Conflict Is the Driving Force behind Bitcoin and Gold

[BobK71]

The more China is in conflict with the US, economically, financially and even militarily, the better it is for Bitcoin and gold.

The 'trilemma of international finance' is well-established, and says, of the three things usually desired by governments:

- A fixed exchange rate (more or less)
- Free flow of capital
- An independent monetary policy

It's said that you can have any two, but not all three.  Between the US and the eurozone, there is no fixed exchange rate.  Between Germany and Greece, there is no independent monetary policy (since a currency union is an extreme form of fixed exchange rate with no independent monetary policy.)  So Greece must suffer under a money supply from Frankfurt that is too tight for Greece's condition.

It seems the dynamic between the US and China is that China wants to give up free flow of capital, but the US wants China to give up its monetary independence.  (It makes sense, since the US will need all the political, military and financial support it can get for its imperial system, and it would have great leverage on a China that is forced to live under the Fed's policy, as Greece is under the German-dominated ECB.)

Over the last few years China has imposed capital controls so that its central bank can keep pumping money into the economy to keep its big credit bubble afloat.  (If Chinese people can't flee from yuans to dollars, then the central bank can hope to maintain confidence in the yuan while printing lots of money.)

Then comes Bitcoin, which is a way for the Chinese to escape the controls.  Effectively, Bitcoin is the weapon with which Washington can bring Beijing to heel.  Since it's impossible to control Bitcoin outside the exchanges, Beijing must also acquire bitcoins to fight Washington.  So, Bitcoin has risen.  (It's interesting that both the Japanese government and 'Japanese housewives' have moved in favor of Bitcoin.  Japan being a strong US ally, it seems, the 'proxy war' in North Korea is being supplemented by a 'financial proxy war' in Bitcoin, with Japan and S. Korea fighting on the US side.)

Somewhere inside the human system, there's a deep-seated connection between conflict among elites and non-state-issued money like gold.  When conflict arises, non-state assets go up.  Bitcoin is only playing the role of gold.

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[Lieldoryn]

To control bitcoin in the country for the Chinese authorities to no problems. The Chinese earn bitcoin because I have the opportunity to do this at home via the Internet. How might this affect the yuan. A lot of products produced in China and therefore its rate stable. The Chinese authorities are trying to control bitcoin only for the purpose of tax collection. China can not threaten bitcoin and the transfer of production from China to America, but we don't see. Trump only knows how to speak and does not know how to act.

[cellard]

Which is why the hard forking idiots are government shills trying to control bitcoin so it becomes absolutely useless. Roger Ver and the rest of its crew want to turn bitcoin into Paypal 2.0.

Bitcoin must stay as it is in order to be valuable. Nobody cares about a cryptocurrency to make transactions with because there are a million alternatives. Crypto as a store of value is the only thing bitcoin has that it's truly unique. Make blocks big and you lose that since sooner or later nobody will be able to run nodes but datacenters, then TPTB can shut down the bitcoin networks. Big blockers are truly the ultimate enemies of bitcoin.

[davis196]

OP you forgot to mention that China owns a big part of the USA government debt.
USA can`t simply force China to lose it`s monetary independence.
Bitcoin is too small to be such an important part of the USA/China economic war.
The chinese can easily take control over btc by buying large amounts of bitcoins of by mining.
USA can`t use btc as a "weapon".

[freedomno1]

- A fixed exchange rate (more or less)
- Free flow of capital
- An independent monetary policy

Then comes Bitcoin, which is a way for the Chinese to escape the controls.  Effectively, Bitcoin is the weapon with which Washington can bring Beijing to heel.  Since it's impossible to control Bitcoin outside the exchanges, Beijing must also acquire bitcoins to fight Washington.  So, Bitcoin has risen.  (It's interesting that both the Japanese government and 'Japanese housewives' have moved in favor of Bitcoin.  Japan being a strong US ally, it seems, the 'proxy war' in North Korea is being supplemented by a 'financial proxy war' in Bitcoin, with Japan and S. Korea fighting on the US side.)

Somewhere inside the human system, there's a deep-seated connection between conflict among elites and non-state-issued money like gold.  When conflict arises, non-state assets go up.  Bitcoin is only playing the role of gold.

Good points it breaks down the essential point of utility effectively Bitcoin is a tool of finance and personal freedom
The question is really how many elites will try to create their own and whether they will be unlimited coins with a secure algo but no real difference in the end from the federal reserve.

[BobK71]

OP you forgot to mention that China owns a big part of the USA government debt.
USA can`t simply force China to lose it`s monetary independence.

China does own a significant fraction of the federal debt, and it does give China some leverage.  But the debt is in dollars the US can create, and it's significantly under 50% of total national debt, so this power is limited.

