(From “Notgeld” to Hyper-Bitcoinization in Under Two Decades)

“Just because something is inevitable doesn’t make it imminent”
— Douglas Casey

For a long time, anybody paying attention knew that central banks printing fiat money out of thin air, then lending it to nation states at interest and blowing it out into the economy would inexorably, eventually lead to such wealth disparity that the society would break down.

It would get to the point where popular revolts would threaten to overwhelm the position of the elite class; those Cantillionaires who lord over this phantasmagorical system that created value ex nihilo and caused, through inflation, the vast majority of wealth to accrue to society’s “capstone class”…

One of my personal favourite quips is:

Eventually always shows up sooner than everyone expects.

It’s been over three years since I released The Crypto Capitalist Manifesto, and in it I laid out my base investment thesis that “The Great Reset” wasn’t actually anything to do with climate change or any of the United Nations Sustainable Development Goals – what it really was all about, is the debt:

“YOU WILL OWN NOTHING, AND YOU WILL BE HAPPY.

The messaging coming out of global elites such as the World Economic Forum, The Party at Davos, the International Monetary Fund and even places as disparate as The Vatican and Hollywood are all riffing on the same theme: You, the middle class, the lower class, the masses – are going to have to get used to a lower standard of living.

 

The real reason why isn’t because of climate change, or even COVID. It’s because of the debt. The world has finally run out of runway from kicking the can down the road all those times the global economy threatened to backslide into recession or when previous monetary bubbles imploded. All those decades of collectively living beyond our means have finally hit the wall. This is it. We’re here.

 

Governments have spent beyond their means for decades, and now the bills have come due. The only way to pay them will include inflation and austerity. It will resemble a controlled demolition of the entire middle class. The easiest way to do that will be to turn them into a completely dependent welfare class via endless rolling lockdowns, Universe Basic Income programs and mandatory health passports.

 

However “The Great Reset” is basically at its core, a monetary reboot. A way to restructure the global debt overhang and turn “money” into technocratic lube for enacting grandiose social engineering projects: most of them geared toward ratcheting down the standard of living for the masses of the developed world and suppressing the standard of living for the so-called Third World.”

(If you want a free copy of the entire manifesto, just sign up for the Bombthrower mailing list and we’ll send you the PDF).

“The Great Reset” and “Build Back Better” attempted to lay the groundwork for the eventual (and still somewhat inevitable) pivot of fiat money into Central Bank Digital Currencies (CBDCs). They will almost certainly be fused with social credit systems denominated in carbon footprint quotas – and thus a mechanism to implement forced austerity across the debt-drowning economies of the world resulting in a kind of “monetary Apartheid”.

What I Got Wrong in My Manifesto

Aside from the fact that events I assumed would play out over decades happened within 18 months, there was another fundamental flaw in my analysis:

I first discovered Bitcoin during the Cyprus banking crisis of 2013 – when people began to understand that “as safe as money in the bank” didn’t quite mean what it used to anymore.

The Cypriots got hit with a 10% “bail-in”, but more ominously – bail-in provisions started showing up all over the place (from the Manifesto, again):

As the bail-in was being planned and executed in March 2013, Eurogroup president Jeroen Dijsselbloem told interviewers that Cyprus would serve as a template for future bank restructurings in the euro zone.

 

In April 2013, the idea of enshrining the framework for bail-ins surfaced in my home country of Canada, with the Conservative Harper government’s budget

 

The Canadian bail-in language was been preserved in the budget even after the Liberals under Justin Trudeau assumed office in 2015. In 2018 it officially became The Bank Recapitalization (Bail-in) Conversion Regulations. 

 

In Australia the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill of 2017 gave the Aussie government the power to facilitate bail-ins.

 

And in case you’re wondering, the USA was a front-runner for codifying bail-ins into legislation: the Dodd-Frank Bill that was passed in 2010, ostensibly to reform the banking sector after the Global Financial Crisis contains provisions for “Statutory Bail-Ins” to recapitalize any “systemically important” banks that gets themselves into trouble.

 

In fact, new supra-national bail-in laws took effect across the entire G-20 in 2014.

It was during the Cyprus bail-in that Bitcoin surged above $100 USD for the last time. It would never again trade at the double-digit level.

Even so,  I never thought Bitcoin would become the world reserve currency or even a component of whatever comes next after this post-post-Bretton Woods era we now live in.

