Bitcoin: The Digital Kill Switch

[AnonyMint]

Discussion between myself and James A. Donald (the first person who interacted with Satoshi at the cryptography forum where Satoshi announced Bitcoin):

http://blog.jim.com/culture/radish-explains-what-racism-means.html/comment-page-1#comment-345629

If bitcoin is fixed – made scalable so as to remain truly peer to peer all the way to volumes comparable to Visa, that would be a huge win. Also, being in on that at the start would get one rich.

I hope you saw my proposed solution.

I also feel strong anonymity is very important, because I think the government may become oppressive as end-stage Rome. The only way I can see to obtain digital coin anonymously is through mining (not an exchange) using a mix-net or dc-net that is more anonymous than Tor, i.e. tradeoff high latency for better anonymity (become impervious to timing attacks). Mining in Bitcon is falling fast (as a % of existing coin supply) to be at 0 in 2033.

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[AnonyMint]

Martin Armstrong has not said that gold isn't money. He has said that a strict gold standard is never sustainable, and he explained why. Society must oscillate between gold and fiat money, because of at least two reasons:

1. Debt isn't possible on a strict gold standard (no fractional reserves)

2. Strict gold standard means savings is 100% more important than production and knowledge formation, because savers (who do nothing but sit on their gold) always get wealthier. You can't pay investors more, because the supply of gold doesn't increase as fast as the increased production value.

Point #2 above hasn't been explained clearly enough for most people to understand.

Martin explained this very abstractly by saying the supply of gold can't expand with the expansion of the economy. Goldbugs ignore this explanation, because they say the value of gold can increase accordingly.

What is missing is that when investors invest in a productive business, they expect to get a ROI which is greater than just sitting on their gold. So if via such investments, the economy grows at X% where X is greater than the expansion of the physical gold supply, then some of the investors can't be paid, i.e. the savers in gold take the gains from the investors in the form of price deflation.

Why can't otherwise smart people see that? I dunno. Cognitive dissonance? I mean I know one guy who claims he scored higher than me on the SAT (but not on the Math) and is a famous silver promoter, and for some reason he just can't seem to understand that (or at least hasn't indicated to me he got the point).

Some people point to the Byzantine empire (Eastern Rome) as an example of a sustainable gold standard. In every case where there was a gold standard, either it wasn't the only money (i.e. banks were creating gold receipts which were backed only by fractional reserves) and/or gold was being imported into the economy thus expanding the supply of gold faster than the 2% per annum expansion of global supply due to mining.

How can anyone make this any more clear? Whoever can't get this, should shut up, they don't have sufficient IQ to be commenting on the matter then.

P.S. Bitcoin is worse than gold, as the increase in supply stops entirely in 2033. Clearly a flawed design, for the reasons above, and also because mining of new coins is the only SURE way to anonymously obtain bit coins.

[AnonyMint]

http://armstrongeconomics.com/2013/08/05/confiscation-of-gold-possible-or-not/

About the above "Confiscation of gold", the key points to remember are:

1. They can't confiscate what you physically hide, but other than coins for barter (no need to assay, trusted), you won't be able to invest that wealth (easily and efficiently in large size) without paying the confiscation or taxes, because the powers that be control the avenues for investment. So all this BS from goldbugs about they can't confiscate what you bury in a hole, is only valid for the Madmax scenario, not for the scenario where they make a new money system after the crisis and you can't enter it without paying the confiscation or taxes. I warned of this years ago:

http://www.marketoracle.co.uk/Article20327.html (End Game - Gold Investors Destroyed)
http://www.financialsensearchive.com/fsu/editorials/moore/2010/0615.html (copy)
http://www.gold-eagle.com/article/no-money-exists-without-majority (No Money Exists Without The Majority)
https://bitcointalk.org/index.php?topic=226033 (discussion)

2. They won't bother confiscating gold if there isn't that much wealth to attack (if the payoff is less than the effort and cost). So bear in mind, that a more anonymous Bitcoin alternative (coming soon), which they can not confiscate, will pull wealth away from gold. A possible reason the Bible speaks of a 666 mark on the forehead and hand (governments will need to physically track you to re-enable their power to tax you after I am done destroying that power), is because the governments are going to be destroyed by a truly anonymous Bitcoin alternative which they can not confiscate. Most people don't realize this is actually possible:

http://blog.jim.com/economics/bitcoin-as-a-speculative-bet.html/comment-page-1#comment-342148
https://bitcointalk.org/index.php?topic=160612.msg2847982#msg2847982


3. Physical gold can't create a new economy. We can't go back to physical barter and have any where near the maximum divison-of-labor we have now (thus quality of life would plummet). Forget it. An alternative to Bitcoin which is is truly anonymous and thus can't be confiscated, could potentially render the USA empire fiscally impotent sending it away powerless with its tail between its legs.

[AnonyMint]

Btw, I don't why but suddenly (ever since I became more convinced of a hard landing for China and Armstrong's Pi model) it seems Michael Pettis is censoring my comments on his blog. So the following comment I posted to his blog may not appear on his blog. Oh well, his loss if so. Thought we were on amicable terms.

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-233

Michael, I don't understand how you can expect a soft landing, when apparently the trajectories that need adjusting have not been reversed yet?

The debt-to-GDP ratios are as high as any where when non-official debt is factored in. There has been no sustained deflation of China's housing bubble yet.

For the elite within the Communist Party to give up wealth to the masses, seems to be the antithesis of what makes the Communist Party exist. They will only do this when they are losing more money by holding on to the old, than they could make by privatizing.

Michael if the western world collapses in a sovereign debt collapse where aggregate global demand is reduced by 30 - 50%, are you claiming China could have a soft landing?

If I am correct about such a global implosion starting 2016, then the process of the elite adjusting will occur with a depression in China.

The Pi model says the center of the global empire moves period round-robin from Europe, Americas, Asia, and that the USA had its depression in 1929 as the handoff from Europe to USA of the global empire. 78 years later in the Pi model (78 = 26 x 3.159, 26 = 8.6 x 3.1459, 8.6 = 1000 x 3.1459), China will have its 1929 starting in 2016/7 as the handoff from USA to Asia of the global empire enters the next phase.

