The Bitcoin future

Fedcoin Will Be ‘Bigger’ Than Bitcoin

Fedcoin doesn’t even exist yet, and yet the Washington Post is already hyping it as the primary cryptocurrency that we will be using in the future.

Do they know something that the rest of us do not?

Just a few days ago, I warned that global central banks could eventually try to take control of the cryptocurrency phenomenon, and so I was deeply alarmed to see the Washington Post publish this sort of an article.

We want cryptocurrencies to stay completely independent, and we definitely do not want the Federal Reserve and other global central banks to start creating their own versions.

Because of course once they create their own versions they will want to start restricting the use of any competitors.

The one thing that could derail the cryptocurrency revolution faster than anything else would be interference by national governments or global central banks.

Unfortunately, now that Bitcoin, Litecoin, Ethereum and other cryptocurrencies are getting so much attention, it is inevitable that the powers that be will make a move.

Over the past few weeks, investors have been flocking to bitcoin, the digital currency whose value has soared by about 2,000 percent in the past year alone. And while many economists are cautioning against excitement about bitcoin — which is caught up in what may be one of the biggest speculative bubbles in history — it’s important to note just how revolutionary the technology may be.

Indeed, the technology underlying bitcoin could fundamentally change the way we think of money.

Professor Harvey goes on to explain that it is “only a matter of time before paper money is phased out”, and that some version of “fedcoin” is inevitable.

The Federal Reserve and other global central banks could just leave us alone and allow us to create our own currencies.

The cryptocurrency revolution is moving along just fine, and there is no need for any sort of interference.

But I have a feeling that the powers that be will eventually manufacture some sort of a “cryptocurrency crisis” if one does not happen naturally.

In the aftermath, they will attempt to introduce some version of “fedcoin”, and many in the general public will be very thankful for the “solution” that the government has provided.

And that day may be closer than we think.  In fact, the U.S. government has already invested millions into cryptocurrency research. To add fuel to the fire, the U.S. government has been rigorously studying Bitcoin for about two years now and instead of fighting Bitcoin, the Feds seem poised to wipe out the U.S. dollar by creating their own digital currency. The National Science Foundation, a U.S. government agency that supports and funds research has awarded $3 million to three U.S. universities for wide-ranging cryptocurrency research.

Cornell, the University of Maryland and the University of California Berkeley will focus on developing new cryptocurrency systems that, according to principal investigator Elaine Shi, will address “pain points” attributed to Bitcoin and other existing networks.

The Federal Reserve is far from alone.  Other global central banks are doing their own research, and the Bank for International Settlements says that “all central banks” may eventually need their own cryptocurrencies. Central banks may one day need to issue their own cryptocurrencies, the Bank for International Settlements said in its latest quarterly review. “Whether or not a central bank should provide a digital alternative to cash is most pressing in countries, such as Sweden, where cash usage is rapidly declining,” the Sunday report said. “But all central banks may eventually have to decide whether issuing retail or wholesale [central bank cryptocurrencies] makes sense in their own context.”

This is going to be a critical phase for the cryptocurrency revolution because the people of the world are going to have to make it exceedingly clear that they do not want central bank cryptocurrencies. Central bank cryptocurrencies would simply be an extension of the current debt-based system that is systematically enslaving humanity.

The thing that makes cryptocurrencies so great is the fact that they are not debt-based and they are allowing humanity to express independence from the current system.

As existing fiat currencies fail, we want there to be independent cryptocurrencies that people can use as an alternative. And we don’t have to just imagine what that would look like.  In fact, it is already happening in Venezuela. But in Venezuela, the collapse of the bolivar has forced locals to turn to alternatives like bitcoin and local community-issued currencies with fixed exchange rates. The rapid erosion of the bolivar’s value made everyday transactions like buying groceries and paying cabbies untenable – customers had to pay with large, cumbersome stacks of bolivars that were difficult to transport. Patricia Laya, a Venezuela-based reporter, tweeted a photo of the 5,000 bolivars – the maximum amount – she was able to withdraw from an ATM in Caracas. They’re worth around $0.05. Laya stated that she had waited 20 minutes in line to obtain $0.05 in hyperinflated currency worth little to no value,according to CCN.

Even though bitcoin transactions can take hours – even days – to settle, local merchants have readily embraced the digital currency. This is a revolution that has the potential to completely change the global financial system, but I have a feeling that global central banks will never let it get that far.

