What Impact Do Negative Interest Rates Have On Bitcoin?
Like any other self-respecting paradigm shift, much has been written about negative interest rates. The coherence of our monetary system and how we make money would be completely turned upside down. This illogical nature is a sign that we are reaching the limits of an inherently inflationary debt system. A very, very good omen for Bitcoin…
Interest rates in Babylon
Interest is an old story… The first trace of usury (interest) can be found in a Babylonian legal text dating from 1750 BC. It was the famous Hammurabi Code which limited the borrowing rate to a maximum of 20%. An obviously colossal rate, but one revealing of the fact that abuses of usury were already prohibited by the law: ‘no more than’ 20%.
Since then, examples of outright condemnation of interests have been governed (in principle at least…).
Usury was punished by the Romans. A great distinction was made between things that could be consumed and those that could not. Since money was considered a non-consumable asset, charging interest on a loan was contrary to charity and therefore almost illegal. In other words, it was not custom to ask for money for lending something that was returned in the same condition.
The Romans started out with the principle that the value of money cannot be altered… They were certainly right to adopt such an attitude because shouldn’t a currency keep its purchasing power over time? Of course! Money is not supposed to ‘burn out’ over time.
That being said, the Bank of England does not seem to share this common-sense view and has mandated to generate 2% inflation every year… In the Orwellian language of the BoE, 2% corresponds to price ‘stability’…
While 2% does not seem a lot, what it actually means is that a currency can lose 50% of its value (purchasing power) in 35 years…
The Romans would have been big fans of Bitcoin for sure!
Excommunication of rate
In the year 325, a year after Emperor Constantine successfully reunited the Roman Empire, the Council of Nicea condemned loans with interest. Pope Leo, known for having met Attila the Hun in 452 persuading him to turn back from the invasion of Italy, declared that, “…he who enriches himself at the expense of others through usury deserves eternal punishment.”
Even Charlemagne prohibited usury in 806 under the capitulary of Nijmegen. Throughout the years that followed, more examples can be found, but it was Pope Clement V in 1311, who threatened heresy with that “…would dare to assert that it is not a sin to practice usury…” and ordered people to be watchful.
This religious jurisprudence suggests that bankers have never been in the holy type and that a long line of Popes have wisely relied on the analysis of Aristotle, who declared four centuries previously that interest on a loan was an “…unjust, dishonourable and unnatural way of taking property of others.”
Aristotle was contemporary and witnessed the emergence of money. The tutor of Alexander the Great was fascinated by the possibility of ridding commerce under the obligation to wander with its cargoes of oil, clothes or other objects.
However, he quickly realised that money, by allowing infinite accumulation, would favour the emergence of a maximalist society. Until that point, the idea of stacking sandals or cans of oil in his garden was not something that was considered. Such an attitude was considered pure madness.
Aristotle quickly realised the evils that money brought with it: the possibility of accumulating money for money AND usury…
In short, it was only in 1917, during the First World War, on the sly, that the Vatican would go astray by lifting the anathema on usury. The Church allowed itself to offer its pious funds in order to make more… What a pity after so many centuries of virtue!
St. Vitus Cathedral, Prague
Watch the dedication to ‘BANKA SLAVIA’ who financed part of the stained glass… A merchant is branded with a hot iron. Very symbolic…
Interest rates: A philosopher’s stone
There was a time when money was available in limited quantities (gold). Lending it meant temporarily depriving yourself of it and therefore it created a shortfall, not to mention the risk of non-reimbursement. The interest rate, even if ‘prohibited’, was already much more legitimate than nowadays, where money is created from scratch (Gold Standard no longer exists).
And yes… When you really think about it, interest should be prescribed more than ever, since nowadays absolutely nobody is deprived from money thanks to new loans… Instead, the risk is adjusted and crazy amounts of interest are paid to bankers (hundreds of billions of pounds in the UK every year), who in turn have the very difficult task of adding a few zeros in the financial matrix from their computers.
