International Man: In a recent interview, we talked about the fight for monetary supremacy between fiat, bitcoin, and gold– however in the geopolitical sense, the nation with the “best” money ultimately enforces its supremacy on others.
Today, the United States dollar is still the global reserve currency, however the United States fiscal and financial policy now resembles the harmful cash printing of every other nation.
What does this mean for the US and its financial chokehold on the rest of the world?
Nick Giambruno: First, I believe it is very important to clarify something.
You often hear the media, political leaders, and monetary analysts toss around the word trillion without appreciating what it truly suggests.
A trillion is a massive, nearly incomprehensible number.
The human mind has difficulty covering itself around something so huge. So let me attempt to put it into point of view.
One million seconds earlier was about 11 days back.
One billion seconds back was 1989.
One trillion seconds ago was 30,000 BC.
So that’s how big a trillion is.
When political leaders carelessly spend and print cash in the trillions, you understand you’re in unsafe area. That’s precisely what is taking place in the US today.
After the onset of the COVID hysteria, the US federal government embraced a policy of printing money to finance growing multi-trillion-dollar deficits permanently. This is what Modern Monetary Theory (MMT) is all about, and it’s already here.
Also, the COVID stimulus checks are the beginnings of a Universal Basic Earnings (UBI). There is no chance any political leader will ever have the ability to roll them back, much less stop them entirely. Who is going to beat Santa Claus in an election?
By embracing MMT and a UBI, the US has actually started the most hazardous economic experiment given that communism.
Eventually, all this costs financed by cash printing will damage the currency.
This is exactly the exact same issue that has actually caught Argentina in a perpetual cycle of hyperinflation and economic collapse. And even then, it’s politically impossible to eliminate the freebies, so the process starts up again.
Here’s the bottom line. With MMT and a UBI, the US has actually surpassed the financial defining moment.
That’s why individuals, companies, and foreign federal governments will undoubtedly look to alternatives to the US dollar and financial system. As they do, a big part of the US government’s geopolitical leverage will evaporate.
International Guy: Countries like Russia and China are building up more gold than ever in the past. What does this signal about the trust in the US dollar and other fiat currencies?
Nick Giambruno: Let’s define fiat currency.
The Oxford English Dictionary specifies it as “inconvertible fiat money made legal tender by a government decree.”
Here’s a valuable method to consider it.
Consider nation-states as casinos and fiat currencies as the casino chips.
The US has the biggest casino in the world. They get to tax anyone in their gambling establishment by producing more chips and diluting their worth. They get to set the rules at the tables, decide on who can go into and who is prohibited. As long as people use the US casino, it gives the US federal government massive power.
The Russians, Chinese, and lots of others are significantly mindful that the US gambling establishment is ending up being more rigged. So they’re taking their chips and squandering for real cash– gold.
International Male: Tech business owner and American venture capitalist Peter Theil just recently made a public statement about the risk of China to the US dollar. He said:
“I do question whether, at this moment, Bitcoin should likewise be considered in part as a Chinese financial weapon versus the United States. It threatens fiat money, but it particularly threatens the United States dollar.If China’s long Bitcoin, maybe from a geopolitical viewpoint, the US ought to be asking some tougher concerns about exactly how that works.”
What’s your view on this?
Nick Giambruno: Thiel’s take isn’t 100% correct. Bitcoin isn’t particularly a Chinese financial weapon. It’s open-source software and a difficult money financial system that nobody controls and anybody in the world can use, consisting of US adversaries.
However, Thiel struck on an essential point. Bitcoin has actually become a geopolitical competition, suggesting that the United States better get in the game or watch China and other competitors develop a tactical edge in the future of money.
International Male: China is the world leader in Bitcoin mining and is likewise accountable for producing a lot of the computer system equipment required to mine Bitcoin.
What advantages does that provide in the fight for geopolitical monetary supremacy!.
?.!? Also, if such a large part of Bitcoin is mined in China, does this present a genuine danger to Bitcoin and its decentralized nature?
Nick Giambruno: China isn’t as dominant as it may seem.
Most of the times, to get in the business of being a Bitcoin miner, you need to join a mining pool, a collection of other miners that jointly contribute calculating power.
A lot of mining swimming pools are indeed in China. However the actual mining makers adding to those swimming pools are not always in China and might change to other swimming pools outside of China if they picked.
Even more, it’s vital to comprehend that miners do not control Bitcoin.
A worldwide decentralized network of over 10,000 full nodes– computer systems running the Bitcoin blockchain– eventually control Bitcoin.
Miners must be sincere and follow the Bitcoin procedure, which is implemented by the complete nodes. If they don’t, they will not do anything however waste money and eventually bankrupt themselves.
Bitcoin supporter Saifedean Ammous said it best: “Miners are Bitcoin’s slaves, not masters.”
What Saifedean indicates is that the miners need to please the Bitcoin network– not the other way around. If they do not, they will have spent a great deal of cash on electricity and hardware for nothing. It’s a dazzling system of rewards.
The “blocksize wars,” which culminated in 2017, drastically illustrated this dynamic. That’s when an overwhelming bulk of the Bitcoin miners– and other popular experts and big business– tried to get together and change Bitcoin. It was an abysmal and awkward failure for them because, even though they represented the huge bulk of the Bitcoin miners, the network effectively rejected their efforts.
So, as it associates with the question, the issue is not about control or altering the Bitcoin network– that is almost impossible, even for large nation-states like Russia, China, and the United States. The concern here is who is engaging in mining to produce the hardest money known to man.
So, is the US simply going to sit back and let its competitors accumulate Bitcoin and prosper and effective by dominating the future of money?
I don’t believe so.
At some point soon, the United States government will realize that it needs to offer a competitive environment for Bitcoin mining, or it will get left as an unstoppable and remarkable type of cash continues to take control of the world.
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