The current system funnels literally trillions of dollars to the very top of the food chain, and the elite are going to jealously guard their golden goose.

Michael Snyder

Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years. Today, Michael is best known for his work as the publisher of The Economic Collapse Blog. Michael and his wife, Meranda, believe that a great awakening is coming and are working hard to help bring renewal to America. Michael is also the author of the book The Beginning Of The End

Universal Basic Income, Inequality and Fiscal Policies

Inequality: Fiscal Policy Can Make the Difference

A more comprehensive approach to Fiscal policies

By Vitor Gaspar and Mercedes Garcia-Escribano

October 11, 2017

Income inequality among people around the world has been declining in recent decades. This is due to countries like China and India’s incomes catching-up to advanced economies. But the news is not all good. Inequality within countries has increased, particularly in advanced economies. Since the global economic recovery has gained pace and is now widespread, policymakers have a window of opportunity to respond with reforms that tackle inequality, and our new Fiscal Monitor shows how the right mix of fiscal policies can make the difference.

Fiscal policy is powerful

Fiscal policy accounts for a large share of differences in inequality across countries.

In advanced economies, fiscal policy offsets about a third of income inequality before taxes and transfers—commonly known as market income inequality—with 75 percent coming from transfers. Spending on education and health also affects market income inequality over time by promoting social mobility, including across generations. In developing economies, fiscal redistribution is much weaker, given lower and less progressive taxes and spending.

Design of redistribution matters

There is no one-size-fits-all strategy. Redistribution should reflect a country’s specific circumstances, including underlying fiscal pressures, social preferences, and the government’s administrative and tax capacity. Also, taxes and transfers cannot be considered in isolation. Countries need to finance transfers, and the combination of alternative tax and transfer instruments that countries chose can have very different implications for equity.

While some policies may have conflicting effects on growth and distribution, our empirical evidence shows it is possible to achieve inclusive, sustainable growth with the right mix of policies. Efficiency and equity can and must go hand-in-hand.

Tackling inequality

Policymakers have many choices to achieve efficient and equitable results. The Fiscal Monitor focuses on three policy debates: progressive taxation, universal basic income (UBI), and public spending on education and health.

• Progressive income taxes. Personal income tax progressivity has declined steeply in the 1980s and 1990s, and has remained broadly stable since then. The average top income tax rate for OECD member countries fell from 62 percent in 1981 to 35 percent in 2015. In addition, tax systems are less progressive than indicated by the statutory rates, because wealthy individuals have more access to tax relief. Importantly, we find that some advanced economies can increase progressivity without hampering growth, as long as progressivity is not excessive.
• Universal basic income (UBI). A UBI—defined as a cash transfer of an equal amount to all individuals in a country—has been widely debated by economists for decades. There is now renewed interest, associated with perceptions of the effects of technology and artificial intelligence on the future of work. The Fiscal Monitor does not advocate for or against UBI, but contributes to the policy debate by presenting facts and arguments relevant for evaluating a UBI. A UBI has potential for having a significant impact on inequality and poverty as it covers all individuals at the bottom of the income distribution. But, being universal means it is costly. The Fiscal Monitor estimates that it would cost the average advanced economy 6½ percent of GDP to provide a UBI set at 25 percent of median per capita income, and the estimates vary considerably across countries. Thus, the discussion of a UBI cannot be disentangled from a discussion of its financing to make it budget neutral. Key considerations for its introduction are its consistency with other fiscal priorities—to avoid crowding out investments in infrastructure, education and health, for instance—and the method of financing, which needs to be efficient and equitable. A UBI could be an option where it substitutes for inequitable and inefficient social spending.
• Spending on education and health. Despite progress, gaps in access to quality education and health care services between different income groups in the population remain in many countries. For example, in advanced economies, males with tertiary education live up to 14 years longer than those with secondary education or less. Better public spending can help, for instance, by reallocating education or health spending from the rich to the poor while keeping total public education or health spending unchanged. The Fiscal Monitor finds that closing the inequality gap in basic health coverage could raise life expectancy, on average, by 1.3 years in emerging and developing countries.

We hope to have persuaded you of two things: that fiscal policy can make the difference in tackling inequality; and that efficiency and equity must go hand-in-hand.