[AnonyMint]

Here is the direct link to that Catherine Austin Fitts video:

http://www.youtube.com/watch?v=0EiMUPdtFXI

Excellent video to bring to my attention.

Essentially she is arguing that the Private sector is extracting itself from the Public sector, as the socialism (statism) is dying.

But she makes the mistake of not identifying which portion of the private sector is allowed to go free and which portion is being held slave to the Public sector.

Btw, Martin Armstrong's ECM Pi (8.6 years = 3145.9 days) model also has the Public sector wave ending in 1981, and the Private sector wave extending to and peaking in 2033, and 2033 is also when the 26 year down portion of the Real Estate cycle bottoms:

http://armstrongeconomics.com/models/7219-2/

Armstrong has also called for the dollar to strengthen and the developing world to crash due to being short the dollar (as they received massive dollar loans as this was only place for international capital to earn a decent return, but now the flow is reversing back to the USA as Fitts also noted).

W.r.t. to old and new economy (robotics, etc) and return to USA of more hitech manufacturing, good to see she read my emails a few months ago, as she is now repeating my theme. Well I can't assume she learned that from me

Fitts calls for long-term boom in the stock market (when asked about China becoming new reserve currency she said "impossible now, something to study 20 years out"), so her view of the USA stock market possibly rising through 2033 I guess wouldn't be an anathema to Armstrong.

However, Armstrong has called for crash in 2016 that will be worse than 2008. Fitts rather views collapse as more likely for the developing world-- not for the USA. Rather she sees a slow-burn (to 2033?) of defaulting on socialism for the USA (at least, does she include Europe and G7? I think so). She sees roving failures globally and nationally, but not one big catastrophic moment of failure globally.

She agrees with Armstrong that the G7 (in defense of the Public sector) is attacking safe havens. She mentions her estimate of $40 trillion stolen from the public sector by those in the Private sector (banks, military establishment, etc) who own the government.

She didn't acknowledge that those powers that be are not attacking safe havens that include themselves and their $40 trillion, rather the
attacking of the safe havens is to go after all the competition from the millionaires and the upper middle class. So this is power consolidation, power grab. She could refer to my recent emails about how empires die, and how they destroy themselves by destroying their tax base-- the upper middle class who create businesses.

She agrees with Armstrong that the USA (G7) empire will not go quietly into the night and they are twisting the arm of the G20, and they will use their power to attack anyone who is not playing ball in their system.

Fitts argues that the USA can reinvent itself, but she misses one very important point. Demographics. Europe even more so. The West can excel at high tech but it can't become lean overall as a society until the boomers die off (i.e. another 20 years or so, i.e. 2033 again). Whereas, the developing world can quickly grow after resetting itself with defaults. Heritage foundation data shows the developing countries have a very low level of government as share of GDP unlike the West, so they are poised to grow after the recent influx of credit is purged in a collapse coming soon (2016). Young people simply adapt more quickly and are highly motivated to do so. Old people are hanging for a "few more good years".

Armstrong thinks the rising interest rates will choke off the old economy and exacerbate the sovereign and local government fiscal positions (not to mention how this will set off derivative defaults on the interest rate swaps, and derivatives get first priority over bond holders and depositors), thus causing a collapse into deflation, i.e. austerity along with rising taxes and hunting down all capital. This is not so different than Fitt's slow burn, except for key point.

Armstrong thinks "safe haven" will come to mean any capital that is not buying a "get out of jail free card" from the government, i.e. all middle class wealth will be targeted.

So this is the difference between Fitts and Armstrong, and I am sure Armstrong is correct, because Fitts missed the point that demographics don't afford her scenario of a widespread recovery and the powers that be want a bunch of slaves with them in control (i.e. they don't want to give up control to millions of free enterprice, they want fascism).

The reality will probably end up being somewhere in between Fitt's optimism and Armstrong's pessimism, especially since yours truly is working on a better Bitcoin that can hide capital from the bastards and build the new economy under their nose.

> http://www.bmgbullion.com/document/buzz/2013-08-07
> ...and she is making some very good points. My
> big question is how many will be left behind by
> the new economy and what's going to happen to
> them? Will they let those in the new economy
> dance while they starve? How peaceful or messy
> will that be That's easily 50M-80M people that
> are "excess" and don't really fit into the new
> world because they will never get the skills to
> be useful. Will they just be plowed under or induced to mass suicide? By
the way if her scenario with a strong
> industrial America
> (oil/agro/technology/manufacturing) is true, the
> moonshot in metals will never come, and gold
> won't even reach 3000, unless there is war.
> Silver might go higher because of industrial use and shortage.

[AnonyMint]

The answer to the problems of deflation/ austerity due to a fixed supply of currency, is and always has been to increase spending by printing or otherwise debasing that currency, creating inflation. Inflation is a form of net worth tax, although a flawed version, as discussed below. Once this flaw is removed, this naturally occurring tax can be allowed to deflate the nominal values of all wealth (not just money). The result is that everyone's relative wealth remains unchanged by the tax, meaning that the currency ends up not debased!

You are responding to my point that gold can never be the only money because it would penalize investing for productivity by giving the returns to those who sit on their gold, because the gold supply doesn't expand fast enough to pay the investors the ROI on the expansion of the economy due to their efforts and risk.

The problem with any tax is that the elite capture it in the Olsen scramble. Top-down is not a solution. We need decentralized solutions.

Inflation is not a problem, because it benefits the working class, whose wages will rise proportionally and depletes the idle capital of the capitalists who are not investing in new technology and productivity.

The problem with inflation as it is created now, is that the elite get their hands on the levers that create inflation and thus give the debased money to themselves.

This problem elite capture won't be possible in a better Bitcoin, that contains sufficient continuous debasement (i.e. inflation), because no entity can control the rate of debasement.

In any event the exponential ramp in technology as we approach the singularity may eventually render the capitalism/ socialism model obsolete.

