Could Digital Currency Liberate us from Government?

The proposed Greek bailout deal is now a done Greek bailout deal. And equity-market traders around the globe heaved a giant sigh of relief today.

As for the terms of the deal, well, it’s hard to get excited if you’re a Greek citizen.

Euro-zone leaders have agreed to give Greece up to €86 billion (about $96 billion) in new loans. That’s if the Greek government implements some rather severe, almost punitive, austerity measures over the next couple of days.

As the Wall Street Journal described it today:

The rescue deal … requires the Greek left-wing government’s near-total surrender to its creditors’ demands. But it gives the country at least a fighting chance to hold on to the euro as its currency.

So, in order to "hold on to the euro" Greece will have to implement an austerity plan that is almost guaranteed to lead to a further and deeper recession.

Not that a curtailing of government spending is recessionary, at least in the long run. But the austerity measures also include sales-tax increases such as a value-added tax.

That’s precisely what you don’t want to have implemented when you’re trying to dig yourself out of a fiscal hole.

But for the Greeks, it’s all about staying in the European Union, and being able to maintain the euro as its currency.

Yet what if there were a solution to the euro’s hold on Greece, and on all countries?

Wouldn’t an objective currency untethered from political and central bank controls be one possible way around the political wrangling that effectively shut down the banking system in Greece?

WORKERS TAKE TO GREEK STREETS AGAINST CUTBACKS

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The question of an objective and truly democratic currency — one that’s unaffiliated with quasi-governmental or explicitly governmental bodies such as a central bank — is what the crypto-currency Bitcoin is all about.

And, according to the most objective measure of value (i.e., price), there’s been a distinct move toward Bitcoin. It has moved higher since the recent Greek turmoil really ramped up.

According to the website CoinDesk.com, the digital currency has gained momentum in the wake of the Greek crisis, but after today’s news of a bailout Bitcoin’s value sold off.

Image Credit: Coindesk.com

According to CoinDesk, there’s a debate on whether the recent spike in Bitcoin value is due to Greece.

Some media reports have suggested Greece’s likely exit from the Eurozone could be behind the cryptocurrency’s recent price movements as people look to it as a viable alternative to the euro or the drachma — the country’s former currency.

Despite a lack of consensus as to whether the Greek crisis has really influenced Bitcoin’s price movements, it must be noted that today’s decline in value coincided with the announcement that Greece had reached an agreement with Eurozone leaders over a possible third bailout.

But could something like Bitcoin …

Or even just the architectural underpinnings that make the electronic currency possible …

Be the ultimate solution to countries scrambling for an alternative to central bank-issued, and politician-controlled fiat currency?

***

Did you catch the article in the Wall Street Journal that’s aptly titled, "How Future Bitcoin Can Prevent a Future Greece"?

Technology writer Christopher Mims tackled the possibilities of Greece (or other countries) being emancipated from having to use the euro with the help of digital currency and its technological underpinnings.

According to Mims, the recent bank restrictions in Greece have forced businesses there to basically pay suppliers and employees in IOUs, or scrip. These are promises to pay back a debt as soon as the banks unlock a firm’s money.

But could a new kind of scrip be issued using Bitcoin’s "blockchain" technology … or an altered version known as "sidechains"?

Here’s how Mims explains it:

To understand sidechains, it helps to know how Bitcoin itself works. Broadly, transactions are recorded on a main digital ledger, called the blockchain, which is like any other account of transfers going back to the clay tablets that recorded pharaoh’s stores of grain.

Bitcoin’s ledger isn’t processed or stored by one central body. Rather, it is distributed across a global network of computers, some of which are granted an economic incentive to keep the whole system running. Owing to this and other characteristics of Bitcoin, no one on the system has to trust anyone else, neither a central transactional authority or the person sending them Bitcoin, for the system to work.

Later in the article, Mims explains that Bitcoin protocols can be modified for use in just about any kind of transaction.

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They could represent any kind of currency, from dollars to frequent-flier miles.

Because Bitcoin is becoming not a currency unto itself but a protocol, like the communications protocol that makes the Internet possible … the kinds of transaction systems developers could build on top of it are limited only by our imaginations. …

Greece could create a "collateralized currency" backed by state-owned assets. Cryptocoins representing a fraction of all the country’s islands, ports and factories would hold their value as long as people believe the underlying assets do.

