Michael Saylor Just Showed the Ruling Class's Hand

Crypto custodied by "banks" (i.e., Federal Reserve System) locks you into the USD

From Cointelegraph.com. Fair use claimed. See story here.

I have to admit, I really had a really hard time believing the story about what Michael Saylor said concerning Bitcoin and “custody.” I am suspicious of faux outrage online, so I was hesitant to pile on. And then today Saylor backs away from the parts of his comments that attracted the most attention.

But before he “reversed” his most inflammatory of his remarks, I listened to the podcast for myself for the full context. And now I don’t think Saylor should be allowed to get off so easily. I am also convinced the outrage is legitimate.

I’ll say up front: I cannot read Saylor’s or any one else’s minds. (I have a hard enough time reading my own.) So I know nothing about what may be motivating these remarkable comments. But there are some things happening right now that might shed light on this.

The TLDR version: The U.S. Dollar is in some very serious trouble. It may be starting its final run-up in value (relative to other fiat currencies) prior to an epic collapse. Michael Saylor (and honestly, most of the names you will recognize among “Bitcoin maximalists”) are not quite the Bitcoin advocates they claim to be. They like Bitcoin only to the extent that its value is referenced against the USD. That is, of course, not at all the point of crypto - which is to offer a viable path to disintermediating all fiat currencies entirely. Saylor and those like him value their “book” in USD. So now - all of a sudden - they are “talking their book.”

Three Signs of Serious Trouble

Sign #1: The U.S. debt has now crossed a Rubicon:

Interest payments are now the single biggest expense in the U.S. budget - bigger even than the U.S. Department of Defense. This is one of those philosophical/historical things that is hard to understand and even harder to explain. So let’s just say this: The history of war is the history of money, and the history of money is the history of war.

Where this all went wrong goes back to the end of the Cold War. An undersecretary of defense by the name of Paul Wolfowitz authored a planning memo which immediately caused quite a stir. In this memo he argued for the U.S. to become the single global hegemon. This was rightly panned as a road map for imperialism. What was founded as a republic would become an empire - and eventually fall for the same reasons all empires before it have fallen. Adjacent to this argument were comments from people like former U.S. Vice President Dick Cheney who said “Reagan proved deficits don’t matter.”

To which I’ll respond: Sure, deficits don’t matter - until they do.

We have spent the years since 1990 running up the national debt in order to maintain global hegemony. Can you see the problem we now face when the cost of our debt service exceeds the cost of the purpose of borrowing that money to begin with? The more obvious observation is how this cannot possibly lead anywhere but to bankruptcy. The less obvious - but far more crucial observation - is that our debt is now at a place where it can only be serviced with dollars that are significantly cheaper than when they were borrowed.

Huh?

I know - not exactly the kind of simple language I like to at least strive for in my blog. Here is an example of what I mean:

If I owe $300,000 on my home, and my salary is $50,000 a year (leaving out interest to simplify the math) my debt is 6x my earnings. ($50K per year for six years is $300K.) Now, if by way of printing money, mainly to prop up the ability of the government to borrow in the ever-more-expensive enterprise of maintaining global hegemony, prices and then wages rise to where I am making $100K a year, my annual salary has doubled but my debt has remained the same. (Let’s assume I have an “interest-only mortgage” - which is basically the same thing as a “bond.”) Now my debt has gone from 6x earning to only 3x earnings. This is what I mean by “cheaper dollars” - cheaper in terms of the labor needed to acquire them.

For those who own their own home there is an offsetting reality here: My mortgage is easier to pay off, but everything else (energy, food, etc.) is more expensive. This is why I like to divide the “middle class” into an “upper middle class” and “lower middle class.” The difference is whether you own your own home - not your annual income.

“Deficits don’t matter” is a distinctly upper-middle-class and “rich” way of thinking because the inflation of our assets (mainly our homes) and the static nature of the mortgage against our homes offsets the other added expenses. And the more other assets (e.g., stocks, bonds, and precious metals) we own, the more in our favor the arrangement becomes.

Until you cross that Rubicon.

Let’s leave aside what ought to be the moral outrage at watching this utter theft of purchasing power from the poor and lower middle class. Let’s leave aside the fact that before he wrote The Wealth of Nations Adam Smith - who was a professor of moral philosophy, not economics - wrote A Theory of Moral Sentiments. Let’s just make sure we don’t miss how the hegemony required to keep the U.S. Dollar at the center of the world economy is being paid for by U.S. Dollars conjured up out of thin air and then charged as a debt per U.S. person of $106,056 or $272,173 per household.

