In my last post, Bitcoin Bashing, I covered what UBS chairman Axel Weber thought on crypto being a currency and today we will delve a little deeper into the modern state money and why I believe fiat has lost, it just hasn't worked it out yet.
The functions and properties of money have long been argued over, however, there are three functions that are well-known and all agree on.
Medium of exchange:
Money avoids the inefficiencies of a barter system when used to intermediate the exchange of goods and services. The reason it works so efficiently is its ability of comparing the values of dissimilar objects.
Measure of value
It is a basis for quoting and bargaining of value. Money acts as a standard measure of trade. It is necessary for developing efficient accounting systems as a unit of account.
Store of value
Money must be able to be reliably stored and retrieved and once retrieved, usable as a medium of exchange. The value of the money must also remain stable over time.
Arguably, inflation on our current money supply reduces its function as a store of value, however that is a discussion for another time. What we are discussing today is the fourth function, the hidden or unspoken function, the function of CONTROL. The Bank Secrecy Act was implemented in 1970 and with that flick of a pen, money was changed forever. It changed into a political tool to control who can receive it, who can send it and ultimately for absolute, utter and total surveillance of all financial transactions worldwide. With this development, all other functions became subordinate to this overruling function of control. Using money as a system of control corrupts the entire foundation of money until it no longer operates as a medium of exchange. Entire countries are being cut off from the world financial system if they do not comply with the best interest of the US and no one is safe whether you are a US citizen or from another country halfway across the world. Money no longer flows freely.
Christian Juebner, an expert of asset forfeiture laws in Australia and a barrister who has worked both for prosecutors and defendants, says the scope of the laws has evolved over time.
“With civil forfeiture…without any charges ever being laid, without any conviction ever being recorded, people still lose their property because the threshold to restrain property is so low, all it requires is reasonable grounds for a suspicion that certain property has been derived from certain prescribed offending.”
But then along comes something new, something that cannot be used as a form of control, cannot be manipulated, that will not be exclusive and will provide a means for anyone to operate outside of their corrupt, over-regulated, system of control. There is a new generation of people that are getting paid in crypto (just look at steemit) and are buying the necessary things to survive, like food and shelter, with crypto. They are completely outside of the system and as more and more vendors accept crypto-currencies the more and more this will become the norm. As the Governments of the world scramble to decide on what to do with crypto, crypto silently but surely becomes stronger and stronger and what do you do with a system that refuses to be controlled? You regulate the entry and exit points, that will be the first form of regulation, but it will ultimately fail. If there is no need to enter crypto, you are paid in it, and there is no need to exit crypto, you can buy what you need to survive with it, then regulation of those exit and entry points well become irrelevant.
In a way, Bitcoin's own success is slowing its acceptance as a daily currency. People believe if they hold onto it, it will make them millionaires, so they don't want to use it to buy a sandwich today when it could buy them a Ferrari in two years and that is where stability comes in. A crypto, in whatever form it looks like, needs to be stable or it won't be used and what we are seeing with bitcoin is anything but stability. As its popularity rises, so does its value and so does the percentage of people wanting to take profit, in turn, causing volatility.
Summary:
Crypto is here to stay, it will be regulated, the regulation will fail and once we have a stable crypto, we will see the mass exodus from the current economic system. I think the next ten years are going to be unlike we have ever seen in the history of the world before. Revolution's of old where violence was the only way will be replaced with the new revolution, the economic revolution that is propelled by crypto. So sit back, relax, fasten your safety belt and get on board the crypto-revolution
Bitcoin will destroy the banking industry.
Cyrptocurrencies and blockchain will destroy the entire financial industry, including insurance.
Financial institutions skim a bit off of every transaction. This is on top of them just printing money out of thin air. As cryptocurrencies mature, they will easily wipe out everything that a broker would do, with a simple app / smart contract.
Couldn't agree more my friend. thanks for reading.
G'day. Great post. Two points you make stood out for me:
Current fiat money has moved from "medium of exchange" to a "method of control".
and...
"so they don't want to use it to buy a sandwich today when it could buy them a Ferrari in two years and that is where stability comes in"
I've often wondered how cryptos could somehow be morphed to cover both spending ("medium of exchange") and saving ("store of value") without all the speculation and volatility??
Absolutely, money does not flow freely when that is one of the most important aspects
This is the million dollar question however we most certainly do have a store of value already, in fact, arguably one of the best stores of value we have ever seen. But as you say for a currency to be a currency it needs to be stable but we are in the most infant stage of crypto and that is causing so much volatility. Crypto is here to stay though, we just don't know in what form. I am extremely bullish on ETH yet it hasn't made the hugest gains in the last 3 months however it is the tech to beat.
Even though it's now a simple process, I wonder how many people actually use BTC as money as opposed to sitting on it?
I'm with you on ETH - what do you think of EOS? Very cheap at the moment but still heading south.
Not many now I bet lol, not with the potential that BTC could climb. The entire crypto market pales in comparison to the rest of investment world so what happens when they start jumping on board.. and they will, they have already started but they are treading carefully.
EOS - I must admit I haven't read the white paper on this one but it does nothing for me at this stage. I don't see a product yet, just an idea. That's why I'll happily invest in steem, you can see it, you can use it. It's real world, right now. Also Vitalik wasn't a fan.
Just waiting for someone to make a HODLCoin
Got one for everything else including beer and sex, so why not lol
Good blog! Printing machines keep a printin'
Thanks for reading
Very scary but informative.
Very true
That is insane that the house was seized for that reason. I just dont understand why we let government have this amount of control.
Cause we have created a world where as long as it ain't happening to us, we are fine with it.
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