The scale and fragility of China's public and private debt bubble is pretty bad.  The way the US-led imperial system works is to make sure other countries are building bubbles even worse than the Americans.  And have its media make sure everyone knows it.  In this the US has done an excellent job.

Any tightening by the Fed may be a minor risk to US markets, but a much bigger risk to stability in China, in every way.  That is, unless China has control over money outflows.  If China totally loses control, under current conditions, all sane people in China will want their savings in dollars (or something else safer than yuan over the long term.)  Fed tightening makes this worse for China.

Bitcoin is too small to be such an important part of the USA/China economic war.
The chinese can easily take control over btc by buying large amounts of bitcoins of by mining.
USA can`t use btc as a "weapon".

China may be buying BTC.  If China has bought enough and is selling (and thus gradually losing control), the US and allies may be buying to maintain confidence in BTC by Chinese savers.  Any way it goes, the state-independence of BTC is good for its value when states are in conflict.  I believe it's ultimately the state actors that are raising BTC values.  (Japan making BTC a currency is actually a big deal.  When was the last time something like this happened anywhere?)

BTC may not be big now, but it was smaller two months ago.  I'm not sure how much of China's capital leak goes through BTC, but the US allies seem to want its share to grow.  Any way you look at it, conflict is good for BTC.

[BobK71]

Good points it breaks down the essential point of utility effectively Bitcoin is a tool of finance and personal freedom
The question is really how many elites will try to create their own and whether they will be unlimited coins with a secure algo but no real difference in the end from the federal reserve.

You bring up an important point, thanks, and I've mentioned my thinking on this, some time ago.

State-sponsored cryptocurrencies still need other states to support.  If other states want to support the empire, they can just support the dollar, too.  So, it appears that the key issue is not what money is, but geopolitical affairs.  Strong alliances among elites are good for the US system, including any and all monies it sponsors, and the opposite happens in times of conflict.

That I believe is one of the reasons gold and silver never die.

As I often repeat from some author, money is really not about finance or economics, but politics.

[BobK71]

To control bitcoin in the country for the Chinese authorities to no problems. The Chinese earn bitcoin because I have the opportunity to do this at home via the Internet. How might this affect the yuan. A lot of products produced in China and therefore its rate stable. The Chinese authorities are trying to control bitcoin only for the purpose of tax collection. China can not threaten bitcoin and the transfer of production from China to America, but we don't see. Trump only knows how to speak and does not know how to act.

I think many educated people have the idea that the ultimate basis of a currency's value is the production of real goods and services in the country.  This is reasonable and has some truth to it, but most people don't realize we live under a global imperial system.

In this system, those who control money and financial assets have the ultimate power.  Even though China's production is 'real,' it only has value because the world wants it.  The empire has created a world where, for survival, many people only need a small fraction of what they can afford.  So, what products/services have demand is ultimately decided by those 'who have money' and how the imperial elites, who have more than enough 'money,' manipulate the financial assets.

[Qartada]

Good points it breaks down the essential point of utility effectively Bitcoin is a tool of finance and personal freedom
The question is really how many elites will try to create their own and whether they will be unlimited coins with a secure algo but no real difference in the end from the federal reserve.

You bring up an important point, thanks, and I've mentioned my thinking on this, some time ago.

State-sponsored cryptocurrencies still need other states to support.  If other states want to support the empire, they can just support the dollar, too.  So, it appears that the key issue is not what money is, but geopolitical affairs.  Strong alliances among elites are good for the US system, including any and all monies it sponsors, and the opposite happens in times of conflict.

That I believe is one of the reasons gold and silver never die.

As I often repeat from some author, money is really not about finance or economics, but politics.

Nice to see someone invading the economics subforum with posts that actually mean something.
The key point is that the number of physical resources is finite.  Gold's price can go down as money moves to other precious metals for various reasons, but it won't drop to nothing due to the lack of physical resources to escape fiat for.

In Bitcoin's case, anyone can make an exact clone of it or another cryptocurrency which is somewhat different and suddenly even though the supply is finite, the number of cryptocurrencies isn't.

This applies to state-issued cryptocurrencies as well.  As long as they're freely traded the price will fluctuate wildly because people will find something that's 10% better than before.  Geopolitical affairs will link to that in that it becomes a competition between states and "freedom-loving" people who are involved in decentralised cryptocurrencies.

[anryze]

I don't think fixed exchange rate is a good point cause everything should be with its own market value.

[matuson]

Good points it breaks down the essential point of utility effectively Bitcoin is a tool of finance and personal freedom
The question is really how many elites will try to create their own and whether they will be unlimited coins with a secure algo but no real difference in the end from the federal reserve.