The technological singularity is nonsense. I refuted it here:

http://unheresy.com/Information%20Is%20Alive.html

Note that Nicolas Taleb agreed with me.

But I do agree that if we earn our ROI in knowledge gained, instead of dollars saved, then for those who are in that new economy they will not be controlled by monetary capital. And thus knowledge capital can grow much faster without being burdened by monetary controls (how much capital do you need to write a new software program in your bedroom?) and in a decentralized manner. My Copute plans are all about that model of the future.

[AnonyMint]

Fitts and you (and everyone else too) are being fooled to some degree by the international capital fleeing Europe and the developing world into the dollar assets forming a bubble. This is a deadcat bounce.

This will drive capital out of bonds (so it can chase also these higher returns) and these high interest rates will choke off the US economy (and globe) by 2016.

Be aware that many people are locking in 5/1 ARMs because they are still 3% while fixed mortage rate loans moved to 4+% recently. Thus this boost in the economy is going to get killed by the higher interest rates coming with those ARMS adjust in 5 years. Many other examples like that of why this bounce is going to collapse.

Armstrong is always correct, because he does not do analysis based on fundamentals which are always questionable. Rather his timing models relate how international capital looks at relative opportunity cost OVER TIME:

http://armstrongeconomics.com/2013/08/07/fundamental-analysis-always-questionable/

> Thanks for the youtube link, it was a great summary by Fitts of all the
> various predictions and analyses she has been making.  My gut tells me she
> is absolutely spot on and her view jives with many other bits of
> information I am picking up.
> BTW, I am also witnessing a huge explosion of prosperity and
> infrastructure development and people are spending money like crazy.  I've
> been hearing anecdotal reports by friends and their extended families
> getting huge increases in their salaries or large revenue boosts from
> their private businesses.  In the metro area I live in, billions are being
> spent on new hospital and research centers and billions more on massive
> transportation projects...

[AnonyMint]

In addition to mining, other than risky personal meetups, one can be paid anonymously, i.e. only known by their private key, e.g. license some digital works where the author is only identified by the private key.

[AnonyMint]

bcc: Kristen Linton @ Solari to pass on to Catherine

Three more points of evidence that seem to argue that Catherine's optimism is unrealistic:

1. Obama's Health Care plan is going to significantly impact to the negative any business where labor is a significant component. How do we get widespread recovery of the economy without widespread involvement of labor?

2. Catherine's model of individuals and small (rural!) communities reinventing themselves is precisely what happens when empires fail. The cities become empty and only those who fend for themselves in the rural areas survive. It is not a model for society wide recovery, rather it is THE model for collapse:

http://blog.jim.com/culture/radish-explains-what-racism-means.html/comment-page-1#comment-345588

The population of Rome plummeted -97% from 1.4 million in 450AD to 40,000 over the next 1000+ years.[1]

Dark Ages where the population abandons cities occurred in Greece from 1600 – 1200BC (with coinage only re-appearing in 7th century BC), after the collapse of Rome that lasted 600 years, and in Japan for 600 years during which no coinage was created.[2]

[1] Sovereign Debt Crisis Conference, Armstrong
[2] Are we Headed into a Mad Max Scenario?, Armstrong

3. What Catherine describes as a slow burn (e.g. the now sick small farmers in her region being turned into welfare dependents eating GMO by the greed of the fascism which outlawed their organic farming in favor of GMO, Monsanto, and corporate farming) is analagous to how the end came about in Rome:

http://blog.jim.com/culture/radish-explains-what-racism-means.html/comment-page-1#comment-344589

@Winter:
You attempt to remove blame from the effects of top-down governance. Agriculture in Western Europe declined for numerous reasons all of which can be attributed to mismanagement due to top-down control and the funding of such misallocation. Socialized debt is a future tax. The agricultural sector was suffering under increasing taxes after the hyperinflation of the 3rd century had adversely impacted funding for the military while there were increasing military threats to the east. Pottery records indicate production increased through the 4th, as the rural sector was squeezed for every drop by Rome. As with all debt funding, growth was too rapid, and irrigation was polluted by clearing for too many new
settlements. The resultant malnutrition, declining production, localized warlords, and thus disease coincided with the collapse of Western Europe due to the bankruptcy of its top-down militarized, servitude model.

We will likely find the same top-down cause applies to of all Dark Ages– even the famines in Africa.

Indeed, probably due to plagues of various kinds

Pinker attributes the entire population decline to the fall of Rome, even though it set in before the fall or Rome.

In fact, what happened was that Rome was in financial trouble because, like much of Europe, it was taxing well above the Laffer limit. Well, thought Diocletian, if overtaxed people will not work, make them work. So he in large part instituted a command economy, which probably caused rises in the death rates for the usual reasons that we observe command economies killing people today and during the twentieth century. Basically, in a command economy, you have to murder people to get stuff done.

My further comments are interleaved within yours below.

> Thank you for the feedback, you make good points.  However, my sense is that the centralization of global economic power has reached the point where TPTB can manipulate just about every variable swiftly and
> effectively, including interest rates - i.e. for several more years under the dollar fiat and then when that system is no longer viable they will make their move to a digital global currency.

Even if the elite were entirely in control (which Armstrong argues is impossible and I agree), why would they want to hold interest rates down? The ROI on each new dollar of debt has reached a few pennies in China and just about every where in the world. There is overcapacity in every sector, e.g. even here in the Philipppines they are building a shopping mall on every corner while the people still only earn $200 per month.

If they continue pumping more debt into the global economy, they will cause massive social unrest because of the waste. They have to move now to next stage which is defaults, which will bankrupt everyone but themselves. They can use the Public sector to hunt down all the remaining capital and assets that isn't theirs (so they will own the growth phase that comes after this wipeout). They got their $40 trillion and have it positioned. For example, they are building pipelines across the USA to carry natural gas to new export terminals so they can export to Asia which they keep dependent on imports, because for example they come to the aid of Japan Senkaku islands and Philippines Spratly islands to keep China from developing these huge natural gas fields.