My mental model for Bitcoin, right up until 2022 was as a kind of globally emergent “Notgeld” – a German term that came into being during their 1920’s Weimar Hyperinflation, and translates into English as “emergency money”.

In Germany, individual towns began printing their own scrip, during the Zimbabwe hyperinflation, people began using prepaid phone and gas cards. Every hyperinflation has its Notgeld, and until early 2022, that’s what I assumed Bitcoin was, on a global level.

Two things happened that changed my mind:

1. The US seized the foreign asset reserves of two nation states – it doesn’t matter who those states were or what they did to “deserve it”.
2. During the #FreedomConvoy, the Canadian government declared martial law and seized the bank accounts of truckers and any citizens who supported them.

The first sequence of events forever changed the calculus that nations would employ for deciding how to allocate and hold their sovereign wealth.

The second did that for individual citizens. It alone orange-pilled Robert F Kennedy Jr, who a year later would make Bitcoin a US election issue when he opened his historic keynote at Bitcoin 2023 in Miami with the words:

“I became a Bitcoiner when I saw what the Canadian Government did to the truckers” 

From that point on – Bitcoin shifted from being “Notgeld” – emergency money amid a slow-rolling, global hyper-inflationary event, and it became inevitable component of a future, successor monetary regime.

The Next President of the United States Has Been Orange-Pilled

No matter what you think of Donald Trump, whether he induces either type of “TDS” (Type 1 = “Trump Derangement Syndrome”, Type 2 = “Trump Divinity Syndrome”), or  you’re more dispassionate and objective, the fact remains that a Trump-led GOP landslide is all but baked-in come November 5th.

Like RFK Jr., Trump has firmly jumped onto the Bitcoin bandwagon. He’s been orange-pilled (props to David Bailey Bitcoin Magazine for doing so).

Trump declared that he “wants all future Bitcoin to mined in the USA”. Granted, it doesn’t quite work that way, but he went on to reiterate that, and the right to self-custody at: the Republican National Convention:

Donald Trump makes EPIC promise to US crypto holders: pic.twitter.com/LqCRtEZTbD

— Altcoin Daily (@AltcoinDailyio) July 19, 2024

The Big Announcement Will Drop on July 27th

This year Trump will be delivering the keynote address at Bitcoin 2024 in Nashville, Tennessee. RFK Jr will also be on hand. Both candidates firmly on board with Bitcoin, albeit one destined for the Presidency more than the other (I expect RFK will land somewhere within a Tump administration come January 2025).

The inside baseball is that at that keynote address, Trump is expected to announce his intention to create a strategic reserve of Bitcoin for the US Treasury.

HUGE BREAKING: Trump to announce a USA #Bitcoin strategic reserve in Nashville – Sources

— Dennis Porter (@Dennis_Porter_) July 18, 2024

Doing so could be as simple as a stroke-of-the-pen on inauguration day, as the US is already sitting on about $5B worth of BTC:

The next President of the USA should sign an executive order to convert the $5.5 billion held by the US Government into a strategic reserve at the US Treasury then use that reserve to back the dollar with #Bitcoin. pic.twitter.com/NYjcbCWXmV

— Dennis Porter (@Dennis_Porter_) July 18, 2024

Once that happens, we’re in a whole new ballgame. The Game Theory of Bitcoin will irrevocably change globally, and nation states will be incentivized to follow suit.

Regardless of how it plays out, Bitcoin has already crossed the Rubicon. It’s here to stay, it isn’t some kind of “emergency money” to temporarily sidestep the ongoing unraveling of the global fiat standard – it’s now part of the plumbing.

Read my special report on what a Trump presidency means for Bitcoin, and which companies stand to win big right here.
Join the Bombthrower mailing list and get a free copy of the Crypto Capitalist Manifesto here (and The CBDC Survival Guide once it drops)
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Even if it was the NSA, the CCP
or the WEF

Rumours have abounded that Bitcoin was created by the NSA (or the CIA, or the CCP or WEFsters)  going back at least as far as 2010, or so.

They resurfaced over the past week when  Dr Mercola interviewed Catherine Austin Fitts. Since then I’ve had numerous readers forward me some choice quotes of their talk  (the transcript is here), and highlighting Fitts’ suspicion that Bitcoin was created non-altruistically by the NSA.

