Barely 100 years ago at the start of the 20th century, people were able to exchange dollars for gold at their local bank. While gold was too hard to trade between people, banking institutions held gold and gave people cash for it. This was during what was known as the gold standard. Each sovereign currency’s value was determined relative to a fixed amount of gold. However, in the decades ahead, that standard quickly changed.
Toward the end of World War II, dozens of powerful people organized a meeting to discuss a new monetary agreement designed to minimize the economic damage done by the war. This meeting was named after the location where it took place: Bretton Woods, New Hampshire, in the United States.
It was a long-term plan with several parts that spanned over decades. And the Bretton Woods delegates decided that multiple fiat currencies would now be backed by the U.S. dollar as opposed to gold itself. At first, the dollar proved to be stable enough to support the Bretton Woods agreement in 1944 — until it wasn’t in the decades ahead. During the Vietnam War, President Richard Nixon called for more money. There wasn’t any more money in circulation. So, he started printing.
In 1971, President Nixon ended the dollar’s convertibility to gold, which effectively ended the Bretton Woods agreement after nearly 30 years.
The removal of the gold standard turned each country’s fiat currency into a floating exchange rate that was no longer fixed. Money was not measured by the dollar anymore; now, each currency was measured in relation to every other currency, with prices that constantly changed, creating foreign exchange market volatility.
Bitcoin as an opposition
Today, one asset that fiat currencies are measured against is Bitcoin (BTC). As I mentioned in 2019, I think Bitcoin is the best investment when it comes to currencies in the sense of sound money.
In certain countries — such as Brazil, Argentina and Venezuela, to name a few — Bitcoin’s price is currently at an all-time high compared with their national fiat. Relatively speaking, that’d be equivalent to Bitcoin price already being around $20,000.
The problem is that Bitcoin is not ready to be a monetary system in and of itself. Most people who have Bitcoin are just holding it — they’re not selling it or using it as currency due to its potential to rapidly appreciate, despite the downside risks.
Bretton Woods 2.0
Meanwhile, the International Monetary Fund is now calling for a second Bretton Woods era to be announced in 2020. This would establish the Special Drawing Right, or SDR, as the new reserve currency as opposed to the U.S. dollar. The SDR serves as the most stable investment option for the IMF. Its value consists of the top five global fiat currencies as a protection against volatile movements in forex markets. The problem with the SDR approach is that it could make the economic situation even worse than it is today.
History has shown that when people have an inflated amount of power with regard to money, they will use it. Just look at President Nixon during the Vietnam War and the original Bretton Woods agreement in the mid-20th century. Even worse is that now, nearly all central banks are printing more money, which in turn leads to inflation as fiat currencies lose their purchasing power.
We can’t have a single powerful entity with the power to print itself out of temporary trouble, especially while it would be putting us in future debt that would be impossible to manage. This is the opposite of democracy, where only a few people control big monetary decisions that affect everyone. Cryptocurrencies like Bitcoin aim to solve this dilemma, thanks to their limited supply, among other favorable qualities inherent in blockchain technology.
Blockchain tech has a solution
Blockchain has raised our standards to expect decentralization in the institutions that are meant to serve us. True decentralization is reached when the hierarchy is broken. Everything becomes transparent, and incentives are offered to push the system forward in the right direction.
Sogur, for example, is a startup tackling the ambitious challenge of creating a new monetary system based on its cryptocurrency SGR that models the SDR while leveraging blockchain and an intelligent economic design advised by world-renowned economists.
I like the idea of currency baskets that serve as a much more reliable, stable means of exchange. I don’t like that the IMF gets endless decision-making power over our global monetary system. Blockchain-based solutions are different — they have a foundation that’s governed by an assembly and, for example, can give SGR holders veto power over every decision at any given time.
Blockchain technology can combine the elements of decentralized governance into a classical corporate structure, in order to comply with international laws and Anti-Money Laundering requirements, while using a smart-contract-based bonding curve to tame inflation and volatility, which remain two of the biggest problems with traditional fiat currencies that can be solved.
This article takes a tilt at increasing speculation about statist global resets, and why plans such as those promoted by the World Economic Forum will fail. Central bank digital currencies will simply run out of time.
