Bitcoin vs. the Caret

Hrvoje Morić of Geopolitics & Empire interviewed Gabe of Libre Solutions Network and Mathew Crawford of Rounding the Earth on Bitcoin’s Rise & Its Future Role … Tulip Mania or Digital Gold?

I summarize their discussion, where Gabe has the courage to ask the simple questions. I’d even say simple-minded, but only if the reader understood that I mean that as the highest compliment. Mathew and I had a long conversation in the comment thread, in which he outlined the advantages of Bitcoin especially as a reserve currency.

I do a comparison of Bitcoin and my Caret system, starting with the difference in purpose and participants. I then look at Bitcoin as a reserve currency and find a fundamental confusion in the Bitcoin world about who creates money now. I end with looking at why the Caret is better than Bitcoin on inflation, scams, laundering, dark markets, organized crime, lack of fluctuation, gov't treasuries that reward oligarchs, building generational wealth, economic migration, mining, exploitation of 'poor' nations, beneficial development of energy supplies, taxation and military aggression. And his final point of aligning incentives in the direction that would solve everything.

Gabe (LSN) & Mathew Crawford: Bitcoin's Rise & Its Future Role...Tulip Mania or Digital Gold?

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financial blobs & fundamentals

In the interview, Gabe traces his interest in Bitcoin back to 2014 when it was the rise as a resistance currency. But now, he says, it’s seen as digital gold. He asks, why are the big industrial players like Elon Musk invested in it? Is this good or nefarious? How does it influence politics and how do politics, like Trump’s election, impact it?

Mathew talks about the bill for the US to buy 200K Bitcoin a year for five years, or 1M Bitcoin, and how he thinks it could flip the US debt as the reserve currency. If BTC goes to $10M, as he says it might, that would be $10T, erasing the US debt.

Gabe goes back to the big question of ‘how do we rebuild civilization after it’s been under attack for so long?’ He suspects the collapse has already happened. The reserve currency he thinks is a pump-and-dump that isn’t addressing the foundation.

Gabe doesn’t see BTC being used for transactions, any more than gold is. There were two things that BTC was meant to solve: 1) ending central banks’ ability to print money and devalue the currency and 2) make international transactions free of fees. He defines BTC as a 10-min auction that becomes less useful as a transaction as the amount gets larger. Was this to divert all the energy just as CBDCs were launched?

Now, he states, mining is consolidated into ASIC farms and big players are buying it up. Gabe goes back to young people who are begging for a way to contribute constructively but instead there are smoke and mirror industries that don’t make anything.

Mathew referred to BTC as an energy certificate and said that people will use the currency that costs the least in energy. Gabe goes back to the fundamental question, “How can we restructure our digital landscape so that it can’t be weaponized against people?”

Answering Gabe’s concern about scams, Mathew says that all the crypto-scams are a drop in the bucket compared to the ones run through traditional currencies, including inflation. If you don’t educate yourself, he states, you will be ripped off left, right and center.

Hrvoje asks about tulip mania and whether it could go that way. Mathew says that if it’s replaced by a technology that makes everyone more prosperous then, it sucks for the people who got burned but don’t put all your eggs in one basket. Hrvoje asks what they see the price going to, Mathew answers $200K to $1M in the short term but now that the finance blog and US gov’t are buying, $10M is reasonable.

Gabe says that BTC is volatile and Mathew pushes back that it would only go down if the financial blob dumps and why would they? Gabe answers, “Margin requirements. Stocks go down and they need more liquidity.” Mathew says they have wealthy investors to draw liquidity from.

Hrvoje talks about precious metals, BTC and land being three components of investing because they rise together, and a program he’s taking to recognize scams. Mathew points out that gold is a robbery risk for transactions and paper gold is hypothecated into trillion dollar intergenerational scams. Gabe states that it doesn’t solve the fundamental problem of governments working against their own ‘subjects’ aka citizens.

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carets & crypto

To compare Bitcoin to my system, the Caret, is comparing guava to kumquats because they don’t serve the same purpose. In my book, How to Dismantle an Empire, I distinguish between money and wealth. Money is the ability to take the products of other people’s labor. Wealth is the ability to survive on your own labor. While money is individual, wealth only exists at some level of community. Bitcoin is preserving the value of money, the Caret is building intergenerational wealth.