In it, there is a reference to Nic Carter’s theory about the NSA having created Bitcoin:

“The common understanding is that Nakamoto is the ultimate altruist and abandoned his 1 million Bitcoin for the benefit of humanity. Nic Carter is a well-known figure in the cryptocurrency community, and he doesn’t buy that story and is convinced that the United States National Security Agency (NSA) is responsible for creating Bitcoin. He believes Bitcoin was written by NSA cryptographers as a monetary bioweapon.^“

Mercola references this Cointelegraph article where Nic Carter clearly lays out that his NSA-origin theory for Bitcoin is “the lab leak” scenario:

“I call it the ‘Bitcoin lab leak hypothesis.’ I think it was a shuttered internal R&D project, which one researcher thought was too good to lay fallow on the shelf and chose to secretly release.”

Very much in line with the Promethean mythos behind the Satoshi Nakamoto legend that resonates so deeply throughout the community – and if true, might explain just why, the he/she/they/them that is Satoshi – left those 1 million BTC exactly where they sit today. Nobody would want to suffer the fate of Prometheus, doomed to spend eternity chained to a rock, having his liver eaten daily by an eagle.

Yet the discussion between Fitts and Mercola, as well as many others who suspect something nefarious behind Bitcoin’s mysterious creation, seem to be deriving the wrong conclusion from Carter’s theory – or dismissing it in favour of an intentional, deliberate creation, and presumably, what that would mean (as per Fitts),

“It depends on how their rollout of complete control works … As long as they have the ability to assert complete control and shut [crypto] down or marginalize it, it’s easy for [Mr. Global] to assert control. Until then, they can continue to pull money out of precious metals and real and hard assets by encouraging retail to go into crypto.”

The assumption being: whoever created Bitcoin, controls Bitcoin.

The reality is:

Bitcoin is beyond anyone’s control

And the reason, quite simply, is because Bitcoin is open source software.
What does “open source” mean and why does it matter to Bitcoin?
Contrast with something closed source and proprietary, like Microsoft Windows – or the entire Microsoft operating system stack, open source means that the instructions that comprise the computer program itself are published to the world openly in their uncompiled source code form.

Further, anybody running the software does so by downloading the open source copy of the code, compiling it locally and then running it.

What this means is that even if the NSA, or the CCP or the WEF secretly created and released Bitcoin intending it as a Trojan horse for digital slavery (like CBDCs will be), then we would all be able to literally see it in the source code, which is right here – and nobody would run it.

• There wouldn’t any Bitcoin devs maintaining the codebase (or if there was, they’d simply remove the malware)
• Nobody would be trading energy, or cash, for Bitcoin generated from compromised code, and
• Bitcoin miners would certainly not be spending hundreds of millions, or even billions of dollars in order to build out massive server farms to run NSA malware.

In other words, there would be zero market momentum behind the phenomenon known as “Bitcoin” that is sweeping the world.

Some others might concede that Bitcoin is an open source movement, with no hidden trojans or malware – but that it’s really One Big Psy-Op  to acclimatize us plebs to a cashless society using digital money.

The people who believe this might even tweet about it from their smart phone while sitting in a cafe sipping a latte that they just bought via ApplePay or tapping their chipped credit card (like that Mastercard that already cuts off your spending when your carbon footprint quota is exceeded).

You don’t need Bitcoin to brainwash people to accept a cashless society or even the coming CBDCs – huge swaths of the population are going to line up for that – and in my mind it will result in a kind of Monetary Apartheid.

Bitcoin is emergence, CBDCs are totalitarian.

The people who think Bitcoin is some kind of meat tenderizer to soften the public’s mind up for CBDCs have simply not been paying enough attention to:

1. The difference between Bitcoin and CBDCs, and
2. The difference between Bitcoin and other cryptos

It all comes down to the decentralized nature of the blockchain, the miners (Proof-of-Work) and self-custody of one’s own private keys vs centralized banking, centralized cryptos, faux-decentralized shitcoins and the like.

We even see this manifesting in legal policy in the US, as Bitcoin is the only digital asset being treated as a commodity while everything else is looking at being designated a security (even Ethereum, especially since that unforced error of switching to Proof-of-Stake).

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Where people mistakenly think that Bitcoin is paving the way to usher in CBDCs, Bitcoin is actually the  anti-CBDC. It is the CBDC’s Kryptonite. An emerging monetary system as a response to the over-centralization of what I liked to call Late Stage Globalism, but lately I have become enamoured with George Gilder’s term: Emergency Socialism.

