according to Bloomberg global debt grew by $19.5 trillion during the pandemic. As an encore the biden administration in the USA has unveiled their next move, "have you tried 4 trillion more?"
The pandemic is really bringing to a head the absurd levels that the conventional banking system has reached. To understand why things have got so bizarre, why this splurge of money creation will continue and why crypto will continue its rapid growth we need to realise that the west no longer has a capitalist system. The fundamental cornerstone of capitalist economics is gold. All fiat money is pegged to gold and this provides limits on what can be done to manipulate fiat money. You can print more fiat, you cannot print more gold, it takes time and investment to mine gold and it is limited in supply. After WW2 the US was the only major country not devastated and bankrupt. When it came time to reset the global monetary system the US held all the cards and the dollar was established as the reserve currency. Not everyone liked this and in the 60s the US started to abuse the dollar position, spending huge amounts on the "great society" programme as well as the very expensive vietnam war.
in 1971 the French had had enough, they called the dollar reserve status an "exorbitant privilege" and decided to cash in their dollar reserves and demand gold from the US. The US response was possibly the most important "temporary" government measure in history, they broke the connection with gold and because the dollar was the reserve status that meant that the connection to gold was broken for every currency.
So why the history lesson and where do things go from here? Well this shift changed the global monetary system from a capitalist one to what has been called a creditist system by economist Richard Duncan. money is borrowed by government or individuals from banks. The money is created out of thin air with an interest rate and so ultimately more money must be constantly created to service the interest, otherwise debtors default and the whole thing goes boom. Essentially our global system no longer relies on the stability of a universal limited substance like gold, instead it relies entirely on money creation and trust that the people borrowing the money will not default with nothing to back things up if they do default. Under our creditist system a government really could just print a fafillion dollars as long as global institutions somehow trust that they are good for it.
This is why I am long term extremely bullish about the crypto space like most people reading this are. The creditist system has reached absurd levels, and everyone can see it. 50 years ago central authorities in many countries had a certain level of trust from their populations. Who trusts a politician or a banker nowadays? Who really trusts that printing trillions of every currency in the world every year is going to work out well? The politicians and bankers may be fine with the system but the search for a more sensible and stable system is leading more and more into crypto.
The most telling thing I have seen yet is that my 70 year old mother wants to have a little bit of crypto in her portfolio just in case inflation takes off in a really big way. I'm sure there are lots of ups and downs for crypto still to come but the world needs something different and this is the best solution I have seen so far.
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