They have given Dept of Homelove (hands down kid's pants) Security the right to purchase billions of hollow point bullets (which are illegal in war because they are so gruesome) and 2714 tank-like vehicles. Does that sound to you like they are preparing for a subtle slow down and
slow-cooked frogs in the boiling pot?

Nothing every crashes like that. In nature, all exponential phenomenon have a long period of exponential gestation, a phase-shift blow off where the nominal change is now large, an then a waterfall collapse that is much shorter than the gestation period.

> In the interview I believe Fitts spoke about how derivatives are used to manipulate interest rates.  Makes sense that the derivatives market is a powerful tool in this context.  How much longer can this work?

Exactly. And now the Fed and the Treasury Dept is telling all the banks that their derivative books won't be bailed out in 2016 and that they need to start unwinding. This is another reason we are seeing the interest rates going up radically since May. The derivatives will take priority to the bond holders and the depositors, e.g. bail-ins are coming.

They are getting ready to default the global economy and they will be the only ones left standing after the dust clears.

They will use this leverage to force the developing world to follow their aims. But remember, they are not entirely in control. And their plan will leak. For example, I am creating the better Bitcoin that will enable private capital to run and hide (and still be liquid unlike gold in large size will be trapped by taxation, but the better anonymous Bitcoin will not be).

> We should also consider compensatory mechanisms.
> Interesting side note, about 9 years ago, I had an online forum chat with an old insider economist (he authored widely used economics textbooks, was Ivy League, bragged about being a close friend of Milton Friedman, etc.) about the dismantling of the U.S. manufacturing sector and he told me he was confident that the U.S. would be in a position to quickly rebuild a large manufacturing sector.

You know I have been calling for that too for past several months.

The point is that the elite will own this sector. The proprietor's capital won't survive the coming wipeout unless they play ball with the elite, except for the leakage I am talking about above.

Also this sector will either be very low labor (thus not a big impact on the general economy in the USA), else they will play ball with the elite (e.g. to get a waiver from the Obama administration on health care or otherwise not abused by the IRS).

Fascism 101.

>  Of course, that seemed very unlikely given
> the U.S. debt situation and China's advantages of slave labor and lack of regulation.

China and Asia will still win on anything that is labor intensive. This is why Asia will be #1 as we come out the crisis.

The elite are planning to use the hitech community in the USA as slaves, while keeping Asia as slaves by controlling key inputs such as energy.

>  In retrospect, remembering other commentary he posited, at
> the time he seemed delusional but now I have to think he was, like Carroll Quigley, being given access to deep insider intel.
> Thanks again for the info and your input.  I will be thinking about your points on interest rates.

[AnonyMint]

>>Inflation is not a problem, because it benefits the working class, whose
>>wages will rise proportionally and depletes the idle capital of the
>>capitalists who are not investing in new technology and productivity.
>
>
> That is a really stupid thing to say. Inflation,
> i.e. fiat money printing or stealth theft, is
> precisely the problem.

There is no problem for workers when their wages keep up with inflation.

> If it wasn't for the
> stolen wealth through money printing, the SOB's
> wouldn't be interested in fractional reserve in
> the first place.

Exactly. Who is receiving the QE?

With Bitcoin mining, the elite don't receive the printing.

:wink:

> That is the raison d'être. And
> inflation rises faster than wages,

Inflation rises faster than wages because the elite are wasting the printed money, i.e. capital misallocation, thus causing economic decline.

Without inflation, the economy can't grow. I already explained why in my prior email where I explained that the investors who fund a project need to get back more than they put in. But this can't happen with a strict gold standard where only gold is the money, because money supply is limited to 2 - 3% per year.

I am sorry if you can't grasp this. It is exclusively to be understood by people with an IQ above 140. Most can never get this.

In the Quantity Theory of Money:

M x V = P x Q

The investor could be paid by increasing V, but we can't just keep increasing the velocity of money forever. M has to increase.

If you can't grasp that, I don't know how else to explain it to you, that you could grasp.

The problem is top-down control over money printing. Decentralized money printing is absolutely necessary, else the economy can't grow.

Only people with very high IQ are going to understand this.

> ...
> justify the cheating. America was built with
> honest money.

Incorrect. It was built on fractional reserves by the private banks all through the 1800s at least.

> I understand your own improved
> Bitcoin has no feature for stealing either. So what gives?

The printing is given to those who mine the Bitcoin. And now I will be proposing that the M scales with the P x Q. Completely decentralized. No one can steal. Money supply will grow with the economy. No central bank needed.

> If the claim is true that a modern economy cannot
> function without lending, which I doubt,

You deny the facts above.

> ...
> No way, that interest has to go to the people,
> wholly.

Interest goes to the lenders and savers. Giving it away to all the people is stealing via socialism.

> ...
> money, etc. Let myriads of local councils decide
> about credit and specially marked credit money be
> printed for the purpose.

You propose more top-down statism, which leads always to socialism. Top-down organization is not decentralized. It always leads to politics and vested interests.

Iron Law of Political Economics:

http://esr.ibiblio.org/?p=984

> All of a sudden you have
> people who are very interested in politics and
> check and doublecheck every action of the
> officials. No more mickey mouse money,
> derivatives shit and financial casino. That will
> take the power away from these SOB's and
> everybody's share of the pie will get bigger.

Have you not learned anything in 3000+ years of recorded human history?

The moneychangers buy the government and the politics.

You propose more of the same.

[AnonyMint]

They got their $40 trillion and have it positioned. For example, they are building pipelines across the USA to carry natural gas to new export terminals so they can export to Asia which they keep dependent on imports, because for example they come to the aid of Japan Senkaku islands and Philippines Spratly islands to keep China from developing these huge natural gas fields.

The elite are planning to use the hitech community in the USA as slaves, while keeping Asia as slaves by controlling key inputs such as energy.

I'm bored Anony what's the news?

