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Bitcoin & Politics

Introduction

In the article I wrote three years ago, Government & Bitcoin, which is still available on the International Business Times website. I argued that governments could not stop Bitcoin. 

This year, we have seen the approval of exchange-traded funds based on Bitcoin by the US Security and Exchanges Commission (SEC), finally allowing the financial industry to take a piece of Bitcoin action.

Blackrock Enters Bitcoin
Blackrock Enters Bitcoin

Rather than stopping Bitcoin, prominent candidates for the US elections, such as Donald Trump and R. F. Kennedy Junior, are now vying for Bitcoin donations to help support their campaigns. What a turnaround! 

So, despite what you may hear in the mainstream media, Bitcoin is far more robust as a technology than they would have you believe. Consequently, it will influence profound changes in our society going forward.

Elections

Given the forthcoming elections in the UK, the EU, and the US, I have updated my previous article. Having covered the history of money elsewhere on this website, I can now expand on its significant influence on governments. Bitcoin fundamentally changes how politics and government will likely operate, and I outline why in this article.

To understand government, we need to appreciate that it is currently responsible for managing the rules and, hence, the legal structures that organise our society. The politicians are the people elected to government and, therefore, responsible for having a say in introducing and managing these rules.

Rules

Rules are powerful, and I still recall the moment I became fully aware of their extraordinary impact on the human psyche.

It was 2006, and while preparing the dissertation for my MBA, I interviewed dentists about occasions when they may have ended their professional relationships with their clients. I remember one dentist who was rather timid and uncomfortable about being interviewed. Still, he eventually divulged an instance where he considered ending his relationship with a client. But it took some digging.

He told me the story of a patient seeing him for treatment, and on the way out the door, this patient took some money lying on the reception desk. The dentist blamed himself for leaving the money available to take. However, he admitted he probably would still provide treatment if the patient returned to see him. 

I was astonished by this and spent some time reflecting after the interview. I was puzzled. Suppose the same person had walked off with some money from an accountant. It is implausible that the accountant would do business with that person again. The trust between them would be broken. So, why was it different with this dentist?

Finally, I realised. As dentists, we are obliged to operate within the limitations set down by the General Dental Council. A set of rules this dentist took very seriously. A central line of which states:

General Dental Council
General Dental Council

I pondered this. If, on the one hand, we are taught not to steal, but on the other hand, someone can make a rule implying that someone else can wrong you, but still, you must put that person’s interests before your own – how do we reconcile that?

Laws and rules are essential in our society; it is helpful to understand the limits of our behaviour. In general, human beings love to be rewarded by being accepted and feeling like they are doing the right thing. They prefer to avoid punishment for doing something inappropriate.

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History

Suppose we consider rules arising from pivotal moments in history. The oldest and most well-known are the Ten Commandments. Moses led the Israelites out of slavery. On their journey through the desert, society deteriorated as the Israelites, having known only life as enslaved people, now felt free to do whatever they wanted. The Israelites needed some structure, so Moses provided the Ten Commandments as guiding principles to promote a way forward.

Ten Commandments
Ten Commandments

In the 13th Century, the nobles of England had finally had enough of King John operating on a whim and executing their friends whenever he wanted. So, the nobles gathered together and drew up the Magna Carta as a code for how they wanted things to be in the future.

Magna Carta
Magna Carta

We also have the Declaration of Independence. The Americans, unhappy at being ruled by the British, overthrew them in the American Revolution. From that moment forward, the population required a new set of rules defining American culture. A new constitution was drawn up, reflecting this new paradigm, with principles to draw on should conflicts arise again.

American Constitution
American Constitution

However, the problem with rules is that the longer they exist, the more they multiply and diverge from their original aim. For example, 

“love your neighbour as yourself.”

 As proposed by Jesus in the Bible, has now become, 

“love your neighbour more than yourself”, 

as shown in the dentist example above. 

Multiplying and diverging rules often become more nonsensical and expensive to enforce nationally and globally.

Rules Related to Money

By the beginning of the 20th century, most world leaders, influenced by the British Empire, had evolved an agreement and set of rules whereby currencies reflected a specific value of gold. Gold was inconvenient to move around the world, so the population entrusted banks with storing the gold and issuing certificates of their holdings, which the banks exchanged as ‘currency’. This arrangement held a remarkably long time, with the dollar assuring a gold price of roughly twenty dollars for over one hundred years, between 1792 and 1932. 

