Topic: Implications of Bitcoin for world economy (Read 3504 times)

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Bitcoin and the US-Saudi alliance


What do the tactical and logistical support of armed Sunni groups in Syria by the US and Saudi Arabia and the de-centralized virtual currency bitcoin have to do with one another? There has to be a link, and I’m writing this post to find out.

Saudi Arabia has always stood out to me as the shining proof of the total hypocrisy of US foreign policy. Ensuring the survival of a so decidedly un-democratic authoritarian government while prosyletizing democracy as the universal standard approved by universal reason seems counter-intuitive at first.

When you understand that the US represents a continuation of the same civil society as the Roman empire by way of the Catholic church, canonization of the Western Roman Empire’s Bible, and the Enlightenment generated by intellectuals who were educated in church seminary schools, later called universities, it makes sense. The principle of the Roman empire was rights and justice for citizen, and none for non-citizens. Avenues are opened to obtain citizenship for those who contribute enough to maintaining the empire. This creates an incentive to cooperation and directs violence towards those not cooperating.

I have also always been struck by the similarity in the Salafi or Wahabi movement in Saudi Arabia and the evangelical and fundamentalist faction in the United States. It always seemed that they should be best of friends- both frown on homosexuality, abortion, both believe in strictly literal interpretations of holy texts, both deny evolution and have believed the day of Judgment to be imminent for forever.
In fact, they are best of friends, in spite of the average fundamentalist Christian’s attitude toward Islam and the average fundamentalist Muslim’s attitude towards Christianity. The Wahabi movement has been inspired in large part by substantial financing from the Saudi royal family, which has in turn been funded by oil purchases from conservative Christians in the world’s largest consumer of oil and biggest importer of Saudi oil, the US.
This is clearly a match made in heaven.

So in my country of birth, near Seattle, backhoes and logging trucks fuelled with Saudi oil develop the land into something the people the banks will give money to feel is valuable- housing developments- this money then flows to Saudi Arabia where it is used to buy US tanks, jets, bombs, rifles, handguns, and ammo from the US and Europe, which the Saudis then provide to their favorite groups. These groups are mostly led by people that were educated in schools funded by the same oil money. The people educated and armed by US dollars then fight against the scourge of secularism and can be conveniently branded as terrorists, which then inspires more arms sales. Collateral damage kills more civilians in the fight against the terrorists, inspiring more and more people to join the CIA-devised Al Qaeda movement. Business booms!

What does this movement have to do with bitcoin?

Creditworthiness is in the eye of the beholder. The banks the federal reserve passes its freshly minted money to are chosen because of their political relevance and compliance. The reason that quantitative easing works is because there is a huge demand for dollars- the sum of the productive capability of the US at this point is not enough to cover the debt. The demand for dollars worldwide allows servicing this debt, since this demand props up the value of the dollar.

Suppose you loan me 300,000 dollars to buy a house. I have an income of 1500 dollars a month. The minimum payment on the home loan is 2000 a month. I pay you on the loan in AMWAY bucks which I get all of my friends to use, which causes the exchange rate to increase- 1500 AMWAY bucks go from being worth 1500 dollars to being worth 2500 dollars. I can pay my mortgage and have some spare cash, as long as my friends keep using AMWAY bucks. When AMWAY bucks were worth 1500 dollars I worked 40 hours a week. I still work 40 hours a week, but now my AMWAY bucks have extra value. Where did this value come from? It came from all of the people who sold dollars and bought AMWAY bucks, shifting the exchange rate. The losers are everyone who holds dollars. In other words, by artificially increasing the value of AMWAY bucks I and my friends skimmed a few pennies off of every dollar owner in the world.

A currency has no intrinsic value- it is worth what people believe it is worth. The dollar will not crash as long as you need dollars to buy oil, because everybody needs oil to run their tankers, trucks, backhoes, and so on. This makes continued quantitative easing possible for the Fed in a way that is not possible for the ECB. The ECB can increase the amount of money they print and issue to try to get the economy going, but the value of their currency, as dictated by demand, is only secured by the world’s demand for European products, which is at most one tenth of the global oil trade- most of which is conducted with dollars.

A quick recap: Wahabism funded by the petrodollar, wahabi groups simultaneously supported by the US (in the case of Syria) and fought (in Pakistan and Afghanistan), with both fronts generating arms sales-jobs-votes.

What does this have to do with bitcoin? Bitcoin is currently gaining interest in China and Russia. Russia’s RT regularly air coverage on bitcoin on their satellite broadcasts specifically designed for the US audience. China’s national television aired a special on bitcoin, which is seen as officially sanctioning use of the currency by Chinese citizens. These moves appear to be Russia and China’s wishful thinking that bitcoin or a bitcoin like currency might be a neutral ground to replace the petrodollar which is enabling the US’s maintaining a current account deficit.

Of course, even if oil were increasingly denominated in a non-state currency, this wouldn’t mean that Saudi Arabia’s oil revenues would dry up. But it would mean that the US would not be able to buy as much oil. Such a move would be what the correction of the US CA deficit being caught up on would look like, and in this case a considerable portion of the flow of money from fundamentalist Christians to fundamentalist Muslims would be disrupted.

