Our current/old system

The last systemic or significant change in our Federal Reserve’s monetary policy occurred in 1971, when gold backing to our dollar was completely removed, and the United States transitioned to a centralized, completely fiat monetary system.  While president Nixon is generally attributed for this action, in reality it was the previous decade’s government spending for wars and public social programs that forced this decision.

Since 1971, budget deficits have grown as national debt has exploded to what recently is now generally recognized by everyone to be at an unsustainable level.  The official national debt (according to the National Debt Clock) at $36.3 trillion excludes the nation’s unfunded liabilities exceeding $222 trillion, which represents approved government programs for which no financial provisions have been made.  In addition, just the present interest costs on our official debt alone exceeds $1 trillion per year, which is larger what ironically is called our defense rather than offense budget.  Since governments always operate with budget deficits, it is guaranteed that our national debt and its servicing costs will continue to rise until the monetary system spirals out of control and destroys the nation’s currency.   This is not something expected to occur decades in the future, but rather something that could occur at any time - only requiring an unexpected event to set it off.

At present the government deficit, that is revenues less expenses are about a $2.3 trillion annually. By 2054, should our currency still be relevant by then, we would (according to government projections) likely have a deficit of about $4 trillion, while interest costs on that national debt would rise to over $3 trillion per year.  That would be $7 trillion of destructive annual money borrowing/printing that would materially raise price inflation.  With such future prospects, how long could our currency survive?

The present fiat monetary system gives unrivaled power to its controllers.  The developing new financial system, which libertarian technologists intended to be decentralized, stifles this entrenched power creating new control dynamics for the world.  But be assured that our incumbent power structure anticipates the collapse of our current financial system and its central banks, and has been busy designing its own digital currency/transition system that would allow the incumbents to control its citizens even more completely.  In such an investment market environment, it makes sense to be invested in all commodities including precious metals, energy, reasonably priced high tech equities, selected digital assets, and high-quality industrial debt bypassing all government debt except for short term bills. 

The long arc and effects of central banking

Historically, the world’s first central bank was the Bank of England, established in 1694.   Central bank’s ability to create currency, gave England an advantage over other countries in times of war, and soon England became a global leader capable of vanquishing rivals and establishing the largest colonialist empire on earth.  Also, huge profits from its colonies such as India and Iran allowed it to finance and maintain its navy and army.  Thus, central banking supported England’s rise and maintenance of its global empire.  Subsequent overspending for wars and various civilian programs in the 20^th century created huge budget deficits which required massive debt and printing of its currency that eventually led to Great Britain’s decline.

America’s central bank, the Federal Reserve was launched in 1914, which starts the long arc of influence that our central bank has had on this country.  Be forewarned that the following abridged narrative is a personalized interpretation of this author, rather than the view of learned historians, politicians, or bankers.

When America’s central bank was established, the country’s debt level was inconsequentially low; accordingly, new money issue was stimulative and its attendant interest costs on its debt was easy to bear for the country’s citizens.  Within a year after establishing its central bank, massive amounts of currency were printed for America’s participation in WWI.  As the war ended, stimulus money printing continued, and the country entered an age defined as the Roaring Twenties.  A few years later, in its attempt to limit market speculation, the Federal Reserve raised interest rates leading to the market crash of 1929 and the Great Depression – which lasted for about ten years.  It took manufacturing and sale of massive amounts of weapons sold for gold to the belligerents participating in WWII to overcome it.  However, it took twenty-five years for the equities market to reach its previous price levels of 1928 – a long wait.  

The country’s real money (gold) had been confiscated from civilians in 1934 by the Roosevelt government, leading to a hybrid monetary system still under central bank control.  Inordinate WWII military spending and America’s own participation in the war raised the country’s debt level in 1946 to an alarming level of 121% of its then GDP.  After WWII, US soldiers returned home, and as military manufacturing turns to consumer production the economy rebounds, the national debt is substantially paid down over the next decade, and America prospers. 

In the 1960’s, America as a new global leader starts to believe in its unlimited might and invulnerability to spending, starting expenditures for social programs such as Medicare, Medicaid, and War on Poverty.  Also, its proactive involvement in Korea and later in Vietnam requires vast new increases in military spending, debt and money printing.  Soon the guaranteed one ounce of gold exchange for thirty-five dollars USD, being available to foreign countries doing trade with America earning dollars, starts being exchanged at such a rapid rate that the US is in danger of losing its former cache of gold - and in 1971, the US decrees that it will no longer honor the previously promised dollar/gold exchange.  