Now the annual interest on hegemony exceeds the annual cost of that same hegemony.

If you do not think you are paying that debt, please look again at your shopping cart and notice how much less you now get for the same salary. Look at your utility bill. Look at how much a tank of gasoline costs. You are paying for it - in purchasing power. Do not let anyone lie to you about this. Your shopping cart will tell the truth - and the truth just might set you free. They are going to come to you with an appeal to patriotism. It is a lie. They merely seek to excuse their theft.

Sign #2: Gold and silver (especially) are dramatically increasing at the same time the U.S. Dollar is “increasing.”

This is not normal. Usually when gold and silver increase the dollar decreases. But right now the USD is increasing at the same time as gold and silver.

It has been noted that when “fiat” currencies start to wobble, the USD always increases in value. The problem with this is the increase is not being measured in real-world terms like what your USD salary buys you in energy and groceries, but against other fiat currencies. The currency markets are picking the currency that stinks the least, and since 1971 that has been the USD. To see what is really happening, compare the value of the USD to gold alongside its peers. That line series will be downward for all fiat. The USD is just not declining as fast as the others.

The USD stinks the least among its peers, but only for so long. To see why, go back and re-read Sign #1.

Sign #3: Once again, the history of money is the history of war, and the history of war is the history of money.

The best analogy is how the English King Charles I wanted to bring the Scots to heel by appointing bishops over the Church of Scotland. This is hard to appreciate today because back then “social order” was the same as “church order.” The Church of England’s order was monarchical, authoritative, and “top down.” The Church of Scotland is the origin of what Americans know as Presbyterianism, and was (and still is) decidedly consent-based and “bottom up.”

The Scots fought Charles I to a standstill in the First Bishop’s War. (Neither side’s soldiers were really interested in fighting.) After an interim period of politics which failed to produce his desired outcome, Charles set out to fight the Second Bishop’s War.

Only this time he needed money.

English merchants had “custodied” their gold with the Royal Mint. Well, not quite. But it helps to put it this way so you understand where this is going. The merchants delivered their gold to the Mint to have it melted and struck into the coinage of the realm to use as currency. King Charles I confiscated these coins from the Mint as a “forced loan” to pay his soldiers.

The first lesson here is this: Money is the scaffolding of all social order. If you do not control the money supply you cannot control the social order. King Charles I needed to seize control of the money supply in order to fight his wars to control church order - and by extension the social order. The Scots, being very Scottish, simply weren’t having it.

There is only one way the USD can be cheapened to the point of pulling the U.S. back from across the Rubicon. And that way is war. We are being brought to the precipice of World War III by provoking Russia with an advanced military power at its doorstep. The last time such affairs obtained, it was Hitler’s German army. When that movie ended there were 25 million Russians dead. On 9/11 we lost about 3,000 souls, and we say: “Never Forget.” Can you imagine the sentiment of “Never Forget” in Russia?

But Russia has not played along quite like some folks over here thought they would - they refused to be baited. Republicans in the U.S. House of Representatives started balking at the blank check the war in the Ukraine seems to require. Largely because of a secret side-deal with Democrats on funding for the Ukraine war, on October 3rd 2023 something happened in the U.S. government which had never happened before. The party in control of the House - where all spending bills must start - deposed their own Speaker. Kevin McCarthy was ousted by his own party.

Personally, I believe this caused sheer panic in the rarified air of Western finance. The war needed to cheapen the USD to stave off the inevitable hadn’t yet happened, and a small cadre of Republicans (the few genuinely conservative among them) looked poised to drive a stake into the funding for needed to provoke that much needed war.

Remember, this happened on October 3rd, 2023. What then happened four days later - on October 7th, 2023? If they cannot get their war in the Ukraine, then maybe between Israel and Iran? And if not there, how long will it be before things really heat up in Taiwan?

Let’s Review

Sign #1: Interest on the debt needed to support hegemony becomes greater than the cost of that hegemony;

Sign #2: Gold and silver start rising against the USD at the same time the USD rises against its fiat peers;

Sign #3: The western ruling class shows an ever more desperate thirst for war.

