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May 08, 2013, 02:08:51 PM |
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Forth coming proposals under the Irish Presidency of the European Council outlined that bank depositors of values above €100,000 may be at risk. The Cypriot bank crisis seemed to have been the test to ascertain whether this approach should be rolled out EU wide. It now looks to be the front running approach by Europe in an attempt to stem its exposure to banks and financial issues. When discussed that the banking resolutions new regime should come into effect by 2018 EU figures such as European Central Bank president Mario Draghi and EU economics affairs commissioner Olli Rehn were keen to introduce the new regime as early as 2015. It was also speculated by certain EU member states that deposits under €100,000 would be forced to bear losses in the event of a bank collapse even though these deposits would be covered under a deposit guarantee scheme.
I would envisage that there are a great many people out there who, when this becomes general knowledge, will be left with very little options and difficult choices. Firstly we should look at why the powers that be are looking to implement such a regime change. The obvious one is that Europe is running out of money. The not so obvious is that this change may also encourage greater liquidity within Europe. Whether this is merely people hedging their savings and thus spreading the risk between banks, or, encouraging citizens to spend, thus investing their savings in longer term investments such as buying property, stocks and shares or other commodities or investments. In turn this will help drive the Euro (€) down as there will be more in circulation which will make Europe more competitive and so increase incoming investment and provide more Jobs. The later is badly needed as unemployment is at epidemic levels 12.5%. (There are major socio-ecomomic issues becoming apparent throughout Europe as a result of the austerity measures Europe has decided to take since the beginning of the Financial Crisis. I believe this is firmly in the mind of EU leaders and this is one measure (perhaps there only measure) to tackling the issue.)
So what does this mean for Bitcoin? Well if I'm honest... I don't know. But, to speculate, whilst it will initially cause widespread consternation (at least!), the next thoughts will be what to do with their/our hard earned money! Many people will not want to invest in stocks, will not have sufficient capital to buy property, many will hedge their savings in multiply banks. The momentum and advance of Bitcoin and one or two other virtual currencies should offer a most viable solution.
Stability in bitcoin will be paramount and a true price reflection needs to be established. What would be a viable price estimate for Bitcoin? Well if world GDP is roughly $70 trillion. I second the estimate by RICK FALKVINGE that Bitcoin can achieve 1% of GDP. But instead of valuing the currency based on 11 million + I believe it should be viewed on the total number of coins which will be achieved (21 million). Thus deducting a price in the region of 33,333. The true value of Bitcoin is that it is self backed and linked to its use as a percentage of total world GDP.
All in all Bitcoin is a sure buy right now. If you can live using bitcoin and spend it in daily life then this is better again! Roll on the digital revolution and the new paradigm shift.
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