With the Central Bank Digital Currency (CBDC) tsunami approaching, it is not surprising that central banks are selling coins at the expense of more sound assets. Recently, European Central Bank President Christine Lagarde went so far as to say that cryptocurrencies are “worth nothing.” According to Lagarde, crypto has “no underlying asset” like the upcoming digital euro. But the secret source of fiat currency’s value is a real explosive scandal.
worthless” innovation
European Central Bank President Christine Lagarde recently said that crypto needs to be regulated because it has “no value whatsoever.” Never mind her humor in trying to regulate something worthless and her lack of understanding of subjective value, Christine, once aconvicted criminal, said something very interesting. Christine said something very interesting.
[In crypto] there is no underlying asset to act as a safety anchor.
She made this observation in comparison to the upcoming digital euro central bank digital currency (CBDC).” Any digital euro, I assure you – so the central bank will support it, I think it will be significantly different,” claims.
This raises the question of what guarantees the value of the euro itself, or the US dollar, or any other fiat currency. Since their value is supposed to be established by the decree of the government (a mere collection of individuals just like you and me), what is the “underlying asset” that gives these currencies their value? In the case of government money, the answer may surprise you.
Guns vs. gold, silver, and bullshells
Gold is sought after for its beauty, rarity, and utility. Society through the ages has valued it almost everywhere, so it has naturally become a good means of exchange and an accumulation of value.
Cowry shells have historically been a great currency (pun intended) and were similarly adopted because they are limited in quantity, easy to transport and move, and basically uniform in unit. I have previously written an editorial on the erroneous notion that money is primarily a state creation. Money occurs naturally in any society where trade takes place, regardless of politics. Jack has the wheels of the wagon. Jack has the wheels and I have the butter. I want the wheels. Jack does not need butter. I am in trouble. But if we both like and have gold or shells or bitcoins to trade – hey, problem solved.
As Austrian economist Friedrich Hayek noted above, states have historically corrupted money, devalued it, inflated it, and built unsustainable credit bubbles. An early example of this was the Roman Empire, where the state graduallyreduced the silver content. gradually reducing the silver content of the denariusThe Roman Empire gradually reduced the silver content of the denarius to almost zero,
Now, if the people are forced to use a particular coin to the exclusion of other coins they prefer, it becomes a world of fiat money, and there is virtually no (easy) escape from bad money. Fiat literally means “by command,” i.e., an arbitrary command; Merriam-Webster’s third definition of “fiat” contains a further illustrative example:
according to the Bible, the world was createdby omission
from nothing. In a world of fiat money, the central bank is God. Not everyone can create money that can be used in the marketplace. This privilege is granted only to the state. For an illustration of what this angry and vengeful God does when people freely try to create their own money or currency and use it against the will of Almighty God, see.
It does not matter how peaceful you are. It does not matter how beneficial your innovations and discoveries are to humanity. If the money you create challenges the supremacy of closed market fiat money, you will ultimately be presented with three basic choices.
- Stop producing and/or freely using your currency.
- Go to jail – or resist being caged and kill or be killed.
- Look for “sneaky detours,” to quotegrow the economy, in Hayek’s
words, and “introduce something they can’t stop.”
What I am after should be universally recognized as a matter of course. The underlying “value” of fiat money is guaranteed by guns.78}by a legal monopoly of violence.
The reason why an inflated and unsound fiat currency like the Euro remains dominant is because it is forbidden to freely use other, better currencies. And when you come from the hallowed pantheon of central banking elites like Christine Lagarde, you simply cannot fail.
Take it from her.
The European Central Bank will not go bankrupt or run out of money if it suffers losses on the trillion euro mountain of bonds it purchased under its stimulus package.
Market accountability and crypto competition
contrast the violent nature of the fiat model for money, where thosewho point out problems with the law or try to protect their moneyare subjected to violence. Here is a comparison with a more voluntary model.
In a free and open market, if I decide to create a horrible crypto scam coin and swindle millions of people out of their money, I may make a buck, but the market actors learn something: one, they learn never to trust or deal with me again; two, they learn that I am not a scammer, and three, they learn that I am not a scammer. Thus, my ability to be perceived as a fraud in a particular society, even a rich one, is severely compromised. The people I scammed will now not allow me to participate in their market to meet my needs. And two, they have learned how to better identify and control similar scams in the future to avoid them.
But with government money, the scam itself is built into the regulations. The creator of a scam coin can demand that everyone dump their preferred asset and switch to his or her own damn coin. You may want to laugh in his face, but you can’t. He is literally holding a gun to your head.
Since every business is required by law to accept the government’s fraudulent coins, called fiat money, in the complete lack of free market consequences, the scammers can do whatever they want, simply printing more coins for themselves and devaluing the currency. Meanwhile, they are using this reckless printing to secure and hoard hard assets before the whole thing collapses.
Acting without permission. Escape from Financial Madness
As pure peer-to-peer transactions are increasingly demonized in the mainstream media and so-called public discourse, private crypto transactions may come to be considered illegal, like Liberty Dollar in the video above – scam coin creators (governments) now have what started as an experiment in freedom almost completely co-opted.
If this seems unrealistic or delusional, keep in mind that state-related financial groups and central banks have already long contemplated implementing measures to make unprotected and unhosted crypto wallets illegal and are planning uniform global regulation of bitcoin. As Lagarde said in early 2021:
It is an issue that needs to be agreed upon at the global level, because if there is an escape route, that escape route will be used.
People definitely want to escape from fanatical printing and the corruption of monetary values. They want to escape being forced to finance wars and escape paying for the lavish lifestyles of legal criminals like Lagarde with no repercussions. The only way to stop this is through individual market behavior. No matter what the hypocrites in their illegitimate “authority” positions say, they should be free to trade, en masse. Unauthorized transactions at all levels, from large purchases to small, everyday exchanges of value.
Even in a so-called unregulated, decentralized, stateless economy, there are many ways to ensure that fraud, acts of violence, and other undesirable practices are mitigated and defended. But the first recognition that must be made in order to establish this more peaceful, rational, and indeed desirable “new normal” is that the fiat money system is built on violence and deliberate inaction.
If Lagarde’s central bank-based digital euro is better than peer-to-peer permissionless cash, what is she so worried about? Let the market take care of it. No need to bring guns into it.
Image credits: Shutterstock, Pixabay, Wiki Commons, Alexandros Michailidis