Deutsche Bank Celebrates ‘Dollar Day’ by Accidentally Shilling Bitcoin

When the fat-cats at Deutsche Bank instructed their social media interns to draft a tweet commemorating National Dollar Day, they probably didn’t …
deutsche bank shills bitcoindeutsche bank shills bitcoin

German financial giant Deutsche Bank has accidentally made the case for Bitcoin while commemorating National Dollar Day. | Source: Shutterstock

When the fat-cats at Deutsche Bank instructed their social media interns to draft a tweet commemorating National Dollar Day, they probably didn’t realize that they’d accidentally end up shilling Bitcoin to their more than 650,000 followers.

But while the Bitcoin isn’t directly mentioned, it’s difficult to imagine anyone writing a better advertisement for the leading cryptocurrency.

It’s #NationalDollarDay! #OTD in 1786, Congress established the US monetary system and introduced the US dollar. In today’s money, one dollar from 1791 would be equivalent to 27.60 USD. #ThrowbackThursdaypic.twitter.com/FwOBvD8kvh

— Deutsche Bank (@DeutscheBank) August 8, 2019

Is Deutsche Bank a closeted Bitcoin admirer?

In the tweet, Deutsche Bank observes that since the U.S. monetary system was established on this day in 1786, the dollar has lost tremendous purchasing power. The German multinational notes that the equivalent of a single dollar from 1791 now has the purchasing power of about $27.60 today.

You do not need years of exposure to Bitcoin to appreciate that Deutsche Bank has by implication turned a negative spotlight on the world’s favorite reserve currency – and by extension, the worldwide fiat currency regime. The bank inadvertently made a case for an anti-inflationary currency that is not printed at the whim of unelected government bureaucrats.

With the maximum number of Bitcoins that will ever be in circulation capped at 21 million, the cryptocurrency was designed to be free of the inflationary risks that all fiat currencies have proven to be susceptible to. This was stated unambiguously in the Bitcoin whitepaper:

“Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.”

And yet the dollar is hardly the world’s worst fiat currency…

Deutsche Bank’s celebration of a fiat currency that has lost its purchasing power dramatically over the years is all the more significant for Bitcoin since the dollar is one of the world’s strongest currencies.

As of last year’s third quarter, the U.S. dollar constituted close to 62 percent of all the foreign exchange reserves held by central banks across the world.

Bitcoin vs USD on national dollar dayBitcoin vs USD on national dollar day
U.S. dollar dominance as a reserve currency | Source: Statista

This means that if your wealth is held in the dollar and you are a little apprehensive over its declining purchasing power, you should be outright panicking if you are holding other fiat currencies.

Bitcoin offers freedom from the tyranny of fiat

So how bad can it get? Well, unchecked printing of money by central banks has in the past led to the total collapse of fiat currencies with Europe, Latin America, and Africa offering standout cases.

Germany’s Papiermark in the 1920s is a perfect example from the 20th century when yearly inflation rose to over 300 million percent in the European country. Most recently, Zimbabwe provided another example of why a hard-capped cryptocurrency is the future when inflation rose to 500 quintillion percent.

Fortunately, there is no need to repeat these same mistakes in the 21st century with Satoshi Nakamoto already having gifted us the solution: Bitcoin.

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

Innovation Or Disruption? The Prospects For Facebook’s Libra Cryptocurrency – Analysis

By Jose Miguel Alonso-Trabanco. Last month, Facebook publicly announced that it’s preparing to launch its own cryptocurrency, called Libra, in 2020.

By Jose Miguel Alonso-Trabanco

Last month, Facebook publicly announced that it’s preparing to launchits own cryptocurrency, called Libra, in 2020. The initiative’sofficial website claims it intends to “reinvent money,” “transform theglobal economy,” and “empower billions of people.” Not surprisingly,these ambitious plans have captivated the attention of strategic circlesall over the world.

Given Facebook’s size, the cryptocurrency could be a game-changer.

In order to keep things in perspective, it is important to highlightthat the currency would operate through platforms like Facebook (whichhas more than two billion accounts) and WhatsApp (said to be the world’slargest texting app) using a digital wallet called “Calibra.” Moreover,the project’s partners include heavyweight business conglomerates likeUber, Mastercard, PayPal, Spotify, eBay, along with some investmentfunds and even non-profits and academic institutions.

Interestingly, the value of Libra will be determined by a basket ofcurrencies – the US dollar, the euro, the pound sterling, and theJapanese yen – bank deposits, and US Treasury securities. In otherwords, rather than being a stateless currency, it would operate as amultilateral derivative of several national currencies, all of which areissued by Western powers and one of their key geopolitical allies.Furthermore, the currency’s operational and policy headquarters will belocated in Geneva, Switzerland, a spot chosen because of the legendarySwiss tradition of neutrality, its prestigious financial know-how, andits openness to technological innovation.

