WHY BITCOIN?
BitcoinReality vs. Central Banks.
The Monetary Evolution for Humanity.
For My Baba´s Soul, All Children, and Humanity in Total Peace.
Part 3:
The Missing Link in the Criminal Central Banking Cartel:
The centralized criminal coordination of the Central bank of all central banks, The Bank for International Settlements (BIS), becomes obvious within the infinite space of fractional-reserve banking, by reading de Soto´s enlightening conclusions in his chapter of “Central and Free Banking Theory” [ Jesús Huerta de Soto, “Money, Bank Credit, And Economic Cycles” (2012), 3rd ed., pp. 664-670.]: “The analysis shows that under such circumstances, even if interbank clearing mechanisms limit isolated expansionary schemes, these spontaneous mechanisms actually encourage implicit or explicit agreements among themselves, and ultimately, a central bank tends to emerge. Central banks generally appear as a result of requests from private banks themselves, who wish to institutionalize joint credit expansion via a government agency designed to orchestrate and organize it.
In this way, the ‘uncooperative’ behaviour of a significant number of relatively more prudent bankers is prevented from endangering the solvency of the rest (those who are more ‘cheerful’ in granting loans). Therefore our analysis enables to conclude the following: (1) that the interbank clearing mechanism does not serve to limit credit expansion in a fractional reserve-reserve free-banking system if most banks decide to simultaneously expand their loans in the absence of a prior rise in voluntary saving; (2) that the fractional-reserve banking system itself prompts bankers to initiate their expansionary policies in a combined, coordinated matter; and (3) that bankers in the system have a powerful incentive to demand and obtain the establishment of a central bank to institutionalize and orchestrate credit expansion for all banks, and to guarantee the creation of the necessary liquidity in the “troublesome” periods, which, as bankers know from experience, inevitably reappear. …
Therefore we can conclude that banking legislation is condemned to failure and will continue to be so unless the present form is thoroughly abolished and replaced by a few simple articles to be included in the commercial and penal codes. These articles would establish the regulation of the monetary bank-deposit contract according to traditional legal principles (a 100-percent reserve requirement) and would prohibit all contracts which mask fractional-reserve banking….Instead, free banking should be seen as an indirect route to the ideal free-banking system, one subject to legal principles, i.e., a 100-percent reserve requirement. All legal means available in a constitutional state should be applied at all times in the direct pursuit of this goal.”
The final point to be understood is that in conclusion, significant (fiduciary)
[ Jesús Huerta de Soto, “Money, Bank Credit, And Economic Cycles” (2012), 3rd ed., p. 687.; the portion of the money substitutes, or demand deposits, which is not fully backed by physical monetary units in the bank´s vault is called fiduciary media. Demand deposits backed by cash reserves at the bank are also called primary deposits, while the portion of demand deposits not backed by the bank´s reserves (fiduciary media) is also called a secondary deposit or derivative deposit.] inflationary processes and severe economic recessions may occur in any fractional-reserve free-banking system: the creation of fiduciary media also entails an increase in the money supply and a consequent decrease in the purchasing power of money. In this way, banks collectively and almost in plain sight expropriate (=steal) the value of
citizens´monetary units. It is ridiculous to declare that the economic slaves and victims who suffer such expropriation (=theft) are voluntarily (?) “saving”:
“It is not surprising that these doctrines have been defended by authors like Keynes [author´s note: non-economist]…, all who have justified inflationism, credit expansion, and the ‘euthanasia of the rentier’ for the sake of aggressive economic policies geared to insure an ‘adequate’ level of ‘aggregate demand’.” [Jesús Huerta de Soto, “Money, Bank Credit, And Economic Cycles” (2012), 3rd ed., p. 700.].
De Soto makes it clear in his final realistic perspective and conclusions of necessary actions that “…the only way to eliminate the central planning agency in the field of banking and credit (the central bank) is to do away with the fractional-reserve privilege private bankers currently enjoy.