I’ll re-iterate a quote from my recent review of Ferdinand Lips classic, Gold Wars, about where monetary systems actually come from:

By 1900, approximately fifty countries were on a gold standard. including all industrialized nations. The interesting fact is that the modern gold standard was not planned at an international conference, nor was it invented by some genius. It came by itself, naturally and based on experience. 

The United Kingdom went on a gold standard against the intention of its government. Only much later did laws turn an operative gold standard into an officially sanctioned gold standard.

The same thing is happening today, with Bitcoin (yes, really).

Hyper-Bitcoinization vs Notgeld

In the early days of my involvement with the space, I too, dismissed claims that the global monetary system was destined for “Hyper-Bitcoinization” – I just didn’t think it would ever happen because central bankers would simply never allow it.

Instead, I viewed Bitcoin as a kind of “Notgeld” – a German term that emerged during the Weimar Hyper-inflation that translated to “Emergency Money”. In those days towns would print their own scrip. In later hyper-inflations, other things would emerge as “notgeld” – in Zimbabwe it was prepaid phone cards and gas coupons. Every hyperinflation had one. I thought Bitcoin was an emergent, global notgeld, but I never thought it would become anything “official”.

Then, two things happened that flipped me into the Hyper-Bitcoinization camp:

The first was when the ruling Liberal/Socialist coalition government of Canada weaponized the banking system against the #FreedomConvoy protestors, probably the one single act that orange pilled the most citizens globally since the Cyprus bail-in of 2013.

The other was when the US government seized the foreign reserves of two other governments. It doesn’t matter that those governments were Russia and The Taliban, doing so probably orange-pilled more than a few nation states.

What I also realized since then, namely watching the globalists attempt – and fail – to impose a permanent technocracy under Covid, was that what ultimately happens isn’t up to the central banks, and it’s not even up to the governments. It’s up to market forces – despite all the central planning and authoritarianism marshalled against it.

That won’t prevent them from trying, however. Which is where CBDCs come in.

Money backed by debt, becomes social credit backed by carbon quotas

In the latest issue of the premium newsletter (while analyzing an Agustín Carstens speech to the BIS working group on CBDCs)  I said:

Right now, what we call “the fiat world” uses debt for money. That’s no longer sustainable, so what we think will happen in the future is an attempt to switch what we loosely identify as “money”, from something backed by debt, to social credit scores, backed by carbon emissions.

When that comes, Bitcoin will not be some sort of gateway drug to CBDCs because there are fundamental incompatibilities, and there are other cryptos out there far more suited to the task – like Ethereum and Ripple, and who actually want to the global base layer for Central Bank Digital Currencies (after all, it’s not called WEFereum for nothing…)

So where we are headed – is a global economy where the world is either going to have to adopt a non-state, decentralized digital bearer asset or international trade flows will inexorably grind to halt as trust deteriorates right along with every fiat currency going.

And a social credit system where the majority of the population (everybody who has any reliance on The State for their economic sustenance) has their lives gamified via their smart phones and their carbon footprints rationed in the name of climate justice.

Marbled throughout this world (for as long as such a system will last, because ultimately, it can’t) there will be “network states” and enclaves of those who hold their wealth and earn their income outside the social credit/CBDC system.

In my next post, I’ll tackle the inevitable arguments that “governments will never allow people to escape the coming CBDC system” and show why, at the end of the day, they have no choice. It’s already beyond their control.

My forthcoming ebook The CBDC Survival Guide will give you the tools and the knowledge to navigate coming era of Monetary Apartheid. Bombthrower subscribers will get free when it drops, sign up today.

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If Bitcoin didn’t exist,
we’d have to invent it right now.

The conventional take on Bitcoin and crypto-currencies in general from the mainstream skeptics is that it’s some sort of speculative bubble. The recent mania in NFTs seemingly adds credence to this argument. However, the NFT craze, as unfathomable as it is, even to somebody like myself, has precedents that show it doesn’t invalidate the crypto thesis.

Coming up in the domain and DNS business, I’ve seen this movie before. I’ve also made the point back in the 2017 crypto cycle that the Tulipmania analogy for Bitcoin was a bad one for many reasons, and that it was a more accurate comparison to the domain name aftermarket of the 2000’s era. When companies and speculators were paying millions of dollars for strings of words from the dictionary with “.com” appended to them, that was a speculative mania and it was akin to Tulipmania. And from our vantage point in the present we can draw the comparison to NFTs.

