Crypto Central Banking?

Since March 11, 2020, the US Federal Government has approved 5.3 Trillion (Source Peter G Peterson Foundation)

This is broken down the following way:

Support to Small Business $968 Billion

Economic Stimulus Payments $856 Billion

Expanded Unemployment Compensation $764 Billion

Public Health and related Spending $657 Billion

Tax Incentives $566 Billion

Direct Aid to Governments $512 billion

Educational Support $282 Billion

Other $730 Billion

Total 5335 Billion or 5.3 Trillion

As of today, there is no government action to address how this will be paid for.  All of this is deficit spending.

On March 17, 2020, six days after the first expenditure above, Bitcoin traded between $5002 and $5371 per coin.  As of this writing, (3/27/2021) bitcoin is priced at $55209.  (Source Yahoo Financial).

The above information is factual, please think about how the sets of facts might be related.  The following is my opinion.

I realize that many people believe that if ever there was a time to deficit spend it was now.  I agree, I just did not agree with the previous decades of deficit spending.  Which was done by politicians on both sides of the isle.  

I believe the increase in the price of bitcoin is the direct result of the deficit spending that has accelerated in the last 12 months.  Some invest in it as a hedge against what they believe will be inflationary pressures, others as digital gold.  Some have invested in it since it has become more readily stored via PayPal and Venmo.  Recently the Oakland Athletics announced on CNBC that they were offering 6-person luxury boxes for 1 bitcoin for the coming season.  When David Kaval, the president of the team was asked why they were doing this, he answered that customers were requesting to pay in this manner.  A recent survey of Bitso, Mexico’s leading Crypto-currency exchange showed a 342% increase in users.  Now over 1 million.  92% are Mexican.  For comparison there are 35 traditional brokerages in the country with under 400,000 active trading accounts.  When asked why?  Locals say the change in Mexican banking laws have made it far easier to send money via Bitcoin than to go through the process of exchanging pesos for US dollars.  This has made it much easier for Mexican’s working in the US to send money home, not in dollars but in Bitcoin.

In recent weeks we have heard central bankers form several countries talk about Crypto currencies in general terms as “concerning” and discouraging people to invest or, more importantly, think of them as replacements for their own currency.  For over two years now I have believed that this time was coming.  When Mark Zuckerberg went to Washington DC in the summer of 2019 to discuss an alternative payment system for Facebook (Libra) it was quickly dismissed as improbable.  Whether governments around the world want it or not I believe it is coming.  The price does not move this much in a year without institutional investors taking part in the growth.  Tesla announced their own investment in Bitcoin to the tune of over a billion dollars recently.  

I believe these institutional investors are quietly betting against not only our currency but all government currencies around the globe.  The United States is not the only country spending money like a drunken sailor on liberty.  Most countries around the globe have used the pandemic to continue printing money.  The US may be the cleanest dirty shirt in the bunch but make no mistake, the shirt is filthy.  

Continuing to print money without any idea of how it will be paid back is a recipe for disaster.  I realize that there are many who believe in Modern Monetary Theory. A theory that espouses this deficit spending forever.  If you can pay your bills in your own currency you can run with deficits forever.  The movement in the price of Bitcoin over the last 12 months tells me that the rest of the world is questioning that theory.  

The Libertarian Party believes in paying our bills as a country.  I know of no other party that even considers this a possibility anymore.  If you believe what we do, join us.  We think there are lot more out there who believe as we do. We need you all to insure that every child born in America isn’t saddled with a bill he or she will never be able to pay.

Jack Rothamel

Chairman 

Polk County Libertarian Chairman

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