That makes it remarkably different from already existingcryptocurrencies. For instance, even though Bitcoin has gained somepopularity as a medium of exchange in some very specific sectors –including the illicit markets that flourish in the deep corners of theDarknet – it behaves as a speculative asset due to its wildly volatilevalue. Hence, it cannot properly perform as either unit of account orstore of value – roles that money has to fulfil in order to be regardedas such.

Bitcoin’s performance has been compared to that of the historicalphenomenon known as Tulip mania, a speculative frenzy that took place inthe context of the Dutch Golden Age. Initially, the arrival of tulipbulbs to Europe as luxurious novelty items triggered a craze that madethe commodity’s price reach extraordinarily high proportions – wellbeyond reasonable levels of intrinsic value – in financial markets, dueto expectations of profits that were increasingly out-of-touch withreality. Eventually, the artificial bubble drastically imploded.

Another case worth analyzing is the Petro, a cryptocurrency launchedby the Venezuelan government and whose value was to be allegedlyanchored to assets like oil, gold, and diamonds. Although it was said tobe backed – at least nominally – by a national state, Venezuela’sconstant political turmoil, disastrous economic mismanagement, andwidespread financial chaos are structural factors that underminereliability and functionality. Under such conditions, the Petro canhardly be taken seriously. Thus, it has not taken off in any meaningfulway.

Therefore, unlike other cryptocurrencies Libra can attain thecritical mass that is needed in order to become highly competitive soits potential can be accurately described as disruptive. In fact, agroup of US congressmen – all of them members of the Democratic Party –wrote a letter addressed to Facebook’s top decision-makers, asking themto freeze the project because it might eventually spark unforeseenconsequences in terms of national security, monetary policy, andprivacy. Tellingly, the letter even mentions the need to protect USnational interests related to the dollar’s monetary hegemony and also toAmerican unmatched supremacy in global financial governance.

Those concerns are neither unreasonable nor unjustified. In order tounderstand what motivates them, several issues need to be examined.

First of all, Mark Zuckerberg, Facebook’s CEO, truly believes in theimportance of transcending national borders in order to build a “globalcommunity” through overlapping networks of connections enabled by ICT,as reflected in the ideological manifesto he published back in early2017, shortly after the political rise of several nationalist forcesthroughout the Western world. Actually, other idealistic thinkers andintrepid businessmen have held similar dreams.

However, according to the dictates of realpolitik, what is ideal andwhat is possible are two very different things. For instance, as anational state, the US is neither politically nor economicallymonolithic. Its complex polity encompasses countless different sectorsand actors whose interests are often difficult to reconcile. AlthoughFacebook is certainly one of the crown jewels of American big tech firms(along with others like Google, Apple, Amazon, Twitter or Netflix),that fact does not necessarily means the national interests of theUnited States are always completely aligned with those of individualcompanies.

On the other hand, it is still unclear if Wall Street – a keycomponent of US national power in the field of finance and closelyrelated to the country’s senior political elite – will enthusiasticallywelcome the arrival of a challenger that could substantially diminishtheir market shares and profit margins both at home and abroad. In thebest-case scenario, a complex negotiation process would have to occur inorder to reach a mutually acceptable compromise.

Another factor worth considering is that a digital currency linkedsimultaneously to the currencies of Western powers makes sense from aneconomic viewpoint. Their GDPs are robust and their developed financialcircuits are both dynamic and reliable. Nevertheless, now thattransatlantic relations are being reshuffled – as reflected in NATO’s uncertain prospects and the European Union’sdecision to heavily fine Google over antitrust violations – thepolitical foundations of Libra would be rather shaky. This criticalissue would then have to be overcome, addressed, or somehow bypassedaltogether. Needless to say, it is not an easy challenge under thepresent circumstances.

Furthermore, the US dollar is not just backed by economic strength.Its hegemonic position as global reserve currency is also tacitlysupported by American power projection capabilities, including aircraftcarriers, stealth bombers, special operations squads and nuclearweapons, amongst others. Nothing even remotely similar can be said aboutLibra. In the event that drastic geopolitical tensions threatened toderail Libra in some substantial way, who or what could protect it fromthese disruptive forces?