Bitcoin is a speculative investment valued at what someone will pay for it in a central bank currency. The 10-min auction puts it out to the market, the same as a stock. If there are more buyers than sellers, and buyers think they’ll be able to resell it for more, they’ll pay more central bank currency to buy it. If the trend starts going down, even a little, it could plummet to nothing because no asset backs it and buyers might unload before it goes lower. Rather than the acronym BTC, it should be BCI for BitCoin Inc because it’s the same as a tradable share in a public company that doesn’t invest in new production but is the same as a gambling chip.

Bitcoin, like gambling, should only be done by someone who can afford to lose. This is Fidelity’s disclaimer on their crypto:

Fidelity Crypto^® is offered by Fidelity Digital Assets℠. Investing involves risk, including risk of total loss. Crypto as an asset class is highly volatile, can become illiquid at any time, and is for investors with a high risk tolerance. Crypto may also be more susceptible to market manipulation than securities. Crypto is not insured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Investors in crypto do not benefit from the same regulatory protections applicable to registered securities.

When Hrvoje suggests diversifying into gold, BTC and land, he’s speaking to investors who can afford to buy land outright. The Caret is targeted towards the 99% who are struggling to make their rent, drowning in debt, or losing their house if variable rates go any higher. They’re the ones with energy and skills, who would love to be building community, but have only high stress bullshit jobs that make the rich richer. And the last thing they want to do with their meager savings is hand it over to the super-rich who own those ASIC farms burning energy in the utterly useless task of producing Bitcoin. Unless they’re gamblers, aka men.

The purpose of the Caret is to build family and community intergenerational wealth, aka self-reliance. It’s backed by the mortgages of the commonwealth, around 200-300,000 people. It distributes an equal share of the collective mortgages monthly as targeted dividends to all commoners—and everyone must be a commoner of somewhere. There are upper limits on how much one person can make so that ‘inflation,’ which is really dilution relative to housing, is reversed. The measure of the Caret’s success is the increase in resident home ownership, small local businesses and small local landlords.

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digital gulled

Now let’s look at the bill in Congress for the Treasury to buy 200K Bitcoin per year for the next five years. In my conversation with Mathew in the comment thread, he wrote:

I believe that if BTC becomes the reserve, it will be the least volatile reserve in history. Was the Sterling less volatile in the years leading up to its adoption as reserve? The dollar? Any of them?

If one Bitcoin trades for $1M, as Mathew thinks likely in the short term, 200,000 Bitcoin would cost $200B. This would be a transfer of $1T from the Treasury to the richest people on the planet who have the ASIC farms, along with a few lucky dabblers. But with a guaranteed government purchase, why sell early? It can only go up as demand outpaces production, even with energy to burn. Is this not money laundering? Is this not the greatest scam since the Federal Reserve?

It would be like members of Congress who own shares in military contractors approving gargantuan defense budgets. Except with secrecy as the selling point for crypto, we wouldn’t even know how much they held, or how much was given to them as an incentive to pass this bill. I’ve only heard of crypto before this as crypto-Jews, those who pretended to convert to Christianity but really had loyalty to other Jews. And crypt is related to death, like the mort-gage. Curious, eh?

Once the Bitcoin was bought, transferring $1T to the oligarchs, it could never be sold again. To do so would flood the market and make the remaining Bitcoin worthless. Even if its speculative value went up to $10T, it couldn’t be used to pay down the debt without selling and no buyers are going to be the chumps left with $10M Bitcoins.

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fed up with the FED

Bitcoiners seem to think that inflation is caused by the government printing money, but the Constitution only gives Congress the rights to borrow money, coin money, and ‘endow banks with the right to issue circulating notes.’ The federal government (six syllables instead of one since the name ‘Fed’ has been usurped along with the function) must pay foreign debts in precious metals. States and municipalities are forbidden to coin money or issue credit, or make anything legal tender other than gold and silver.