This is a necessary measure, though it is not sufficient: the central bank must still be completely abolished and the fiduciary money it has created up to now must be privatized….In conclusion, if we wish to build a truly stable financial and monetary system for the twenty-first century, a system which will protect our economies as far as humanly possible from crises and recessions, we will have to: (1) ensure complete freedom of choice in currency, based on a metallic standard (gold) which would replace all fiduciary media issued in the past; (2) establish a free-banking system; and most importantly, (3) insist that all agents involved in the free-banking system be subject to and comply with traditional legal rules and principles, especially the principle that no one, not even banker, can enjoy the privilege of loaning something entrusted to him on demand deposit (i.e., a free-banking system with a 100-percent reserve requirement).
Until specialists and society in general fully grasp the essential theoretical and legal principles associated with money, bank credit, and economic cycles, we may realistically expect further suffering in the world due to damaging financial crises and economic recessions which will inevitably and perpetually reappear until central banks lose their power to issue paper money with legal tender and bankers lose their government-granted privilege of operating with a fractional reserve. We now wrap up the book as we began it, with this opinion: Now that we have seen the historic fall of socialism, both in theory and in practice, the main challenge to face both professional economists and lovers of freedom in this century will be to use all of their intellectual might to oppose the institution of the central bank and the privilege private bankers now enjoy.” [Jesús Huerta de Soto, “Money, Bank Credit, And Economic Cycles” (2012), 3rd ed., p. 811–812.].
Sadly, in our “modern” civilization, humanity has been systematically brainwashed and conditioned into thinking that the continuous inflation (=reduced purchasing power of each monetary unit and increased prices of consumer goods) is a normal economically acceptable process of things. Today, all working (and unemployed) people is prepared to consider a rise in his nominal or monetary income as an improvement to his material well-being. Henry Hazlitt pointed sharply to the perversion of inflation: “But neither is he as fully aware of his real as he would have been if his cost of living had not changed and if his money salary had been reduced to give him the same reduced purchasing power that he now has, in spite of his salary increase, because of higher prices. Inflation is the auto-suggestion, the hypnotism, the anesthetic, that has dulled the pain of the operation for him. Inflation is the opium of the people.” [Henry Hazlitt, Economics In One Lesson (1946), p.198.].
Humanity´s focus is directed more toward the rise in nominal wage rates and the money equivalent of wealth than to the increase in the supply of commodities. In a world of rising purchasing power for the monetary unit they would concern themselves more with the fall in living costs. This would bring into clearer relief the fact that economic progress consists in making the amenities of life more easily accessible. [ Ludwig von Mises, Human Action, p. 469.].
De Soto explains “deflation” in the context of a pure gold standard and a 100-percent reserve requirement :
“If by ‘deflation’ we understand a drop in the general price level or a rise in the purchasing power of the monetary unit, it is clear that to the extent that general economic productivity increased faster than the money supply, such ‘deflation’ would be present in the monetary we recommend. We described this model of economic development above, and it offers the great advantage of not only preventing economic crises and recessions, but also spreading the benefits of economic development to all citizens by stimulating gradual, continuous growth in the purchasing power of each person´s monetary units and a parallel decrease in each person´s demand for money….However in this respect it is only important that in practice economic agents be able to easily predict the evolution of the purchasing power of money and to take into account when making decisions.
This would be sufficient to avert the sudden, unjustified redistribution of income between creditors and debtors which in the past has always accompanied the expansionary credit or monetary shocks economic agents have failed to foresee in time”. [Jesús Huerta de Soto, “Money, Bank Credit, And Economic Cycles” (2012), 3rd ed., p. 774–775.].
This is exactly the condition on how people are able to choose and adopt more and more a low-time-preference:[See detailed explanation: Saifedean Ammous, The Bitcoin Standard (2018), pp. 74–75.]. “…Human beings´ lower time preference allows us to curb our instinctive and animalistic impulses, think of what is better for our future, and act rationally rather than impulsively. Instead of spending all our time producing goods for immediate consumption, we can choose to spend time engaged in production of goods that will take longer to complete, if they are superior goods.
As humans reduce their time preference, they develop the scope for carrying out tasks over longer time horizons, for satisfaction of ever-more remote needs, and they develop the mental capacity to create goods not for immediate consumption but for the production of future goods, in other words, to create capital goods…This is the essence of investment: as humans delay immediate gratification, they invest their time and resources in the production of capital goods which will make production more sophisticated or technologically advanced and extend it over a longer time-horizon”.