You bring up an important point, thanks, and I've mentioned my thinking on this, some time ago.

State-sponsored cryptocurrencies still need other states to support.  If other states want to support the empire, they can just support the dollar, too.  So, it appears that the key issue is not what money is, but geopolitical affairs.  Strong alliances among elites are good for the US system, including any and all monies it sponsors, and the opposite happens in times of conflict.

That I believe is one of the reasons gold and silver never die.

As I often repeat from some author, money is really not about finance or economics, but politics.

Nice to see someone invading the economics subforum with posts that actually mean something.
The key point is that the number of physical resources is finite.  Gold's price can go down as money moves to other precious metals for various reasons, but it won't drop to nothing due to the lack of physical resources to escape fiat for.

In Bitcoin's case, anyone can make an exact clone of it or another cryptocurrency which is somewhat different and suddenly even though the supply is finite, the number of cryptocurrencies isn't.

This applies to state-issued cryptocurrencies as well.  As long as they're freely traded the price will fluctuate wildly because people will find something that's 10% better than before.  Geopolitical affairs will link to that in that it becomes a competition between states and "freedom-loving" people who are involved in decentralised cryptocurrencies.

The price of gold does not depend on other metals. I doubt that gold is so necessary for people. People just never came in. Demand for gold may be reduced only after sometime people will find a planet of gold and bring back thousands of tons of this metal.

[Harry Callahan]

Then comes Bitcoin, which is a way for the Chinese to escape the controls.  Effectively, Bitcoin is the weapon with which Washington can bring Beijing to heel.  Since it's impossible to control Bitcoin outside the exchanges, Beijing must also acquire bitcoins to fight Washington.  So, Bitcoin has risen.  (It's interesting that both the Japanese government and 'Japanese housewives' have moved in favor of Bitcoin.  Japan being a strong US ally, it seems, the 'proxy war' in North Korea is being supplemented by a 'financial proxy war' in Bitcoin, with Japan and S. Korea fighting on the US side.)

So you think this has become an economic war between two countries,i really doubt that is happening here,the recent rise is simply because of the legalization in Japan,it is only a matter of time when all the countries starts accepting it as they really cannot control bitcoin,they have to come to terms on how people are sending the money and that is the reason why these legislation are in place.

[BobK71]

Nice to see someone invading the economics subforum with posts that actually mean something.

Thank you.

The key point is that the number of physical resources is finite.  Gold's price can go down as money moves to other precious metals for various reasons, but it won't drop to nothing due to the lack of physical resources to escape fiat for.

In Bitcoin's case, anyone can make an exact clone of it or another cryptocurrency which is somewhat different and suddenly even though the supply is finite, the number of cryptocurrencies isn't.

This is a good point, although I think there is a lot of advantage in money to being first.  Where there is a theoretically infinite number of alternative monies (unlike gold and silver, being capped at two,) there should also be a network effect in favor of already established ones.

This applies to state-issued cryptocurrencies as well.  As long as they're freely traded the price will fluctuate wildly because people will find something that's 10% better than before.  Geopolitical affairs will link to that in that it becomes a competition between states and "freedom-loving" people who are involved in decentralised cryptocurrencies.

This is where things get interesting.  We know the state can create a crypto and borrow against it.  At the beginning we know the system will be very stable, because the state has power.  We also know the history of all state issued financial assets eventually becoming unstable due to over-issuance.  So, in effect, this is no different from fiat money and debt.  And the differentiation between state and non-state crypto (Bitcoin) will be the same as between dollars and gold.  Nothing really changes, in the final analysis.

[BobK71]

I don't think fixed exchange rate is a good point cause everything should be with its own market value.

Unfortunately, there is no real free market in this world.  Since the most central and liquid asset in the world, the dollar, is controlled by state power, nothing else can escape the fact that all supply and demand is indirectly driven by policies of the US government and the Fed.

In general, the US wants exchange rates to float, but most other governments want them to be more-or-less 'stable.'  This is because the dollar serves the same role as gold in the past.  Governments generally try to achieve financial and economic stability by, in effect, pegging their monies to the dollar (or gold/silver in the past.)  This tends to force politicians and central bankers to be disciplined, and also for the country to attract investor confidence.  By definition, this kind of system is a more-or-less fixed exchange rate system.

The US, being effectively 'the issuer of gold' and holding the most power and wealth, is not as afraid of exchange rate instability.  In times of instability, money tends to flee to the dollar, so there is a natural counter-balancing effect to keep the US system stable.  In fact, the US can easily benefit from such instability, as holders of dollars often buy foreign assets on the cheap during crises.