Instead, the collapse of unbacked fiat currencies will end all supra-national government solutions to their policy failures. Already, there is mounting evidence of money beginning to flee bank accounts into stocks, commodities and even bitcoin. This is an early warning of a rapidly developing monetary collapse.
Moreover, nothing can now stop the collapse of fiat currencies, and with it schemes to control humanity for the convenience and ambitions of government planners. There can only be one statist solution and that is to mobilise gold reserves to back and save their currencies, which in order to succeed will have to be fully convertible into circulating gold coinage. It will also require the role of governments to be reset into a non-welfare, non-interventionist minimalist role, which can only be achieved after a complete collapse of the current fiat-financed system.
Anything less will fail.
The Deep State and The Blob fuel conspiracy theories
Increasingly, people are beginning to realise that their world is undergoing a period of rapid change, with the future of fiat money now uncertain. For most, it is too difficult to even contemplate. But growing uncertainties are driving wild speculation about what those in authority now have in store for the human race in the form of a global reset. It is a time for conspiracy theorists, aided and abetted by our politicians and central bankers who are being increasingly evasive, because events are spiralling out of their control.
Then there is America’s Deep State, or the British equivalent, the more recently christened Blob; an amorphous entity comprised of the permanent bureaucracy with its own agenda. These faceless planners have moved on from merely making ministers’ lives difficult if they deviate from the blob’s predetermined course — immortalised in “Yes Minister” and its sequel series “Yes Prime Minister”.
As we saw with Brexit, The Blob has been rigging political outcomes, even conniving in elections. Christopher Steele, an ex-MI6 officer produced a dodgy dossier on Trump to influence the American presidential election in 2016. But there is no such thing as an ex-MI6 Agent because of the Official Secrets Act, so we can only conclude that the intelligence arm of The Blob sanctioned it on a distanced basis. MI6 works with other intelligence agencies under the five-eyes agreement and is close to the CIA. Though they do not necessarily share intelligence, it is impossible to conceive of Steele’s role in influencing the outcome of a US presidential election without the CIA’s knowledge. Almost certainly, the fact that it was commissioned must have been with the CIA’s blessing.
At the time of writing, we do not know the outcome of the current presidential election, but enough doubt has been thrown on the validity of the voting process to implicate unknown parties in managing the outcome. It can never be proved, but for increasing numbers of sceptics it looks like a Deep State operation. It is therefore hardly surprising that conspiracies abound.
The World Economic Forum
The most prominent of these conspiracies has hit the headlines in recent weeks. Its ambition is to take the lead in resetting the world by dismantling the capitalist system in favour of a greater technocratic rule — a fourth industrial revolution no less, even planting microchips in humans to read their brains and control them. The leader is one Klaus Schwab, whose World Economic Forum runs the annual Davos bunfight.
As leader of the Davos forum, Schwab probably sees himself as the coordinator of world government. If so, at 82 years old he is probably getting impatient about the progress towards his personal vision of ultimate power. The covid chaos and the success of his climate change agenda must be encouraging him to think he is very close to a breakthrough. Alternatively, we might consider Schwab as a latter-day Charles Fourier (1772—1837), the utopian socialist philosopher, whose forgotten ideals were only marginally more narcissistic and bizarre than Schwab’s.
While the great and the not so good love the annual Davos party as a networking venue for the politics industry, when it comes to transferring real power to Schwab, it’s a no-no. The only time a politician transfers power is when he is deposed by his or her electorate, colleagues, or the military. And history is littered with utopians, like Schwab, grasping for power over their fellow men. In addition to Charles Fourier, we can include Georg Hegel (1770—1831) and Auguste Comte (1798—1857), as well, of course, as Karl Marx. As thinkers or philosophers, they were all influential in their day and some of their ideas persist in the naïve.
So, while increasing numbers of well-informed people are beginning to sense the end of the current world order, to assume that this will hasten the WEF’s grab for world domination by influencing events is a mistake. All our deep states, blobs and their branches, particularly central banks, will want to hold onto and enhance their executive power with the political class increasingly cast as cover. The planners at national level are not going to submit to Mr Schwab’s plans for world domination. Instead, international relations involve mutual cooperation to secure purely domestic objectives, something President Trump was in the process of destroying. From the Deep State’s point of view, perhaps that’s why he had to be deposed in favour of Biden, who is a long-serving compliant figure.