Universal Free Movement of Workers: A world of free movement would be $78 trillion richer

A world of free movement would be $78 trillion richer

Yes, it would be disruptive. But the potential gains are so vast that objectors could be bribed to let it happen

A HUNDRED-DOLLAR BILL is lying on the ground. An economist walks past it. A friend asks the economist: “Didn’t you see the money there?” The economist replies: “I thought I saw something, but I must have imagined it. If there had been $100 on the ground, someone would have picked it up.”

If something seems too good to be true, it probably is not actually true. But occasionally it is. Michael Clemens, an economist at the Centre for Global Development, an anti-poverty think-tank in Washington, DC, argues that there are “trillion-dollar bills on the sidewalk”. One seemingly simple policy could make the world twice as rich as it is: open borders.

Workers become far more productive when they move from a poor country to a rich one. Suddenly, they can join a labour market with ample capital, efficient firms and a predictable legal system. Those who used to scrape a living from the soil with a wooden hoe start driving tractors. Those who once made mud bricks by hand start working with cranes and mechanical diggers. Those who cut hair find richer clients who tip better.

“Labour is the world’s most valuable commodity—yet thanks to strict immigration regulation, most of it goes to waste,” argue Bryan Caplan and Vipul Naik in “A radical case for open borders”. Mexican labourers who migrate to the United States can expect to earn 150% more. Unskilled Nigerians make 1,000% more.

“Making Nigerians stay in Nigeria is as economically senseless as making farmers plant in Antarctica,” argue Mr Caplan and Mr Naik. And the non-economic benefits are hardly trivial, either. A Nigerian in the United States cannot be enslaved by the Islamists of Boko Haram.

The potential gains from open borders dwarf those of, say, completely free trade, let alone foreign aid. Yet the idea is everywhere treated as a fantasy. In most countries fewer than 10% of people favour it. In the era of Brexit and Donald Trump, it is a political non-starter. Nonetheless, it is worth asking what might happen if borders were, indeed, open.

To clarify, “open borders” means that people are free to move to find work. It does not mean “no borders” or “the abolition of the nation-state”. On the contrary, the reason why migration is so attractive is that some countries are well-run and others, abysmally so.

Workers in rich countries earn more than those in poor countries partly because they are better educated but mostly because they live in societies that have, over many years, developed institutions that foster prosperity and peace. It is very hard to transfer Canadian institutions to Cambodia, but quite straightforward for a Cambodian family to fly to Canada. The quickest way to eliminate absolute poverty would be to allow people to leave the places where it persists. Their poverty would thus become more visible to citizens of the rich world—who would see many more Liberians and Bangladeshis waiting tables and stacking shelves—but much less severe.

If borders were open, how many people would up sticks? Gallup, a pollster, estimated in 2013 that 630m people—about 13% of the world’s population—would migrate permanently if they could, and even more would move temporarily. Some 138m would settle in the United States, 42m in Britain and 29m in Saudi Arabia.

Gallup’s numbers could be an overestimate. People do not always do what they say they will. Leaving one’s homeland requires courage and resilience. Migrants must wave goodbye to familiar people, familiar customs and grandma’s cooking. Many people would rather not make that sacrifice, even for the prospect of large material rewards.

Wages are twice as high in Germany as in Greece, and under European Union rules Greeks are free to move to Germany, but only 150,000 have done so since the beginning of the economic crisis in 2010, out of a population of 11m. The weather is awful in Frankfurt, and hardly anyone speaks Greek. Even very large disparities combined with open borders do not necessarily lead to a mass exodus. Since 1986 the citizens of Micronesia have been allowed to live and work without a visa in the United States, where income per person is roughly 20 times higher. Yet two-thirds remain in Micronesia.

Despite these caveats, it is a fair bet that open borders would lead to very large flows of people. The gap between rich and poor countries globally is much wider than the gap between the richest and less-rich countries within Europe, and most poor countries are not Pacific-island paradises. Many are violent as well as poor, or have oppressive governments.

Also, migration is, in the jargon, “path-dependent”. It starts with a trickle: the first person to move from country A to country B typically arrives in a place where no one speaks his language or knows the right way to cook noodles. But the second migrant—who may be his brother or cousin—has someone to show him around. As word spreads on the diaspora grapevine that country B is a good place to live, more people set off from country A. When the 1,000th migrant arrives, he finds a whole neighbourhood of his compatriots.

