In the early months of 2023, we witnessed a series of bank collapses, marking another shift in our banking sector towards further consolidation of the market by "too big to fail" players. But what does this really mean? And why did these failures occur in the first place? Aren't we supposed to have regulators who oversee bank actions and warn depositors of risks? What are they doing in Washington all day? As someone who works a regular 9 to 5, I can't help but wonder.
These failures have been blamed on ridiculous and misleading reasons, such as depositors using their money, Twitter, and even other banks in the form of "short sellers." But the real reasons are simply due to market manipulation, greed, over-leverage, and bad debt that are inherent in a financial system with central planners who actively participate in the game while acting as referees. It's like if the biggest gamblers in the 2023 NBA championship were the refs!
The central planners consist of a handful of government institutions and actors where every single one stands to win as long as the money is easy to come by. They have an intricate relationship between their fiscal health and the money creation, credit, and debt expansion of the public, which creates clear incentives to distort reality. These distorted realities tend to require a resolution that can only come from further money creation, credit, and debt expansion. This easy money comes from a couple of things: a citizenry that uses a shared currency and the government having the ability to create that money. This allows the central actors to create money with no barriers. When thinking about gold, it at least requires the work of digging it up.
The powers that be understand that the gravy train is leaving the station, which is why we see the easy money being printed and sent directly to heavy fogs of war. They are enriching themselves in paper money that they then turn around and buy real things, such as land, houses, and ports, which inflates the price for the people. They know that controllers of real wealth and assets such as oil, wheat, and pharmaceuticals are slowly turning away from accepting this fabricated valuable paper for their actually valuable resources. The mirage of the alchemy is fading. The world is no longer entertained by the vast ordeals & gymnastics of these social commentators trying to portray a scene of disciplined engineers & scientists while extracting wealth and wreaking havoc through the international scene & its people.
The dangers present in the US are the same as in other countries that suffer from wealth extraction & redistribution from their politically elite class. For example, Argentina faces 106% inflation while the political elite cut off access to safe havens, and Venezuela suffered 10,000% inflation in 2019 (if bread costs $1, after a year, it costs $100). The US is in a precarious situation when compared to other countries. The central actors have the ability to distribute the problems while extracting wealth from everyone in the world who holds its currency, being the US dollar. This is what they mean by the world's "reserve" currency. I put "reserve" in quotes because that's part of the alchemy system I mentioned earlier. One critical aspect of the process of turning paper into gold is "language obfuscation," referring to slight changes in the structure of sentences that make it appear as though what they are selling is as solid and true as gold itself. Something so reliable that everyone keeps it as a "reserve" to fall back on in times of distress and uncertainty, like a food reserve or water reservoir.
Hard money once made the world go round and reined in kings without needing to meet in battle. It used to be gold, but it shifted to the vision of death through military force, and then to the full faith and credit of the politician of the day. As the American people lost faith in them, so has the world. It seems that the majority of people are shifting away from the will of a select few in DC and towards a more decentralized world with a diverse set of perspectives. Gold clearly has some appreciable aspects but also has its limitations.
Money is meant to facilitate trade between individuals. What people tend to gravitate towards to use as this medium of exchange varies, but usually is something that they believe is valuable. Valuable characteristics tend to be things that are rare and difficult to create. That's really all there is to it. All the complexity of the "financial system" is really just the alchemy discussed earlier, the process to trick individuals into thinking the byproduct of that system is of value. At one time, money represented an individual's time they spent producing or catching something. People tend not to value things that are common or easily destroyed, which is why for centuries now gold has been used to represent this value and store it over time.
Going back to a few articles ago, fortunately, we do not live at the end of history. The world has seen transitions & cycles throughout human civilization, and I'm convinced we will see and live through more. The world has never seen a global "reserve" currency of similar scale before the US dollar being enacted in 1944, although being backed by gold. It could be argued that this would have been a failing effort without technological advances such as the telegraph, air travel, and most notably, the internet which allowed for people around the world to communicate and establish these plans. Another outcome from the invention of the internet was the dot-com bubble - just more debt-fueled financial speculation. But the interesting thing was that the speculation was being done on companies that were expanding & leaving footprints inside of a digital realm, rather than in some geographical realm within a country. Like any uncharted territory, there are adventurers encapsulated by open-source projects where anyone with the right skills or knowledge could participate versus colonizers encapsulating the profiteers such as Amazon, IBM, & Microsoft. As you can imagine with any pirate, morals & ethics aren't enough to restrain the pirates from pirating.
In 2009, an anonymous actor introduced to the world a form of digital gold that is native to this digital, uncharted territory that's not controlled by any single entity or actor. The digital gold is native to the new realm, meaning it is uniquely suited to perform in that type of environment. Managed by the natural rules set in the environment, there is not a need for a centralized actor to manage. This eradicates the need for any person or institution to "account" & eradicates their ability to rob the people through inflation. Similar to Bane from Batman's famous quote: "you merely adopted the darkness, I was born in it." That's a good way to think about the dollar (even when backed by gold) vs digital gold: Bitcoin. Abstraction layers adopted to help speed up communication & trade in the world along with the telegraph, yet the last telegraph the world saw was in 2006.
A theme sprinkled throughout my articles is the antiquation of society as a whole. From community alignment to the ways we think of ourselves. The introduction of Bitcoin allows us to completely rethink money and finance as we know it today. The underlying technology, blockchain, has opened the prison gates and freed individuals from financial demagogues & corrupt politicians with a trigger finger on the printing press. Concepts we'll explore next week around decentralized finance; allowing individuals to actively manage and participate in financial networks where all participants have a stake to align all incentives. We may be able to finally relieve ourselves from a heavy shiny rock & where the vast spectacles of central bank interest rate hikes are a thing of the past.
Imagine a world where the hocus-pocus of turning paper into gold is replaced by transparent, accessible, and genuinely valuable means of exchange, putting power back in the hands of the people.
Are You Feelin’ Moody?
INRI