Holding vs. Hoarding
The feds have no choice. They not only have to borrow, they have to ‘print.’ They have to inflate the money supply. And they can only do so as long as people take their fake money as if it were real.
Wednesday, October 23rd, 2024
Bill Bonner, writing today from Baltimore, Maryland
In the never-ending press babble is news that Kamala Harris is warming up to crypto. Benzinga:
Kamala Harris is taking a different approach to cryptocurrency than President Joe Biden and she's making moves. Harris isn't just talking about being more crypto-friendly. As reported by Joseph Zeballos-Roig from Semafor, she's already sending her aides out to build relationships with crypto investors and Democrats in Congress who support digital assets.
It is the home stretch for the election. (Want to know which way to vote? Look for our Special Election Issue coming soon!) Ms. Harris will take votes wherever she can find them. She is in favor of new ‘innovations,’ she says.
But neither she nor Donald Trump can permit a new innovation to undermine the inflation grift. Crimes need victims. And if the elites are going to keep the show on the road, they need to steal money from consumers, savers and lenders to pay for it.
They face $2 trillion deficits. They have to finance them somehow.
Since 1980 US debt has been growing about eight times faster than GDP. Raising middle class taxes is political suicide. So is cutting benefits. The politicians must borrow to keep the show on the road.
But households only save 5% of their incomes. Take US GDP as the ‘income’ for the nation... and you have about $1.4 trillion of available savings. Even if the feds borrowed every penny of it, it still wouldn’t be enough to plug the gap. In the fiscal year just ended, for example, the deficit was $1.8 trillion.
There’s also the ‘crowding out’ problem. As the feds borrow more and more, they push up interest rates... and leave the real economy with less credit to draw upon for new factories and new homes. The economy shrinks, causing tax receipts to fall and deficits to grow larger.
The feds have no choice. They not only have to borrow... they have to ‘print.’ They have to inflate the money supply. And they can only do so as long as people take their fake money as if it were real.
Tin-pot dictators... as well as great empires... resort to inflation from time to time. It robs the masses... and destroys the economy... but it keeps the cash flowing to the elites — for a while.
Typically, ‘sh*t hole’ countries with an inflation problem impose capital controls, making it impossible to have overseas accounts or exchange your local money for dollars or gold. Argentines were forced to become math whizzes as they juggled white money, blue money and black money — each with different rates of exchange that were adjusted hourly. ATMs ran out of cash. And traveling overseas was almost impossible as the government limited how much money they could take with them.
In order to make inflation work for them, the feds have to make sure it doesn’t work for you. But what will they do if Americans turn to crypto?
Bitcoin was widely used in Argentina as the inflation rate rose over 200% last year. But not to buy beer and cigarettes. It was largely an intermediate form of money. People got paid in BTC, for example, and then forwarded their electronic data to a moneychanger who gave them paper dollars or pesos to spend.
But BTC is limited. And its price rises as it becomes more popular. People who switch to BTC early might find that they not only avoided losses to inflation... they actually got rich. This would have strange repercussions.
People don’t like to use an appreciating asset for living expenses. They would rather spend a depreciating asset — paper money. Then too, in BTC terms, consumer prices would be falling rapidly... creating an incentive for crypto hodlers to hodl (hold on for dear life) even more.
In other words, if the consumer economy switched from using fake dollars to real BTC, the incentives would turn around. Instead of spending, people would save... and instead of growing, the economy would shrink — at least at first. A BTC-based economy would probably trigger a depression, in other words.
This is really too far out for us to think about very clearly... so let’s go back to our moorings.
If BTC ever becomes a ubiquitous alternative... allowing people to escape dollar inflation... expect the feds to make it illegal, tax it, or regulate it so much that it poses no threat to them. Fed researchers and strategists are already laying plans for it.
And what about gold? On April 20, 1933, the Roosevelt Administration banned citizens from holding gold. Should we prepare for an encore?
More to come...
Regards,
Bill Bonner
If we still had professional journalists they would be informing the American people of this threat but they are all just puppets of the rich elites and only produce propaganda now.
"In order to make inflation work for them, the feds have to make sure it doesn’t work for you."
And there is the treason for all to see, but few to acknowledge.