So the Gallup numbers could just as well be too low. Today there are 1.4bn people in rich countries and 6bn in not-so-rich ones. It is hardly far-fetched to imagine that, over a few decades, a billion or more of those people might emigrate if there were no legal obstacle to doing so. Clearly, this would transform rich countries in unpredictable ways.

Voters in destination states typically do not mind a bit of immigration, but fret that truly open borders would lead to them being “swamped” by foreigners. This, they fear, would make life worse, and perhaps threaten the political system that made their country worth moving to in the first place. Mass migration, they worry, would bring more crime and terrorism, lower wages for locals, an impossible strain on welfare states, horrific overcrowding and traumatic cultural disruption.

Open questions

If lots of people migrated from war-torn Syria, gangster-plagued Guatemala or chaotic Congo, would they bring mayhem with them? It is an understandable fear (and one that anti-immigrant politicians play on), but there is little besides conjecture and anecdotal evidence to support it. Granted, some immigrants commit crimes, or even headline-grabbing acts of terrorism. But in America the foreign-born are only a fifth as likely to be incarcerated as the native-born. In some European countries, such as Sweden, migrants are more likely to get into trouble than locals, but this is mostly because they are more likely to be young and male. A study of migration flows among 145 countries between 1970 and 2000 by researchers at the University of Warwick found that migration was more likely to reduce terrorism than increase it, largely because migration fosters economic growth.

Would large-scale immigration make locals worse off economically? So far, it has not. Immigrants are more likely than the native-born to bring new ideas and start their own businesses, many of which hire locals. Overall, migrants are less likely than the native-born to be a drain on public finances, unless local laws make it impossible for them to work, as is the case for asylum-seekers in Britain. A large influx of foreign workers may slightly depress the wages of locals with similar skills. But most immigrants have different skills. Foreign doctors and engineers ease skills shortages. Unskilled migrants care for babies or the elderly, thus freeing the native-born to do more lucrative work.

Would open borders cause overcrowding? Perhaps, in popular cities like London. But most Western cities could build much higher than they do, creating more space. And mass migration would make the world as a whole less crowded, since fertility among migrants quickly plunges until it is much closer to the norm of their host country than their country of origin.

Would mass immigration change the culture and politics of rich countries? Undoubtedly. Look at the way America has changed, mostly for the better, as its population soared from 5m mainly white folks in 1800 to 320m many-hued ones today. Still, that does not prove that future waves of immigration will be benign. Newcomers from illiberal lands might bring unwelcome customs, such as political corruption or intolerance for gay people. If enough of them came, they might vote for an Islamist government, or one that raises taxes on the native-born to pamper the newcomers.

Eyes on the prize

There are certainly risks if borders are opened suddenly and without the right policies to help absorb the inflow. But nearly all these risks could be mitigated, and many of the most common objections overcome, with a bit of creative thinking.

If the worry is that immigrants will outvote the locals and impose an uncongenial government on them, one solution would be not to let immigrants vote—for five years, ten years or even a lifetime. This may seem harsh, but it is far kinder than not letting them in. If the worry is that future migrants might not pay their way, why not charge them more for visas, or make them pay extra taxes, or restrict their access to welfare benefits? Such levies could also be used to regulate the flow of migrants, thus avoiding big, sudden surges.

This sounds horribly discriminatory, and it is. But it is better for the migrants than the status quo, in which they are excluded from rich-world labour markets unless they pay tens of thousands of dollars to people-smugglers—and even then they must work in the shadows and are subject to sudden deportation. Today, millions of migrants work in the Gulf, where they have no political rights at all. Despite this, they keep coming. No one is forcing them to.

“Open borders would make foreigners trillions of dollars richer,” observes Mr Caplan. A thoughtful voter, even if he does not care about the welfare of foreigners, “should not say...‘So what?’ Instead, he should say, ‘Trillions of dollars of wealth are on the table. How can my countrymen get a hefty piece of the action?’ Modern governments routinely use taxes and transfers to redistribute from young to old and rich to poor. Why not use the same policy tools to redistribute from foreign to native?” If a world of free movement would be $78trn richer, should not liberals be prepared to make big political compromises to bring it about?

This article appeared in the The World If section of the print edition under the headline "The $78 trillion free lunch"

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