People’s Bank of China Creates Chinese Digital Currency To Hedge Against Upcoming Collapses of Fiat Currencies

According to various news sources and Simon Dixon, People’s Bank of China has announced China’s own digital currency.  According to Mr. Simon Dixon, China is buying up gold and announcing digital currency to hedge against the upcoming biggest collapse of most fiat currencies in the world.  Near the end of his video, Mr.  Simon Dixon says people may adopt China’s digital currency, but this will encourage many more people to use Bitcoin.  Mr.  Simon Dixon thinks that Bitcoin is more attractive to people since it got no governments’ censures.

In my opinion, any government has the ability to outlaw Bitcoin.  I think Bitcoin might not have such a bright future when China herself is creating a brand new digital currency.  If China is going to be successful in convincing her own people and other peoples to use her digital currency, she can totally outlaw Bitcoin.  Once Bitcoin is being outlawed in China, China’s own digital currency will continue on to be one of the future, central crypto currencies.

Of course, any other government besides Chinese government can follow China’s playbook and come up with another government’s digital currency.  Thus, I don’t think China will be the only country that would create a government sanction digital currency.  I guess it would be fun to see a government sanctions another with outlawing another government digital currency within one’s own territory.

In the video, Mr.  Simon Dixon suggests that China may use the brand new digital currency to implement quantitative easing.  Instead of printing more fiat currency, China may as well create the second tier monetary system such as digital currency to help ease the many debt related bubbles that fiat currency has been creating.  It’s an interesting idea for sure, but I think only China would know what she will do with her brand new digital currency.  I guess time will tell.

Check out Mr.  Simon Dixon’s video on People’s Bank of China creates a Chinese digital currency in the video right after the break.  Enjoy!

[BBC Documentary 2015] Gold Moves East (YouTube Video)

Some people claim gold to be out of fashion, because it’s only a commodity with ancient intrinsic value.  Nonetheless, we all know that an ounce of gold comparing to an ounce of most things on earth, gold would be more coveted after.  Since gold is more valuable than most commodity — even though nobody can ever eat it — it makes sense that according to the demand of time any price could be named for just an ounce of gold.  For an example, hypothetically, another major world war may boost the price of gold to $20,000 for an ounce of gold.  Of course, it could also mean a future world disaster may dictate the price of gold in any amount of worth, but the example I gave is a hypothetical one only.  Since gold is being imagined as out of fashion in this moment in time, people are buying up gold as trinkets and not as something that could secure their future, thus people may easily give up their gold in good time.  When bad time comes, I fear people who go without gold will find life suddenly becomes a lot bleaker.  In World War II, gold was a major source of finance for battles across Europe and elsewhere.  In ancient time, gold was the source of wars and greed.  What would be the role of gold for this century and the next?  Check out the video right after the break to see how gold is being viewed throughout the world.  Enjoy!!!

All Fiat Currencies Are Fallacies?

I think all fiat currencies are fallacies.  One most notable fact about all fiat currencies that scares me most is that all fiat currencies can be multiplied out of thin air.  The problem is that nobody has real control over a fiat currency’s multiplication.

What on earth I’m saying?  Let’s discuss this further.  Let’s say if the government that is responsible for a specific fiat currency is printing the money, then it can basically use financial tools such as interest rates to control the fiat money supply.  What if an enemy of a state is capable of printing the same fiat currency to introduce hyperinflation into an economy?  Even if the government is trying to stop inflation by raising interest rates, buying back government issue bonds, raising the banks’ reserve ratios and so on, these tools might be too blunted by then since an enemy is printing the government’s fiat currency in untold amount of units.

I might be wrong, but in my opinion fiat currencies are the derivatives of non-fiat currencies such as gold.  Unfortunately, even gold can be rigged with derivatives such as gold future contracts.  Without any real delivery of hard assets such as physical gold units, future contracts can be switched to different owners at specific contract prices, thus these future contracts are rigged to move prices.  With prices can be inflated or deflated at will, even gold itself is sound, the gold market itself isn’t sound.  Since gold isn’t using as a unit of money as it supposed to be in the past when there was a gold currency based system, a rigged gold market isn’t a catastrophe if the market gets corrected.  Nonetheless, a rigged fiat monetary market would be a catastrophic life changing event for all walks of life if this market gets corrected.  After all, modern societies are using fiat currencies as real money!

If the keeper of a fiat currency isn’t doing well in regulating ebbs and flows of the inflation/deflation and the flight of the currency, such a fiat currency may very well become valueless and destroy the whole economy of a country.  If a country’s fiat currency is too influential in the world market, the whole world market may as well appear to be on a verge of collapse if such a country’s fiat currency is out of whack.

