This alternative option of private money, void of the strict control of banks, was painted by leading SA economist Dawie Roodt during the EBI’s Captains of Industry breakfast held recently.
Roodt spoke on the coming revolution of private money and how such a revolution is no longer a fairy tale but is becoming a reality.
As an example of a case study, he presented the Ora, which is the local currency of Orania, an Afrikaner enclave in South Africa. It is pegged to be on par with the South African rand.
Such a world consists of concepts such as Fiat money, blockchains, private currency and crypto money among others.
Fiat money is a currency established as money by government regulation or law.The term derives from the Latin fiat (“let it become”, “it will become”. It was introduced as an alternative to commodity money and representative money.
Blockchain was originally developed as the technology behind cryptocurrencies like Bitcoin.
This allows for money, equities, bonds, titles, deeds, contracts, and virtually all other kinds of assets to be moved and stored securely, privately, and from peer to peer because trust is established not by powerful intermediaries like banks and governments, but by network consensus, cryptography, collaboration, and clever code.
Is is therefore a world of private money being moved around a group of companies and individuals based on trust.
Therefore, Blockchain allows two or more parties, be they businesses or individuals who may not even know each other, to forge agreements, make transactions, and build value without relying on intermediaries (such as banks, rating agencies, and government bodies) to verify their identities, establish trust, or perform the critical business logic.
Such transactions, according to Roodt, hold numerous benefits including transactions being much faster, cheaper and unable to regulated.
Then you get cryptocurrency (or crypto currency), which is a digital asset (wallet) designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency.
For example, Bitcoin became the first decentralized cryptocurrency in 2009. Since then, numerous cryptocurrencies have been created. These are frequently called altcoins, as a blend of bitcoin alternative.
- Technology
Roodt painted a picture of how more and more companies are using blockchain technology and cryptocurrency to run a private world of private currency. Such a currency is then backed by a standard and used to do transactions which are private and confidential.
Roodt said this revolution is at hand because the system of centralised banks is no longer working, considering how centralised banks have become all powerful when it comes to a country’s economy.
He said the concept of centralised banks followed the age of the great world wars to provide stability to the world.
The new economic deal that was struck decades ago did work wonders, and it involved private property, human rights and democracy. It resulted in a bigger role for the state and the gold standard
“At one stage about 90 per cent of the world lived in abject poverty which has been reduced to about 10 per cent. Our life expectancy has also increased from about 30 years to 80 years.
“However, it is time for a new deal. We have dropped the gold standard, we sit with global massive state debt (around $160 trillion) and the central banks have gone mad with power.
“We also sit with an uber class of career politicians and professional bureaucrats who run the entire show. This has led to the pending revolution that will break the power of the banking system as we know it,” said Roodt.
This new deal involves the age of the digital, of technology that is making transactions quicker and cheaper. It is the age of virtualism and of individualism. This means the end of Big Brother, and time for greater individual freedoms
- Central banks
He lamented how central banks today are exceptionally powerful.
“They started off by looking after banks, but today they issue money, control interest rates and can swing the world economy.”
He explained that global economies depend, to a large extent, on the decisions made by the largest four or five central banks in the world, each of which is headed by only a few individuals.
He predicted that the time of central banks is nearing its end, saying virtual currency will become the future’s norm, leaving banks, central banks and eventually government taxation, by the roadside.
“Considering that 95 per cent of taxes are based on transactions, consider how the world of virtual, private and digital money will cause such regulated transactions to be changed and therefore the entire taxing system to be altered.
“This will certainly mean a boost to wealth, re-alignment of economies, new careers of specialty and more freedoms.
“Can you imagine what a world of private currency will look like, without banks and the end of fiscal policy as we know it?”
Roodt said the world economy is potentially on thin ice, one factor being all-time low interest rates. Interest rates in many economies are negative today, meaning the lender must pay the borrower.
“At the end of the day governments and the banking system do not want a reduction in costs when it comes to doing business. They will lose out on taxes and fees. Yet this is what the new world of private money means – a reduction of costs, therefore greater production.”
Roodt said at the end of the day, the revolution will usher in a new uber class, which is the common person, “you and me” who will now take back power and control.
Roodt also touched on the economy of SA, which he has labelled as a disaster and how the new radical economy will entail more BEE, more taxes, more centralised powers, a bigger state, more civil servants, redistribution of land and greater labour market regulations.
