We are crumbling under thousands of billions of dollars backed by bad debt. Since the end of the Gold Standard in 1971, the world has lost track of what “money” is. We forgot that this invention was a tool to serve humanity, not to dominate it. Debt has become the shadow of a currency serving the wealthiest 0.1%. And while the economy has to unexpectedly slow down the time to stem a pandemic, the system has again seized up, with no possible escape route. We find ourselves as in 2008, to bail out the banks with the money of the people. A bipolar response that can be compared to a firefighter trying to put out a fire with water and oil at the same time.
Why are we witnessing a remake of the 2008 heist? Why is the taxpayer still going to checkout? Why use Bitcoin – a debt free currency – would have avoided this umpteenth crisis?
Donald Trump on brink of second bailout for banks
The US Central Bank (FED) has announced that it will print as much money as it takes: Quantitative Easing unlimited. “Whatever it takes“. $ 650 billion this week alone and some say the total could reach 5000 billion…
Behind the phrase “Quantitative Easing” – voluntarily unintelligible by ordinary people – there is something very simple: the central bank turns the printing press.
You see, in normal times, the State finances itself with the commercial banks by exchanging IOUs againstfresh money. The State then reimburses this debt over 5 or 10 years (sometimes 50 years, let’s be crazy) by adding the interests. Otherwise what good is it to be a banker… By the way, the States do not actually never repay their debt. They do “ roll their debt ” To put it another way, states perpetually make new loans to repay past loans. Plus the interest, which explains why the States must borrow more and more under pain of recession (Cf. Greece)…
This crazy headlong rush is not possible with Bitcoin. There is no bank that can multiply Bitcoins at will. The Currency Blockchain Satoshi Nakamoto is a decentralized protocol which set once and for all the number of Bitcoins that can be created (21 million). Miners are financially incentivized that Bitcoin should never be devalued via a fork wacky that would betray the very essence of Bitcoin.
In short, when a central bank does quantitative easing, it gives fresh money, created ex nihilo, to commercial banks in exchange for IOUs. Isn’t it simple? So simple that the mind is disgusted … In the middle, it is said that central bank buys debts.
We are witnessing today a remake of 2008 with one or two differences. The 2008 crisis came from the inability to repay home loans. Why ? Because the FED sharply raised rates from 1% to more than 5%! Millions of Americans who had taken out “variable” borrowing rates were caught by the throat. Note also that we reached the peak of conventional oil in 2008 and that the price per barrel was then $ 140, which forced many companies to poach. So many borrowers who also found themselves unable to pay their bills. There followed a chain reaction in the economy. A domino effect or, to put it more precisely, a vicious circle of declining consumption which wobbles confidence, curbs investment, generates more unemployment, etc. It’s here depression economic.
Now, in our modern system where every dollar, every euro in circulation, comes from a debt which must be reimbursed right in time. If a grain of sand comes delay repayments, the banking system gets flu. Sooner or later, ailing banks are running out of cash to manage day-to-day operations. So to prevent one or more systemic banks from going bankrupt, central banks flood them with fresh cash.
In 2020, the spark was not the criminal rate hike by the central bankers, nor a $ 200 barrel of oil, but one supply chain break with the shutdown of the world’s workshop: China. You only miss one spare part and everything is depopulated… Not to mention the non-payment of wages due to compulsory confinement. But the consequence is the same: debts are no longer paid on time while interest accrues …
There is something to worry about when looking at Uncle Sam’s recent unemployment figures:
Privatize gains, socialize losses
The other difference with 2008 is that Quantitative Easing is no longer just used to buy government debt but also the debt of multinationals. And the FED not having the right to buy private debt, this is the US Treasury (Ministry of Finance) which now acts as an intermediary!
The FED lends money to the US Treasury which then buys back the debts of the multinationals! To put it another way, the Trump administration is nationalizing the debts of multinationals. American taxpayers will therefore find themselves in first line in case of default.
That’s done. Now let’s talk a little bit about the debt of the multinationals, you will see, it’s scandalous. Thanks to accommodative monetary policies implemented by central banks in the wake of the 2008 crisis, multinationals were able to access even easier than before with bank credit. And what did they do with this money? They used it for buy back their own shares … According to Bloomberg, the rise in stock markets in recent years is due exclusively to these share buybacks.
Why do multinationals buy back their shares? Because the executive salary is indexed to the share price of their businesses. Redeeming shares (and destroying them) also has the mechanical effect of boosting earnings per share and therefore its value. It’s beautiful…
Share buybacks thus experienced a exponential growth these last years. More than 1000 billion in 2018 alonein the USA. 700 billion in 2019!
Let’s sum up to understand. Multinationals generate of debt to buy back their own stocks , artificially fueling the surge in stock markets. These debts are now being bought by the US Treasury, which will have to absorb the losses. if the multinationals can no longer reimburse (which will happen sooner or later, when the peak oil – planned for 2025 according to the IAA – will come explode production costsand put more than one business on the straw).
Currency-debt vs Bitcoin
Bitcoin is a currency debt free. This means that once in the economic circuit, she stays there forever.
No need to refund. This is not the case with the current currency which is always created from debt. Our monetary system underpins the need to constantly recycle money, that is to say the repay on due dates, without fail, then re-borrow in an endless inflationary cycle .
In a world where Bitcoin is the official currency, the little criminal game multinationals consisting of borrow from open bar banks to drive up the priceof their actions would impossible . You wouldn’t have prizes totally disconnected from realityor a stock market crash as soon as you stop working for a few weeks.
These stock market crashes are deals to print thousands of billions, water the debt bubblet AND, above all, nationalize the debts of multinationals . All this after their leaders and shareholders paid billions in salaries, bonuses and dividends.
Debt always benefits the same: those who are sit just belowfrom the liquidity tap. Those who own stocks get rich from debt. With this enrichment, they buy goods from others who in turn buy goods and, as money spreads in the economy, it creates inflation. The last one to receive this money (the furthest from the sector where the money was first injected) will not benefit from money creation because of the inflation that is generated in the meantime. This is the principle ofCantillon effect .
The debt is source of inflation for the poor and enrichment for those who drink directly from the source. To put it simply: running the money printing press (inflating the debt bubble, it’s the same) enjoy to those who own the capital (company shares) and impoverishesthose who don’t have it (the new generations).
Inflation has caused the dollar to lose more than 95% of its purchasing power over the past century. To illustrate, imagine someone who stashed a dollar under his mattress in 1920. By spending it today, his purchasing power would be $ 0.05. 5 cents … Whereas the one who kept his dollar in the form of a Ford share saw his purchasing power increase to $ 10 since the Dow Jones has multiplied by 10 at the same time.
If you have saved money and inflation is 5% per year, the purchasing power of your savings will decrease by 5% each year. If inflation is 5% a year and your salary increases by only 2%, you still get poorer by 3%.
The trillions of billions of Trump will impoverish us. Bitcoin repairs this injustice because it is not tied to debt. It cannot “depreciate” (over the long term) because there will never be more than 21 million. Impossible to create it with debt and make the taxpayer pay the bill once it explodes, for lack of sufficient economic growth (pandemic, peak oil, war, exhaustion of raw materials etc …).
Child of Satoshi, the alchemist who turned a cryptographic algorithm into gold.
I’m talking about monetary geopolitics, not shitcoins.