If the government could print money, why would it be in debt? The greatest power of government was given to the bankers, as is evidence by the Federal Reserve Note in your pocket. It reserved only their ability to stamp coins and set their value, which is called seigniorage. HOWEVER, there’s no limit on the value they can set.

Under my plan, three platinum coins are minted and given a value of $1T each to replace the savings of US taxpayers as the Social Security Trust Fund. The Treasury can then issue credit against this debt-free money to the commonwealth banks, capitalizing each at the rate of $9000 per resident. By the authority of Congress, banks are allowed to issue 10X their capital, or $90,000 per person, as mortgage debt and the circulating notes to repay them.

Congress would NOT endow private banks with the right to issue circulating notes as debt. This would end the Fed and replace it with a network of commonwealth banks, that are neither States nor municipalities, and therefore not forbidden under the Constitution. The amount that can be issued is capped by the 10:1 lending rule, unless the commonwealth adds to their capital reserves.

The Caret takes no more energy to issue than a few strokes of a keyboard. It requires no mining in the earth or in the ether. It will always keep pace with the cost of housing because it’s produced by mortgages. The refinance rate can be set at 3% initially and raised to 5.3% over five years, so that all mortgages will transfer sooner rather than later. Mortgage costs will come down for local homeowners and the value of the Caret will always match the cost of housing.

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flim flam scams

Mathew says that Bitcoin scams are a drop in the bucket, it’s a learning curve he’s not bothered by, and if you don’t educate yourself, you’ll be scammed left, right and center. I think that’s a little callous when ordinary people are in danger of losing everything. Your savings can be gone in a heartbeat and there’s no one to complain to. People I know have set up the transfer mechanism and had their accounts drained. All you’ll get is a lecture on passwords and why you should have known better.

Another friend from Molokai fell for a $300 scam that sent a text through his friend’s phone number requesting him to buy some gift cards and send the codes. My friend didn’t use banks and took cash out of a jar, because that’s how loyal he is. When he found out he’d been scammed, he wanted to kill himself. It wasn’t the money but the shame and embarrassment. It reinforced that he knew nothing of how the world worked. Later, the friend whose phone had been hacked collected the money from the dojo they shared and gave it to him. A happy ending, sort of.

Is it right that we are always under the constant threat of being scammed, with the corporations, insurance companies, banks and government the biggest scammers of all? Everyone around you is out to get your money. That’s the reality of transactional relationships that substitute for community. The best you can hope for is that people take your money in a fair deal. The more you need what they have, the less likely that is to be true.

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security instead of gambling

The caret is like leprechaun’s gold—if you steal it out of the commonwealth, it vanishes and leaves a yellow streak leading straight to the culprit. It isn’t an anonymous transaction. The word credit comes from credere meaning trust or reputation. The caret is based on your membership as a commoner. Its taxation depends on its use. To use it inside the commonwealth is tax-free except for the pension contribution. Outside the commonwealth, it’s taxed before being converted into dollars. Large transactions are authorized in advance.

To review, the Social Security Trust Fund enables mortgage loans of 10X its value, without diminishing the fund. It acts as a cap on lending but isn’t loaned out itself. At the minimum mortgage interest of 3%, it would return 30% per year on the fund. So the Trust can be given a 7% return, keeping it viable forever. Participants can count on it in retirement and lowering the age back to 65 might be feasible.

In addition, for long-term savings the commonwealth can give a substantial interest rate, like 4%, with limits on maximum contributions. So pre-tax dollars can be saved for retirement, a house, an education, or a car. Commoners can borrow against their savings for 5%—only 1% over what they’re making. Or they can get an equity loan up to 80% of their home value for 3%. So they can save without fear of needing the money later.

Rather than hiding money in different pockets in case one gets robbed or the scamble goes bust, the commoner can keep her money in one place, secure in the knowledge of a steady and sufficient income in retirement. You don’t needs stocks, gold, Bitcoin, or other speculative investments that could go up or down. Your money may not make a killing, but it will make a living equal to the cost in your commonwealth.