How will Asia be kept slaves with energy ?

http://pro.contrarianprofits.com/Cameron49/LJMTP800?h=true

(click close on your browser tab for the above link, then click "stay on page", then the transcript will appear so you don't have to listen to the whole video)

That came from a link in a Casey Research post:

http://www.caseyresearch.com/cdd/how-to-invest-to-avoid-a-chinese-slowdown

Here is more about it:

http://stockgumshoe.com/reviews/macro-trader/whats-the-mysterious-400-billion-cameron-parish-project/

[AnonyMint]

> I'm not getting fooled by anybody, just listening to different
> view points. And hers [Fitts] is not all bad. But true? Who knows.
> Nobody knows the future in all points, including Armstrong.
> Refer to my recent 1781 example.

Indeed no one knows every individual action, and Armstrong doesn't attempt to predict what his model does not model.

The misconceptions of the British in 1781 have nothing to do with the validity of Armstrong's Pi model. His model was found by inputting $100 million in data from the history of the world into a computer which then searched for repeating patterns. Thus it was discovered that Pi is fundamental. Well that makes plausible sense, since The Universe is composed of frequencies which are multiples of Pi (in the Fourier domain of
spacetime).

I am searching for one instance since 1970 where Armstrong's prediction of trend and timing was grossly incorrect. Have you found one? I haven't found one yet.

His computer validated that the Pi cycles were always correct since the beginning of recorded time.

It is difficult for me to deny the scientific method. How about you, you prefer to believe in the tooth fairy?

[AnonyMint]

>>Inflation is not a problem, because it benefits the working class, whose
>>wages will rise proportionally and depletes the idle capital of the
>>capitalists who are not investing in new technology and productivity.

There is no problem for workers when their wages keep up with inflation.

And the data from 1790 to 2012 says:

http://www.measuringworth.com/growth/

http://www.measuringworth.com/growth/growth_resultf.php?begin%5B%5D=1790&end%5B%5D=2012&beginP%5B%5D=&endP%5B%5D=&US%5B%5D=UNSKILLED&US%5B%5D=MANCOMP&US%5B%5D=NOMINALGDP&US%5B%5D=NOMGDPCP&US%5B%5D=SAP&US%5B%5D=POPULATION&UK%5B%5D=GDPC&UK%5B%5D=GDPCP&UK%5B%5D=POP&gold%5B%5D=NEWYORK&gold%5B%5D=SILVERRATIO

The average annualized values from 1790 - 2012 are as follows.

3.26% - Production Worker Compensation
5.24% - Nominal GDP   
3.18% - Nominal GDP per capita
1.99% - Population (millions)

3.26 + 1.99 = 5.25 which is very close to 5.24%

In other words, the increase in nominal GDP was spread proportionally to the workers, diluted by the increase in the population.

So the only problem was if the money supply was increasing faster than the nominal GDP, i.e. if the velocity of money was declining. Indeed the velocity of money is declining now, because the bastards have their hands on the levers of money supply creation and are hoarding it for themselves.

Here is the same data again 1970 - 2000:

5.46% - Production Worker Compensation
7.82% - Nominal GDP   
6.68% - Nominal GDP per capita
1.07% - Population (millions)

So we see that lately the workers have been cheated.

5.46 + 1.07 = 6.53, which is 1.5% less than 7.82%.

M2 increased only 7.12% from 1970 to 2000, so velocity was increasing:

http://www.economagic.com/em-cgi/data.exe/frbH6/m2

So it appears the bastards were able to steal about 1.5% per year from the working class from 1970 - 2000. Hopefully we could eliminate that by eliminating their control over the printing of money.

Without inflation, the economy can't grow. I already explained why in my prior email where I explained that the investors who fund a project need to get back more than they put in. But this can't happen with a strict gold standard where only gold is the money, because money supply is limited to 2 - 3% per year.

I am sorry if you can't grasp this. It is exclusively to be understood by people with an IQ above 140. Most can never get this.

In the Quantity Theory of Money:

M x V = P x Q

The investor could be paid by increasing V, but we can't just keep increasing the velocity of money forever. M has to increase.

If you can't grasp that, I don't know how else to explain it to you, that you could grasp.

The problem is top-down control over money printing. Decentralized money printing is absolutely necessary, else the economy can't grow.

Only people with very high IQ are going to understand this.

> I understand your own improved
> Bitcoin has no feature for stealing either. So what gives?

The printing is given to those who mine the Bitcoin. And now I will be proposing that the M scales with the P x Q. Completely decentralized. No one can steal. Money supply will grow with the economy. No central bank needed.

So ideally we want to scale the money supply by the optimum nominal GDP growth rate. That appears to be 5% historically. Bitcoin will not scale its money supply after 2033, and thus MUST be debased by external credit else the economy would stop growing if Bitcoin was the only currency.

I will be proposing for my new alternative to Bitcoin, that the mining of new money follows a similar curve to Bitcoin but never declines below 5%. That way it can support an economy whose average annual growth rate is 5%.

Note the growth rate can go higher or lower, because the velocity of money can change, but over time it will have to average the same as the growth rate of the money supply.

[AnonyMint]

http://armstrongeconomics.com/2013/08/09/what-can-we-do/

http://armstrongeconomics.com/2013/08/09/email-service-used-by-snowden-shuts-itself-down-warns-against-using-us-based-companies/

I suspect he may be reading my emails, because he nearly copied some of my recent statements verbatim:

That decentralized inflation is not bad:

Pretending money must be tangible like gold and calling for the Fed to be leveled and eliminating derivatives and reserve banking are ideas that would destroy society on a wholesale basis. They are impractical.

All of these rantings are based upon a single notion – control of the money supply.

On how empires end with police state and not hyperinflation:

This is the typical reaction that always takes place in the end times for every empire, nation, and city state in history.

Those who think you can buy gold coins to survive had better realize that unless you are paying cash where there are no surveillance cameras, chances are they know you have the gold and view that as someone who disagrees with their power.

http://armstrongeconomics.com/2013/08/09/is-hyperinflation-associated-only-with-revolutionary-new-governments/

A direct quote of my "to a hammer everything is a nail" statement I have made 3 times recently:

if you are dependent upon selling that product or commodity, then it is as if you only have a hammer and everything appears to be a nail.