Additionally, a digital currency is – by definition – vulnerable tocyber-threats fueled by geopolitical, economic, and sometimes evencriminal interests. In fact, computational algorithms can be hacked andreprogrammed into making erratic decisions. Thus, a prospective attackercan weaponize them in order to unleash systemic chaos and instability.Reports about the alleged involvement of Russian intelligence in theimplementation of malware that targeted the NASDAQ stock exchange a fewyears ago must be borne in mind as a cautionary warning that the spacewhere finance and high-tech meet is not immune from geopoliticalinterference. It would be naïve to think otherwise.

Likewise, it is also pertinent to wonder if the project’s developershave envisaged the implementation of measures meant to secure itsinstitutional structures by minimizing or deterring the risk ofinfiltration from covert operatives who might ultimately respond withhostile agendas. So far, it is unclear if this will be taken care ofsomehow, but it is important to highlight that digital firewalls willnot suffice to do so.

Last but certainly not least, Libra’s push towards internationaldecentralization might fuel or accelerate a potential bifurcation of theglobal financial system and thus strengthen the prospects of newpossibilities in an increasingly competitive ecosystem.

For instance, the Eurasian powers – notably China, Russia, and Iran –have been trying to challenge the enduring Western control overinternational finance. China has even established institutionalframeworks and structures that operate as parallel counterparts of theirWestern equivalents. In a foreseeable future, the rise of a digitalcurrency – operated through Asian technological platforms like WeChat –and supported by assets like gold or currencies like the yuan is ahypothetical possibility that deserves to be taken into account.

Although its actual future is still uncertain, Libra raises relevantquestions, some of which remain unanswered. However, the project’smultidimensional ramifications illustrate the growing complexity ofglobal phenomena which are being shaped by a myriad of shiftingtechnological, economic, financial, and geopolitical factors.

The views expressed in this article are those of the author alone and do not necessarily reflect Geopoliticalmonitor.com or any institutions with which the author is associated.

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The Libra’s Cold Reception from Congress Shows Why We Need Bitcoin

This is precisely why a peer-to-peer, decentralized network like Bitcoin is needed: any centralized challenge to the dollar’s dominance, by a company …

The hostile receptions Facebook’s Libra coin received should be viewed as a validation of the need for Bitcoin.

One of Many Payment Platforms

As a fiat currency pegged stablecoin, Libra offers little threat to the U.S. dollar’s monopoly. To Libra users, it would be little different from PayPal, Alipay, Apple Pay, Google Pay, WeChat, Zelle, or the dozens of other peer-to-peer payment platforms around the world.

Yet, Libra threw the powers-that-be in such a panic that President Trump was pressured into tweeting a condemnation of Libra and a Congressional hearing was swiftly organized. Rep. Brad Sherman compared Libra to the 9/11 attacks, which in case you forgot, killed several thousand Americans.

Anything which is remotely a threat to the U.S. dollar’s dominance as the world’s reserve currency will be swiftly neutralized.

I certainly have my reservations about both Facebook and Libra, but a “blockchain-enhanced” payment network that competes with Paypal is hardly the terrorist event of the century. It is highly unlikely that President Trump wrote his rant against Libra himself—his tweets were likely scripted for him as the party line against potential dollar competitors.

I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity….

— Donald J. Trump (@realDonaldTrump) July 12, 2019

What’s crystal clear from this episode is that anything which is remotely a threat to the U.S. dollar’s dominance as the world’s reserve currency will be swiftly neutralized.

Legislative Crack Down on Alternative Currency

This is precisely why a peer-to-peer, decentralized network like Bitcoin is needed: any centralized challenge to the dollar’s dominance, by a company or nation-state, is likely to face swift retribution from the United States government. The U.S. economy relies on the dollar’s status as the world’s reserve currency to keep issuing new debt to sustain our unsustainable budget deficits.

Libra is currently little more than a vague white paper and a few lines of open-source code, yet legislators like Reps. Carolyn Maloney and Maxine Waters are demanding that the project be shut down before the concept has even been fully fleshed out.

The government relies on its ability to collect taxes to pay interest on its enormous debt and fund its unsustainable fiscal commitments.

It is clear that when U.S. dollar regime inevitably collapses—be it next year or decades from now, the U.S. government will not permit any organization within its reach to develop an alternative that can safeguard American assets. The government relies on its ability to collect (dollar-denominated) taxes to pay interest on its enormous debt and fund its unsustainable fiscal commitments.

This makes it all the more essential for those of us who wish to safeguard our life savings and ensure an economic recovery based on sound money to support decentralized, borderless, and censorship-resistant alternatives like Bitcoin. While Bitcoin is certainly not immune from legislation, it is substantially more difficult to control as can be seen in countries such as Venezuela, China, and India, where it is still widely used despite being banned.

This article is republished with permission from the author’s LinkedIn.