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me & the math(u)

Here is my comment thread with Mathew Crawford:

I wrote: Nov 17

I watched this over time and some parts twice. I'm still trying to wrap my head around computer-generated currencies so tell me if my assumptions are correct: 1) They're mined by computers using large amounts of energy for no other purpose. 2) They belong to whoever owns the computers and pays for the energy. 3) They're sold for one of the imperial currencies, at whatever the market will bear. 4) They then fluctuate in value, like a stock does, relative to an imperial currency based on recent sales. 5) Like the stock market, they have no intrinsic value and aren't backed by anything.

The words Ponzi Scheme were occurring to me.

It seems, Mathew, it wouldn't change anything about how the oligarchs control us. Perhaps the people in your network could use Bitcoin to buy a house and some land outright. But for the other 99%, they're struggling to pay their rent or mortgage as the noose tightens. I think the PTB are definitely drying up the money in circulation. So what to do with extra money, to preserve its value, only changes oligarchic control for a few. For the rest, the bankers are still owning their houses, lives and labor through the mortgage.

I'm thinking to do an episode called Bitcoin vs. the Caret, that contrasts the two in areas like scams and theft but also how do we enhance wealth, which is the ability to control your own labor and produce real goods, while money is the ability to take the labor of other people without giving back an equal share (or any share) of your own.

I enjoyed this and I always learn a lot from you both, Mathew and Gabe.

Mathew Crawford replied to my statement that “ it wouldn't change anything about how the oligarchs control us." He wrote:

(1) They would no longer be able to constantly inflate away your savings,

(2) They would no longer be able to launder [entirely] invisibly using the reserve currency,

(3) They would no longer be able to engage in dark market activity [entirely invisibly] using the reserve currency (which is >90% of laundering needs),

(4) The weakening of the incentives for organized crime mean a substantial weakening of dark markets, which are the primary mechanism by which criminals engineer outsized profits that can be rotated into governance and control,

(5) The fluctuation in dollar/BTC is only the process of getting the kite to fly. Once the kite is in place, its fluctuation will relate to the winds of capital demand in the most basic way, a return to nature, so to speak,

(6) There will be no imperial currencies once BTC ascends. They will suffer the fate of Thier's law, Zimbabwe dollar style. Remaining currencies will then be based on a stock of BTC in a treasury, with a publicly viewed address, or possibly something natural and fundamental such as an education market.

The vast majority of people in the banking system will have to get new jobs. They'll have to provide value in ways that do not support the criminal banking syndicate. They'll have to provide value aimed at something other than laundering money or running the "free checking" front for money launderers.

The working poor will have a better chance to save generational wealth. Instead of paying 35-40 percent to the banks in remittance fees, they'll pay a single BTC tx fee, saving thousands of dollars per annum for each working person sending money home from a wealthy nation. The poor nations will become wealthier and harder to push around.

No longer will the world be stripped to mine so much metal.

Energy sources that are not currently worth developing will be developed. Stranded gas that isn't currently used will become the backbone for most of the mining economy. The net use of current energy supplies will likely be negative when you consider how much energy the finance/banking industry uses [including their lifestyles, large houses, boats, private jets, etc.].

Nations will still look for ways to tax people, of course. They might also run mines (some do already), reducing that burden. But there will be less need for military (see the "Softwar" theory that takes "soft power" to a greater extent).

This doesn't solve everything, but it's a pareto improvement, and one that aligns incentives.

I answered:

Thanks for this reply, Mathew, and for knowing that my disagreement with ideas comes wrapped in abundant affection and respect for you as a person. I love your thinking and I don't know if you caught my comments on your interview with Doc Malik exclaiming over how much your enthusiasm for teaching math delighted me.

I'm also trying to lure you. I have a masculine brain that operates on logic and numbers but a feminine purpose of empowering families equally. The mothers, who resonate with my purpose, often say, 'My brain doesn't work like that' on the logistics. So I'd love to work through the logistics of my caret system with someone whose brain also finds it a pleasure to play with numbers. And certainly 'Math-you' ;-)

I will leave it to you, Catherine Austin Fitts and others to figure out how people with large sums in savings can preserve the value of their money relative to essentials like housing, energy and food. I don't dismiss that as a goal, since I'm months away from living entirely on my savings and pensions like social security. The banker-led system has made hoarding money into a necessity, and also gambling with it. Bitcoin, gold, stocks, funds, and real estate are all speculative values that can go up or down. 'Stable coin' is an oxymoron because it's a gambling chip that people are betting will go up because others will buy it for more. We shouldn't need to gamble to have 'security.'