A new society emerges 

Once the gold backing is removed, our government is on a pure fiat money system, whereby the government is no longer constrained to print a limited amount of currency.   An acceleration of money printing takes place over decades eventually resulting in a serious rise in price inflation on goods and products.  In the decade of the 1970’s, the rise in multi-year inflation approximating 130% is severe enough to lead to a significant and irreversible change in our society.  

In previous post WWII years, the male wage earner was able to provide for the financial needs of his family, but with the severe inflation of the 1970’s it became increasingly important for the wife also to seek employment in order to make up the inflation ravaged wages of the husband.  But, the totality in social change is not simply that the wife also needs to seek employment to earn wages, but that she in no longer at home raising the family’s children.  The lack of a mother’s guidance, and necessary dependence on outside others, or the state, to care for their children over decades, changes that society to one with radically different values than that of their parents.  Both parents working has also led to divorces, and fatherless families which has led to more anti-social behaviors in children and juvenile crime that soon enough transforms to adult crime. 

As the military-industrial complex continued to grow, it required increased currency issue, making now both salaries inadequate for raising a family.  Accordingly, thoughtful families concerned with providing their children with a good start in life by paying for their children’s increasingly expensive education ultimately decided, or were forced, to reduce their family size. The reduced family size now results in reduced levels of new workers who in the aggregate pay less into our Social Security Fund, endangering the solvency of this pension system and millions of its dependents.  

Not only was family size reduced, but over time the devalued earnings of both husband and wife were ultimately inadequate to maintain their standard of living requiring that they invade, utilize and borrow against their home owner equity.  That action started over two decades ago, and since then as mortgage default rates have been growing, home ownership seems less affordable to new buyers than ever.  At an interim climax in 2008, there was an economic explosion in mortgage defaults culminating in central bank bailout of the banks from decades of destructive policy.

The increased social deviancy observable in our society, and the now lamented reduction in family size and pension funding problem is being fraudulently attempted to be addressed by disastrous illegal immigration.  All of this can be blamed on the Federal Reserve’s Central Bank debt-based money issue system and the attendant persistent loss of the purchasing value of our dollar currency over the last century.  It is informative that of the ten pillars of communist rule (check them out on the internet and be amazed), pillar number five requires government control of our banking and credit system.  Our nation is experiencing a socialist controlled phase, the precursor to communism – with loss of individual freedom as proposed by the World Economic Forum.

Need for a new monetary system

Central bank policy of debauching the currency for over a century is directly responsible for the destruction of America’s nuclear family, increase in juvenile social deviancy and adult crime, reduction in population growth and decreased contributions to Social Security thereby promoting its financial failure.  Clearly, we are in immediate need of a new and socially more constructive monetary system.  Ron Paul was right and insightful in publishing his book “End the FED”.

Corporate computer use is over sixty years old.  Accordingly, the underlying computerized banking software systems are similarly old, despite many newer programs and hardware.  Given the incredible improvements in computing power and software languages, we are now able to exchange information and capable of transmitting monetary value electronically, essentially eliminating the need for the formerly trusted bank intermediary.  As Bill Gates famously said: “We need banking; we don’t need banks”.

The central bank fiat monetary system, with its now unsustainable debt, is at the practical end of its useful life, and the world needs to exchange its fractionalized, centralized debt-based monetary system for a peer-to-peer decentralized asset-based monetary system.  No more of the ever-persistent inflation tax by centralized banking for government capture, wars, demographic destruction, or mal-transformation of family and society.  Thankfully, that change is now in process.

The weaponization of our present monetary system though sanctions worldwide, and even confiscation of foreign central bank assets has alerted foreign countries that they cannot trust the United States to be the steward of a global reserve currency.  For example, as sanctions increased, denying countries to use the dollar and its SWIFT payments system, the global use of dollars understandably declined.  Countries in need of a trade settlement currency started to develop and now have payment systems independent of the dollar.  Ironically, after forbidding countries to use the dollar system, the US is now blaming those foreign countries for not using the dollar.  President-elect Trump has threatened to blacklist any nation which uses currencies other than the dollar in international trade.  That is simply further weaponization of the dollar world reserve currency – that simply cannot and will not work longer term, but it will make the dollar less relevant.

Current state of digital asset regulation and adoption

Before the accumulation of unsustainable debt, it used to be that when the Treasury borrows money it stimulated the economy.  However, with the current high level of debt, it no longer stimulates our economy, instead giving a signal that our currency value is being further inflated away.  Foreign central banks holding US dollars as a reserve currency are concerned over its decreasing purchasing value and are returning those dollars to our shores – which, when fully engaged, could create unimaginable levels of domestic price inflation.  Our leaders are aware of this and accordingly are dreaming up schemes to counter such a tsunami of returning dollars to our shores.