And now for Saylor, Bitcoin, and “Custody”

Because I prefer to traffic in context rather than sound bites, I have transcribed a part of Saylor’s comments on this podcast. Starting at 20:30 you can hear the question posed about risk of confiscation with large percentages of Bitcoin in the custody of a few institutions. Please keep in mind the history of the Royal Mint and King Charles I as I have outlined above as you consider Saylor’s response. It starts at 20:52. By all means, watch and listen to this for yourself. Hold on your cold storage wallets because this is an amazingly revealing three minutes:

[Saylor]: No I think its the opposite. I think when the Bitcoin is held by a bunch of crypto anarchists who aren’t regulated entities, who don’t acknowledge government, or don’t acknowledge taxes, or don’t acknowledge reporting requirements, that increases the risk of seizure. [Saylor then uses China as an example from 21:14 to 21:32].

So, normally, the risk is greater when there are unregulated private entities that are perceived to be holding the asset. When you have regulated public entities like Blackrock and Fidelity and JP Morgan and State Street Bank holding the asset. Well, all the lawmakers and all the law enforcement arms, they’re invested in those entities, right? So there’s no way that all the Senators and Congressmen are going to seize the asset from Fidelity and Blackrock or Vanguard because that’s where all their retirement money is invested.

So the assets moving from private to public hands and moving into regulated entities - it does a bunch of things. It decreases the volatility. It decreases the risk of loss. It decreases the - you know. Who do you trust more as a custodian? FTX or Fidelity? Right? Or Vanguard. Or State Street, right? And if you walked down the street and you said would you put all your family’s money in an offshore entity without a headquarters run by five dudes without an auditor. Or would you put it with a bank that’s too big to fail in the U.S.

At the end of the day you have an “O.G.” crypto community [I had to look this up. It apparently means “Original Gangster”] that’s very hard core about it. But, if you look at where all the money is - 99.9% of the money - is actually in the traditional economy. And in the war for the future of money, the war is going to be won with money, right? At the end of the day, Bitcoin is capital. Who is going to actually decide who is a winner and a loser? The people with the the capital. And so where is the capital? Its at Vanguard, Fidelity, State Street, JP Morgan Stanley. They’re all regulated entities of sorts.

So, when Bitcoin is held by those entities, it becomes regular and normal and, you know, people would no more think about seizing that than they think about seizing a building in the middle of Manhattan. Or seizing the S&P Spider assets [this is an ETF which tracks the S&P 500]. Why would you do that? That’s just the capital that you’ve built the country on. [23:53].

All I can say at the outset is I will never again take seriously a single thing Michael Saylor has to say - about anything. Honestly, his whole Bitcoin-related social media presence now makes an immense amount of propaganda sense to me. But before I dissect this gem, let me point out two “tells” from my experience working with people who end up revealing their true intentions.

First is the repetitive use of the interrogative: “Right?” I picked up on this immediately. It tells me the speaker is not secure in what he (or she) is saying. At this point I ask myself: Are they bullshitting me? Or do they just not know what they are talking about? My bet here is on the former. The second is related, but you have to watch the podcast. As he starts tossing “Right?” in his speech he also “gesticulates” - he uses his hands more. Putting these two things together, my bullshit radar pops up and starts spinning wildly.

Beyond that, let’s unpack this - starting at the end and working back.

“That’s just the capital you’ve built the country on.”

This one is simple: Read “Founding Finance: How Debt, Speculation, Foreclosures, Protests, and Crackdowns Made Us a Nation” (Available on Amazon here.) That story is not as nice as Saylor seems to want you to believe.

“And in the war for the future of money, the war is going to be won with money. Right? At the end of the day, Bitcoin is capital. Who is going to actually decide who is a winner and a loser?”

Holy shit! He actually uses “war” as his metaphor for the “future of money.” Damn, he makes my case for me!

Please think this trough: How are we going to fund a war over the future of money? How, exactly, is a war provoked by the failure of fiat money going to be funded with that same failed fiat money?

[W]ho do you trust more as a custodian? FTX or Fidelity? Right? Or Vanguard. Or State Street. Right? And if you walked down the street and you said would you put all your family’s money in an offshore entity without a headquarters run by five dudes without an auditor. Or would you put it with a bank that’s too big to fail in the U.S.?

So, “too big to fail” is now a business model to which we should trust our family’s money? Do you really think we’re this damn stupid?

How about neither? Or maybe just me? This is the most abjectly dishonest part of this whole discussion. The idea of “self custody” means I have my Bitcoin on a device much like a USB stick. It is not “deposited” with “… an offshore entity without a headquarters run by five dudes.” If I want to convert it to USD, I can transfer it into an account on an exchange, spend it, and call it a day.