So I'll put your measuring sticks into my article comparing Bitcoin to the Caret. And your final point of aligning incentives in the direction that would solve everything.

Mathew clarified;

I think that any declaration of Bitcoin as "speculative" with an implication of volatility should come with a discussion of Metcalf's law and whether anything like "price instability" would remain after mass adoption. I very much doubt it, and yet the talking point remains even as BTC's volatility sinks and sinks and sinks. I believe that if BTC becomes the reserve, it will be the least volatile reserve in history. Was the Sterling less volatile in the years leading up to its adoption as reserve? The dollar? Any of them?

Yes, alignment of incentives should be a larger part of the conversation.

I rejoined:

I think we should analyze volatility as both relative to the dollar (or other imperial currency) and relative to the local cost of housing. I assume you want Bitcoin to be volatile in a positive direction as the dollar devalues, but stable relative to housing.

I posted elsewhere that I wanted to know what it means if Trump uses Bitcoin as part of the US Treasury. Would he use Treasury bills to then buy Bitcoin? Who would he buy it from? Would the Treasury bills be redeemable in dollars? Would he use gold to buy it?

Thanks for your help, Mathew.

Mathew explained:

Gold is slow.

T bills convert to dollars in liquid markets.

Exchanges have dollar buyers and sellers to BTC.

I interpreted:

So using Bitcoin for the Treasury reserves would mean taking the only money (other than coins) that was created as sovereign currency by the Federal gov't—since the banking cartel called the Fed creates 94% of all dollars out of thin air through mortgages—and giving them to some of the richest people on the planet? And in exchange, they'll get technology-generated digital shares backed by nothing?

Mathew:

If you think Bitcoin is backed by nothing, you haven't learned the basics. I recommend reading up on it. Otherwise, you're wasting both our time.

I queried:

In the interview, you compare Bitcoin to Facebook stock pre-IPO. Let's say that FB went belly-up and declared bankruptcy. All the shares would be worth zero, yes? Not even an office chair in the fire sale. If, for some reason, no one wanted to buy Bitcoin with another currency, its value would plummet to nothing. Is that not true? Explain it to me, please.

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point by point

If anyone else can explain what real world asset backs Bitcoin, I would be grateful. Mathew felt his health restrained him from getting more deeply involved with my caret system, and I appreciate his time in answering my points. However, the two are not in competition and serve entirely different purposes. If people put their savings in Bitcoin or the US Treasury buys Bitcoin, it won’t change the fundamentals that the banks own all the houses and therefore our labor for free.

It will make no difference to the vast majority of people struggling under skyrocketing costs for housing, healthcare, higher education and hope for retirement—the Unaffordable 4H. And what I used to call the Cheap EFG—energy, food, goods—have gone crazy too. And the noose of disappearing jobs and scarce money in circulation is tightening around our necks.

So my argument is not against Bitcoin but why the Caret deserves as much attention because it solves more problems for far more people. The caret is backed by our houses. The caret provides the incentives for building our future. It doesn’t solve our problems for us but it gives us the tools to solve them for ourselves. And that seems like it’s worth investing a little of our time. And I suggest we all aspire to be simple-minded.

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Explains why inflation is really dilution and your house is not worth more, your money is worth less. Gives examples from my book, How to Dismantle an Empire, on how the interest rate affects the price of a house and how they fluctuate it for the bankers' benefit. Cites Ellen Brown and Matt Ehret on bail-ins and reads passages from my book on how the bond rating sunk Cyprus. Begins with dramatic and personal illustrations of inflation—the hospital bill when I was born and my college scholarship.

Responds to Matt Taibbi's "Magic Monetary Theory Goes Primetime." He looks at the film Finding the Money with Stephanie Kelton and says, "Run!" From my book, How to Dismantle an Empire, I show how deficits do turn into someone's assets—and we need to make sure that someone is local communities.