A Fiat Standard Hell May As Well Revive Gold And Silver As Unit Of Account

Not ever before that our world is so connected, because technology allows us all to trade and travel in seconds.  Just imagine this, before the Internet age, we were pretty fast, because we could travel the world in hours and very few days through flying on airplanes.  Nonetheless, age before the Internet is pretty slow comparing to now, because traveling around the world is no longer requiring us to be physically there.  Instead of just flying around the world, we can simply utilize the Internet to interact with various parts of the world in seconds.  Why traveling in the first place?  Sight seeings and trading and get to meet people and tasting different cultures and foods are probably on the todo list for many people, but the Internet allows us to do most of the stuffs I mentioned in seconds.  Of course, without physically traveling, we cannot use the Internet to have firsthand experience.  Nonetheless, with technology improves we might just as well be able to use virtual reality to somewhat attain the firsthand experience of physical traveling.  Trading is obviously done in seconds in the Internet age, and this has let the physical retail stores and what not to become almost obsoleted.  Fortunately, it’s that, nothing has yet to beat the firsthand experience of whatever, thus the physical retail stores might be able to retain the customers who prefer to have the physical feel and touch of things.  Too bad though, the trend is that many people rather go to physical stores for showroom experience, and then they go home to purchase the products they want on the Internet.

With being so connected as how we are now, it does seems that a small hiccup in the market would not be able to stir any storm and damage the wealths of many people.  Unfortunately, since we are so connected, a huge hiccup might churn out a firestorm that is huge enough to bring down the world market.  If this happens, the whole world will be in depression.  This almost happened in 2007-08, but China was holding up really good and stopped the whole world’s market from collapsing even more.  Nonetheless, I feel that, it is possible for a scenario such as a whole world’s market to really collapse and destroy all economies at once.  This is possible since we’re so connected and using only fiat currencies.  Never ever before in our human history that we have all countries using fiat currencies.  Some wise homo sapiens once said, the strongest link could also be the weakest link.  By being so connected, our economies could affect each other fast and furious, and so this would allow change to happen fast and furious.  When positive things are happening in the world market, this contributes as the strongest link.  The opposite could happen, and this would be the weakest link for the world market.  At the strongest link, positive effects would echo throughout the world at fast and furious speed.  At the weakest link, negative effects would also echo throughout the world at fast and furious speed.

Nowadays, we are using several main currencies that are known as reserve currencies.  The Dollar is the prominent of them all at this very point in time, but we never know how long can the Dollar hold this prominent reserve currency status.  If the world isn’t so connected, the multiple reserve currencies might be a panacea for world economic structural problems, because one economy can always spread foreign reserve wealth into multiple reserve currencies for diversifying.  Unfortunately, our world is so connected in a way that all reserve currencies’ hosts can be taken down, consequently rendering the reserve currencies themselves to be on the fringe of uselessness.  This has me thinking that perhaps gold and silver and other valuable metals are still very much the sort of wealth that us people may need to turn to if a perfect storm does hit the world market and bring down the world market in one fell swoop.

Just like fiat currency, gold and other valuable metals are backed by nothing.  Intrinsically though, gold is being used practically.  This means gold does have industrial applications.  Let me list a few gold’s industrial applications here.

  • Dentists can plant new gold teeth for patients.
  • Gold can be used to prevent rust and corrosion of important components within electronic devices.
  • In the medical field, gold can be used for various purposes such as treating patients with arthritis (gold salts reduce swelling, bone damage, joint pain, and stiffness).
  • Architects and builders can use gold to design beautiful structures.
  • Space devices can use gold to reflect radiation and cool temperature.

Besides gold’s few industrial applications, people like gold for its shininess and immune to rust qualities.  Before the well known use of gold in several modern industries, gold was being used as money since the early period of the entire human history.  Gold was minted into coins and so forth.  Since the dawn of human history, gold was used as money then was replaced by whatever and then it made a comeback, rinse and repeat kind of event really.  In our modern history, president Nixon of the United States abandoned the gold standard, thus he was effectively allowing the Dollar to not be redeemable by gold.  Since the Dollar was the most prominent (and still is at the moment) reserve currency in the world, Nixon’s gold standard abandonment was effectively put the world on fiat based standard, only.

With the knowledge of how humans tend to turn back to gold in hard time to hedge against paper currencies, it’s not too hard to see how people like us nowadays see gold might play the role of hedging against the possible collapsing of the fiat based standard.  Silver is considered to be a lesser quality metal than gold, but silver does have practical industrial applications too.  Nonetheless, I won’t elaborate on silver in this blog post.  With gold and silver and other valuable metals around, I think people and governments alike will use these metals in hard time as money.

To summarize everything up, what makes fiat currencies valuable is that people around the world see them as valuable.  Regardless fiat currencies are backed by anything, as long people of the world think fiat currencies are good enough as a unit of account, the fiat currencies can go on being the monies.  Unfortunately, people are usually illogical.  This is why if the so connected world market like ours stops functioning somehow, people aren’t going to wait around for the consensus that the fiat currencies will be OK.  Instead of waiting around, people may have a run on the fiat currencies and hoard golds and silvers.  This is when people will see golds and silvers as monies.  Perhaps, some people may argue that if the dollar collapses, the market will turn to IMF’s SDR (Special Drawing Right) or China’s Yuan as the reserve currency.  Since nobody knows the future, they maybe right, but I argue that none of those so called possible reserve currency replacements can hold water to gold and silver.  After all, gold and silver do have industrial application values and these metals have been used as unit of account over and over again in our past histories.  Moreover, I question the ability of IMF’s SDR or any other single fiat currency can be confident enough to rescue the fiat standard from hell.  By this I meant if the fiat standard does go to hell, by then it’s way too tough for any other fiat currency to be able to rescue the fiat standard system.  People may just as well turn to gold and silver as a change!