Returning to the analogy before, assuming that the overvaluation of the dollar actually represents a subtle theft of a fraction of the value of the currencies of all countries who are forced to buy dollars in order to trade oil, this would be effectively returning that valuation back to its rightful owners. The US would not only be unable to buy oil at the rate it has been, it would also be unable to service the debt that has been amassed. This would lead to a massive correction that would lead to the sovereign debt rating of the US to plummet, and reducing imports to the US considerably.

This in turn would destabilize China, with their high dependence on exports to the US, as well as the EU, dependent on exports to both China and the US. This is why the bitcoin adoption has to be slow, because China has to wean itself off of dependence on the US market, just as the US has to wean itself off of overconsumption. The unemployment that would result from a sudden dropoff in US consumption(which is inevitable with the end of the petrodollar) would cause the collapse of both EU and the Chinese governments, not to mention the US government.

But as long as Saudi Arabia has oil left and is able to keep selling it, it doesn’t matter what currency it’s denominated in, right? Demand for oil will continue to grow, right? Well, the US accounts for 20% of global demand for oil right now, the biggest consumer. Assuming the demise of the petrodollar would significantly reduce that portion, the resultant decreased demand for oil from China and then the EU would drop oil prices, which would lead to Saudi Arabia’s revenues, which come almost exclusively from oil exports, to decline. This would ideally cause them to consolidate, focusing on maintaining order inside of the country and reducing the inflows as well as outflows of weaponry and ammunition, as well as reducing the budget for financing Wahabi ideological schools in elsewhere.

So in other words, while the exchange of the petrodollar for  bitcoin or bitcoin like standard would be terrible news for bankers and politicians who would be eaten alive by the unemployed masses, it could increase profitability in commerce by reducing the cost of transport and force frugality among those who have been overconsuming. This means more sharing would be necessary, as in bigger average household size, and would make it worthwhile for people to be self employed in small enterprises. That is to say, if running a neighborhood laundry service seems unfeasible now because it translates to a two dollar an hour salary for the person running it, two dollars an hour might not seem so bad after the end of the petrodollar. Doing laundry at central nodes would be more efficient than every household owning a washer and drier- bigger machines could do more laundry with loads always being big enough to maximize efficiency of running the machines, and then people could sell their old, inefficient washers and driers for scrap, and wouldn’t have to foot the cost of owning them.

This is just an example of one kind of change that would come along with living in a less wasteful society. Of course, if events resembling those described above were to transpire, it would mean a total restructuring of the economic and political reality on every level. What about all of the factory workers in the appliance factories building washing machines with intentionally built in engineering flaws so that the buyers will have to buy a new washer in five years? With a decentralization of the financial system, where currency can be issued by anyone with enough technical knowledge and computing power, we can expect to see a decentralization of all industry as the channels of financing become more evenly distributed.

I see this as leading to a revival of cottage industry and local markets, with losses in efficiency due to smaller scale of production being made up by decreased cost of labor and increased consumption efficiency. This decentralization will lead to better distribution- imagine if instead of 3 huge banks controlling 80% of deposits, we had 50,000 small banks financing local projects. This would mean that every family could have a banker capable of securing a loan for a reliable family member who wants to start a small business. I’m basically talking about a hybridization of first and third world economies, made possible by national currencies being made obsolete.

Anyway, the real topic here is Wahabism and Saudi Arabia- and I see bitcoin or a bitcoin like oil standard disrupting the cycle of Saudi-US sponsored “terrorism.” Bitcoin will not give unfair advantage on the international level to any state- just to bitcoin users, who will probably become global citizens as they move from country to country responding to unsuccessful legislation intended to curb the rising influence of decentralized currencies.

This decline in the power of nations, who have already lost a lot of their clout to the rising tide of corporatism, will make it all but impossible to fund a continued occupation of the Middle East by national armies, and these armies will probably be disbanded and transition into decentralized mercenary armies that will be hired alternately by nations or corporations when the need arises, which will be much more efficient than maintaining standing armies.

The implications go on and on, and it’s up to us to imagine the new world order. The “War on Terror” was basically a desperate attempt to preserve the decaying system that is now collapsing, and with the end of US financial hegemony and Saudi supported militias, we are going to see a total meltdown of the map of political boundaries first in the Middle East, and then worldwide.

I am trying to say that the petrodollar is the key to the escalating of the “War on Terror,” and that the end of the petrodollar means large scale deescalation of US military presence in the middle east, the decline of US support of Israel which will lead to the end of the state of Israel, and “terrorism” will evaporate as new forms of warfare come to the fore. “Terrorism” is mainly a fire that is being fed in order to justify resource wars and sell arms. A global recession caused by the shock of the end of the petrodollar and a huge dropoff in aggregate demand from the US will severely hamper the ability to fuel that fire.

Conclusion: Bitcoin is the end of “terrorism”.

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   I just wrote some thoughts about possible implications of bitcoin or a decentralized currency replacing the petrodollar. If anyone cares to read...

http://mounthegel.wordpress.com/2013/06/21/bitcoin-and-the-us-saudi-alliance/

EDIT: Link corrected