Central bank digital currencies (CBDCs)
There can be little doubt that central banks wish to increase their control over money and how it is used, cutting out the obstacle of commercial banks who produce most of the money in circulation through the expansion of bank credit. From a statist point of view, commercial banking is a dinosaur, an outdated remnant of free markets, perpetuating needless systemic risk and superseded by technology. Branch networks will disappear with cash, changing relationships between banks and the general public for ever.
By introducing direct central bank accounts for members of the public and every business, commercial banks become superfluous and can be allowed to die. And if one goes bust before commercial banking has ended, the facility to transfer all its loans and deposits onto a central bank’s books will then exist. The removal of systemic risk by the abolition of commercial banks is one of several likely long-term objectives of CBDCs. Commercial banks can be left with the role of investment banking activities in capital markets.
We can imagine the development of CBDCs going even further than just replacing cash. Stimulation by dropping money into personal accounts can be used to target increased spending by consumers, or even groups of consumers, sorted by wealth, location or other factors. Some consumers can be favoured relative to others, so in a swing state, for example, an incumbent administration might buy votes. While this would be strongly denied, as we have seen with unfettered fiat currency the state creeps incrementally towards unstated objectives, using every tool at its disposal. The election of Deep State-approved politicians then becomes possible.
Eventually, funding of all capital projects will come under the direct control of the central bank. And savings deposits, always seen to be a brake on consumption, can be banished. Capital can be made available for government schemes and favoured businesses on the say so of the central bank.
A future government statement might be issued on the following lines:
“Your Government is pleased to announce that the National Audit Office has approved a number of infrastructure projects targeted at improving communications between administrative centres. This investment over ten years will secure an estimated 500,000 jobs. The cost over the life of the project is XXX billion monetary units. The Central Bank has confirmed it will make funding for these projects available, both to your Government and approved private sector contractors.”
This would be a planners’ heaven. Furthermore, CBDC money can be withheld or frozen for anyone suspected of crimes and tax evasion, starving them into confessions of guilt. The justification is always that it is in the national interest to ensure that financial and tax crimes are eliminated — something commercial banks have singularly failed to do. Overseas payments can be routed through other CBDCs, giving the central banking network control over world trade. Just imagine foreign trade being conducted through a grander version of the Eurozone’s TARGET2 settlement system!
Worried yet? In the advanced economies Covid-19 has nearly eliminated cash, which doubtless is intended to be replaced entirely by CBDCs. The end of cash and bank deposits will allow the central bank to cap the amount of cash anyone can hold, and also ensure that everyone is paid a “living wage”. Already flagged, another intention is to eliminate the burden of interest rates and by controlling where money supply is expanded, manage the economy.
It is commonly assumed that those in charge of us know what they are doing — they don’t. They have become trapped at a socialist endpoint and are doubling down in their efforts towards greater socialism. But their dreams of future control are mere escapism. Individuals will lose yet more personal freedom, but ultimately the state cannot conquer human nature and the will of individuals to do what they want. The Soviets attempted it and failed, despite killing and starving many millions.
Central to the collapse of any state-directed reset will be the loss of faith in fiat currencies, and particularly that of the world’s reserve currency, the US dollar. This remains the case irrespective of whether circulating currency is in cash, bank deposits, or CBDCs. Indeed, the collapse could be hastened by CBDCs, because the intention is to increase the pace of injection of new money into the economy if it is required (it always is), and to impose deeper negative interest rates, which cannot be easily achieved under the current monetary system.
If these statist intentions are allowed to prevail, along with other agendas such as the elimination of cheap and effective fossil-based energy, the outlook for humanity is exceedingly grim. Like communism, the global reset into which the western world is drifting will destroy society. Those who believe in liberal values in the original sense of the term — not the modern socialist connotation — will find themselves welcoming the destruction of the current system before it is evolved any further.