Thus, currency turned into debt. Every pound is created out of debt. A debt that can only increase. We are stuck on a crazy Ponzi scheme under the inevitable pain of economic depression. This system requires each new generation to go into debt even more than the previous one.
If you say debt is constantly expanding, you’re actually saying prices are constantly expanding and all other things stay the same (in particular growth). Growth that continues to slow because of the natural limit of earth’s resources… most notably its biggest source of energy, oil.
Barrels of oil extracted from the ground (millions) Source: IEA
In 2008 peak oil prices were reached and today’s global production is increasing only thanks to American shale oil. The International Energy Agency (IEA) predicts that the all-oil peak will be reached in 2025. However, is the peak already behind us (2018)?
“Only when the last tree is dead, the last river has been poisoned [and the last drop of oil has been extracted…], will we realise that money cannot be eaten.”
– Seattle Indian Chief
The blackmail of negative rates
So we live in a highly inflationary world. If you are not convinced, just ask young people what they think of property prices… The growing gap between salary and property prices means that the share of owners has not increased since the 2008 crisis. The reason being that you have to think twice before borrowing half a million. That kind of debt takes away your freedom… just a little.
So what are the banks doing to try to encourage us to borrow? They lower rates and increase loan durations. Today, most loans are made over 30 years, when in 2000 they were around 13 years – and less than 10 years in 1970! That is dire to say the least…
Yet, despite these credit facilities, the new generations’ appetite for borrowing has waned. This is by choice, but also by fatality, because someone who is unemployed cannot borrow… A number that has increased rapidly since COVID-19.
However, the central banks are ready to do anything to encourage us to take money from them and thus avoid the collapse of their precious house of debt. They decided to set up negative interest rates! How? Explanation below:
There are several interest rates. There is the rate at which you borrow to buy a house. The rate at which the bank borrows from the central bank. Finally, the rate at which the central bank remunerates the reserve requirements of commercial banks.
Currently, the European Central Bank (ECB) no longer remunerates these reserves but applies a negative rate of -0.50% to them! In other words, commercial banks lose 0.50% of their reserves each year. The ECB does this to force them to lend.
However, there is still a problem… people won’t borrow if you don’t have a need to (who doesn’t want to go into debt for 25 or 30 years to buy a dump for half a million?). Therefore, in order to push us into borrowing and thus relaunch the sacrosanct growth (and inflation), the banks are on the verge of introducing negative rates directly on our savings.
To put it another way, it is blackmail: either we perpetuate the inflationary Ponzi debt scheme or we lose our savings.
Bitcoin vs inflation vs negative interest rates
To carry out their dark plot, bankers need to make the cash disappear. This is logical as otherwise everyone will empty their accounts and start keeping their cash under their mattresses.
What they did not account for was Bitcoin… which not only protects us against inflation but also protects us against negative interest rates.
And the clock is ticking… Ever wondered why if you hold very high amounts of cash in your account you don’t receive any interest any more? Or why you are only protected up to £85,000 by the FCA (Financial Conduct Authority)?
First it will be £85,000, then they will tell us that we have to make the cash disappear, and finally they will tax everyone while the money of billionaires stays warm in exotic tax havens.
Don’t fall for this trap. Trade your play money for Bitcoin before the value of Satoshi soars. Remember, there are less than 21 million Bitcoin addresses, or less than 0.4% of the world’s population. Being part of these initial visionaries will allow you to benefit from its appreciation. Don’t wait any longer and download a wallet. #Electrum
‘Painless’ inflation, negative interest rates, bailouts, mass surveillance, social credit… There are plenty of good reasons to emancipate yourself from this dystopian future that is taking shape. Voting means voting with your wallet…
Just your average global millennial embracing, and interested in, the future of money and finance. Excited by blockchain tech as well as fintech but have a special passion for DeFi and Yield Farming, what will this technological disruption bring next?