'm a central bank and I loan you $10 and charge you 10% interest, in one year you will owe me $11. The problem: that $10 that I lent you is the only money in existence, so how are you going to pay me back $11? Answer: you are going to borrow more money from me (say $20) to pay off the initial loan plus interest. Thus, the inflationary vortex (or downward vortex depending on your perspective) begins. As a central bank, I did nothing except to pull out my printing press, create money out of thin air, and loan it to you at interest. It is the debt component (the interest) that makes me wealthy and powerful and the masses increasingly poorer. Under our current central banking model, the level of debt is always greater than the amount of currency in circulation. If all debts were paid off - impossible because of the interest component - there would be no money in circulation.
Money does not need to be backed by a precious metal - actually that is foolhardy. Fiat currency is superior for many reasons; however, it needs to be introduced debt-free into the economy (i.e., produced and spent into the economy by the government.) That way, it is an aid in the conduct of commerce - a true median of exchange, an alternative to barter - not a lien on it. I know that anything a government touches usually never ends well, but there is a way to accomplish this end. And we will never, ever have to hear about the U.S. government being $30 trillion in debt ever again. The debt will almost completely vanish over the next 30 years and ~88% will disappear over the next five years.
Simply:
1. Have Congress repeal the Federal Reserve Act of 1913 and the National Banking Act of 1863 and as amended in 1864.
2. Move the printing press from the now defunct Federal Reserve to the U.S. Treasury. The Treasury will produce U.S. Government Money instead of Federal Reserve Notes. The Treasury will also oversee the commercial banking system in the United States.
3. As the government debt comes due in the form of maturing treasury securities, pay it off completely, principal and interest, with U.S. Government Money (from the printing press or stoke of a computer - 'out of thin air') instead of rolling it over.
4. As the debt is monetized (i.e., paid off with cash), money will flood the banking system. To offset this inflationary dynamic, the U.S. Treasury will gradually increase the fractional reserve requirement for commercial banks. When all the debt is retired, the fractional reserve requirement will be at 50%, up from its present 10% - actually there is technically no requirement since the pandemic but 10% is pretty much what banks currently adhere to.
5. Remove the Federal Reserve Notes from circulation in the same manner old $100 bills are retired: by replacing them when they enter the banking system.
6. To keep the per capita money in circulation constant, run a deficit when the population increases; run a surplus when the population decreases.
Obviously, those in power (the central banks) will never stand for this idea, but this is the answer to a fair and honest money system.
Reading this just days after the collapse of FTX makes you wonder. Kudos to Doomberg and team on this piece. You can't bat a thousand, but heck y'all got this one right and saw the writing on the wall ahead of the pack. Cheers to many more!
Love your stuff. A few issues here. 1) Maxi’s don’t represent bitcoin, they are to bitcoin akin to what a fanatical doomsday cult is to a religion 2) It’s not fair to say bitcoiners view fiat and central banks as “evil”, I think we just realize that we’re not at the end of history and we recognize that this Keynesian/fiat experiment is doomed to fail because it requires central banks to endlessly pump in liquidity to keep the entire system afloat which leads to the devaluation of currency and concentration of wealth. It’s nothing personal, I think central bankers are doing the best they can to keep a bus with no brakes from going off a cliff but ultimately the cliff is coming and well… the bus has no brakes. 3) I think your comment that fiat works just fine for you comes from a place a of privilege, you are one of the lucky few with access to the dollar and America’s relatively stable and incorrupt financial system. Do you “need” bitcoin? Absolutely not, does the majority of the world who have no access to a stable currency or trustworthy banking system need bitcoin? Absolutely.
Great article and is prescient given recent regulations. One point is that you quote the Market Cap of Bitcoin. While with public stocks or circulation of fiat money this has a precise definition, with crypto this is somewhat meaningless. It doesnt represent the real value of money invested, and it's also significantly inflated by other stablecoins that are artificially created (i.e. Tether).
Really great article and especially nice work seeing the symbolism in Sam Bankman-fried. Another interesting one is Jeffrey Skilling.....Jeffrey's Killing.
Wow…. Right on the money
https://www.washingtonpost.com/nation/2022/12/17/sbf-prison-bahamas/
Home to roost:
https://www.washingtonpost.com/nation/2022/12/17/sbf-prison-bahamas/
Terrific piece. I think there is a significant misunderstanding (even amongst the informed) about fiat currency vs precious metal-backed currency vs crypto currency (in which I don't speculate or invest).
