Cryptocurrency Is Needed To Spur Economic Growth

in LeoFinance3 months ago

The world does not realize how badly it needs cryptocurrency. Basically, future global growth is going to depend upon crypto's ability to provide the economy with enough capital to ensure innovation and development at the level required to sustained an ascending growth line.

For the last few decades, in spite of China's astronomical growth rates, the overall trend is toward lower growth. This does not make sense in a highly technological era where we see automation adding a great deal to our economic output.

Here is a chart from the World Bank depicting the growth rates of the global economy. Notice how the trend, in chartists terms, is toward lower highs.


This chart only goes through 2019 and we know there was a big drop off in 2020 due to the COVID lockdowns.

Here is a chart of the US economic growth rates that is updated:


Even with all the stimulus that the US Government has undertaken, the growth rate is now back into the range it was before. This recovery is not turning into an expansion.

The problem is that there is not enough money out there. This might sound counterintuitive considering the actions the Fed and other Central Banks were taking. However, when it comes to the US Dollar, the reserve currency, there is not enough in the US economy and certainly too little in the global.

This is where cryptocurrency enters the picture.

Before getting to that, some might be wondering where all the money went to. What about all the easing that the Fed (and other Central Banks) did?

It can best be answered by this detail found in The Economist.

A central bank buying a bond for cash sounds like a simple swap of asset for asset. In fact it often swells the banking system. When the Fed buys assets in the secondary market, say from a pension fund, it cannot pay the fund with the electronic money it creates, because only banks can hold these so-called “reserves”. Instead, the fund gets a newly created deposit at its bank, and the bank gets the newly created reserve at the Fed.

In other words the "money" that is being created is locked in the banking system. The only way for it to enter the economy is for the banks to lend at a furious pace. Since most industrial and commercial lending has been tightening the last year, we can see how this is arising.

So the Central Bank can only create a Reserve Asset, which is a cash equivalent but not cash. Hence why all of this gets locked up in the banking system.

What does the growth of these Reserve Assets look like? As you can guess, it is a moonshot.

fredgraph 6.png

Notice how this did not really exist 15 years ago. However, the amount of money being held by banks at the Fed is skyrocketing. This is effectively locking the money into the banking system, swelling the balance sheets of the banks, since the Reserve Assets cannot be used other than for transactions with other member banks.

Therefore, we have plenty of liquidity in the banking system yet not enough in the economy. The abysmal growth rates show that.

There is another factor that is outside the scope of this article which is the fact that more of the pie is going to servicing debt, which is an unproductive use of money.

How Cryptocurrency Fixes This

We are seeing an entirely new financial system being constructed. Part of the potential power of Decentralized Finance (DeFi) is the fact that all which is described here is averted.

The present problem is all that the Central Bank does goes through the banking system. Hence, to have growth, debt is required. Banks need to loan out money to people looking to innovate and develop. Of course, the way lending standards are established means that few get funded. Even when we consider the Venture Capital world, there is only a small percentage of the project out there that receive any money.

Thus, unless you are in a position like Jeff Bezos where family members can cough up $250K in seed capital, you are out of luck. Millions find themselves in this situation. Over time, this takes a massive impact on the entire economy.

When we look at all the "stimulus" over the past 12 years, where did most of it end up? The answer is the banking and financial system took the lion's share of it. Very little actually made it out into the economies themselves (this is also why the wealth divide is increasing). An overly financialized system only became more so.


The power of cryptocurrency is in the directness of its operation. If we step back, we can see how the banking and financial sector can be looked upon as a giant intermediary. Viewed through this lens, it is easy to see how they are able hinder the entire process simply by being in the middle of the flow of capital. Hence, little money actually makes it to the areas that can generate growth resulting in the numbers on the charts above.

It is evident the present situation is not going to change. We are only going to see more debt that takes away from the productive aspect of the global economy as well as the banking and financial system accumulating more of the entirety. Therefore, the case is being made that the decline in economic output will only decline (meaning this "boom" is short-lived).

Cryptocurrency bypasses the entire banking system. Here we see the community given the ability to create currency as it sees fit. Over the next couple years, we will start to see DeFi infrastructure expand to the point whereby people can start funding legitimate projects via a new model. Think of it as crowdfunding but on steroids. People will be able enter DeFi "pools" to fund different projects that have real world applications. This will open up the gates to an entirely new set of entrepreneurs and innovators.

This is a system that requires no approval. The only question is whether people are willing to fund it with their cryptocurrency. If enough individuals believe in the idea and are willing to put up the money, it is good to go. Failure to do that means that the project will need more work to get funded.

The only way to get long-term sustained economic growth is to get enough money into the hands of the economy, i.e spread throughout the population. This is not happening with the present system nor does it look like it every will. Instead, we need a new financial system that goes direct and get the resources where they need to be.

Cryptocurrency accomplishes this. When the infrastructure is built out, we will see an entirely new model which provides funding without the need for banks or even the financial system. Hence we are witnessing the beginning stages of making them mostly obsolete.

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The only things the US government has stimulated seem to be 1. a huge labor shortage and 2. big screen TV sales to people who are in no hurry to return to work. Just my libertarian take on things. Governments can stimulate chaos, but they cannot create wealth. We individuals, on the other hand, can!

Well they didnt stimulate the labor shortage. In fact, the labor force participation rate has never returned to 2007 levels.

There are a lot more dynamics taking place than many want to acknolwedge.

