Former Deputy Editor of the Wall Street Journal: Bitcoins are an Option if US Monetary System Fails

Comments from a panel at the Cato Institute’s 29th Annual Monetary Conference:

George Melloan
Former Deputy Editor, Wall Street Journal

- Jokes about what a nickel could buy during the (big Baby Ruth bar) Depression and now (a jellybean).

- Talks about post-WWII monetary policy in Britain, and how British Socialism led them astray. War in Vietnam did much the same thing in the US, leading Nixon to end Bretton Woods.

- Dollar’s primacy increasingly questioned.

- Inflation coming as the Fed creates credit to fund the US government.

- Doubts that multilateral currencies like the SDRs of the IMF would work. The Euro proves that.

- The US needs monetary reform, but we might need to fail before that comes. Gold, bitcoins, scrips, barter if things break down. Fiat currencies are liquid, barter is inefficient.

- If the US dollar goes, a lot else will go down as well.


Speaking of the US monetary system failing:

Forbes: "The next financial crisis will be hellish, and it’s on its way"

"We're raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out."

"The Fed's entire balance sheet totaled around $800 billion before the 2008 crash, nearly all of it Treasuries. Now the Fed holds more than double that amount in mortgage derivatives alone, junk that the banks needed to clear off their own balance sheets."

"Today, the Fed has $52.5 billion of capital backing a $2.7 trillion balance sheet. Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out."

And I will end with the last line from Ann Barnhardt's letter announcing the closure of Barnhardt Capital Management:

"Alas, my retirement came a few years earlier than I had anticipated, but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law."

I sleep well at night knowing I'm holding Bitcoins, because I don't have to try to predict on exactly which day the global financial system will collapse, because it's about to implode, and it's not far off.

Posted in: global financial collapse,investing