The course of a currency collapse
The end of fiat currencies is likely to come sooner than later, from the consequences of today’s massive money-printing, particularly of dollars. Already, US government spending is financed substantially more by currency debasement than taxes, a condition that will almost certainly continue to deteriorate rapidly in the coming months. Furthermore, the global banking system, which is extremely thinly capitalised, faces a tsunami of bad debts which can only lead to a systemic failure — most likely in the Eurozone initially, but threatening all other jurisdictions through counterparty risks. It is coming to a head and is likely to happen soon, possibly triggered by the second covid wave.
Long before the two or three years required for any CBDC to be operational, the world’s reserve fiat currency, the US dollar, is already hyper-inflating. There are signs the markets are beginning to understand this. Bitcoin’s price has risen sharply, sending signals to everyone that the differential between its ultimately fixed quantity and the accelerating rates of fiat currency debasement is feeding dramatically into the price.
Despite the economic slump, equity markets are being driven to new highs as non-financial customers deem stocks to be preferable to bank deposits. It has not helped that the Fed reduced deposit rates to zero last March, well below everyone’s time preference. The Fed has also promised infinite QE in order to fund the fiscal deficit. Therefore, it is not surprising that individuals and corporations are shifting out of cash balances into financial and other assets, with the notable exception of fixed-interest bonds. Rising commodity and raw material prices are also telling us that dollars are been sold in those markets.
This is the point being missed in all commentaries: the mounting evidence that markets, being forward-looking, are beginning to abandon the dollar. And once it goes beyond a certain point, nothing will reverse a rapid loss of purchasing power to the point of worthlessness. To avoid this outcome central banks led by the Fed must immediately abandon inflationary financing of budget deficits.
That is not going to happen. In addition to the current hyperinflation must be added the inflationary cover for the costs and consequences of rescuing a failing global banking system. The costs are immediate, in that governments will take on their books everyone’s bad debts. The consequences are that through their central banks they will have no political alternative other than to counter the economic slump through yet more money printing.
US Treasury bond yields are already beginning to rise, perhaps reflecting this developing outcome as Figure 1 shows.
The up-arrow at the bottom-right of the chart shows that the downward momentum for the bond yield has reversed, forming a golden cross; that is to say the yield is above its two commonly followed moving averages which in turn are forming a cross with the 55-day moving average rising above the 200-day moving average, a strong indicator of a major turning point and of higher bond yields to come. The upward turn of bond yields is to be viewed in the context of the dollar’s trade weighted index, which is shown in Figure 2.
Currently standing at 92.40, if the dollar’s TWI breaks below 91.75 (the low on 1 September) it is likely to head significantly lower. With foreign holdings of dollars and dollar denominated financial securities totalling almost $27 trillion, the chances are that dumping of the dollar on the foreign exchanges will increase rapidly. That being the case, the Fed will not only be funding the unprecedentedly high (for peacetime) budget deficit but will have to absorb foreign sales of US Treasuries and dollars in order to keep the cost of government funding suppressed.
Evidence is mounting that it cannot be done. And with the end of the suppression of interest rates comes the collapse of accumulated malinvestments, of government finances, and of the currency itself.
First the ashes, then, hopefully the phoenix
Elected in 1929, Hoover was the first US President who thought he could improve on the capitalist system of markets reforming themselves, and the results were a disaster. He was thrown out of office and replaced with another interventionist, Roosevelt, and the supremacy of the US Government over markets reforming themselves became established. The situation today is the logical destination of the fallacy that governments can run the economy.
It will end with the collapse and replacement of today’s unbacked fiat currencies — the ashes and then the phoenix. There is every indication that the time when all is rendered into ashes is rapidly approaching. People with fiat, earning fiat, relying on fiat will be impoverished. A currency collapse with no foreign currency to escape into is a cataclysmic event, the like of which we haven’t seen before, not even in Roman times. If it doesn’t buy you food and warmth a million bucks is worthless.
Governments will also have no means of collecting taxes, other than in their worthless currencies. They will be unable to pay their administrators, who cannot even afford to attend their offices. Their pensions and everybody else’s will be worthless. There will be no incentive for anyone in government without money. And without money there is no political power.