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The fact that cryptocurrency is building a new set of entrepreneur and innovators also a new source of wealth is the first step to show the world that crypto is here to help and not to harm anyone in any way, though a lot of people misinterpreted this and called it all sort of names that don't relate with it.

I believe the growth we need can be achieved through crypto, not Fiat. Cash is not powerful enough to bring decentralized growth which is why crypto is the only way out of the banking sector's Rat race.

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The problem with the fiat system is it was already nuked. The austerity that is going to be required to clear the debt out and to free up money for more productive opportunities is not going to happen. Couple this with the banking system that is filled with money (and power) and they are not going to let go either.

It is a massive tug-o-war with the economy in the middle. In the end, it will screw the global population unless a change is made.

I believe that change to be cryptocurrency.

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i believe so too. More reason why we need more people to get in the crypto world now. Time will tell how things will turn out at the end, am sure technology will make it easier for crypto to win in the end.

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No matter what tricks the Fed plays, its fate is sealed, total failure as it will inevitably backfire.

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They were backed into a corner a long time ago and still have no way out. The only saving grace for the Fed is all other major central banks are doing the same thing which helps to offset things on a relative scale.

From a global economic standpoint, it is still crushing things.

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After the bank bailouts I wondered what purpose these institutions had? They cut credit lines and basically didn’t lend to anyone. They did however take choice properties and screw everyone. Obsolescence couldn’t come any sooner. Society will be better off.

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FinTech wasnt at the point it is now. Remember, back then, most mortgages still originated in the banking system. That is no longer the case.

The banking industry is just starting to wake up to how much of a threat CBDCs are to them. That wipes a bunch of them out.

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I don't think rug pulls can spur economic growth :P

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It depends upon what the rug pullers do with the money.

Lambos sales could moon which would help Italy's economy a great deal.

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I'm sure the italians would be grateful :)))

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I love how you can always count on 2008 to make a seemingly normal chart look really exciting! :) This makes a lot of sense what you are saying here. It makes me feel like I should take some of my money out of the bank and inject it into the economy! :)

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Well the charts that have 2020, tend to make 2008 look minor. The second charts breaks down things monthly so that is why it is so out of sorts compared to the rest of the chart. If we did it yearly, we would come up with one that is tighter on the downside and the 2021 upside will not be as great.

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I don't think access to financial capital is the real bottleneck in developed economies. I think it is the lack of competent software developers and other professionals capable of producing what the market demands. The developed world has aging populations and shrinking labor forces. Many people have lack the training and perhaps even aptitude for the kind of work there is the most demand for.

Financial capital is easy to create at the push of a button. The real challenge is finding tech professionals at an affordable cost. That obstacle may or may not be overcome in a few decades with better AI but at the moment there seems to be a huge shortage of senior developers. These people are very difficult to find in the desired quantities because perhaps only 2-5% the population are cognitively gifted enough for it and only a fraction of that population has any interest in the field.

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Well that is what happens when we are in a rapidly moving technological era. This is something that had to be addressed a decade ago.

However, without capital, all industries are affected. There is a lot more taking place than just a shortage of senior developers. There is a shortage of truck drivers at the moment (something that is rapidly being addressed).

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Cryptocurrency bypasses the entire banking system, physically the government still look down on cryptocurrency to have the ability and power to lift the economy.
A lot is changing so fast and if the government will recognize this change and fall in line with the trend, crypto currency will be the best tool and strategy they have been seeking for .

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Government isnt going to fall in line because it is all about power and control. Government is politicians and bureaucrats, two groups that focus solely on amassing more power.

Crypto is the alternative to the government. We simply have to start developing our own governance models and spreading them throughout the world.

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Not bad, if doing that will add effect of a greater good to the world.
All the government is after to Fiat money that hits there bank bal

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I like your view for DeFi and how money needs to be put to work and in the hands of development, not locked in banks inly getting to developing hands through lending. For quite a few years I've come to the conclusion that our current money is not ours and not even designed to be working in our benefit while crypto is doing the exact opposite. Fiat is meant to serve the elites and control the masses and that's why I fear CBDCs that much and crypto has been created to unchain and empower.

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People will be able enter DeFi "pools" to fund different projects that have real world applications. This will open up the gates to an entirely

Thereby solidifying the inevitability of crypto currency, the truth is that I think DeFi itself has shown it's capacities and what it can offer especially changing the narratives when it comes to how it can change real-time ventures when it comes to finance. The possibilities are endless.

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DeFi is just starting to show us what is possible in my opinion. There is a lot more to come and most of it based upon peer-to-peer lending.

We could see an entirely new paradigm take over in just a few short years.

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The only problem is I don't know how the new structure will look like. It could be possible that we don't have the same Defi rates given the amount of possible money entering. Similar to how we get CUB as more people enter the different pools. So how much is enough to fund these advnetures?

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Crypto is the future, it's time for the traditional financial industry to join the future as they make good use of decentralized systems like the application from, to keep funds safe and secure.

is the future cryptocurrencies must be stimulated so that it grows and strengthens

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I've always thought crypto was a double edged sword, but at this point, I don't see any other option for the world at large, other than maybe total financial collapse. And yeah it'll definitely bring about a kind of prosperity that no one could have predicated before bitcoin. I am not here cause I LIKE crypto, I'm here cause I can see the writing on the wall. I have to admit, the potential for 3rd world countries to totally turn their situations around WITHOUT the need to be colonized is extremely exciting. There will be all kind of new ideas and innovation that come out of those cultures if they have the opportunity to thrive.