De Soto explains the time-preference in a similar fashion: “The sine qua non for producing capital goods is saving, or the relinquishment or postponement of immediate consumption. Indeed in an action process the actor will only be able to reach successive and increasingly time-consuming intermediate stages if he has first sacrificed the chance to undertake actions which would produce a more immediate result. In other words, he must give up the achievement of immediate ends which would satisfy current human needs (consumption).” [Jesús Huerta de Soto, “Money, Bank Credit, And Economic Cycles” (2012), 3rd ed., p. 273.].
The economist Hans-Hermann Hoppe explains that once the time preference drops even further, a “process of civilization” is initiated. Differently said: once the monetary-economical conditions are created with the hardest money (=Bitcoin) ever created in human history, humanity can invest more time, ressources, and creativity into a human civilization of evolutionary science, technology, and spirituality. It should be of no surprise then why we are still using primitive and environmentally damaging technologies (burning of fuels, combustion engines etc.) for more than a century by now. [ Hans-Hermann Hoppe, Democracy: The God That Failed (2001), p. 6.].
As Saifedean Ammous concludes correctly: “This helps explain why civilizations prosper under a sound monetary system, but disintegrate when their monetary systems are debased, as was the case with the Romans, the Byzantines, and modern European societies.
The contrast between the nineteenth and twentieth centuries can be understood in the context of the move away from sound money and all the attendant problems that creates”. [Saifedean Ammous, The Bitcoin Standard (2018), p. 81.].
Money can only be understood as a medium of exchange, store of value, and unit of account. Not the quantity is what matters, but its purchasing power is the essence of money. Any quantity of money is enough to satisfy the monetary functions, as long as it is divisible, groupable, and fungible enough to satisfy the money-holders´ transactions and storage needs. Theoretically, the ideal money would be one whose supply is fixed, so that nobody could produce more of it.
It had proven to be impossible to create a type of money of which more cannot be created. With its relative scarcity of gold, new mining supply of approximately 1–2 % per year continues to be a reliably and predictable tiny fraction of existing stockpiles of gold. This is the reason why more than ever governments and central banks hold a significant percentage of their reserves in gold, constituting a significant percentage of total gold supply.
If this chronic inflationary devil´s cycle of central banking continues without a fundamental transformation of the monetary-system, eventually it will lead to a burst of of a gigantic super-inflationary debt-bubble.
In order to understand the sophisticated, inconspicuous, but powerful operations of the central banking-structure, we need to make an excursion into the Central Bank of all central banks:
The Bank for International Settlements (BIS). Janne Jörg Kipp describes the historical roots (storage of stolen gold, gold-laundering, diverse international banking-transactions with Nazi-Germany, networking for the global business of the military industry, wars etc.), before he details the hypocritical roles of the BIS: On the one hand, it makes warnings about the high national debts, and on the other hand, — as an offshoot of the BIS- the “Basel Committee” supervising the banks, increases the volume of money through governmental credits, either by printing more (paper-) money and / or digital creation of fiat-money out of thin air.
[See in detail, beginning with the historical background: Janne Jörg Kippe, BIZ — Der Turm zu Basel, Geheimpläne für eine globale Weltwährung (2014).; read my other articles in connection with Bitcoin vs. BIS & central banking cartel: medium.com/@keyvandavani].
To be continued…in Part 4:
The Logical and Ethical Solution …& Bitcoin is the seed and source for monetary, financial, economic, and social freedom. & Guidelines for Your Financial and Investment decisions for Your Future…Is Humanity Mature for The Holy Grail of Evolution? Bitcoin.About the author:
Keyvan Davani.
Ph.D. in Law (Juridicum, Univ. of Vienna/Austria )
CEO, Founder and Show-host of The Total Connector.
Total Bitcoin. Total Decentralization. Total Freedom.
e-mail: kd@keyvandavani.com.
First comes total security for your Bitcoins & Satoshis — your hardware-wallet:
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