The next decade will be very interesting to watch.
We are going to see technological progress like never before. At the same time, the massive debt that is being held around the world, especially by governments, is going to cause major problems.
While many are watching the money printing that is taking place, the real challenge is the debt levels that exist. For a country like the United States, this is less of an issue since it can keep printing the world's reserve currency. That could create a problem except other countries are also expanding their currency.
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The situation is really bad for all those entities that do not own a printing press or ones that do not play on the world stage. This includes countries within the EU, developing countries, and states/provinces. These areas are holding trillions of dollars in debt that is going to be very difficult to service in the future.
Governments have two ways of generating money. They can engage in the various forms of taxation (including all their fees) or take on debt. This is the means by which all government entities are funded.
The challenge with raising taxes is that it harms overall productivity. Under these scenarios, the highest incomes earners end up leaving. They are the most mobile so they take the wealth elsewhere. Rush Limbaugh waged this battle with New York a number of years ago. Ultimately, he took his $33 million annual salary, moved his show to Florida, and saved himself the New York State income tax.
It is a situation that gets even worse in a digital age. In an era where entire companies can be run on servers, the idea of being in a particular geographic location becomes less important. Companies can set up their businesses anywhere in the world, likely opting for the ones with the lowest tax implications.
When the tax base erodes, this leaves only debt. Here we see the challenge of who is going to buy it. The next decade is going to be marked by a loss in confidence in government. We are already seeing some of the early signs. This means that investors are not likely to blindly keep buying the government debt that is issued. Thus, the entities will have to offer higher rates to get investors to take it on, making it more expensive to operate.
Ultimately, this feeds into greater inequality since it pushes more people into equities. A lack of confidence in government means that bonds take a hit. The flow of capital is easy to follow in this situation. When it moves out of one, the other benefits.
Until now.
We are seeing a third alternative emerging that, with growth, could be viable. In terms of the ability to close the wealth gap, cryptocurrency fills this need. By operating outside the system, it created a distribution mechanism that allows those who were on the outside of the present system to partake. Anyone can get involved in cryptocurrency and start to accumulate tokens. At present, there are many ways to do this, something that only will keep growing.
As we saw back in March, when the crapola hits the proverbial fan, people flee for safety. Capital flows into what investors feel confident in. This is really going to take on new meaning when some major countries start defaulting on their debt. When the likes of Germany, Japan, and the UK enter that realm, it is a totally different world.
Bitcoin introduced a revolutionary concept to the masses. For the first time, we had a legitimate currency that had no owner, was controlled by nobody, and operated, for the most part, completely autonomously. In fact, Bitcoin could be considered the first, major DAO. It is a network that is run completely by computers, located all over the world. Each day, the system operates without a hitch regardless of what is taking place.
Over the past decade, other cryptocurrencies followed this same path.
We are going to enter the next decade nearing a point where we see the collapse of government. Here again, cryptocurrency ecosystems stand to benefit. By experimenting with different governance models, we can see alternatives forming as the present system is collapsing upon itself.
The debt levels are unsustainable and central banks are printing money simply to buy some time. To a certain degree, they might be successful on this end. However, the underlying animal, debt, does not just go away. Servicing debt only works for so long if one is accumulating more of it. When things are expanding, it is possible to prop things up. When they turn the other way, watch out.
Bear in mind, this is going to be a drawn out process. There will be a lot of backlash from politicians and bureaucrats who try to defend what is already in place. To a degree, desperation is already setting in. Their goal is always control and, as the coronavirus shows, they are willing to go to any lengths to achieve this. Of course, as the global protests/riots are showing, people can only be bottled up for so long.
We can see how far the entire cryptocurrency industry came in just the past 5 years. The next decade will see a great deal more progress as we see more players entering the market. Networks are developing all over the place, offering people an option.
It is ironic but the Great Reset they are talking about might actually be that digital currency that the general public brushed aside for so many years.
As the old debt-based system starts to default, cryptocurrency is going to be there to step in.
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Watched an interesting episode of Kaiser Report where he had James Turk of Goldmoney.com on as a guest. He made an interesting observation and that is that what we call the dollar is really the Federal Reserve Dollar with all US money clearly marked as "Federal Reserve Note". By law the US dollar is 11.5 grams of gold. Should the dollar collapse and the US Congress reclaims their role as money printers and return to the gold backing of pre-1971 leaving Federal Reserve Notes behind in the dust of hyper-inflation then all debt created with Federal Reserve Notes would essentially become worthless in such a great reset. The return to gold with collapsing currencies has been the historic pattern for millennium. The new dollar would be based on Constitutional money not the scam brought into reality in December 23, 1913.