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Facebook’s Libra prospects dim, but cryptocurrencies roll on

Much of the movement to crypto has been based on distrust of monetary … “Financial innovation generates products and systems that outstrip the …

Facebook’s planned global digital coin Libra has run into a wall of opposition in Washington that could prevent its launch as envisioned, but analysts say cryptocurrencies are likely to make gains around the world nonetheless.

The plan by Facebook and its partners has generated skepticism from US lawmakers and G7 finance ministers as well as from central banks and regulators globally.

Lawmakers have also raised concerns over Facebook’s spotty record on privacy and data protection.

Why is there opposition to the Libra?

Facebook’s scale – with some 2.7 billion users for all its applications – means the proposed Libra currency could roil the global financial system and make the job harder for the world’s central banks.

“If people are using Libra as a stored value and holding a lot of money in it, you might have less effective monetary policy,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics.

The US Federal Reserve, for example, “can affect the dollar but it might not affect Libra in the same way”. Since the Libra would likely hold the dollar, euro and other major currencies as reserve assets, the impact could be significant in “emerging markets or developing countries where people want to get rid of those currencies,” Chorzempa said.

“Imagine the demand for Libra in a place like Venezuela,” where the currency has collapsed from hyperinflation.Hoping to avoid the wild swings of other virtual currencies, Libra would be governed by a non-profit association backing up the coin with a basket of major global currencies.

Lamont Black, a finance professor at DePaul University, said Facebook has yet to fully explain how the Libra Association, with up to 100 members, would operate.

“That’s really the role of a central bank,” Black said.

Could the Libra launch in 2020?

Libra is most likely “dead in the water”, at least for the US market, said analyst and cryptocurrency investor Lou Kerner.

There are “too many regulatory bodies and government agencies with potential oversight responsibilities, too much uncertainty at Libra about what it’s going to be, and too little knowledge about the topic for there to be consensus around a regulatory framework”.

Kerner said the US government wants the dollar to be the global reserve currency, and will oppose any “threat to that”.

US Treasury Secretary Steven Mnuchin has said that Facebook must meet “a very high standard before they have access to the financial system”.

G7 finance ministers also expressed a “need for action” on Libra at a meeting this week. “One has to wonder how much more criticism Facebook wants to take before it cuts bait,” said Nicholas Colas of DataTrek Research.

What about other cryptocurrencies?

Facebook argues, and many experts agree, that if Libra fails, other digital currencies will gain traction – something that is already happening.

“If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different,” David Marcus, the head of Facebook’s initiative, told lawmakers this week.

Chinese “fintech” companies are already operating in many markets from Britain to South-East Asia, even if they don’t have the same reach as Facebook, according to Chorzempa.

“If US regulators ban projects like Libra” or delay them with unnecessary regulations “to guard against real risk, the path will be open for Chinese fintech to extend its dominance around the world,” he wrote in a research paper this week.

Chorzempa said that China’s WeChat and Alipay have helped created “a cashless society where people use their apps for everything, while Americans still use billions of checks and carry plastic cards”.

Now what?

Kerner believes that crypto money will grow whether or not regulators approve the Libra, and bitcoin may become the de facto global currency.

“They cannot stop this,” Kerner said. “If it doesn’t happen here it will happen in other parts of the world.” Much of the movement to crypto has been based on distrust of monetary authorities, and Kerner argues that halting Libra will not halt this trend. Facebook, he notes, asked for permission and regulation while others have not.

“Everything is based on faith, the dollar is based on faith,” he said. “People have faith until they don’t. Governments print as much as they want, and that massively distorts money”.

DePaul’s Black acknowledged that the US is lagging China in this area, but cautioned against moving too fast as a result.

“Innovation is risky by nature,” he said. “My hope is that this process of scrutiny will help us understand how these innovations can be refined and improved”.

Timothy Massad, a former US assistant treasury secretary and a current fellow at Harvard’s Kennedy School, said the uncertainty around Facebook’s plan highlights the need to “reset the regulatory parameters” to cover digital assets including Libra, bitcoin and others.

“Financial innovation generates products and systems that outstrip the existing regulatory framework, which can offer convenience and lower costs, but that doesn’t mean they don’t also bring risks,” Massad said. – AFP

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US DOLLAR PROVIDES THE MUSCLE FOR ECONOMIC SANCTIONS

From drug kingpins to terrorists and from human traffickers to money … Buyers of Iranian oil will seek alternative currencies for their transactions, both …

Money Talks

From drug kingpins to terrorists and from human traffickers to money launderers, the United States has nearly 8,000 economic sanctions in place, and the list is growing. Particularly in the post-9/11 era, the U.S. government has leveraged the global preeminence of the U.S. dollar to turn off spigots of funding for sinister activities and unwanted behaviors by state actors.