Thinking even further into the future, it isn’t hard to imagine a way to use digital tokens to permanently institutionalize the last resort in all currency crises — barter.

When you actually think about the basic principle of money involved here, we shouldn’t be at all surprised that humans are trying to employ technology to solve that basic premise.

That premise, of course, is that money is a tool of exchange.

***

A better tool of exchange that liberates citizens from government control will almost always be an improvement to top-down management.

As Mims writes:

The most exciting thing about Bitcoin’s blockchain technology is that it has the potential to democratize how money is created. And that, for many observers, is fundamentally what the debate over Greece and the fate of the entire European Union is about.

I couldn’t agree more.

***

Do you think technology such as Bitcoin will ever supplant fiat currencies such as the euro and the dollar? Are you suspicious of technology employed to the realm of money?

***

U.S. stocks spiked Monday after Greece reached a bailout deal with its Eurogroup creditors. Stocks in Europe also experienced a relief rally on the Greek news.

•  The benchmark S&P 500 gained 1.1%, ending the day at 2,099.60. Utilities gained the least today, with the Utilities Select Sector SPDR (XLU) adding just 0.05%.

•  Meanwhile, technology did the best, with the Technology SPDR (XLK) gaining 1.52%. The broader Nasdaq gained 1.4% today to end at 5,071.51.

•  Nasdaq component Netflix (NFLX) gained nearly 4% in today’s trading to hit an all-time intraday high at $716.16. The company is on track to reach 65 million streaming subscribers around the world this quarter. Shares ended the day at $707.61.

•  Hillary Clinton called for "progressive, principled and pragmatic policies" aimed at boosting middle-class incomes, as she laid out her vision of the American economy in the first major policy speech of her presidential campaign.

•  Oil traded lower today as talks progressed on an Iran nuclear deal. The West Texas Intermediate August contract closed lower by 54 cents to end the trading session at $52.20.

Good Luck and Happy Investing,

Brad Hoppmann

Publisher

Uncommon Wisdom Daily

Your thoughts on “Could Digital Currency Liberate us from Government?”

  1. The German Third Reich replaced the Weimar Republic bird cage liner with an alternative, faith based fiat currency that from 1933 to 1939 became the strongest, most sound currency in the World…that embarrassed the Depression Era Bangksters in New York and London to the degree that they could hardly wait to gin up a war to crush the new nation that embarrassed them, and exposed their financial predatory misbehavior.
    Libya’s Kaddafi got crushed for trying to do the same thing, except with an oil and gold backed Pan-African currency…the REAL reason he was toppled; and that worked out SO well for Libya, didn’t it ?

  2. It really does not matter what form currency takes. If more is spent or promised than can be repaid the result is bankruptcy. Bitcoin assets would not be locked by a bank holiday, that could save the day for people who had them but it would do nothing for the underlying problem with the financial state of the country.

  3. Brad: I’m a little suspicious of any type of currency that you cannot hold in your hand. Right now, you might as well consider anything that you have deposited at a bank as a rudimentary form of crypto-currency. The only difference between it and something like Bitcoin is who or what draws the measuring stick that tells you what it’s worth, and who has access to it. If our paper currency pieces of paper are outlawed and we are required to use some type of debit or credit card to transact all our business, then you can be certain that all our transactions will be taxed directly by “our” government.

    The possible good side of the outcome is that we could develop our own form of money that would be completely untethered from government manipulation on the other side of the tunnel.

    But that’s the purpose that gold (and silver) take care of.

  4. the central bankers will attack Greece if they make their own crypto currency !
    They have had their proxies attack all countries with their own money not controlled by the central banks ! Lybia ,Iraq, Syria [in process [and Iran next][ Russia and China are to big but China will be in the fold with out war]
    we joined in 1913 and got taxed because of it [ https://en.wikipedia.org/wiki/Revenue_Act_of_1913 ]

    Personally , it would be great to stop people from spending what they do not have ,
    since they could not spend what they do not have and loans would be automatic from it
    IF they arranged to have direct deposit and you would only have the one account with biometric safe guards !
    now also would be fun to tie Governments to this also , no deficits would be allowed !
    It would also limit the world bank s , computers do not lie and would not be able to do cover-ups , has no friends to lend to , and would follow th same rules for all
    { THIS IS UNDER THE PREMISE OF AN AI AND PROPER PROGRAM }
    [ ALL PARTICIPATING IN IT WOULD WANT AND PROTECT HONEST ACCOUNTING JUST TO GUARANTEE THAT THEY ARE NOT SHORT CHANGED !}

    if you are going to mention Hilary , then u should mention what all the other candidate say , INCLUDING THIRD PARTY candidate !

