The End of Central Banks and the Crypto Currency Revolution

While cleaning up my desktop a week ago, I found something I wrote back in February 2015. I had a little giggle, and thought you might too. Have a look:

A week ago yesterday, the Reserve Bank of Australia did the unthinkable. It dropped the cash rate to a never before seen 2.25%.

One of the commentators over at The Age called this move a “surprise”.

However, if you’ve been paying attention, there was nothing surprising about it.

All the central power’s favourite economic numbers are down.

Wage growth has slowed to 2.6%, the slowest pace since the late 1990s. The consumer price index had the lowest increase in several years, with underlying inflation coming to 2.25%. While house prices were up, consumer spending was down — even with the crude oil price falling to its current US$56 per barrel.

So, hoping to fix these numbers, the RBA decided to cut interest rates.

There, she’ll be right mate.

Ah, weren’t we so naïve back then? Interest rates at never-before-seen levels of 2.25%. Since then, the Reserve Bank of Australia hammered the cash rate all the way down to 1.5%. Also a never-before-seen low.

Yet nothing’s changed for the better.

Today, wage growth is at new lows of 1.9%. That’s below consumer price inflation, running at 2.1%.

All this tweaking with interest rate policy has done nothing.

The problem with central banks is that they call it ‘managing the economy’, when in reality it’s economic manipulation.

The power central banks have over asset prices is enormous. What appears to be a simple up and down interest rate movement is far more complex. Centralised decision-making has left us ‘trapped’ in a banking system that benefits governments but robs wealth from the people.

But what if we weren’t part of this system?

The crypto currency revolution

Bitcoin, the most well-known cryptocurrency, caught the mainstream off guard.

The idea was simple. A monetary system without a ‘trusted’ third party. A digital currency that can’t be controlled, manipulated or printed; one whose value is determined by the market alone — the opposite of the fiat currency system we have today.

Australian banks and governments continue to distance themselves from any digital currency. They label them as ‘untrustworthy’ and ‘volatile’. Oddly enough, you and I would probably use those same words to describe the banks and government.

Perhaps cryptocurrencies aren’t unstable. Perhaps, instead, they are just working out their place in fiat money world.

Bitcoin price index

Source: CoinDesk

Click to enlarge

The price rise in Bitcoin in a few short years is incredible. And that’s exactly why governments and central banks warn you that cryptocurrencies are for ‘crooks, charlatans and people who lurk in shadows’.

However, I see it differently. Money that operates between two parties alone liberates us from the oppression of fiat money.

Cryptocurrencies have the power to free us from the tyranny of central bankers.

But whether Bitcoin replaces the monetary system isn’t the point. What matters is that it has already challenged that system.

This needed to happen.

Think of it like this: Tesla Motor Inc. [NASDAQ:TSLA] first launched its Roadster in 2006. Was there a market for a pure electric vehicle? No one knew for sure. Yet there was an idea that people wanted something else…

Less than a decade later, Tesla challenged the offerings of carmakers globally. Now, every major car manufacturer has an electric model.

Tesla challenged and changed the market.

Bitcoin is the first mover in cryptocurrencies.

This manipulation-free currency has many questioning their faith in the fiat money system and the dominance of the central banks.

Cryptocurrencies will become more powerful as more people learn about and use them, and their success will put pressure on central banks to leave the monetary system to its own devices.

Sam Volkering, editor of Revolutionary Tech Investor, tells me there are over 800 cryptocurrencies available today. However, he says that while Bitcoin was the first mover in the crypto space, there are greater investing opportunities ahead outside of Bitcoin.

Yes. I do mean ‘investing’. Rather than being a fringe idea that gets your money out of the banking system, cryptocurrencies are slowly becoming legitimate investing options.

As Sam explained to his subscribers last week:

We remember people thinking bitcoin at US$200 was expensive. Heck, we were one of those people at the time. But that was our “traditional” finance brain speaking. Our gut told us this was transformational. It was a revolution — and that’s exactly what bitcoin is.

It’s easy to sit back and think you’ve missed the boat. The incredible price rises these cryptocurrencies have already enjoyed are hard to ignore. But the potential future gains are far greater than what we’ve already seen.

It’s gaining ground among governments. It’s got big business on board. It’s already showing what it can achieve. And its development community is pushing ahead with updates and improvements to the network.

And Sam has his eye across far more than Bitcoin. As he told me, with cryptocurrencies still in the early-stage growth phase, it’s not too late to get onboard one of the fastest-rising asset classes of the 21st century.

Stay tuned for more on that from Sam next week.


Shae Russell,
Editor, Strategic Intelligence

Since starting out in the financial markets over a decade ago, Shae has extensive experience across various aspects of the industry. Shae cut her teeth in the derivatives industry, teaching clients basic trading techniques with technical analysis.

Joining Fat Tail Investment Research eight years ago, Shae has worked across a number of publications, such as Australian Small-Cap Investigator, Gold Stock Trader and Microcap Trader. She’s spent the past two years however, honing her macro analysis skills alongside Jim Rickards, showing Australians how to invest and profit form global macro trends.

Drawing on her extensive experience, Shae is a contributor to Money Morning, and lead editor of sister-publication Markets & Money, where she looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

Money Morning Australia