The reason central banking (fiat) currency is a scourge is that it is created out of debt (i.e., it is loaned into existence with an interest component to it), not that it is not backed by gold. If I'm a central bank and I loan you $10 and charge you 10% interest, in one year you will owe me $11. The problem: that $10 that I lent you is the only money in existence, so how are you going to pay me back $11? Answer: you are going to borrow more money from me (say $20) to pay off the initial loan plus interest. Thus, the inflationary vortex (or downward vortex depending on your perspective) begins. As a central bank, I did nothing except to pull out my printing press, create money out of thin air, and loan it to you at interest. It is the debt component (the interest) that makes me wealthy and powerful and the masses increasingly poorer. Under our current central banking model, the level of debt is always greater than the amount of currency in circulation. If all debts were paid off - impossible because of the interest component - there would be no money in circulation.
Money does not need to be backed by a precious metal - actually that is foolhardy. Fiat currency is superior for many reasons; however, it needs to be introduced debt-free into the economy (i.e., produced and spent into the economy by the government.) That way, it is an aid in the conduct of commerce - a true median of exchange, an alternative to barter - not a lien on it. I know that anything a government touches usually never ends well, but there is a way to accomplish this end. And we will never, ever have to hear about the U.S. government being $30 trillion in debt ever again. The debt will almost completely vanish over the next 30 years and ~88% will disappear over the next five years.
Simply:
1. Have Congress repeal the Federal Reserve Act of 1913 and the National Banking Act of 1863 and as amended in 1864.
2. Move the printing press from the now defunct Federal Reserve to the U.S. Treasury. The Treasury will produce U.S. Government Money instead of Federal Reserve Notes. The Treasury will also oversee the commercial banking system in the United States.
3. As the government debt comes due in the form of maturing treasury securities, pay it off completely, principal and interest, with U.S. Government Money (from the printing press or stoke of a computer - 'out of thin air') instead of rolling it over.
4. As the debt is monetized (i.e., paid off with cash), money will flood the banking system. To offset this inflationary dynamic, the U.S. Treasury will gradually increase the fractional reserve requirement for commercial banks. When all the debt is retired, the fractional reserve requirement will be at 50%, up from its present 10% - actually there is technically no requirement since the pandemic but 10% is pretty much what banks currently adhere to.
5. Remove the Federal Reserve Notes from circulation in the same manner old $100 bills are retired: by replacing them when they enter the banking system.
6. To keep the per capita money in circulation constant, run a deficit when the population increases; run a surplus when the population decreases.
Obviously, those in power (the central banks) will never stand for this idea, but this is the answer to a fair and honest money system.
Reading this just days after the collapse of FTX makes you wonder. Kudos to Doomberg and team on this piece. You can't bat a thousand, but heck y'all got this one right and saw the writing on the wall ahead of the pack. Cheers to many more!
Love your stuff. A few issues here. 1) Maxi’s don’t represent bitcoin, they are to bitcoin akin to what a fanatical doomsday cult is to a religion 2) It’s not fair to say bitcoiners view fiat and central banks as “evil”, I think we just realize that we’re not at the end of history and we recognize that this Keynesian/fiat experiment is doomed to fail because it requires central banks to endlessly pump in liquidity to keep the entire system afloat which leads to the devaluation of currency and concentration of wealth. It’s nothing personal, I think central bankers are doing the best they can to keep a bus with no brakes from going off a cliff but ultimately the cliff is coming and well… the bus has no brakes. 3) I think your comment that fiat works just fine for you comes from a place a of privilege, you are one of the lucky few with access to the dollar and America’s relatively stable and incorrupt financial system. Do you “need” bitcoin? Absolutely not, does the majority of the world who have no access to a stable currency or trustworthy banking system need bitcoin? Absolutely.
Great article and is prescient given recent regulations. One point is that you quote the Market Cap of Bitcoin. While with public stocks or circulation of fiat money this has a precise definition, with crypto this is somewhat meaningless. It doesnt represent the real value of money invested, and it's also significantly inflated by other stablecoins that are artificially created (i.e. Tether).
More on market cap and crypto
https://medium.com/blockchain-review/why-market-cap-is-a-meaningless-dangerous-valuation-metric-in-crypto-markets-8deb78c50995
Data on how Tether inflates the market cap of Bitcoin
https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3
Wow, Prof K gave you a plug in his Op-ed piece on Bitcoin ... nice work!
Really great article and especially nice work seeing the symbolism in Sam Bankman-fried. Another interesting one is Jeffrey Skilling.....Jeffrey's Killing.