To be precise, hyperinflation takes place when there is a collapse in confidence that supports a government so it can be an established government such as in South America. The key is the currency is not accepted by the people. That comes FIRST and then we see that they print more and more following the trend and propelling it. This is the chicken or egg dilemma. It is not the REVERSE that the supply increases and that causes the currency to decline as characterized by the gold promoters.

Money never becomes worthless in a major core society for if the core were to collapse then everything else must fall as well.

Human nature does not change with time. It remains consistent and this is why history repeats. With the fall of Rome, the invading barbarians wanted to be Roman. Their rulers initially issued coins merely pretending to be the emperor.

http://armstrongeconomics.com/2013/08/08/pakistan-bans-gold-imports/

When the economy turns down in 2016, the demand for gold will rise again. We must realize that governments are also likely to target gold for taxation and confiscation between 2016 and 2020.

http://armstrongeconomics.com/2013/08/09/crime-is-also-rising-in-europe-among-the-youth-solution-more-police-restore-border-checks-not-lower-taxes-to-create-jobs/

Hiring police has been rising, but at the same time there are those who are arguing it was the removal of borders in Europe that fueled criminal operations. The theory is that police are confined to the locality whereas the criminals are not. So the unemployed youth in the south move north to plunder. Ironically, instead of looking at the high taxes destroying job creation, they want a FBI of Europe and border controls restored. They always see this as they need more power to correct the trend rather than the possibility that they are causing the trend.

My point about demographics is the key distinction for the west:

http://armstrongeconomics.com/2013/08/08/the-next-generation-pensions-r-vanishing-why-the-dow-may-yet-double/

[AnonyMint]

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-304

Shelby, the US was the dominant technological and economic power both overall and on a per capita basis by the 1870s, and the US had the highest wages in the world for nearly all of the 19th Century. By the end of the Civil War German officers watching the war already saw the US as the dominant military power. I am not sure why you do not think this happened until the 1950s.

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-329

New York did not become the financial capital of the world until after WW2. As you know, this was because Europe imploded and capital fled to the new frontier. The Florida land bubbles were caused by gold fleeing Europe into the USA. The same is about to happen to the USA going to Asia circa 2033, but first we have one last hurrah for the dollar as the emerging markets are short the dollar (either bond issues or China's dependence on exports) and capital will rush back to the core economy as global socialism implodes (again, which is what caused prior world wars).

Note the Asian crisis at the turn of the 21st century was caused by capital rushing back to Europe for the launch of Euro (and we see how that speculative capital flow into PIIGS ended up now).

Although Asia is not #1 per capita, they have several times more population. And if valued on a PPP basis including TRUE health care and social services costs NOT SHIFTED INTO THE FUTURE BY BEING OFF BALANCE ENTRIES, then Asia is already ahead of the West in aggregate (perhaps not per capita but we really don't know until the write-downs come). One can argue that Asia will have to pay for their elderly one day, but that is not a significant balance sheet item now or anytime in next few decades. The Japanese throw their 50+ off the job bus.

The USA was importing immigrant labor so labor was not in oversupply as is the case in Asia. So we shouldn't be comparing wages, rather social balance sheets (c.f. Michael's astute blog about "social capital").

Again my theme has been that socialism's peak also corresponds to some massive technologically induced unemployment in the former dominant economies (this corresponds every 78 years to the collapse of real estate in the dominant economies), e.g. the factories disrupting cottage industry going into the 20th century and now computers and internet with outsourcing, robotics, automation (even accounting and POS system integration, etc).

====================

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-305

Perhaps more importantly there has probably never been a “hand-off” in history, and certainly not in modern times, from a more open society to a more closed one. I don’t think this is a coincidence.

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-333

Didn't verify so I will take your word for it. And indeed this is why I had been bearish on China, because I didn't see how it could become more open without a complete change of political and philosophical culture. I even criticized their top-down educational culture, population-wide (cultural) disregard for intellectual properties rights, etc..

Then Armstrong made some valid points that shocked me-- points we all probably know but didn't bring to our conscious mind yet (i.e. cognitive dissonance).

1. The West is less open. Shocking but true. We have the illusion of free speech, but in the Wallstreet protests they just arrest you for stepping on the grass. A recent news story reveals anti-terrorism forces are showing up at individual homes 100 times per day, e.g. a husband did an internet search for "backpack" and the wife searched for "pressure cookers". Consider the relative level of regulation and government share of GDP. Even California has made it a criminal offense not to comply with Obamacare.

2. Some claims the Chinese don't have true private land ownership (the man who blocked a highway disagrees), yet in the USA we don't own our house.

And I add my own point:

3. Although we can view Asia as top-down managed, in reality there is massive choice and competition, but as a Westerner you might not see it because you expect it to take the same forms you know at home. Some claim that China doesn't have private health care, but I bet they have ubiquity of private folk medicine-- there is a "quack doctor" in every community in the Philippines. James White wrote about this w.r.t. to manufacturing diversity, and alibaba.com is evidence of that. In the Philippines I can choose from three (or five) nationwide PREPAID cell phone networks (so I need at least a dual-simm phone) meaning I can buy a new simm in 30 seconds have a new number. In the west, you nearly have to give a blood sample to get a phone number and USA has much slower internet because of telcom monopolies. The list goes on and on...

=======
Its depressing that the world is moving to a lower common denominator of liberty, with Asia's top-down systems as the best we have to look forward to, but actually what appears to be happening from my perspective is we are moving to anarcho-capitalism where an alternative Bitcoin will make it nearly impossible for the nation-states to tax and spend. The frontier of freedom appears to be on the digital highway. There is actually technology for all of this, e.g. Chaum's high-latency mix-net, dc-net, OTR, and the Socialist Millionaire algorithm.

[AnonyMint]

Shelby wrote: "The printing is given to those who mine the Bitcoin."

This is the same as instituting a net worth tax on holders of Bitcoin, and making a top-down decision to give the proceeds to workers who sign up to build a bridge to nowhere.

No it is not. Top-down is never the same result as free market decentralized, c.f. my prior link to Some Iron Laws of Political Economics.