Such schemes include the issuance of a Central Bank Digital Currency (CBDC) that provides for total surveillance and programed control over people’s assets, and issuance of regulated stablecoins.  President Trump has promised to protect Americans from government overreach and never allow a CBDC to be issued by our Central Bank.  Stablecoins, however, can be programmed to serve the same purpose as CBDC’s, and while these can be issued by private government-approved companies as opposed by the central banking system, great care still must be taken to protect civilian freedom from government tyranny.  Once stablecoins become ubiquitous, new versions will provide interest earnings on their purchase increasing adoption, and global organizations will promote their practical everyday product purchase settlement use.  

Currently it is expected that stablecoins with 100% USD backing will soak up trillions of dollars being held around the world, maintaining a stable dollar exchange value.  But, ask this question: will our central bank be still able to print more fiat dollars?  It is arguable that as long as more stablecoins can also be issued with the continued increase in national debt, and/or increased amounts of currency, stablecoins will be stable only in context of payment or settlement transactions lasting a few seconds.  

Given past evidence for fixed issue or strictly limited-supply cryptocurrencies such as Bitcoin to rise exponentially in value when compared to fiat currency - another scheme is to establish a domestic Strategic Bitcoin Fund, or a national cryptocurrency reserve.  The idea here is that purchasing Bitcoin to be held by our government, would be similar to it owning a strategic supply of gold or oil.  But in Bitcoin’s case it could rise greatly in value and help offset the nation’s massive debt.  

Understand that Bitcoin with a hard limit of only 21 million coins to be issued is not large enough to make any real difference to our monumental debt.  In addition, over 94% of its maximum permissible amount have already been issued – that is, they are already owned by someone, and therefore not readily available to our government.  Even at a future price of $1 million per coin, the total value of the total Bitcoin system would be only $21 trillion (21 mil. coins X $1 mil/coin).  Thus, this system, even if totally owned by a US strategic fund, which is not possible, and at $1 million per Bitcoin is not large enough to resolve America’s needs – never mind accommodating or solving the fiat monetary system problems of the world.  A government Bitcoin fund would be a meager amount relative to its present $36 trillion of national debt, and over $222 trillion of unfunded liabilities of other government programs. Therefore, it will take other far larger crypto platforms with fifty or one hundred billion coins at a high value that will serve the needs of this nation and the world.

BlackRock’s suggestion that “a portfolio allocation of 2% is reasonable for investors who wish to hold Bitcoin”, added to the potential purchase of Bitcoin by a number of competing governments around the world and a number of individual states will certainly be rocket-fuel for Bitcoin and other crypto pricing.  But it will not solve our problem of overbearing government debt, and debt-based creation of more currency.  However, increasing preference for citizens to hold Bitcoin and other exploding digital assets compared to fiat currency would accelerate the ultimate demise in the value of our traditional fiat dollars.  All of the above schemes centralize ownership of Bitcoin, which could become kryptonite to the super-coin price.  What would be the market price of Bitcoin, if only one government owned it?

None of these schemes address the real problem of paying down the nation’s debt.  Since it is no longer a solvable problem, that may be the reason why our government has been obstructing the approval of digital currencies which provide citizens an escape to the nation’s collapsing fiat currency.  The new technology makes our present/prior banking system and its structure obsolescent and unnecessary, but government is seeking ways to control the people’s future money before they approve the new asset-based monetary system.   It may also the reason why programs are being approved and promoted that allow investment in the ETF performance of crypto currency funds without investor actual crypto ownership.

Foreign country systems technology and financial platform and network development is substantially of ahead of regulation in the United States.  Indeed, SEC’s regulation of this industry by enforcement rather than by establishment of clear rules, arguably has set back America’s innovation and competitiveness for at least one presidential term.  SEC Chairman Gary Gensler, since his appointment four years ago has stifled digital currency approval and adoption in the US.  As a result, the rest of the world has been developing rules and coincident digital adoption ahead of the US.  Neither our legislators nor media have raised the question of why Mr. Gensler is doing this – or asking another important question of whom does it benefit?  Is it to allow central and commercial bank incumbents to devise a means to maintain control of the new global payments system, and its immense profits and influence?