By agreeing to tie their currencies to a specific value of gold, the world’s countries prospered as their tenuous understanding established trust and promoted trade by agreeing on how their currencies would coordinate. 

By 1914, however, this tenuous understanding was fragmenting, and the world’s financial system was teetering on fragility. Unfortunately, disagreements escalated as the twentieth century opened and World War I broke out. The urgency of the war situation eventually persuaded all countries involved to abandon their gold standards.

War

Going to war is expensive. By this time, however, most of the population had learnt to trust the banks unquestioningly. The coordination of central banks gradually deteriorated their banking options—a key one being the Federal Reserve in America, which consolidated many American banks under one organisation. The legislation for this finally met the approval of Congress, led by Woodrow Wilson, in 1913.

The central banks of Europe decided that temporarily suspending the relationship of their currencies to gold was justified to keep the war going. By doing this, governments realised additional funds to support the fight. In essence, all this required was a simple accounting trick to create bonds secured by a promise of the government to allow this to happen—a manoeuvre that was, in truth, the beginning of the end for the gold standard. 

As a result, not only did the European population then have to contend with the devastation, death, and destruction resulting from this great war, but they also had to manage the collapse of their currencies.

War Reparations

European leaders essentially bet on who would win the war by suspending their gold standards and gambling that the loser would pay war reparations. Allowing them to restore their currencies, as Britain had done following the Napoleonic wars. However, Germany lost this bet, resulting in a bill for astronomical war reparations, eventually leading to the Weimar Republic’s hyperinflation.

German Reparations
German Reparations

Worldwide politics in the 1920s, characterised by ongoing discussions and failed attempts to return to the gold standard, continued to flounder. There was much unhappiness at the outcomes of the war towards the working class. The weak and vulnerable were suffering greatly. It was a tricky business because reverting to the gold standard would immediately devalue the assets of the wealthy. (see Bitcoin & Inflation) Still, in turn, the dilemma was crippling the productivity of companies and their ability to pay fair wages. So, a new breed of economists, led by John Maynard Keynes, decided upon another strategy. 

If European leaders could use accounting tricks to fund a war, why couldn’t they be used to help the weak and suffering? By following through on these arguments, the welfare state was born. In Britain, Keynesianism facilitated the National Health Service and in America – the New Deal, as their governments decided to abandon returning to the gold standard in favour of Keynesian strategies in the early 1930s.

Bribery

So began the national bribery campaign, which is still in play today. It is similar to the badly behaved child, pacified by neglectful parents while they squander their resources. So, a population campaigning for every worthy cause they believe their governments have unlimited resources to fulfil cannot see the dysfunction behind the scenes, allowing their politicians to get away with anything.

Such politicians are the architects of our ever-increasing rules and the artisans of our now dysfunctional finances.

If one looks around today, it is tough to find someone untouched to some degree by a welfare system, whether it’s childcare benefits—services from national health care, occasional unemployment or sickness. The government even now grants loans to businesses to help support them through an unexpected crisis. We have reached a point where it is almost impossible to function without the government playing its part. It is hard to believe there was ever a time when such things were incomprehensible.

As more people require the services of the welfare state, unlimited money is needed to fund it, and managing the exploding behemoth becomes increasingly unwieldy. It has reached a stage where currencies are managed carefully behind the scenes to create the illusion that these services can continue unchanged. But their funding is wholly divorced from their roots in the real economy.

Extraordinary Measures

We have recently seen this play out in extremes. Politicians argued that the recent pandemic was a time for extraordinary measures. But the trouble with emergencies, especially if they land on you unexpectedly, is that they don’t allow time for considered action. The misallocation of resources is rife; ultimately, holding the government accountable for its mistakes is impossible. Voting for the opposition party only allows us to watch them make precisely the same mistakes over time.

Fraud

Catherine Austin Fitts, a researcher in the United States, demonstrates that governments can have nefarious accounting schemes behind the scenes. 

Catherine began her career in 2000 working for the Department of Housing, the federal government’s housing agency in America. In fulfilling this role, she discovered the department’s fraud, which led her to further research. In this research, she uncovered that $21 trillion is missing from the US government accounts—equivalent to $65,000 per person—almost as much as the national debt at the time of her study.