There can only be one solution, and that is a reset with gold. The slide in currencies can be stopped by making them exchangeable into gold. The reason for a gold-backed reset is not so much to stop a fiat currency from further collapse but to use it to ensure the widest distribution of the national gold reserves through a reformed gold-backed currency. The US Treasury claims it still has over 8,000 tonnes of gold, which assuming the Deep State hasn’t raided it, can ensure that a new dollar, convertible by everyone into gold, can circulate as money.
The same is true for other currencies, to greater or lesser degrees depending on their national gold reserves. But to be credible, gold coins must also circulate freely alongside readily convertible paper and digital substitutes. The banking system must also be reformed to do away with bank credit expansion, which creates deposits unbacked by gold. By then most of them may be in public ownership or protection, so a reform to abolish bank credit expansion should not be too difficult.
The mobilisation of central bank gold is the best outcome by far. It returns the choice of money to the people who use it for the intermediation between their production and consumption. But very few in government, their Deep States or The Blobs, have the intellectual capacity to understand what needs to be done. Their advisors are inflationists to a man or woman. Furthermore, the US’s Deep State is obsessed with the threat from China and Russia, which between them control international bullion markets (London and Comex are just paper), and have substantial declared and undeclared reserves. Legitimising gold will transfer enormous monetary and geopolitical power from America to the Asian hegemons, which is likely to be strongly resisted.
Furthermore, it will require governments to backtrack on the socialising process, whereby by providing welfare and regulating everything their budgets got out of hand. They must aim to reduce the full burden of their activities on the economy to under 20%.
Following a currency collapse, any central bank that thinks it can use a CBDC to manage market outcomes will undermine its own credibility. Other than issuers of gold-backed notes, they will have no role. In order for the necessary reforms to stick, flights of fancy such as the statist ambitions of planners and of the Klaus Schwabs of this world must be abandoned, along with all the false sciences adopted by statists. But on the positive side, a collapse of fiat currencies is required to sweep away the current failing system, and sooner or later that is what we are going to get.
Yesterday was a truly remarkable day in American history.
The official legal team for President Donald Trump—led by Rudy Giuliani, Sidney Powell, and Jenna Ellis—outlined an argument that America’s elections were hijacked by a conspiracy involving Dominion voting systems, the Smartmatic corporation, and elected officials of both parties. The team claimed that these actors collaborated with foreign enemies of the president to ensure he lost the 2020 election, actively inflating the vote totals for Joe Biden. The evidence, they say, will include hundreds of sworn affidavits and other documents that will validate their accusations. They also implied that the Department of Justice is either actively involved in this plot or serving to protect those involved.
The press conference was heavy in bold and striking claims, but so far the legal team has not provided enough documentation to adequately vet the claims made. It is certainly true that questions existed about some of these voting systems prior to the election and that the official results include all sorts of unprecedented voting trends that have sparked questions about their statistical likelihood. Unlikely outcomes are not, however, impossible outcomes, and there are no accusations that any voting machines were illegally used without going through the legally required certification processes.
Any serious legal challenge by Trump’s campaign team will require significant evidence that they have yet to make available. Of course, if the claims are accurate, the case involves a crime that may be beyond the capabilities of America’s judicial system.
What the Trump campaign can legally prove, however, is almost a secondary issue at this point.
Yesterday’s press conference has entrenched the current American president in the position that his anointed successor is illegitimate and that he is the one who holds a democratic mandate to govern.
America has had controversial electoral outcomes before, such as the elections of 2000 and 1876, which ended up being decided by party leaders in a smoke-filled backroom (Republican Rutherford Hayes was given the presidency over Samuel Tilden in exchange for the repeal of Reconstructionist-era laws in the Southern states).
There are several key differences between these instances and the current political turmoil: you now have a populist sitting president, actively despised by the corporate press, who is simultaneously disliked by the establishment of his own party and passionately beloved by his base.
regardless of the legal outcome, America is about to find itself with a president that will be viewed as illegitimate by a large portion of the population—and perhaps even the majority of some states. There is no institution left that has the credibility to push back against the gut feeling of millions of people who have spent the last few months organizing car parades and Trumptillas that their democracy has been hijacked by a political party that despises them.