If I ignore your future posts, you know why.

It is essentially free to create new Bitcoins. This plan would be a grossly wasteful boondoggle, as shown below.

Absolutely not, the difficulty scales to the ROI on the hardware and electricity.

The cost of maintaining Bitcoin, which is currently paid for by issuing new Bitcoins, is a separate issue. Those maintaining Bitcoin were initially paid well in order to get more Bitcoins into the system. The issuance of new Bitcoin is set to expire.

Expiration of the 5% debasement needed by economic growth is a big mistake and is why I will be making a better Bitcoin. See my posts upthread.

I probably won't reply to you again, because you have so many misconceptions and I am lacking time. No personal insult intended.

In a competitive environment the cost of maintaining Bitcoin is negligible,

False. We need ever higher difficulty to prevent a 51% attack.

so the amount of new Bitcoin paid for this maintenance after the expiration date will be so tiny as to not even be considered new issuance, and certainly not enough to provide stimulus to the economy-- I would say that paying 5% of the entire economy, each year, to the people maintaining Bitcoin, would be the ultimate government bridge to nowhere.

We've got to have 5% debasement, else you can't get 5% growth over the long-term trend.

Who else is going to manage that distribution better? Again see the Some Iron Laws of Political Economics.

While just spending the money on anything, or giving it away as charity would stimulate the economy, how about using it to boost decentralized risk-takers in their ability to fund the brightest and best projects, as mentioned in my prior post?

Socialism already failed every time. Sorry.

[AnonyMint]

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-339

@Shelby: The tax rate in the US hasn’t gone up, it’s gone down. In the 1950′s the top end rate was 90% and the middle class had high tax rates too. And besides, Rome turned into an oppressive empire and still lasted for 400 years. I’m really not seeing much evidence to support your conclusion. Also like I said, declinist rhetoric is nothing new.

Sorry, you couldn't have been more wrong.

I was including Europe, which has insanely high rates of taxation.

USA income and capital gains taxes are on the way back up (and that doesn't include that caps on FICA do not adjust higher as fast as true inflation), the investment tax and regulation costs (hidden tax) in Obamacare starts next year, and Obama wants more. Property taxes so high, you can't own your house (property taxes were minuscule in the 1950s). There are many hidden taxes due to regulation that did not exist in the 1950s. There has been a 1250% increase in taxation for a family of 4 since 1948.

Pottery records indicate that production continued to increase into 5th century, but then the rate of clearing and expedient farming methods to keep up with the tax and debt reached the point where soils collapsed, irrigation was polluted, and the economy collapsed. We will know the true condition of the USA when interest rates rise several percentage points (by 2016) and then eventually to double-digits. Don't forget a $quadrillion in interest rate swap derivatives, and those have been moved in front of bond holders and depositors when bankruptcy hits. Note the Fed is privately telling banks there will be no more bailouts. Ditto Europe is preparing for bail-ins, over $100,000 is gone (and if you take it out now there will be clawbacks), and under $100,000 will be limited to 100-200 euros withdrawal per day. After that reduction in money velocity crashes Europe, they will have to make the capital controls even more severe.

[AnonyMint]

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-395

1) I provided a link upthread about telcom monopolies give us slow internet in the USA. Regulation has multiplied and now touches every small business, as explained in the link I provided. Indeed, the New Deal launched many of the programs we have today, but now the programs are pathological, e.g. you can't build on your land because the federal government makes some environmental ruling about an insect or otherwise comes to steal your rural land. Google "sheriff stops federal government" and there is a lot more in that rabbit hole than I care to detail here.

2) The low property tax percentages (you've got state + local schools, etc) are mostly if you live far from civilization where the opportunities for employment are much less. And either property taxes and/or sales taxes will be skyrocketing because the state and local governments are under severe financial stress which will get worse (the demographics of the USA are not improving any time soon, and many retirements to pay).

3) In the 1950s, nearly no one paid capital gains, mostly only corporations. Now a significant percent of the population are investors, e.g. their 401k plan, etc.. I already provided a link in prior comment that capital gains is increasing from 15% to 18.8% under Obamacare, and dividends are no longer taxed as capital gains rather as income where the top rate is increasing from 33% to 35%. In 1950s, dividends were not taxed as income. Note capital gains on gold is taxed at 28% and you are going to need gold to maintain your net worth after 2016.

4) You fail to assimilate that most Americans weren't paying much tax back then. Did you just ignore the data in the link I provided as quoted below?

Federal Tax Rates up 1,250% for Families of 4
This chart compares the federal income tax rate for 1994 with that of 1948 for a family of 4 at median income level. (data: Family Research Council, reported October 1996 by presidential candidate Steve Forbes, Impris)

The tax rate has jumped from 2% to 25% - - an increase in tax rates of 1,250%.

Nearly no one paid the top bracket income tax rates in the 1950s. There wasn't an Alternative Minimum Tax as we have now at 20%, so used loopholes to avoid paying any tax. And the middle class was only paying 2%.

Also the regressive sales taxes we have today were progressive back then, meaning again that most people didn't pay them (or the top rate). And the highest rate I've found is 3% with most at 2% or less (and most weren't even paying that) and some locales have over 10% now.

Although it is true that we have a huge underbelly that pays no tax (used to support leftist arguments that taxes are low), that socialism is exactly what it going to tax the middle class into extinction over the next decade as the fiscal situation deteriorates as more boomers retire and interest rates rise.

When Reagan lowered taxes, they also closed many of the loopholes and deductions that were available to the middle class.

A google search for "Hauser’s law" brings up a relevant historical chart showing that those top tax brackets in the 1950s weren't being paid.

[AnonyMint]

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-416

I’m pretty sure China is going down, and that it will prompt a major economic collapse in SE Asia too. SE Asia is currently in its biggest boom ever, from what I can see, from Singapore to Malaysia to Indonesia to Thailand to Cambodia to Laos etc. giant condo projects are announced every few days and sell out tp speculators in a weekend. Thai guys are buying shiny new pickup trucks at a rate that would make an Alabama redneck scratch his ears. New Range Rovers and Hummers almost outnumber the beggars in downtown Phnom Penh. All of SE Asia is on steroids. Most of the reason is China and central bank money-printing worldwide.