But when the .com aftermarket fizzled, the entire internet kept right on plugging along using DNS as the carrier tone, and domain names for endpoints. That didn’t change and to this day, without DNS you’ve basically  got nothing.  It’s part of the internet plumbing (yes, there are multiple projects seeking to supplant DNS via blockchain, separate convo for another day).

The overall point is, a seemingly speculative mania can erupt out of a relatively new protocol, be it the long defunct hedge fund that rang the bell at the top by purchasing “fund.com” for $10M USD, or an NFT selling today for $69M USD, and that doesn’t make the underlying protocol from which it sprang forth a speculative bubble (we discussed this along with attention markets and BAT on the latest AxisOfEasy Salon #40).

But if everything from NFTs to stonks to real estate and gold and cryptos are all hitting fresh all-time-highs, it seems to be that the obvious pattern here isn’t necessarily that “Everything is in a Bubble” as much as that the numéraire is collapsing.

Most people reading these kinds of articles know that bonds are a dead man walking and M2 money supply is going up everywhere. I was going to pull in charts from multiple places (my home country of Canada’s is below). Japan, Eurozone, China, there’s no point, they all look the same, everything looks like this:

And if you zoom in on the last year, the Pandemic Year that will bisect modern history into The Beforetimes and The New Normal, they all look like this:

The Pandemic panic and the monetary response to it pulled forward what I’ve been calling The Great Bifurcation by decades.

That acceleration and its intensity is a big reason why everything that can be construed as an asset in the world is going like this:

We aren’t in a hyperinflation yet. Policy makers are still trying to pretend inflation is undershooting and they’re still trying like hell to ignite it. As Charles Hugh Smith noted recently, money velocity is plummeting, even as M2 is blasting off (hold that thought).

When you read about historical hyperinflationary episodes, you will find that what invariably happens is that capital flight occurs in all directions and people end up using some sort of “notgelt”. From Jens O. Parsson’s “Dying of Money”

The recent institutional move into Bitcoin and cryptocurrencies is a reaction against systemic, global financial repression. What the naysayers like Peter Schiff and Nouriel Roubani don’t get about where we are in history is this:

If Bitcoin didn’t exist, we would have to invent it, right now.

Fortunately Bitcoin and the other crypto-currencies do exist, and they’ve enjoyed a spectacular debut onto the world stage and into monetary history.

Fortunately proof-of-concept has already occurred and countless FUD cycles surmounted.

Fortunately the decentralized crypto ecosystems are ready for prime time, exactly when humanity needs it the most. Necessity really was the mother of invention.

In my Crypto Capitalist Manifesto (30 pages), which is one of the documents subscribers receive after they sign up to my new Crypto Capitalist Letter, I lay out some scenarios which show the theoretical effect of an exodus from bonds and cash on the price of bitcoin, I’ll extract a couple below:

This one estimates the lift to the Bitcoin price in nominal terms based on capturing a fraction of a fraction of a secular exodus from the nearly $20 Trillion USD in negative yield bonds. If half of the capital fled negative yielding debt and of that, 10% moved into Bitcoin, it would push it up over $100K (extrapolating in linear terms of the price is where it is today when this happens).

There’s at least another $100 Trillion USD in nominally positive yield bonds, but mostly negative real returns that would also be good candidates for re-allocation. The second table tries to model Bitcoin capturing a fraction of a fraction of that as well. If there was a 25% exodus out of bonds and Bitcoin caught 10% of that, that alone would put Bitcoin up over $6 Trillion. Other alternative assets like other cryptos, and gold and silver and real estate would all experience similar lifts.

Of course those are all linear extrapolations based on the current price. In the manifesto I model out a bit more, such as Bitcoin capturing more of the exodus out of bonds as it accelerates. There would also be a generalized acceleration of the Bitcoin price once the market participants became increasingly aware of this dynamic.

In other words, this is what I think is happening, metaphorically….

The Crypto Capitalist Letter will (hopefully) be in the tradition of The Privateer, but with a tactical focus on investing in crypto stocks.

Given what has happened to asset prices and crypto in response to just an inkling of inflation, imagine if Charles Hugh Smith is right, looking at the collapse in money velocity occurring now, that this is one final deflationary “tide receding” before the inflationary tsunami hits. Then what happens to the price of Bitcoin, cryptos and gold?

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