Among additional sanctions against Iran, Russia and Venezuela, The Trump administration earlier this month tightened travel restrictions to Cuba stating, “Cuba continues to play a destabilizing role in the Western Hemisphere…these actions will help to keep U.S. dollars out of the hands of Cuban military, intelligence, and security services.”

The muscle behind an array of U.S. financial sanctions derives from the reach and power of the U.S. dollar as the “lead currency” in the global economy. This status makes it possible to not only prevent U.S. individuals and companies from doing business directly with a sanctioned entity, it makes it risky to do business with third-country companies that do business with sanctioned entities. Acutely aware of their vulnerability, non-U.S. companies also frequently take steps to minimize their exposure to possible violations of U.S. sanctions lest they jeopardize their access to the U.S. financial system.

The U.S. Dollar Reigns

How strong is the dollar’s foothold in the global economy? The U.S. dollar was used in 88 percent of global foreign exchange transactions in 2016. For comparison, the euro was the medium of exchange in 31 percent of transactions in 2016, the Japanese yen in 22 percent, the British pound in 13 percent, and China’s renminbi in four percent (as two currencies may be involved in exchange, these numbers will add up to more than 100 percent).

Companies selling their goods and services outside the United States often accept dollars as payment because they can easily turn around and use dollars to pay for imported products and inputs. Or, they can hold onto their dollar revenues with confidence they are storing value.

Why is the Dollar Preferred?

The dollar is the world’s lead currency because it meets three key conditions.

First, the dollar is fully tradable and exchanged at relatively low costs. The U.S. government does not restrict the purchase or sale of the dollar.

Second, the dollar holds its value against other currencies. The United States is still considered a stable and open market economy, current tariff vagaries notwithstanding. At the end of last year, just under 62 percent of all central bank reserves were held in U.S. dollars.

Third, the United States is still the largest economy in the world, equivalent to 24 percent of global GDP. Below is a snapshot from the International Monetary Fund comparing the world’s largest economies. We have a large money supply, providing liquidity for the global economy.

Into the Arms of Another

Some have argued bad actors like North Korea will find always find ways to evade U.S. sanctions. Buyers of Iranian oil will seek alternative currencies for their transactions, both diluting the effect of sanctions and hastening reduced dependence on the dollar.

Several European countries developed a clearinghouse to enable companies to avoid the U.S. financial system in transactions involving Iran as part of their effort to salvage the nuclear pact the Trump administration pulled out of last year before restoring a slew of sanctions against Iran.

Despite initial discussions about a wider scope, Europe’s Instrument in Support of Trade Exchanges (INSTEX) will, at least for now, only facilitate trade in humanitarian goods such as pharmaceuticals, medical devices and agri-food products, all of which are already permissible under U.S. sanctions. Despite European government grumbling about being beholden to the U.S. dollar, there appeared to be little appetite on the part of European companies and commercial banks to risk U.S. penalties by using such a clearinghouse for other types of transactions.

Will the Euro or Renminbi Overtake the Dollar?

Not anytime soon.

The euro covers a large economic zone featuring sophisticated financial market institutions, but the politics surrounding continued support by members of the euro zone and unresolved debt discussions with southern states (we were talking about Grexit long before Brexit) are holding the euro back in overtaking the U.S. dollar.

Although the renminbi’s share in global transactions is still low, it should be noted that usage and overseas holdings of China’s currency by individuals, businesses and central banks has expanded in the last decade, enabling China to break through in 2016 to join the top five most-used currencies. The Chinese government is making a big push to internationalize its currency through global infrastructure investment funds associated with its Belt and Road initiative and through renminbi-denominated commodities futures contracts, among other initiatives.

China’s currency, however, is not freely convertible, its performance has been volatile, and the degree of state and private debt in China’s financial system remains murky.

The Dollar’s Achilles Heel

For the time being, most experts believe there’s no real threat to the U.S. dollar’s dominance. Europe would need to address skepticism regarding the monetary union’s future, China would need to implement significant reforms to its financial sector, and much-hyped cryptocurrencies still have long way to go to challenge the conventional system of global payments.

These are all big “ifs”. Instead, the dollar’s Achilles’ heel is of our own making. One of the biggest risks to the dollar’s long-term value is continued fiscal imbalances in the United States and the sustainability of our debt burden.

Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. She is a nonresident Senior Fellow at the Chicago Council on Global Affairs and an adjunct fellow with CSIS. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught International Trade for the last fourteen years as an Adjunct Associate Professor at Georgetown University’s Master of Science in Foreign Service program.

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