What has been happening more than anything in the last century, and what most people haven’t caught on to yet, equals to
Prohibition of Gold
Due to the pressures of economic growth, the Federal Reserve had to find a mechanism to increase money velocity in 1913, which necessitated the creation of debt. Gold was an obvious choice as hard money in the 20th century, and paper gold certificates were manufactured to keep up with the economy.
However, as time went on, the Federal Reserve’s deliberate ignorance resulted in the disastrous expansion of debt (so-called “printing money”), and by 1933, critical circuit breakers had been tripped. As a result, the Federal Reserve issued Executive Order 6102, making gold possession unlawful. Gold was taken, IOUs were rendered worthless, and trust in central banks was shattered.
Almost a century later, gold repatriation — a plan to return gold stashed outside the home country back home – has never been more popular. Austria, the Netherlands, Germany, Venezuela, and other countries aimed to bring back their gold reserves with more or less success. Paper gold (IOUs) is not reliable when trust gets diminished.
Confiscation of funds
As the United States, Japan, and the European Union blocked Russia’s central bank from accessing billions of dollars in foreign reserves (as Afghanistan had previously done), its SDRs and SWIFT network access dwindled, and the trustless payment network’s deflationary pressure grew. With the benefit of hindsight, economist Adam Tooze told us,
Rights Have Been Abolished
Last February, the Bank of Canada froze the bank accounts of peaceful protestors with the flick of a button, without the need for a court order and with legal immunity. Governments can deploy war measures (the Emergency Act) on anyone who is suspect enough, regardless of the cause, as the world has seen.
If you talk against us, your money isn’t really yours.
The Death of Cash and the Birth of CBDCs promises us that neutrality, privacy, and security will be dead and gone. As the globe continues to experience untrustworthy conflicts and tensions, desire for a neutral payment network grows. Until then, take care.
Trust Has Been Shattered
The Bretton Woods system – the rules for commercial and financial ties – was formed when World War II concluded, with the dollar linked to gold and other fiat currencies fixed to the dollar.
However, after the FED’s intentional stupidity in creating unscaled debt, French President Charles de Gaulle openly opposed the U.S. and its constructed financial system – the contradictory trinity – in 1965 (so-called Triffin dilemma).
When a result, in 1971, as the United States’ debt default loomed, a new Bretton Woods system – Bretton Woods 2 – was founded. As a result, the Nixon shock effectively transformed commodity money into fiat currency, with the dollar being “pegged” to the black gold – petrodollar system.
Years passed, and the world was able to achieve so-called “peace” by mutual assured annihilation (threat of nuclear war). Unfortunately, because the Federal Reserve had to keep “creating money” (QE) to pay for the U.S. debt, the uncontrolled debt creation spiraled out of control. Surprisingly, 40% of all U.S. dollars in circulation were created in the last two years, and as IMF head Kristalina Georgieva puts it,
Without a question, the United States has proved its ability to change the rules of the game in its payment network, paving the way for Bretton Woods 3. This latest variant of the Bretton Woods system means that governments would prefer holding commodities and gold over securities (U.S. Treasurys), SDRs, FX reserves, and so on, bringing the world back to commodity money once more.
A New Beginning
To transact in dollars requires to put faith into the most saleable and liquid global currency, the petrodollar. As a result, the dollar is essentially a payment network — it’s the most convenient way to move money around the globe.
However, as the U.S. currency becomes increasingly armed, foreign countries’ national financial defense will become a top priority. The single solution for vetoed countries (e.g., Afghanistan, Russia, the Middle East, Africa, etc.) would be to avoid dollar payment networks (U.S. Treasurys, international agreements, etc.) and instead switch to a neutral payment network that is secure, transparent, censorship-resistant, free of counterparty risk, and has a stable monetary policy.
Due to technological inadequacies, gold, while a great instrument of storage of value, failed as a final settlement instrument (high-cost transfer, prehistoric verification, counterfeited gold, etc.). As a result, central banks required gold certificates in order to improve money velocity.
As a result, central banks established various credit instruments (IOUs) to fundamentally accommodate the intensity of wealth creation, which, at least in the Bretton Woods system, goes hand in hand with the production of additional debt. Unfortunately, the central planners became the largest looters of the nation’s wealth over time as a result of the FED’s institutionalized irrationality.
To put it another way, hard money is a requirement for global prosperity. The government-issued fiat system, which is not backed by tangible assets, has served us well for nearly a century and has brought us to the world’s poorest countries. When trust is lost, the system collapses, resulting in de-globalization, devolution, and a demand for neutral settlement networks around the world.
As a result, and as a first mover, the world’s digital era now has a neutral payment network with a limitless money velocity and the role of ultimate settlement: the so-called Bitcoin network, physical money in the form of digital energy.
Technology (e.g., the industrial revolution, steam engines, trains, automobiles, the internet, decentralized technology, and so on) alters the world and develops new things for the future that will not only be different, but also better.