  5. Digital currency is convenient, but the ability to use cash during emergencies is needed.

  6. You must be joking to suggest that digital script would free people. It does not exist away from a totally moniterable system which the Govt would be overjoyed to have AND get rid of paper money.

  7. I have heard that the govt. is going to make available a digital currency, when the crash happens. The problem is, unlike Bitcoin, where individual privacy is protected, the govt. will be able to know where and how you spend your money – where you get it from, etc. It does not sound good. I don’t know how true this is.

  8. I think Bitcoin and other similar currencies are desperately needed to take the currency out of the hands of the manipulators (the central bankers) that have divided interests. Too many times we see that the big bankers get bailed out by us taxpayers but it never happens the other way around. Never. Andrew Jackson was right.

  9. Hi, Brad —
    Your columns are always so interesting, and so are your own remarks. Thank you soi much for interesting, thoughtful, and thought-provoking articles.

    Regarding bitcoin – – – – Will digital currencies replace fiat currencies? Yes AND no.

    Yes, digital will replace physical currency (dollars, Euros, Yen, etc.). There will no longer be any physical cash. It will be sold as a convenience to the consumer.

    No, because the new digital currency will still be FIAT currency. It will be issued by a “non-government” (it will be touted as “fair to everybody”) and it will be CONTROLLED by the elite, as opposed to Bitcoin which has no such controls, and which is precisely why Bitcoin will NEVER be accepted by the “powers that be.”

    Consider this — When LTCM got into trouble, the banks bailed them out and prevented a disaster. When the banks got into trouble (2008-09) the Fed bailed out the banks. What happens when the FED gets into trouble? Who will bail out the Fed? Answer: The IMF.

    The IMF already has SDRs (Special Drawing Rights) and they will be the “new currency” even though we will do our daily business in Dollars (or Euros or Yen). The Dollar will be devalued when the SDRs become the “new currency” and it will all be digitized, The value of the “new dollar” will be set by the IMF.

    That way, the “elite” still have control of the money, but there is no National Bank of any country involved. When will this happen? I don’t know, but LTCM happened in 1998 and our current mess began 10 years later in 2008. I think we’re getting close to another crisis, so maybe in 2018? That would be 10 years from the 2008 crisis, and its only about 2 1/2 years away.

    I submit that the REAL problem goes even deeper — the real problem is a monetary system based on DEBT (as opposed to one based on assets). “Debt money” is great for a while as things grow, but eventually the point is always reached wherein there is either a devaluation of the currency or a recession (or even a depression). Fractional banking will always result in either of those choices, but the bankers love it so we will always have it. Pretty sad.

    Thanks again for your excellent articles.

    Regards,
    Dan B.

  10. Why is that the governments are not doing anything yet about bitcion, is that when every one is in, the trap will be closed! If the governments can steal for almost all, who says they can not shut down bitcoin when ever they want since they have the back door to it. When time is right, those who think they are rich, will be in the same boat unless they pay dues to the government, even the investors

  11. I certainly believe (as most of you do) that the Greek/Euro crisis will, alongside the various other weak euro nations, notwithstanding America’s problems, trigger a currency overhaul (in whatever form it takes (I know not)). This will take shape sometime soon. This HAS to happen. I think your headline “Could digital currency liberate us from government” is partially true. It will liberate us from individual national government, but NOT world government.
    It is written in God’s Word-Revelation 13.17-18 “No man might buy or sell, save that he had the mark, or the name of the beast, or the number of his name. Here is wisdom. Let him that hath understanding count the number of the beast, for it is the number of a man; and his number is Six hundred and three score and six.”
    When this new worldwide financial system comes upon us, I believe it will be something like “digital” (electronic) as you say. the black market will be finished forever and the world antichrist system will be upon us….

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