And as we’ve been showing you, it’s between government-issued currencies… and cryptocurrencies such as bitcoin that break money away from government control.
James Garfield, the 20th president of the United States, summed it up best when he said, “He who controls the money supply of a nation controls the nation.”
Right now, the U.S. federal government – with the help of the commercial banks it licenses – controls the money supply. It can create U.S. dollars out of thin air.
It’s a vital source of wealth and power. So it’s no surprise to see the government taking shots at alternative currencies.
Folks in power have been taking shots at cryptos since bitcoin first burst on the scene in 2009.
But Trump hadn’t expressed an opinion on the subject either way.
That changed last week. Here’s what he told his 62 million Twitter followers last Thursday…
A day earlier, Fed Reserve chief Jerome Powell went after Libra. That’s the corporate version of bitcoin that Facebook plans to launch next year.
Powell told lawmakers on Capitol Hill that “Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability.”
Then, as we went to press, it was Steve Mnuchin’s turn to have a go.
The Treasury Secretary said Libra “could be misused by money launderers and terrorist financiers”… and that this is a “national security issue.”
As regular readers know, Libra will allow Facebook’s 2.7 billion users to send and receive funds online. And it will be run by a group of corporations known as the Libra Association.
And given Facebook’s scale and reach, it has a shot at becoming the world’s most widely used currency… if it gets the legal go-ahead.
Here’s Jeff Brown, our go-to tech expert at Legacy Research…
What other company can you think of that has 2.7 billion customers worldwide? It’s a product that everyone carries with them all of their waking hours. And on average, people use the Facebook suite of products for more than an hour a day.
This is easily one of the most powerful networks on earth… and maybe the most powerful today. This will allow Facebook to create the world’s largest purely digital currency network – almost overnight.
We have to appreciate the chutzpah demonstrated by Facebook. It is launching a global central bank (Libra and its “association”) that it will control. Literally, this will be a global reserve currency, effectively controlled by one corporation (or a group of corporations – let’s call it a cabal), that is more transferable, more fungible, more secure, and more divisible than any fiat currency on earth.
But that’s not something the president is on board with. Here’s what he tweeted next…
That’s a clear message to Facebook: Forget about trying to launch your own currency as a private corporation. You’ll have to become a federally licensed bank first.
And crypto investors are paying attention. Following the tweetstorm, bitcoin took it on the chin…
Over the weekend, the world’s most valuable crypto fell as much as 17%.
Here’s how he wrapped up his tweetstorm…
But we have a different take on the dependability of the dollar.
As Legacy Research cofounder Bill Bonner has been showing our Bonner-Denning Letter readers, the feds are stuck in an “inflate or die” mentality.
They dealt with the last crisis by printing money and lowering interest rates. Now, they’re stuck in that one gear.
And that’s bad news if you’re relying on the dollar holding its buying power.
As Bill explained it in the latest issue (paid-up Bonner-Denning Letter readers can read it in full here)…
Once the feds inflate – either through the monetary channel or the fiscal channel – they are stuck. They have to keep inflating … or the boom dies. And the longer they keep at it, the bigger the disaster that awaits us when they stop.
In 1913, Congress passed the Federal Reserve Act. It established the Federal Reserve as the guardian of the U.S. dollar.
Back then, you could buy the same amount of food, clothing, and other necessities with $100 that you can buy with $2,613 today.
That’s a 96% loss of buying power over the past 105 years.
And nearly half of that loss of buying power has happened since 1990 – less than 30 years ago.
Its value isn’t based on “thin air.”
It comes from the fact that’s it’s a store of value governments and banks can’t inflate away.
Remember, bitcoin has no central bank or issuing authority. An algorithm controls its supply. The cap is 21 million coins. Once these have been unlocked, the world’s supply will be tapped out.
That’s in sharp contrast to the supply of U.S. dollars. Its supply is governed by the whims of the government and banks. And that’s what makes it vulnerable to inflation.
And it’s this contrast that makes bitcoin so attractive. Here’s Bill with more…
We’ve traditionally used gold as money because it’s a natural fit for the role. Gold is durable, fungible, divisible, and portable. And it is restricted in supply. Those properties make it a very good money.
For instance, you can grow a crop of tomatoes. The tomatoes will be gone in two weeks. But you can sell those tomatoes while they are still fresh… receive gold in payment for them… and enjoy the fruits of those tomatoes 50… or 100… or 1,000 years later. That’s the beauty of gold.
And I see that – theoretically, at least – bitcoin does the same thing. It’s also divisible, fungible, durable, portable, and limited in supply – all the properties of gold.
When you boil it down, bitcoin is a digital version of gold. Or as Bill likes to put it, bitcoin is “honest money.”
You know how many bitcoins will be in existence. So you don’t have the same kind of inflation risk that comes with dollars and other government-issued currencies.
This week, lawmakers are hauling Facebook up to Capitol Hill to grill it on its Libra currency.
Jeff Brown is headed there, too. He’s meeting with members of the Senate and the House about the future of blockchain technology and the need for a light regulatory touch.
As a Daily Cut reader, you’ll be one of the first to find out what he uncovers.
At 8 p.m. ET on July 24, he’s pulling back the curtain on a system he’s been developing for five years.
It’s a way for everyday investors to gain access to early-stage technology companies… without having to buy pre-IPO shares. In other words, as Jeff puts it, you can invest like a venture capitalist.
Learn more – and reserve your spot – right here.
Regards,
Chris Lowe
July 15, 2019
Lisbon, Portugal