The response we will receive from the corporate press, Very Serious pundits, and the various talking heads representing all the institutions that Trump has repeatedly mocked and belittled is obvious. Trump’s legal team is being dismissed as a bunch of partisan, sycophantic cranks spinning baseless conspiracy theories. Donald Trump is being portrayed as a spoiled, entitled man-child who would rather take down American democracy than admit he lost. His supporters will be dismissed and mocked as, at best, dumb suckers or, at worst, potentially violent right-wing extremists.
The problem is that, regardless of one’s opinion of Donald Trump or the specific claims made by his legal team, America’s elite and those in power have no credibility of their own.
For almost four years, the corporate press has propped up various false stories about the president while simultaneously propping up his political enemies and actively ignoring stories about the misconduct of Joe Biden’s son and potential conflicts of interest regarding the former vice president. The concerted effort to ask serious questions even forced journalists like Glenn Greenwald to ditch a media company he helped found.
At the same time, progressively-aligned Big Tech companies (many of which are staffed by former members of Kamala Harris’s political offices) have been taking an increasingly aggressive role in censoring and editorializing President Trump and his supporters.
Their claims that they have an ethical obligation to combat “misinformation” in the name of “democracy” are undermined by their willingness to actively assist the Chinese Communist Party in censoring dissidents.
Meanwhile, the professional political class in this country, lauded as “experts” by the bad actors mentioned above, has long mocked the notion of democratic oversight. An explicit example was offered just recently when Jim Jeffrey, a US envoy to Syria, gleefully disclosed to DefenseOne that American military leaders successfully maintained a larger military presence in the country than President Trump had ordered. The power of America’s professional bureaucracy goes beyond military matters, however, and the hope of much of America’s elite is that US policy will be increasingly influenced by their colleagues at the UN and other globalist institutions. Be it the Paris Accord or the Great Reset, many American progressives increasingly view very serious policy matters as issues too important to be entrusted to American voters.
Further still, America’s political environment has become so polarized and hostile that you have many elected officials in positions of influence who openly despise large swaths of the American population. For example, Arizona’s secretary of state—the woman in charge of election integrity in the state—described Trump’s base as “neo-Nazis” in 2017. Given her public statements, why would any Trump supporters have any faith in a governing body she influences to count votes? Meanwhile, the secretary of state in Michigan was a former employee of the Southern Poverty Law Center, a left-wing hate group.
It would, of course, be wrong to suggest that the elites of the American left are alone in their hatred of their political enemies. While the Left has tended to be more violent in recent years, there are many Republican voters who consider the political left immoral, un-American, and a threat to their families. The difference is that, outside of a few levers of federal power held by the Republican Party, the American right does not have nearly the same institutional support that the Left does currently.
It appears that 2020 may be the year that finally proves that the façade of democracy is not enough to maintain a unified political body. The election process does not inevitably lead to compromise and tolerance, but rather ends in those in power and those who are politically vanquished. When the losers of elections do not view their loss as a genuine reflection of democratic will, but rather an illegitimate coup, it is difficult to maintain governance over a population. Joe Biden appointing John Kasich–type Republicans will do little to soothe and reassure those who view a Biden presidency as little different than an occupational force.
This is why Ludwig von Mises viewed political decentralization and secession as a necessary component of liberal democracy. The proper objective of the democratic process was the peaceful transfer of power reflecting changes in the political will—political self-determination—rather than some form of civil worship of the will of the majority. When political differences become irreconcilable, true political decentralization allows for the breaking of political unions.
Will that end up being the ultimate result of the position of Trump's legal team? Who knows. Trump and a few lawyers will certainly not be enough to overturn the official results or to successfully spur a Trump secession movement. What will be interesting is how the institution of the Republican Party will respond to the escalating rhetoric of the president.
Under President Obama, the Republican Party remained civil and submissive while its Tea Party base discussed ideas like nullification and a convention of states. The sterility of the traditional GOP is likely a major reason why Donald Trump was able to take over the party. How much of the modern GOP will continue to follow the forty-fifth president, and how many will end up being perfectly content with being partners with Joe Biden?
What we can be sure of is that it will be much harder for Biden to win over many of the 70+ million Americans who voted for Donald Trump earlier this month.