Sources:

Bookworm: “The Death of Money: The Coming Collapse of the International Monetary System” By James Rickards

The main stream and alternative media alike had been buzzing about the $400 billion natural gas deal between Russia and China.  These media described that this huge natural gas deal between these two huge countries could eventually undermine the dollar reserve currency status.  Whether this will be true or not for some time to come, nobody will know!  Nonetheless, one could tell that China and Russia are diversifying their dollar reserves into something else such as this $400 billion natural gas deal.  These two huge countries are hedging against the dollar, thus either these two huge countries will trade with each other in other currencies other than dollar or spending their dollar reserves to materialize their dollar reserves into something more tangible such as the $400 billion natural gas deal.

With all the talks of the dollar is losing reserving status either gradually or slowly reaching a tipping point where an avalanche of events will drive the demise of the dollar reserve status at a breakneck speed, I’m getting more interested in being more informed about this whole shebang.  It was no surprised when I got a whiff of the new book “The Death of Money: The Coming Collapse of the International Monetary System” written by James Rickards, I was eager to purchase this very book on Amazon Kindle Store.  Yes, I purchased this book in dollar!  Anyhow, I’m going to read this book now, but by the time I finish this book I might be able to write a blog post or two about my reading of this book.  It will not be a review of sort, but it will be more of what I think I’ve learned by reading this book.

 

Can Bitcoin Be Real Money?

The bitcoin logo

The bitcoin logo (Photo credit: Wikipedia)

Bitcoin is all the rage recently as value per Bitcoin has climbed really high.  As I’m writing this blog post, it’s about $866 per Bitcoin.  Furthermore, more reputable businesses are beginning to join the fun by accepting Bitcoin as payment for business transactions.  With Bitcoin is moving toward mainstream or so as people think it is doing so, we have to wonder how long will Bitcoin would shine right?

As we all know, money has to be backed by something.  Sure, money can be in various currencies, but all currencies have to be backed by something.  In the antiquity time, countries accepted all sorts of bartering items as currencies.  Nonetheless, most of those bartering items could not withstand the test of time.  Gold is one of those few bartering items that have withstood the test of time thus far.  Gold could be used as money in the antiquity time, and even today some parts of the world are still accepting gold as real money.

How can gold be so resilient against time?  For obvious reasons such as scarcity and so forth, gold cannot be seen as just another bartering item.  Scarcity is important, but gold has one more trait that is very very important.  People have often overlooked that gold has always been special throughout the globe and through time.  By special I meant since the antiquity people have found gold to be valuable and sexy.  Since the whole world is being captivated by gold since the antiquity, therefore gold cannot be easily discarded in time.

Bitcoin might have the appealing of gold if it can convince people that it too can be valuable and sexy, worldwide.  As I have mentioned earlier, money (currencies) have to be backed by something, and so we have to wonder what is backing Bitcoin, right?  I think what is backing Bitcoin is how people put Bitcoin into practice throughout the world.

Nonetheless, without a specific government endorsement, can Bitcoin last?  I think Bitcoin is special in that it’s not being bounded or controlled by a specific government, and yet the people throughout the world are willing to have faith in Bitcoin.  With that being said, if Bitcoin doesn’t have the appealing of scarcity, it would probably be just another funny money (i.e., monopoly money).

Bitcoin can be scarce since it does require tremendous amount of effort in mining it.  For an example, one has to be spending real money to buy expensive hardware before one can mine Bitcoin effectively.  One might have to mine 24/7 for months and years before one can have few Bitcoins.  Now, if one is really rich and wealthy, one can build many Bitcoin mining rigs that can churn out Bitcoin really fast.  It is all about being rich in the first place, right?  There is a saying and it might go like this, the rich get richer and the poor get poorer.

In summary, I think Bitcoin can be real money, but for how long I won’t know.  I know though that if people around the world use Bitcoin as money, then Bitcoin won’t easily be discarded.  If the whole world is using Bitcoin, then not a single country can stop Bitcoin from being used as money.  If the whole world is using Bitcoin, then politics will become less important when it comes down to currency manipulation.  Bitcoin can be traced just like how cash can be traced, but both Bitcoin and cash can be way more stealthy than most forms of currencies.  With stealth as one of its awesome traits, Bitcoin can definitely be facilitated as cash-like money.  With all of that being said, Bitcoin isn’t cash since it’s not physical.  Since Bitcoin has to be used in a digital form, it might just be inconvenient enough that some people will not want to use Bitcoin as their money.  Invention such as smartphone apps to facilitate the Bitcoin transactions might help Bitcoin to be seen as physical cash, because there are so many people who carry their smartphones around.