Consistent with the theme in the previously recommended video on central banking, is it possible that Mr. Gensler has been trying to “assassinate” crypto and blockchain development?  One can suppress and delay the adoption of new technology, but it cannot be killed off, as technology will always innovate around obstacles.  So, the new monetary system is coming, regardless of its suppression by incumbents.

One way to control the decentralized crypto market is to buy it up, with control residing with banks, and investment fund managers.  By creating ETF’s which incentivize the public to get exposure to crypto performance, the fund manager gets to buy and own and control the actual crypto assets, the public investor only gets a simulated performance of the actual crypto.   By this means, control of the crypto assets can become centralized and controlled.  However, after a century of central banking in the US we can see that centralization of banking even in the supposedly democratic US doesn’t work.  Centralization of anything consolidates power and breeds corruption which over time destroys itself.

Jerome Powell recently said at the New York Times DealBook Summit that “Bitcoin is a speculative asset - like gold”.   Well, Mr. Powell, since gold has been money for over five thousand years – with that analogy you must mean that Bitcoin is money.   Also, President Trump’s has raised the possibility that crypto gains in the US will not be taxed.  Is it also an acknowledgement that crypto is non-centralized money – as capital gains never apply to a currency?

BRICS and the global south

The BRICS membership consists of ten countries invited to be full members, each with significant natural resources.  Only Saudi Arabia has not officially accepted, perhaps fearing a military coup from its previous sovereignty guarantor.  At its last annual meeting in October 2024, the BRICS coalition has expanded its membership by inviting nine new participants, while developing BRICS PAY a trade payment system that excludes dollars.  This BRICS expanded membership with interest from many other countries to join is now recognized as a credible danger to the present colonialist world order.  Accordingly, the West is now bringing war to it, raising the risk of a real WWIII to simply delay a sharing of global decision making.

There are rankings of countries as measured by their natural resource wealth.  Countries which have been at the top of this list over the last century have also been the countries which have been exposed to regime changes, assassinations, and war.  Argentina, Venezuela, Brazil, Iran, Iraq, Libya, Afghanistan, Ukraine, Syria, and other countries with an abundance of natural resources have had their governments toppled, Western colonialist supported administrations installed, national wealth extracted, with its people deprived and suppressed.  In that context, is it any surprise then that the leading country of natural wealth, Russia with the world’s largest land mass, is and has been the most vilified and plotted against for the longest period?  This is of course, because it has the most natural resources to be plundered by present world colonialist leaders.  

Anglophile colonialist countries have been following Britain’s Mackinder global dominance strategy of a century ago for maintaining their global hegemony.  This is accomplished by promoting wars among the landmass countries around “the Heartland” as a means to keep them at war with its periphery, thereby retarding industrial development, depleting military manpower, reducing cohesiveness and influence.   

A great example of this is the blow-up of the Nord Stream Russia-Germany gas pipeline during the Ukraine war.  Severing this low-cost energy source guarantees that these two countries will not build stronger industrial ties, and Germany’s energy dependance will be supplied by the high-cost US gas, which destroys Germany’s manufacturing dominance and its economy.  We “win”, maintain our empire, weaken Europe, Russia and China, but at a risk of a nuclear WWIII.

Consequences of the monetary system transition

First, we must understand and accept the fact that we are beyond the “use by” date of our traditional fractionalized fiat monetary system – it is at the end of its life cycle.  A technologically advanced asset-based financial system is replacing it, which may require a decade or more to fully replace the present system.  This period of transformation will bring economic distress to the whole world, and we in the US finally will have to acknowledge that in correcting our published statistical distortions of the past, that we have experienced recession and even depression – especially when accounting for the loss of purchasing value which distorts GDP statistical measures and substitutes illusory growth for reality.

The new monetary system is likely to create a different means of market valuation.  Indeed, could capital markets eventually disappear as digital assets become tokenized and are traded on blockchains via decentralized exchanges and automated market makers?  Stablecoins and clusters of networks for individual countries will be joined together to form one global super-network.  Scores of individual country stablecoins and digital currencies will be interoperable, and used for payment, as fiat currencies and traditional markets atrophy and decline in usage.

We will slowly transition from a time of perceived limited global resources, and the divisive battle between capitalist producers of goods and socialist re-distributers of that production to reliable, clean energy, and AI assisted robotically enhanced economy of abundance, which may finally end the centuries of strife and war from Marxism.   Imagine the flowering of humanity in an environment where the global monetary system does not promote war.  It is a multipolar world where no one country dictates its policy for the world to obey; rather multipolarity suggests respect and true sovereignty for every country regardless of size or influence.  It will take time, but it is a future worth anticipating. 

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