Are We Ready For A Sovereign Debt Crisis?Written by Paul Rosenberg Subject: Bitcoin
I've been warning Bitcoiners that we needed to be the adults of finance for quite some years, and I'm pleased to say that we've come a long way in that direction. I still see more juvenille behavior than I'd like, but progress has clearly been made.
I bring this up because we're only one or two sovereign debt crises from Bitcoin becoming a major asset. How we behave now will matter a lot more than how we behaved eight or ten years ago.
Our personal behavior has nothing to do with the operation of Bitcoin, of course: Whether we're saints or buffoons, the blockchain will continue to pump out new blocks every ten minutes, as it has since the beginning. But it matters a great deal to people who need to protect their assets and are forced to look into this "controversial" Bitcoin thing.
People in the midst of financial disaster will need to make judgments about us, having previously heard conflicting reports. When they take a harder look, they'll need to see thoughtful, responsible operators, because humans in crisis look harder at people than they do at numbers; it's an instinctive thing: They'll decide because of us more than our arguments.
If these people see snarky adolescents, they'll miss the only lifeboat available to them. They'll be ruined, and some significant degree of it will be our fault.
Over the past ten years there have been debt crises in Cyprus, Greece, Venezuela, Lebanon, Argentina, Ecuador, Ghana, Zambia, and Sri Lanka. All of these were contained by the usual suspects, who printed more money, increasing the overall insolvency of the world's fiat money regimes.
It was the governments and bankers who were actually bailed out, of course, with non-elites left to suffer. But still the game was kept together, and the big systems were protected.
Nonetheless, trouble is still afoot, and further debt problems are coming. Japan is massively insolvent, as are more or less all Western governments. It's only a matter of time, and with both inflation and stagnation (not to mention war) rolling over so much of the world, easy times for insolvent mega-debtors may be drawing to a close. That's been a fool's wager for a long time now, but eventually reality asserts itself.
Some defaults will come the traditional way, with governments refusing to pay off their bonds, or paying pennies on the dollar. Other defaults will come via inflation, where the bonds will eventually be paid, but in massively less valuable currency units. Either way, the non-elite population will be economically smashed, unless they can get their value into an independent currency. And the set of independent currencies, these days, includes Bitcoin and pretty much nothing else.
I'd like you to consider some sample cases. There are going to be millions of people like these, and they'll be looking for any available option, regardless that their overlords brand such things as foolish and evil.
Consider the owner and operator of a mid-sized construction firm: He needs to keep reserves for payroll and project financing, but his national currency is being destroyed. More importantly, he owes bills in currencies that aren't being ruined. So, what is he to do? Paying bills and employees in gold is all but impossible, and foreign exchange controls are either in place or threatened. Bitcoin is the obvious answer, but when he looks at Bitcoin, does he see an effective system ready to go, or a jumbled mess of promises?
Consider the elderly widow with enough money for her last years, but not a lot more: Her bonds are being redeemed at a reduced rate, but that rate will probably drop lower and lower. She has clung to the system as if it were her husband, but there's no evading the fact that it has failed her. She's frightened and has been ripped-off before, but won't survive being ripped-off this time. When she looks at Bitcoin, what does she see?
Consider the successful, retired investor: He (or she) is up to date on events, and knows that the bell is tolling for their portfolio. He's been scared away from Bitcoin several times, but has heard the pro-Bitcoin argument as well. But now he has to make a very serious choice: does he stay with a leaking and sinking ship, or does he go to the despised Bitcoin? When they looks deeper, what does this person see?
You get the picture, I'm sure. We can help these people greatly, helping ourselves at the same time. Or, we can turn them away from their economic salvation. None of this will change the blockchain, but it will make a tremendous difference to millions of basically decent people.
What would you like your legacy to be?