Theorists of all kinds and persuasions agree: We’re almost certainly hurtling toward a cashless, digital currency-using society at some point in the not-too-distant future.
The question is, what is it going to look like?
Realistically, it will be nowhere near the original vision laid out for Bitcoin, much to the chagrin of crypto-enthusiasts and real-money libertarians everywhere.
As I’m going to show you, the path being taken is a tale of national, international, and even supranational intrigue that you might never have imagined.
It’s filled with so many contradictions, it’s become laughable.
Yet the central planners behind it all have so much to gain, it’s a near certainty that soon we’ll all be using the same virtual global cryptocurrency – like it or not.
And if you think your freedom and privacy are threatened now… well you ain’t seen nothin’ yet.
Governments Will Crack Down on Anarchic Bitcoin
When bitcoin caught fire last year and entered full-blown “tulip mania” territory, many of its supporters got one thing wrong: They assumed governments and big banks would allow the cryptocurrency to flourish.
But the power to issue fiat money is so valuable to those who control it that there was no way they were going to let a private, anonymous, and relatively scarce virtual currency move in on their territory.
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It simply isn’t going to happen.
That said, blockchain technology is revolutionary and enormously valuable, especially to governments or institutions who might use it to control a currency and its transactions.
So blockchain is here to stay and improve, but currencies will remain fiat and under the thumbs of central planners. You can bet on that, since they can use blockchain to eventually tax, regulate, and track any and every transaction… period.
Consider that without physical cash, bank runs become an impossibility. Consider, too, that a negative-interest rate regime would be a snap to initiate.
And it gets more insidious than that.
If a central planner decides you’re not eating the “right foods” according to your health condition, that you’re drinking too much, or that you’re simply not a “good citizen,” it would be all too easy to block all kinds of transactions you might attempt until you “see the light.”
And lest you think I’m just blowing a lot of hot air, consider that China’s massive, ongoing “social credit” experiment is already drifting in this terrifying, authoritarian direction.
Read on and you’ll see how all of this may lie nearer in the future than you ever thought possible…
Government’s Sinister Involvement in Crypto
Multiple government- and institutionally sponsored cryptocurrency projects, all at varying degrees of advancement, are in the works. Some are even international in scale.
Goldman Sachs alumnus and former White House Economic Advisor Gary Cohn recently told CNBC that he believed in blockchain technology, but that the world will have a simple cryptocurrency.
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He said, “I do think we will have a global cryptocurrency at some point where the world understands it and it’s not based on mining costs or cost of electricity or things like that. It will be a more easily understood cryptocurrency.”
Last year a group of highly influential, highly regulated financial institutions, including JPMorgan Chase & Co. (NYSE: JPM), State Street Corp. (NYSE: STT), Wells Fargo & Co. (NYSE: WFC), Cisco Systems Inc. (Nasdaq: CSCO), Accenture Plc. (NYSE: ACN), Swift Networks Group (ASX: SW1), Mitsubishi UFJ Financial Group Inc. (TYO: 8306) and the London Stock Exchange, announced a joint push to develop an open-source standard blockchain application.
Even International Monetary Fund (IMF) Director Christine Lagarde has sung the praises of digital currencies, but with an IMF twist.
You see, the IMF has its own Special Drawing Rights (SDR) currency, which is essentially a basket of major currencies that includes the U.S. dollar, euro, Chinese yuan, Japanese yen, and British pound sterling.
Many feel the U.S. dollar has too big a place as a reserve currency. They want some of the other SDR components, or perhaps more readily the SDR itself, to become the world’s reserve currency.
Some see an “IMFCoin,” a cryptocurrency backed by the SDR, as a way to rejuvenate that currency basket in international finance and possibly dethrone the dollar’s reserve status.
And now policy thinktanks are shoring up support.
This Dangerous Idea Is Getting an Academic Boost
A recent article in Project Syndicate by Andrew Sheng and Xiao Geng was entitled “From Dollar to e-SDR.”
Really, that title pretty much says it all.