Solari Report

Most people continue to assume that governments know what they are doing. Many don’t believe the seediness happening within governments, or even if they do, they don’t know what to do about it. In the meantime, the gap between the rich and the poor and the ongoing gross mismanagement grows ever larger.

The welfare system’s initial idea was to help the vulnerable. In reality, as time passes, these services crumble under their unprecedented responsibilities, and currencies deteriorate even further. The rich learn how to manage their assets in an environment of burgeoning inflation. Those with no understanding of how the system works get weaker, and as time passes, they cannot recall how the situation came to be in the first place.

Dysfunction

In 1971, Richard Nixon pulled the final link to the gold standard when he refused to exchange dollars for gold—citing the need to maintain the dollar’s stability and avoid ongoing currency crises. 

Despite the promises that managing the economy would prevent boom and bust cycles, these cycles have become ever more significant and catastrophic, as seen on Black Monday in the 1980s, the dot-com bubble at the turn of the century, and the financial crisis in 2008. 

Black Monday
Black Monday

So, as we see, the governing bodies we live under are becoming more dysfunctional daily. It is safe to say that, similar to other pivotal points in history, we have reached a time when a new set of guidelines is required.

Bitcoin

Although many have heard of Bitcoin as a new form of money, those unfamiliar with the technology must realise that Bitcoin establishes a new set of rules. Rules set by the software design and managed by numerous worldwide operators, not politicians and governments. 

The intricacies of the technology are beyond the scope of this article. Still, if you are interested, I outline how the system works in my book Truth Decay—How Bitcoin Fixes This.

Truth Decay How Bitcoin Fixes This
Truth Decay - How Bitcoin Fixes This

Chapter three discusses Bitcoin’s rise and the story of its creation and provides details on the technology. I also summarise how Bitcoin works in my ‘Simple Guide to Bitcoin’ video below.

The need for multiple actors to keep Bitcoin balanced and decentralised creates a trust system. Coordinated and monitored by computer software, it is an increasingly impossible system to corrupt.

With these incorruptible rules, this technology has the potential to be the foundation of a new economy. 

A New Economy

An economy based on Bitcoin would limit government funding and spending by tracking transactions and curtailing the money supply as a national currency. It would allow a government to be held more accountable and constrain regulation. Bitcoin would prevent a government from creating currency on demand in a crisis, encouraging more creative solutions without damaging a population’s savings. 

It would no longer be possible for a government anywhere to irresponsibly throw money at a problem and expect that to be the solution. Including perpetuating endless wars, which is, in effect, bullying other people into doing what you want them to do. Those who have the power to create unlimited resources and steal from others are the ultimate tyrants, even if disguised in sheep’s clothing, with the promise of a fractured welfare system as a pacifier.

So, as Western democracies face their forthcoming elections, bear these principles in mind when considering who to vote for – even if the roles of media-sponsored politicians are becoming increasingly irrelevant as they lose their power.

Summary

For the last 330 years, since the inception of the Bank of England in 1694 (See Bitcoin & The Gold Standard), central banks have been the power behind the throne of government. Only following the English Civil War did a parliament become more potent than a monarch (who relied on metallic coins for their currency). The English Nobles facilitated the overthrow of James II with William of Orange from the Netherlands. 

By manipulating this new King, the Bank of England was formed. With the assistance of Isaac Newton as Warden of the Royal Mint, the gold-backed British Pound became the global currency and the foundational power of the British Empire. The First and Second World Wars then facilitated the transition of this power to the United States and the US dollar. A dollar that has been progressively failing ever since.

Despite a failing dollar, trust in central banks has maintained the strength of national currencies. Without a better option, the public managed their circumstances as best they could despite uncovering ongoing corruption. This untenable situation now has the potential to end, finally. A government’s policy enforcement becomes redundant without the mechanism of central banks assisting a country’s currency and, therefore, its military. Thus, supporting their legal and welfare systems also becomes redundant, forcing us to find another way.

Until next time, enthusiasts!

Victoria

Play Video about Simple Guide To Bitcoin

Simple Guide to Bitcoin

Bitcoin can be tricky to understand. In this short video, I explain what Bitcoin is, how it works, and why it is important.

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