Field Testing Crypto

CANADA

The recent debanking of protesters by the Trudeau Government in Canada this month has been a demonstration of the sort of tactic that crypto is intended to solve. While the Prime Minister may feel all powerful in having the ability to take away the livelihoods of people who disagree with the vaccine mandates, he has only created a new market of people who would explore cryptos. By pushing people into the margins, governments are going to find that the margins have been preparing for this day.

RUSSIA

Russia has been on the fence with regards to crypto. Yes, it's legal. No, it's not legal. It's somewhat legal. Recently, all of that has been settled. Russian banks are directed to provide crypto services to the public. The timing is suspicious given the actions in Ukraine.

Can you imagine what happens if NATO countries try to impose sanctions on Russia? Normally, this would severely impact the citizens of the sanctioned nation by limiting their ability to purchase foreign goods and services using the SWIFT banking system. However, having the legal means within Russia to use crypto, the more Russia is squeezed, the more their citizens benefit. I don't have all the details on what Russians can do with crypto. They may still be prohibited from using crypto to buy goods and services. But, does that mean they can't buy Euros or Dollars with their Bitcoin? At the very least, Russian citizens will be able to count on the safety of their savings.

EL SALVADOR

The hype has died down on El Salvador recognizing Bitcoin as legal tender. This was obviously a major milestone. The reason why this was such a massive move is that the World Bank and International Monetary Fund have a tendency to trap developing nations into unfavorable loans that position them to legally extract the wealth of those nations. This sort of thing is laid out in Confessions of An Economic Hitman.

By creating an alternate legal tender, El Salvador has opened up another source of capital for the nation. By buying Bitcoin from citizens who want more stable dollars, the Government of El Salvador is building up collateral that can be used to source loans from other providers than the IMF. The advantage of this is that the loans are collateralized by the Bitcoin, not Salvadoran natural resources. Worst case scenario, if El Salvador defaults on the loans, they lose their Bitcoin. The traditional way is that they would lose a portion of their exports and natural resources used to collateralize the loan. In this case, Bitcoin is a buffer between the predatory bankers and their livelihoods.

The Bigger Picture

The bigger picture in all of this is that crypto is in the process of being field tested. We do not truly know what kind of prosperity is possible for developing nations when they are freed from having to collateralize their natural resources. For example, imagine if in African nations the government could have collateralized Bitcoin for funding to pay for infrastructure rather than the oil beneath their feet. The governments can be trusted to mismanage the money. But, at the very least they would still have oil and some infrastructure rather than no oil and infrastructure they can't afford to maintain. What happens in El Salvador can illustrate what other developing nations can do without mortgaging their futures.

Something else that El Salvador is doing, besides skirting around the international money cartel, is that they are demonstrating, at a macro level, what a two-currency system can do. An inflationary money supply has its problems. Deflationary money also has problems. When we were on the gold standard, the problem was that the money supply was supposed to be representative of the the gold supply. But, it could not work. Every bank loan creates money out of thin air without creating more gold to back it. Money was supposed to be representative of the gold supply.

The logical step they took was to decouple money from the gold standard. They introduced a purely inflationary monetary system. It never occurred to them to have a dual money system. One inflationary system to be able to provide liquidity as needed. And, a deflationary system that could maintain or increase in value while waiting to be put back to work. Rather than have one money that serves two opposite purposes, we need two money systems that serve those purposes. Fiat is good for spending, for accounting, and for playing hot potato. Deflationary money is good for parking wealth.

The problem we often see is that as hard times come around, people stop spending money. They park it just in case they will need it. If, instead, they convert it to something harder than cash, that money is free to flow through the economoy whilst the hard money sits on the sideline to be converted back to cash. Velocity is not compromised as cash is kept out of savings accounts. El Salvador could be that economic lab that demonstrates what a dual-currency system can do.

And, finally, what is war like when money can't be stopped? Prior to World War I, nations dealt in gold to finance wars. The war could go on so long as there was money in the treasury, the exception being the British, who were able to shrug off the gold standard based on their reputation for honoring debts. Napoleon, on the other hand, was forced to deal in gold and silver precisely because of reputation (see British and French Finance During the Napoleonic Wars ).

It was during these times that the Rothschild banks were able to amass great wealth. In ways similar to Bitcoin, the Rothschilds were able to finance both sides of the wars in Europe. Now, imagine what happens to crypto when both sides of a war need it to finance their international trade without obstruction from the SWIFT system. Suddenly, everybody in the world who holds crypto is profiting from conflict, not just a select few.

What happens when tyrannical governments cannot keep pace with the funding received by their opposition with no way to block it?

Many of the things we see happening are unrelated. But, they are unified in that they are field tests of what is possible when capital cannot be controlled. Keep watch of what works and what does not work.

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