Will Crypto Set Us Free from Excessive State Power Over Money?

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Boromir: It is a gift. A gift to the foes of Mordor. Why not use this Ring? Long has my father, the steward of Gondor kept the forces of Mordor at bay. By the blood of our people are your lands kept safe. Give Gondor the weapon of the enemy, let us use it against him!

Aragorn: You cannot wield it! None of us can! The One Ring answers to Sauron alone. It has no other master.

The Lord of the Rings

The power of big government is now bigger than it’s ever been.

Especially in financial markets…

Everyone — whether trader, investor or dare I say it, newsletter editor — hangs on every word the self-appointed financial elite say.

 Bitcoin buyer’s guide: everything you need to know to buy your first bitcoin today

No one even pretends it isn’t so anymore…

For example, JPMorgan just created the ‘Volfefe Index’ — the word ‘Volfefe’ is a play on an infamous Donald Trump tweet that stumped the world in 2018.

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Source: Twitter
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The index measures the market impact — the volatility — of Trump’s tweets.

Your chuckles of mirth may quickly die down when you realise that JPMorgan aren’t joking around here.

They explained quite seriously:

Trade and monetary policy have become an increasing focus for the executive branch, and everything from casual sentiments to seemingly formal policy intentions have been disseminated, globally and instantaneously, via this carefully scrutinized social media platform.

In response, a broad swath of assets from single-name stocks to macro products have found their price dynamics increasingly beholden to a handful of tweets from the commander in chief.

The ultimate power, the power over everyone’s wealth and standard of living, now lies in one man’s pudgy hands.

Not a ring, but a smartphone instead.

It’s not just Trump, he also has his horde…

Orcs and hobgoblins

There’s an entire ensemble of orcs and hobgoblins at work in their paper castles — the deliberately opaque acronyms that make up the world’s financial institutions.

The IMF, the RBA, the ECB…full of faceless people whose policy decisions make you exclaim WTF!

Over the past decade these institutions have worked together to throw out cash like confetti, they’ve given us negative interest rates, and basically done everything in their power to pump up the economy using their supreme power of money creation.

But they’ve overdone it. Instead of propping up the economy, now they are the economy.

This is bad news…

When you try to stop the natural ups and downs of the business cycle by raining down cash on everyone, you put pressure on the political cycle instead.

Populist politicians scramble to persuade the populace that only they can be trusted to use this power best. Which really means to reward supporters and vanquish enemies.

This battle for government favour plays out in the rise of extremism.

And as the disastrous lessons of the 20th century showed, both extreme right and extreme left result in the same bad outcome for most people brought under its heel.

Make no mistake, this is all a direct result of the loose monetary policies we’re living under.

But there is a way to fight back…for those willing to take it…

#6102 killed the gold dream

For decades libertarians thought they could fight the state head on.

Like Tolkien’s dwarves, they’d dream that gold would set the world free.

A return to stable money backed by the ancient metal. And in turn we’d end up back at a monetary system free from the interference of big government and all the problems that can cause.

But despite the best of intentions, the gold bugs were outwitted.

In 1933 US President Franklin Roosevelt issued executive order #6102. It made private ownership of gold illegal and people had to hand over their gold to the government or go to jail.

This draconian law lasted until 1975.

By then the government had cornered the gold market.

Today governments around the world own a lot of the ‘above ground’ gold. And like Smaug in his lair, they guard it very carefully. There’s a reason security is so tight at Fort Knox.

Central Banks have even been accumulating more gold since 2010.

Now gold may still be a good investment. Some think this government buying is a sign of a world gradually going ‘back to gold’.

The gold price is on the up. And some governments — particularly the adversaries of the US, like Russia and China — may favour a return to gold over the US dollar.

But in my opinion, gold will always be under government control. It’s not going to be the tool to set us free from excessive state power over money.

That will be something completely different…

Cast it into the fire

From Nic Carter’s ‘A Most Peaceful Revolution’:

Just as sixteenth century Protestants began to question the official doctrine of indulgences and the scope of the Pope’s authority, so too came to wonder a ragged bunch of nerds and cypherpunks: is inflation really necessary?

In a free market economy, should central banks really have the right to arbitrarily set the price of money?

Should the State really have full discretion over one’s saving and spending? Should savers really be forced to trust banks (and ultimately, the taxpayer) to redeem and honor their savings? What does an entry in a bank’s database really mean?

This is how the idea of bitcoin came to be…

A ragtag bunch of technologists asking the big questions about what money actually was and who really controlled it.

And they agreed in many ways with their gold-bug and libertarian forerunners. That we needed money to be free from state power.

But their solutions came with the power of technology that makes it vastly superior to gold in so many ways.

Forget everything the mainstream tells you about cryptocurrencies.

By now you should know the mainstream news is mostly an establishment mouthpiece. The very people who control money today and have most to lose if this system dies.

In my opinion, bitcoin and cryptocurrencies are the only chance to take that power from them.

In fact, in developing countries, it’s already helping to do just that…

Recent findings from Raskin, Saleh, and Yermack evaluating currency crises in Turkey and Argentina confirm that the cryptocurrency has its most immediate applicability outside the developed world (my emphasis):

At first blush, Nakamoto’s vision did not pan out, except insofar as a new option was created that a majority of people choose not to use.

When one investigates the developing world, however, the story is a little different. […] [Turkey and Argentina] are the first currency crises since the creation of bitcoin, and therefore they offer an opportunity to investigate the impact that alternative digital currencies have on unstable sovereign currencies. Extrapolating out, this may show that Nakamoto’s vision has come to fruition.

Although private digital currencies have not replaced the dollar, their mere existence may have a counterfactual impact in that they exist as a check on both fiscal and regulatory policy.’

That is amazing!

The very existence of bitcoin is already creating discipline in fiat systems of money through its sheer presence! Already it’s doing its job, whether it has achieved widespread adoption yet or not.

And you can help that cause today.

By buying even $50 or $100 worth of bitcoin and simply holding onto it, you’re sending the powers that be a strong message.

That you see what they’re doing and you’re ready to fight them if need be.

Here’s the thing…

Bitcoin doesn’t need mass adoption to succeed. It just needs a bunch of forward-thinking individuals to keep it ‘at the ready’ as a check to monetary power.

You can literally help cast the state controlled power of money ‘into the fire’ for good…

Good investing,

Ryan Dinse,
Editor, Money Morning

PS: Cryptocurrencies are just one aspect of huge changes coming to the financial world. I think in the next few years you’ll see once in a lifetime changes take place. Find out how you can profit here.

About Ryan Dinse

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately…

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