Why you cannot escape cryptocurrencies
It’s rare for a government insider to offer insight into the future. But many can’t keep quiet once they leave government. That’s why big financial firms hire them in an instant. Their connections and ability to predict the government’s future moves are incredibly profitable assets.
A few months ago, a former government insider gave us an extraordinary insight into an event that will dominate your financial future. It’s a sort of reset of the global financial system.
I’ve already warned our Strategic Intelligence subscribers how such a reset might come about. I call it the Davos Accord.
Let’s briefly take a look at this idea so you can appreciate just how remarkable the new disclosure is.
The history of debt jubilees
Every few decades, the world’s financial system goes through a reset.
Just before a complete collapse, the powers that be come together in an obscure place and hash out the terms of the new currency system.
That new system usually gets named after the random place they decided to meet. After World War Two, it was Bretton Woods. Trade imbalances and the outflow of gold forced the Smithsonian Agreement and the Jamaica Accord in the 70s, which gave us floating currencies. The Treaty of Versailles was one such reset they got wrong, with disastrous consequences that Britain’s John Maynard Keynes predicted.
These are just some examples from the 20th century. But the history of financial system resets goes back much further. The Rosetta Stone records such an event.
These resets occurred for the same reason as those last century — to prevent a crisis and the popular uproar that goes with them (i.e. rebellion). The aim is to create a new workable system rather than allowing the old one to collapse.
At some point, a reset of the financial system is preferable to the status quo of a failing system. It might be that the level of debt is just too high to service. Or perhaps a government printed too much money.
In the 40s, war had ravaged Europe. In 1971, it was the American trade deficit that led to an outflow of gold. The Rosetta Stone and related records suggest that the number of debt slaves was so high it risked a rebellion at the time.
Whatever the threat, a reset comes before anything really hits the fan. That’s why you’ve got to keep your eye out for them. They precipitate the crises we’re all worrying about, catching most people unaware. The gold confiscation in 1930s America is an example of what happens when you don’t see such a reset coming. As was hyperinflation during the Weimar Republic.
Having imagined how such a reset occurs, my advice was simple: Opt out of the financial system in a way that will preserve your assets.
The remarkable news is that the coming reset features an asset you’d never expect.
When money is reborn
Dr Pippa Malmgren used to be part of America’s Plunge Protection Team. The officially named ‘Working Group on Financial Markets’ looked into market crashes and how to prevent them getting out of hand. They also helped draft statements for policy officials intended to manipulate markets.
In other words, she’s no conspiracy theorist or alarmist — quite the opposite. She worked at the pointy end of government intervention in financial markets. And these days, government intervention is all that matters in financial markets.
Her incredibly well-informed past makes this quote from a Macro Voices podcast interview rather startling:
‘[…] you have got to understand if the size of your debt problem is so big that it can’t be paid off and in fact even inflation, which is the usual way you would seek to default on your debt slowly over time, you can’t get enough inflation generated, then there is one further option. And that is you literally abandon the entire system of money, and accounting. I know that sounds unbelievably radical, but we have seen it happen before.’
There you have it. A currency system reset is now mainstream.
More remarkably, Malmgren also tells us how the coming reset will play out:
‘Today, we are on the brink of similar step change, and the way you will do it is you move to electronic money in conjunction with blockchain. Blockchain is the new ledger, and e-money is the new currency.’
Bretton Woods gave us the gold standard. The Smithsonian Agreement gave us floating currencies. Now Malmgren is telling you the coming reset will be to a form of cryptocurrency. Probably a selection of national ones, or an international one. Your economic life could soon be running on cryptocurrencies, whether you like it or not.
It’s no surprise that technology enables financial change. It’s always been the case with every reset. Mining and minting, the printing press, digital currency, and now the blockchain. It’s a natural progression.
What is very surprising is that a government insider is telling you the coming reset will be to cryptocurrencies. That’s a major break.
It used to be radical to say that governments would try to inflate their way out of the impossible amount of debt they’re in. These days, it’s not even radical to suggest a complete reset of the monetary system to a form of money that the government is busy demonising.
How far we’ve come…
But it’s not that simple
This confirmation from inside government circles certainly puts a lot of what’s going on into perspective.
The global War on Cash, for example. India’s experiment with forcing commerce online is shaping up to be a success after a very turbulent few months. Someone even named their baby GST after the new Indian version of VAT.
Then there’s Russian President Vladimir Putin and his meeting with the developer of Ethereum. Not to mention the many small approvals of blockchain technology for use in financial markets around the world. The Australian Stock Exchange recently announced its new settlement system will use blockchain.
But there are plenty of bumps in the road too.
Dr Malmgren identified the longer-term issue at stake if governments do start to utilise cryptocurrency technology.
- Who issues, owns and controls the currency?
For now, cryptocurrencies are private initiatives. Although Singapore is testing a government version.
The power to control and mint money is simply too big for governments to give up. It puts their entire revenue base at risk. Not to mention the ability to control the economy.
- What sort of privacy goes with a cryptocurrency?
It’s called ‘crypto’ for a reason. And privacy is one of the features making cryptocurrencies so popular to begin with. They’re hard to crack down on.
If two people can transact anonymously over the internet using a token they consider to be of value, then a new cryptocurrency can be born no matter what the government does to try and stop it. The power of cryptocurrencies comes with the feature of decentralisation — what governments fear most.
But there are many other benefits of the blockchain over and above privacy. It’s certainly superior to government money today.
And many of a cryptocurrency’s features are flexible enough to be tailored to the government’s purpose. Privacy is not an inherent feature of a cryptocurrency.
The opposition’s positions
Standing in opposition to the coming reset are voters. They rather like cash.
And it’s not just in Greece and Italy, where cash and tax avoidance go hand in hand. Germans and Japanese, for example, love cash too.
But as Malmgren explained, at some point a reset is needed. And cryptocurrencies offer one option for the replacement system. You need to understand them to stay one step ahead of the coming reset.
Talking of staying ahead, my friend and colleague Callum Newman has officially released his brand-new opportunity report on the blockchain. And while you may have heard of the technology driving the crypto boom…I’d be extremely surprised if you’ve heard of the ideas Callum has unearthed to profit from it.
Check out his report, right here.
Until next time,
For The Daily Reckoning Australia