When Will the $243 Trillion Global Debt Bomb Explode? By James Reed

     It seems it is only a matter of time now before the entire house of cards of the global economy comes crashing down.

“Global debt now stands at a terrifying $243 trillion according to a report by the Institute of International Finance this week. That’s quarter of a quadrillion. We’re in the realms of the absurd and the unsustainable. That’s money that will never be repaid. The debt-based system is irrevocably broken and is still propped up by the lies told by central bankers and governments in order to remain in positions of power over others. The record debt figure stands at three-times the world’s total gross domestic product (GDP). In other words, it’s three times larger than the value of all products and services on the planet.  And the United States is contributing massively to this problem, propping up a debt bubble that will crush everyone when it finally bursts. It’s pretty safe to say that if you aren’t concerned, you simply aren’t paying attention and will be hurt when it all collapses. An irresponsible monetary system addicted to printing money and issuing credit is destroying the standard of living almost everywhere on the planet. It’s time to admit that we, as human beings, need a new alternative to the control, wealth redistribution, theft, and slavery that’s overtaken humanity. And one website dares to say that while it’s far from perfect, bitcoin offers a viable solution with its fixed supply. According to CCN, Bitcoin, the decentralized cryptocurrency, is a way out of the poorly designed monetary system forced down all of our throats by power-hungry sociopaths. When economic growth is insufficient, governments and companies borrow more money.  But this is nothing more than a cycle of addiction, writes  John Mauldin inForbes:

“This is classic addiction behavior. You have to keep raising the dose to get the same high… Central banks enable debt because they think it will generate economic growth. Sometimes it does. The problem is they create debt with little regard for how it will be used.”

     I think supposing that Bitcoin will suddenly save the entire global system, is a bit of magical thinking. The problem is many orders of magnitude greater than anything that Bitcoin is, and ignores any of the real concerns about Bitcoin:

“Back in August 2014, I discovered that the bitcoin mining industry had the industrial structure of a natural monopoly. A natural monopoly is a market in which production is most efficient with a single producer. This discovery came as a shock, but the implication was clear: Bitcoin could not survive in the long run. As a check, I field tested my reasoning on various people who are economically literate. None disagreed. When I first arrived at that conclusion, bitcoin’s price was $379. Since then, its price rose to nearly £20,000 and has since fallen to a value $3,621 at the time of writing. Does the subsequent price behavior of bitcoin mean my prediction was wrong? No. I still think that the long-run equilibrium price of bitcoin is zero. It just hasn’t bitten the dust yet. My reasoning is based on two simple economic arguments. The first is that the bitcoin mining industry is a natural monopoly and a natural monopoly undermines bitcoin’s core value proposition. The second is that in markets with zero regulatory entry barriers, an inferior product cannot survive long-term. Either of these arguments is sufficient to produce my conclusion that the price of bitcoin must go to zero in the long term. Together, they are more than sufficient to establish that conclusion.

To work as intended, the bitcoin system requires atomistic competition on the part of the miners who validate transactions blocks in their search for newly minted bitcoins. However, the mining industry is characterized by large economies of scale. Indeed, these economies of scale are so large that the industry is a natural monopoly. The problem is that atomistic competition and a natural monopoly are inconsistent: the built-in centralization tendencies of the natural monopoly mean that mining firms will become bigger and bigger – and eventually produce an actual monopoly unless the system collapses before then. The implication is that the bitcoin system is not sustainable. Since what cannot go on will stop, one must conclude that the bitcoin system will inevitably collapse. The only question is when. I could go on at length about how this centralizing tendency will eventually destroy every single component of the bitcoin value proposition, knocking them down like a row of dominos: the first domino to fall will be distributed trust, Bitcoin’s most notable attraction; the system will then come to depend on trust in the dominant player not to abuse its power.

This player will become a point of failure for the system as a whole, so the “no single point of failure” feature of the system will also disappear. Then pseudo-anonymity will go, as the dominant player will be forced to impose the usual anti-anonymity regulations justified as means to stop money laundering and such like, but which are really intended to destroy financial privacy. Even the bitcoin protocol, the constitution of the system, will eventually be subverted. Every component of the bitcoin value proposition will be destroyed. The bitcoin system will then become a house of cards: there will be nothing left within the system to maintain confidence in the system.

     It is only a matter of time before Bitcoin too bites the dust. Clearly the financial and economic system needs a more radical revision, the sort proposed by the social credit movement, to deal especially with the perennial crisis of capitalism.

Authorised by K. W. Grundy
13 Carsten Court, Happy Valley, SA.

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