The Slow Extinction of National Money and Fractional Banking
The old elites are facing a two-front war.
It’s strange that I still hate getting electronic bills on email. There’s something comforting about pilling up a stack of paper bills stuffed in envelopes. Once paid they make there way to another pile of paperwork which accumulates in a drawer, or file folder somewhere, never to be looked at again. There’s something about these paper bills that just make me feel like a part of the real world.
Though I’m beginning to understand the logic and organizational possibilities of electronic bills, it has taken years for me to accept the parting of ways with the low resolution world in which I grew up. The old man at the bank filling out his deposit slip and balancing his cheque book comes to mind when I think about it.
Damn. Am I that person now? Not quite yet.
The world is suddenly full of excitement and hopeful expectations. Trump is making America great again and all the right geopolitical chess pieces seem to be moving in the right directions. Even North and South Korea will be participating in the Olympics under one unified flag. Mind-blowing stuff to be sure. But will it last? I think so.
The Anglo-American establishment golems are running from the light of a world which is no longer afraid of them. Some understood the change that was coming and realigned themselves beforehand to ensure their wealth and families would have recourse in the new world. This process of change will take years and maybe even a few generations, so others may still have a chance to right some wrongs.
In the meantime we will witness once powerful icons and idols fade into a dim forgetfulness. They will lash out at the world and spew fear based venom as they retreat into the shadows. The Pope is now entering this phase with comments about nuclear war and World War Three. It’s almost sad, like the old man standing in the lineup at the bank, waiting for his turn to see the teller, while people quickly come and go from the automated teller just inside the doors, completely oblivious of his existence.
It has always been my contention that the US dollar would not collapse and cause widespread economic and financial destruction. That is still my position. But what I do see is the slow erosion of paper money as it rots and blows away upon the winds of technological change. The comparison between fiat currency and cryptocurrencies are as varied as they are accurate.
Some state that fiat, like dinosaurs, have become too heavy and will collapse under their own weight. Some make the comparison that fiat currency is like a horse and buggy compared to the cryptocurrency race car which is being unleashed. Others use the snail mail and email comparison which we touched on above. All are accurate reflections of the fate which will soon be bestowed upon the increasingly irrelevant fiat money.
To be sure, the Federal Reserve, and other central banks, will be looking at converting national currencies into digital money. But that is only half of the problem. How do the traditional centralized institutions remain functional in an increasingly de-centralized world?
Is there room for both centralized and de-centralized processes in a new multilateral world?
Multilateral is a word and concept which we have explored thoroughly here on POM. National currencies were never going to be the vehicle for the new multilateral world. That much was clear. There was always going to be the Special Drawing Right (SDR) multilateral asset, or some combination of regional Optimum Currency Area assets, like the test model euro, which would take over the responsibilities of the US dollar and other national reserve currencies.
You see, the imbalances which are inherent in the use of national money on an international scale were always going to cause problems. Triffin Paradox aside, nations like America and England, and the establishment cults which they bred, were always going to resist a multilateral change, as it would remove the destructive power they welded and whipped with the international use of national currencies in reserve capacities.
The development of blockchain technology and cryptocurrencies has removed this power through a structural de-centralization process which these dusty old elites are now attempting to mold to their own centralized process. But it will never work because they are facing a two-front war. Not only are fiat currencies threatened by the blockchain, but the very foundation of modern economics and finances is also having its foundations eroded.
This is of course the fractional banking system which creates all money through the issuance of debt. As we have explored many times in the past, real wealth is the accumulation of human time and labor. The fractional banking system, in conjunction with the use of fiat currency, has leeched wealth away by forcing human time and labor to be accumulated in a debt-based negative wealth system.
Imagine going to work and getting paid on the blockchain by the second in real-time. No more waiting two weeks for the payroll deposit. No more cashing a cheque. No more free interest for companies as they wait the two weeks to pay you. Your crypto-wallet just accumulates your time and labor which you provide to someone else as a service, for which you in turn are remunerated in real-time.
Kinda wow, right?!
Nations, for as long as they even stay relevant themselves, will use a centralized version of blockchain based cryptocurrencies. Ripple XRP is one of these, which we covered in the previous post. But the de-centralized nature of the blockchain will ensure that governments will be unable to stop the peer-2-peer based technology.
Like the large dinosaurs who ate their food supply and eventually collapsed from being so heavy, or slowly starved to death, governments and national money will follow that same pattern.
There’s no needs to panic. There are still people, like myself, using snail mail. The overlap between both worlds will last for many years before the old simply just disappears quietly into the echo of the past.
The people of the future will not organize themselves around ideologies and centralized governance structures. The development of blockchain will have more of an impact on the existing world than the Gutenberg printing press did. Keep in mind that the printing press, and the non-Latin Bibles which were printed and distributed, fundamentally changed the control the Catholic Church had over the world, and directly led to the Protestant Reformation.
The central banking system developed as a response to the Reformation, and was used as a means to reclaim much of the wealth which the Church lost. Now we have blockchain technology which is making both central banks and ideological governments obsolete.
The disorganized masses are beginning to re-organize themselves around something new, which is presenting the old elites with a two front abstract war. Exciting. – JC
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JC Collins can be contacted at firstname.lastname@example.org