At the end of the day you have an “O.G.” crypto community [I had to look this up. O.G. apparently means “Original Gangster”] that’s very hard core about it. But, if you look at where all the money is - 99.9% of the money - is actually in the traditional economy.

So, Bitcoin is not “money?” Paging Satoshi Nakamoto! Somehow I think “he” would disagree!

For God’s sake, the “economy” is what ordinary people do with money over time. There is no such thing as the “traditional economy.” There is the economy of the ruling class who skim rents off of every transaction. And then there is the economy of people who actually make things for a living. There is an economy built on rents. And then there is an economy where wealth is created when people use these things God gave us called hands and take the raw materials of the earth and make useful things. Saylor has shown us which economy pays his bills. And it is clearly not the economy we have built with our own hands!

So the assets moving from private to public hands and moving into regulated entities - it does a bunch of things. It decreases the volatility. It decreases the risk of loss.

Wait, what?

Do you mean “publicly traded hands?” These “regulated entities” are regulated by what? Oh, that’s right, by the Federal Reserve! So you want us to custody our crypto within the Federal Reserve System? Because it “decreases volatility [and] the risk of loss[?]”

Folks, please understand that the Federal Reserve System has a “bank note.” Pull out a dollar bill from your wallet - whatever the denomination - and look at the top. It says “Federal Reserve Note.” The U.S. Dollar is the Federal Reserve Note. They are one in the same. And the degree to which the Federal Reserve creates money out of thin air is the degree to which they subtract from your purchasing power so the government can continue to borrow in the service of maintaining global hegemony.

If there is “volatility” in the USD price of Bitcoin, that volatility is an indictment of the USD, not Bitcoin. And the risk of loss? Please. Loss of what? The USD value of your Bitcoin? Or the loss you see everyday in your shopping cart as you get less and less for your USD salary?

Bottom line, up front: In Saylor’s world you must value your Bitcoin in USD - meaning the Federal Reserve System’s banknote. And you thought Bitcoin freed you from “counterparty risk?” If you value your Bitcoin in USD, the Federal Reserve System is your counterparty!

So, normally, the risk is greater when there are unregulated private entities that are perceived to be holding the asset. When you have regulated public entities like Blackrock and Fidelity and JP Morgan and State Street Bank holding the asset… well, all the lawmakers and all the law enforcement arms, they’re invested in those entities, right? So there’s no way that all the Senators and Congressmen are going to seize the asset from Fidelity and Blackrock or Vanguard because that’s where all their retirement money is invested.

So, here’s how this works, y’all. We’re supposed to be OK storing the value of our labor in the same place the ruling class stores the value of the rents they skim off the top of our labor. Just stop and think about that for a moment.

We’re supposed to believe that the ruling class is just as dependent on the same institutions as the rest of us.

Dude (that would be you, Michael Saylor): There are real people out here who do real work, but who do not own real assets. You do know what that means, right? It means they have nothing but the work of their hands to earn an income. You and I - we have at least the house we own. Maybe we have other assets that are managed by people like you. You do get it, Right? We are not all there is of America!

And since 1971 we have been systematically raped of the value of our labor. When do we finally say enough is enough?

And finally:

No I think its the opposite. I think when Bitcoin is held by a bunch of crypto anarchists who aren’t regulated entities, who don’t acknowledge government, or don’t acknowledge taxes, or don’t acknowledge reporting requirements, that increases the risk of seizure.

[CORRECTION: Below I originally referred to John Locke as a Scotsman. I had confused him for Adam Smith, who was Scottish. Smith’s quote from Wealth of Nations most salient to this - and all discussions concerning money and crypto - was “The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable.”

“… a bunch of crypto anarchists who aren’t regulated entities.” You mean your neighbors who mow you damn lawn for you. The problem isn’t that we “…don’t acknowledge government..” The problem is we aren’t Statists. That means we believe the authority to govern arises from the consent of the governed. It means our beliefs about government come to us from John Locke rather than Thomas Hobbes - whose writing informed a certain American Founding Father named Thomas Jefferson.

You do remember him? Right?

It’s not that we don’t acknowledge taxes. It means that we acknowledge our American tradition of taxation, where we account for our income and make an offer to the government as to what we honestly believe we owe - rather than being dictated to from on high. You do understand, Mr. Saylor, what we call this, right?

The word you’re looking for right now is “freedom.”