Tuesday, March 15, 2016

UK Telegraph: Central Banks beat Bitcoin with Rival Supercurrency

When I first saw this article in the UK Telegraph, I thought perhaps it might be significant in terms of what we cover here on this blog. The article talks about a new "super currency" to be used by the Bank of England. It describes a new technology called RSCoin as though this might leading to a big change in the monetary system. 

It turns out based on input I received from experts I trust that this is probably not the case. Below are some quotes from the article and then a few added comments.


"Computer scientists have devised a digital crypto-currency in league with the Bank of England that could pose a devastating threat to large tranches of the financial industry, and profoundly change the management of monetary policy.

The proto-currency known as RSCoin has vastly greater scope than Bitcoin, used for peer-to-peer transactions by libertarians across the world, and beyond the control of any political authority.

The purpose would be turned upside down. RSCoin would be a tool of state control, allowing the central bank to keep a tight grip on the money supply and respond to crises. It would erode the exorbitant privilege of commercial banks of creating money out of thin air under a fractional reserve financial system. "

. . . . . .

"Mr Broadbent said such a currency could greatly widen the balance sheet of a central bank, hinting that the system could be designed in such a way that ordinary people could by-pass the commercial banks and hold balances directly with the Bank of England - a staggering concept. "It's likely you'd see money moving out of existing deposits," he said."

. . . . . 

"RSCoin may be irresistible for central banks. Dr Danezis said it is allows them to turn the money tap on and off with calibrated precision, and lets them track the sort of counterparty liabilities that nearly blew up the financial system during the Lehman crisis. "There would be instant visibility. They could react very quickly in an emergency, " he said."

My added comments: Again, at first reading I had thought this article might be talking about something that could lead to the kind of major monetary system change we have speculated upon in earlier writings here on the blog. Fortunately, I have some great experts who provided me feedback on this article suggesting that this technology is most likely NOT anything that would lead to the kind of major change we watch for here.

At this point, the research I have done on all this leads me to conclude that a major change like we watch for here such as a version of the SDR becoming a true global currency that everyday citizens could own is unlikely to happen any time soon. Perhaps not even in my lifetime (I'm 60 years old). Momentum for major change like that does not appear to exist within the system and I see no evidence that there is any kind of consensus on moving forward with such change. It's becoming clear to me that unless we do get a another major crisis such as Jim Rickards has predicted that any kind of major monetary system change that we would notice in our daily lives is not likely on the near horizon.

This means we really only have one thing left to monitor here on this blog. That being if we do get another major crisis or not. Because of this situation, I have decided that it no longer makes sense to produce daily articles here on the blog. Since a major crisis is impossible to predict from a timing standpoint, I will just produce a summary update type article now and then unless there are indications that a major crisis has actually begun. 

I want to thank the experts who have helped me along on the journey here. I started out with many questions and no real inside sources of information to help get answers. Over time I was fortunate to meet some experts who have given me some better insight into the realistic prospects for the major monetary system we watch for here on the blog. Since it is now pretty clear that no such major change is on the horizon, it's time to change the direction of the blog here. My best estimate at this point is that unless we do see a major crisis of the kind Jim Rickards has predicted, major systemic change is likely to take many years to decades if it happens at all. I will now be surprised if I see it in my lifetime unless a crisis changes things.

I will continue to monitor events and will certainly produce an article if I do see something that warrants it. I appreciate all the readers here who have forwarded me both comments and article links. I appreciate people like Jim Rickards and Willem Middelkoop who mentioned a number of articles here on their twitter feeds. It was greatly appreciated and very helpful. I will leave all the research done here up on the right hand side of the blog here and here to be available for anyone who can use it. Best wishes to all! 

Added note: One of the best articles we ever published here was the two part article on the limitations of Bitcoin/Blockchain technology. As time goes by, the problems listed in that article by our expert here who wrote that article have become more and more apparent. Here is another Bitcoin developer who now concedes the issues raised by our expert here were very real.

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