As Sheng and Geng propose, “The private sector can work directly with central banks to create a digital SDR to use as a unit of account and store of value. Such an ‘e-SDR’ would, in a sense, be the quintessential reserve asset, because it would be fully backed by reserve currencies in the IMF-determined ratio… A politically neutral body, owned by the private sector or central banks, should be established to issue the asset. Participating central banks and asset managers would then have to swap their reserve currency holdings for e-SDRs…”
But U.S. dollar supporters already have a serious horse in this race, and aren’t backing down.
Already in 2015, St. Louis Fed Vice-President David Andolfatto suggested a “Fedcoin” could provide the Fed with an “added tool.”
That’s terrifying, when you think about the mayhem the Fed causes with the “tools” they already have at their disposal.
Fast forward to 2018, and Goldman Sachs-backed fintech startup Circle is introducing a cryptocurrency pegged to the dollar, called the USD Coin.
The company said in a blogpost that “a price-stable currency, such as a token pegged to the U.S. dollar, is critical for enabling mainstream adoption of blockchain technology for payments as well as for supporting maturation in financial contracts built on smart contract platforms, such as tokenized securities, loans, and property.”
Vying for dominance of this enormously valuable market has the SDR camp on full throttle.
One project is already aiming to create a world fiat cryptocurrency, one meant to be used by everyone everyday, not just central banks or large financial institutions.
Its name is Saga, and it’s being developed by Swiss non-profit The Saga Foundation, whose stated purpose is to develop new technologies in open and decentralized software.
The Foundation’s board reads like a who’s who of finance: Nobel Laureate Myron Scholes, the man who put the “Scholes” in the Black-Scholes model for pricing options and derivatives; Dan Galai, who co-developed the VIX market volatility measure; and former Governor of the Bank of Israel and chair of JPMorgan Chase International, Jacob Frenkel.
Oh, and don’t forget that board member Myron Scholes is, yes, the same Myron Scholes who was principal and limited partner at the infamous Long-Term Capital Management. When that hedge fund collapsed, the debacle required a $3.6 billion bailout from the world’s biggest banks under supervision from the U.S. Federal Reserve.
Not exactly reassuring.
Anyways, Saga’s slight resemblance to Bitcoin ends at the blockchain-type “distributed ledger technology” (DLT).
Because unlike Bitcoin, whose volatility has become legendary, Saga is supposed to hold a stable value so it can gain acceptance as a unit of account and a means of exchange. Apparently, Saga will be pegged to the IMF’s SDR and function on a fractional reserve method as reserves are deposited in everyday banks.
See how far we’re getting from Bitcoin? Hang on, there’s more.
Supposedly, algorithms will adjust the supply of reserves underlying Saga’s economy, including a price band to limit volatility.
And finally, Bitcoin-like anonymity? Not for Saga. Holders of the currency will have to fill out the usual “know your customer” and anti-money laundering information requirements demanded by Swiss law.
Come to think of it, this sounds a whole lot like what the IMF’s Lagarde was suggesting.
As Always, the Best Way to Protect Yourself Is…
In any case, as you may already have figured out, a global fiat cryptocurrency is not the altruistic answer to money for you and me.
It is, on the other hand, an extremely powerful tool for central planners to gain even more control.
Your best antidote to these shenanigans is physical gold. If you don’t own any, I suggest you go out and buy some non-numismatic coins. If you do already own some, re-evaluate your holdings, and consider whether you need more.
You probably do.
While not perfect, you can also contemplate a basic physical gold-backed exchange-traded fund (ETF).
One worth considering is the Sprott Physical Gold Trust (NYSE Arca: PHYS). It holds gold bullion that is fully allocated and stored at a secure third-party location in Canada, subject to periodic inspections and audits.
What’s more, U.S. investors holding for at least 12 months can benefit from a 15% capital gains tax versus the 28% rate with most precious metals ETFs.
Just remember that most if not all banks or quasi-government institutions looking to roll out a global fiat cryptocurrency do not have your best interest at heart over theirs.
You need to look out for Number One. And owning some physical gold is the best way I know.
5,000 years of history prove it.
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