He predicts the collapse to begin in earnest within a 6 month period. Time will tell. Glad for my BTC (including all its children) and precious metals. Meanwhile the central authority continues to send me their inflationary currency as some bizarre prize for making it to my ripe old age. Spending it as quickly as possible on real assets.
P.S. Your post was a great read as always.
Fiat money is the same as a mortgage or car loan....when people take those out, they acquire debt after signing a note.
This means every USD printed results in the dollar having to be paid back PLUS interest. This makes it impossible to have the system ever square up and someone is always going to be caught holding the bag (bankrupt).
I would be careful about buying into the hyper inflation argument since we are in a deflationary supercycle.
That said, you metals will do well in 2021-2023 since we will see a run in commodities and food.
Those should do very well.
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Governments can do nothing and the growth in demand in cryptocurrencies will be natural. People will realize (although it is a little late for that) that crypts are the future and the way out of these eventual crises. It is going to be crazy to have mass membership of people buying everything they can.
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There are two catalysts to crypto adoption.
Those governments who increase taxation will see many citizens moving into crypto to avoid paying taxes. And those who print money as the US, will see their currency devaluate against crypto and citizens will move part of their assets there to cover their income.
All in all, I foresee a big demand for crypto.
I cant speak for all governments but, in the U.S., taxes are still owed even if crypto is used in the transaction.
So crypto as a way to avoid taxes could be problematic.
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Interesting read.
People have been loosing confidence in governments continuously over the past years. Hungary 1956, France May 68, 2011 England's riots ,more recently Greek's went for what was looking like a left wing party (Siriza) tired of the same two families ruling the country over the past 40 years only to go back to them.
How much has truly changed?
The Greek bond was communicated as an excellent buy in mainstream media not that long ago. Bankers are accumulating Bitcoin and I'm feeling they are getting ready to offer it to the same clientele accumulating government bonds, gold, stocks or any other institutionalised asset out there.
Every single hint of hope for changed has been slapped in the face as we are greedy self destructive creatures .
Bitcoin actual practical usage has been sacrificed and we are now talking about stock to flow and how accumulating more will make us future millionaires.
Deep changes are needed in our society in order to be able to move forward and I feel we are not there yet. Meanwhile, until we hit rock bottom as a species the motto still seems to be the same, get rich (for all the wrong reasons)or die trying.
if only more knew about this option of protest :)
The best form of protest is to opt out.
Cryptocurrency is rapidly becoming a viable alternative to the present financial system. Perhaps with two more years of development, we will be at the point where not only can a decent part of individual wealth can be stored in it but, we will see a good percentage of individual transactions taking place using it.
That will be a marked changed from today.
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is this in the same category as "steem will reach $100 by the end of 2018" ? :))))
Not quite but similar. :)
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well we all now how well that went
@taskmaster4450 Awesome post. Thanks.
Governments can create many ways to try to "stop" this digital trend, but they certainly will not succeed. They will resist, but the world will bring them to their knees and accept the new reality.
This is not just an opinion, it is a fact.
In my opinion, cryptocurrencies are not the solution to the crisis for governments, but they can be a store of value as gold for citizens. As you claim, money printing will lead to a devaluation of the value of fiats currencies, this is good for the US and EU economy for the following reasons:
In conclusion, governments have no intention of renouncing their monetary sovereignty because it is a means of holding the reins of the economy and relaunching it.
What has been explained so far is extremely simplified, if you want to go deeper read some books on macroeconomics (I studied on Blanchard).
Countries are starting to see how their currency can be manipulated and devalued overnight. Bitcoin and some other cryptocurrencies are simply a measure of demand. Not saying it is impervious to manipulation, but you can't just print new bitcoin to your heart's desire...
Great post! Keep spreading the word 😁
Yes, I totally agree with what is in this paper. I raise the best thumbs up for this writer. Because it is very easy for readers to understand. Yes, if a country only relies on debt and automatically raises taxes for the source of paying it. And I firmly believe that the debt is piling up and is just waiting for destruction. But we believe that only digital currency can be the solution. Thank you for writing and sharing this great article.
agreed time that people open their eyes up to what is happening
Interesting perspective...
Asi es amigo cuando todo este colapsado por esta gran pandemia a nivel mundial referente a las deudas, siempre el comienzo de algo nuevo es influyente y percevera a un futuro no muy lejano, gracias por compartir, saludos.