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-434

I was reading the Philippines Inquirer news section on some days earlier this year, and nearly every time I read about some bond issue by a corporation denominated in dollars (e.g. MegaWorld, Ayala Land, San Miquel, etc). My hypothesis is that QE sat at the Fed but it raised the reserves of the banks allowing them to loan out more money, but this doesn't show up in Western credit increases rather somehow the loans are ending up in the developing world. Or it could just be investors seeking higher yield due ZIRP in the West. I read from Martin Armstrong that this was going on in Latin America too.

But now the Great Rotation has started and capital is rushing back into the dollar, USA housing, USA equities, and as this drive USA interest rates higher, then it has a spiraling upwards feedback because potential home buyers rush to lock in the rates before the rise more, international investors (escaping coming capital controls in Europe and depreciating Yen due Abeconomics) rush to grab higher rates with an appreciating dollar, and domestic investors jump on the bandwagon (noticing that the recovery in equities since the 2008 crash is now more than just a recovery given new all-time highs).

This rotation is also pushed by declining GDP in China, Europe, and thus rest of the developing world which feeds commodities and manufacturing inputs (notice a deadcat bounce in copper, gold, and stall in USA equities since China released better data past week).

This rotation thus reveals the developing world is short the dollar (they owe dollars) while their currencies decline relative to the dollar due to this shift in capital flows. This will bring the developing world to its knees between now and the end of 2015, while the USA non-bond (except high yield) assets and dollar will be skyrocketing. Yet simultaneously this rise in USA interest rates and dollar will be choking the real economy (along with Obamacare tax rises coming 2014 and plans for more increases), thus in 2016 we will likely see the USA economy roll over, as Europe, Japan, and the developing world will likely already be sinking into the abyss by 2015 (c.f. my upthread post on the net liabilities of Germany, France, USA, and UK greater than the PIIGS although this is hidden in accounting gimmicks, also German and French banks are bankrupt, again hidden in accounting gymnastics).

Michael offered his calculations on China in an email to Mish Shedlock. The problem is those calculations don't factor in a 30 - 50% contraction (contagion) in global trade.

Face it, the world is bankrupt financially (maybe not in human and real capital in the countries with much youth but the write-down can be chaotic). Fasten your seat belts. Giant Portobello ahead.

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-437

Armstrong's ECM (Economic Confidence Model) is global (and based on time multiples of Pi, i.e. 224 yrs ≈ 78 yrs x 3.1459, 78 yrs ≈ 26 yrs x 3.1459, 26 yrs ≈ 8.6 yrs x 3.1459, 8.6 yrs ≈ 1000 x 3.1459 days) and it expected the turn downward and shift of exodus capital flows to accelerate Aug 7, 2013. Right on time on Aug 7, Europe decided that depositors will only be able to withdraw 100 Euros per day when a bank is bailed-in. Imagine the collapse in monetary velocity thus GDP upon widepread bail-ins. I've read that banks' trading losses have priority in bankruptcy ahead of bank investors and depositors.

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-438

Armstrong arrived at this ECM model with the scientific method by back testing the hypothesis to all recorded history (even spending $100 million to obtain the data and build the computer model) and then to the future, and has been more accurate than any other forecaster. I have not been able to find one forecast from him since the 1980s that didn't come true. Predicted the Sept 2000 market top, Nov 2002 market bottom, January 1st, 2005 yearly high for the NASDAQ to exact day in document that was published in 1997 which also predicted the 2007 market top and earlier had predicted the upturn in commodities in 1977. Predicted back in Jan. 2012 that gold would decline from $1600 to below $1200 before 2015 even while everyone was screaming he was nuts. This year he was writing a blog every few days shouting that gold was going to fall. The goldbugs hated him. He predicted the top in gold in 1980. He predicted the crash of 1987 (to the day!) and that bull market in Japan would continue until end 1989. His model predicted an event something like 9/11 would happen, etc, etc, etc..

http://blog.mpettis.com/2013/08/the-changing-debate-over-chinas-economy/#comment-439

Clif Droke wrote an article challenging the Great Rotation based on the Kondratieff wave, while explaining why the divergences in the USA equities are largely an exodus from low yield muni-bond funds. Thus the net capital ingress is much higher than he realizes as it is obscured by an egress which is funding the ingress. Kondratieff only used data from when the economy was primarily agarian and thus commodities. Unlike Armstrong who gathered data from 10,000 B.C. until now, the Kondratieff wave is only valid for commodities and thus yes gold won't likely bottom until 2014 (under $1050). Yet the ECM model sees the DJIA doubling (after a dip now due to deadcat bounce in China) by 2015.75.

I know this blog is not about speculation predictions, yet what I am writing about here is the model for the unraveling dominoes order of the coming global contagion, i.e. the international capital flows. Herbert Hoover wrote about the Great Depression, it was as if capital where chairs on the deck of the Titantic, rushing from side-to-side of the global economy unable to find a safe haven and real growth. This is what happens with ZIRP and sovereign debt end game all through out history. This pattern repeats as Michael wrote in his blog about "Globalization". The ECM quantifies the timing of the (business, political, technology) cycles.

Why does energy transfer in waves and why does human action occur in waves (i.e. cycles)? Michael possesses a physics background so he can readily appreciate inertia, acceleration and force. For example, if you push on a twig then you increase the force until it breaks. If you put too much force on a thick enough twig, you fall down as it breaks and your inertia pulls you forward. Then you recoil, i.e. a wave. Everything in the universe has an inertia, including every human and thus human action. My blog is linked on my name and I wrote more about this in The Universe.

[bianhua]

Ultra-high valuations of single BTC ignore the fact that the very large Bitcoin-denominated economy needed to sustain such a price could exist only by reducing the size of USD-denominated economies. Such evaluations don't take into account deprecation of the USD in response to lower demand for traditional currencies.