Raison D’etre
The post-WWII Bretton Woods economic order is coming to a close. As economic systems have become financialized, capitalism has largely been replaced by cronyism and free markets by ‘too big to fail’ casinos; while the middle-class has increasingly been hollowed by Ponzi-like financial structures designed to funnel wealth to the top 1%. The status quo is unsustainable.
Irrespective of how it may have come about, the COVID pandemic has been the pin that has finally catalyzed the over-inflated credit markets to burst beyond repair, the collapse of which — in combination with the decline of the pertrodollar — signals the end of the seventy-five-year macro-debt cycle. This is a paradigm shifting event, such that the socio-economic foundations to drive the next era of human civilization will be decided in the coming months and years.
The following aims to make sense of the current, seemingly chaotic environment, and to provide a concise, to-the-point overview for how a potential socio-economic reset may play out.
A Roadmap
Stage 1: Deflation
Response: Money Printing
- QE / Rate Cuts
- Corporate Bailouts & Bankruptcies
- Consumer Debt Defaults
- Real Estate Crisis
Market Reaction: Rush to Safety / Liquidity
- USD
- Bonds
Stage 2: (Hyper-)Inflation
Response: Currency Devaluation / Loss of Purchasing Power
- QT / Raise Rates
- Gov’t & Corporate Debt Defaults
- Bond Market Collapse
Market Reaction: Rush to External Safe Havens
- Precious Metals: Gold / Silver
- Cryptocurrency: Bitcoin / Ethereum
Stage 3: Bretton Woods-style Systemic Reset
Response:
- Political Negotiations
Potential Outcomes:
a. New Global Reserve Currency
- Central banks bailed out via the IMF SDR (basket of five largest fiat currencies)
- SDR global reserve settlement system established; IMF becomes lender of last resort to central banks
- Transition off the USD reserve is entrenched, along with a move to a multipolar geopolitical power base
- SDR currency weighting may ultimately be governed by central banks via a privately controlled distributed ledger (centrally controlled Libra-like ‘blockchain’)
b. Debt Jubilees
- Government debts could be forgiven / reset, especially for emerging markets
- Some consumer debts may be forgiven, such as student loans and credit cards
c. Universal Basic Income (UBI)
- Required to negate the disrupting effects brought by the automation of the economy / labor force
- Elevates every person in society to a basic standard of living; beyond which is left to the individual
- Spurs innovation as a greater number of individuals are freed to pursue their passions and contribute to society in a meaningful way
d. Expedite ‘Fourth Industrial Revolution’ (4IR) Technologies across the Global Economy
- Deploy distributed renewable energy smart-grids
- Scale 3D printed manufacturing
- Increase economic efficiencies with the integration of blockchain, where appropriate
- Embrace automation and new forms of distributed decision-making
e. Return to a Gold Standard
- This is unlikely as central banks will want to maintain control over monetary policy and currency issuance
- Gold (and eventually cryptocurrency) will be retained as bank reserves, but will not back fiat issuance
Overall, such a reset could result in a shift from a unipolar to a multipolar geopolitical system based upon a global reserve currency basket of the largest economies, with drastically enhanced economic efficiencies introduced via blockchain. Subsequently, with the integration of 4IR technologies and UBI, a transition to a sustainable ‘zero marginal-cost society’ could be expedited (details).
Potential Risks & Alternative Objectives:
Technology is a tool. Depending upon how it is deployed and utilized, it can equally free humanity and enslave it. Embracing state-surveillance and central bank control over financial networks is a dangerous road, destined for totalitarian outcomes.
- Digital ‘Self-sovereign’ ID — would enhance privacy / user-control of data if truly self-sovereign (deployed on a decentralized blockchain with user-controlled ‘certificates’)
- Loss of Privacy / Enhanced Surveillance-state:
- Central Bank Digital Currencies (CBDCs) — fiat currencies are issued on a privately controlled ‘blockchain’, allowing central banks unfettered access and control over individual financial transactions and savings
- Location-based Tracking — state-wide facial recognition networks; centralized ‘contact-tracing’ applications; increased use of drones
- Restrictions on Freedom of Movement — restrictive border controls; ‘immunity passports’ required for operating within the state
- ‘Earn It’ Act — a recently introduced bill to the US Senate which would limit the ability of companies to offer private and secure services by undermining the use of encryption - Central Banks Co-opt and Subsume the Role of Commercial Banks — central banks could potentially make a power grab by issuing a retail CBDC and allowing individuals to hold accounts directly with the central bank. This would undermine commercial banks and could ultimately result in governments issuing their own CBDC directly in response, thereby circumventing central banks themselves (gov’ts would no longer borrow from central banks, but instead issue fiat directly)
Opportunity Out of Chaos
Ultimately, the coming societal upheavals present an opportunity to lay the foundations for a transition to a new socio-economic paradigm. In parallel to the structures of state-control, decentralized and anti-fragile protocols are being built that are open and accessible to anyone on the planet. These distributed networks provide society with a check on government overreach and the means with which to opt-out.
The opportunity now lay before us to move from a society burdened by debt-controlled slavery and rampant cronyism, to one in which individuals are empowered to innovate and pursue their passions as never before. Open, neutral, borderless, censorship-resistant networks will provide the rails for truly free and efficient markets, and provide a foundation for a society built on the ethos of sustainability in line with the carrying capacity of the earth.
Together with 4IR, efficiencies will be unleashed that drive exponential advances in the quality of life for all.
The secret of change is to focus all of your energy, not on fighting the old, but on building the new.
-Socrates
Donate: (Bitcoin)
- 34QgQbdsKA1yybupwyuv4cGoEdw1H4FH7E
Disclaimer: This article is provided as general market commentary and does not constitute investment advice.
