Why ripple could become the next hit instead of bitcoin? This can be described for the following reasons.
- Key currency countries that use currency such as dollars will never be able to tolerate decentralized electronic currency such as bitcoin.
- From the beginning, ripple was designed with the purpose of combining centralized currency with the profit of financial vested rights.
To sum it up in a sentence, "if bitcoin is gold then ripple is dollar."
Why is it that bitcoin has already shown a steady increase, and yet it is an area in which many are unfamiliar with and areunable to analyze the potential price of bitcoin in the future. Similar to the chaos theory, in which the flapping of a butterfly's wings in China can cause a hurricane in the United States, no one is able to predict the future and its numerous variables.
However, if you shift your gaze and focus on the structure of our current society, and analyze the psychology of those who possess financial power in it, then you'll be able to predict probable scenarios to some extent.
Ten years ago, the Japanese economy was plagued by the "Lost Decade" otherwise known as "the lost 20 years", and there were many negative articles released in the newspaper. Nevertheless, during that time Wall Street investors who were considered legends, invested large sums of money into the Japanese stock market. What led them to make this decision?
This is due to the fact that they predicted the success of Abe Shinzo's administration and policy. When they witnessed his promise to print Japanese yen by using rotary printing presses, it was obvious that he would practice quantitative easing and promote his policy to artificially raise Japanese stock prices. This can be reasonably predicted through human intelligence, instead of turning to public madness.
What I am about to explain from now on, is purely hypothetical and is in no way a recommendation for investment. However, in my opinion ripple has a likelihood of increasing thousands or tens of thousands of times in the future rather than only ten to twenty times. This is because unlike bitcoin, ripple has the possibility to become globally accepted as legal currency. From the perspective of all national governments or holders of financial vested rights, making ripple the most popular form of currency would be the most surefire way to prevent other unacceptable forms of decentralized electronic currencies from being used.
They will never be able to accept the use of electronic currency. Not including governments like Venezuela who face severe bankruptcy, it is normal for politicians in other countries to have the mindset that electronic currency can't be tolerated.
The core of blockchain technology, such as bitcoin does not depend on a fixed center. This means that it is similar to the return of the gold standard, which owners of financial vested rights hate the most, and the loss of currency issuing authority, which is the state's main source of power. In this analogy, we can imagine that the number of bitcoins is at a fixed amount and individuals can unlock it through mining. In this case, the state would lose all source of power over currency and this power would be given back to the private sector. In other words, paying public officials' salaries or issuing national policies becomes much more difficult. The only way for the state to properly operate its finances is to charge taxes on peoples' physical labor. Just like in the middle age kingdoms, in order to receive rice or labor-roles, the government must enact the gold standard and secure tax amount from the labor force equivalent to that of the fixed value of money. Although this may sound ideal at first, the government will not be able to control policy over currency and therefore is unable to supply liquidity to the market.
The amount of bitcoin is limited. It is fact that bitcoin replaces legal currency and therefore implies a reappearance of the gold standard. Moreover, there is no possibility that more gold mines will be discovered in new continents as during the Age of Exploration which caused inflation. This means that inflation will completely disappear.
The modern economic system can’t be maintained without 3% of annual growth. The state seems to hate inflation and consequently tries to regulate it, but in truth the government is much more afraid of an economy without any growth which is likely in today’s low-growth economic era. This is why the state advocates increased birth-rates to combat the issue of oversupply and low-growth economics that we suffer from in our present day and age.
As a lawyer, I’m aware of what a terrible issue oversupply can be. When I decided to become a lawyer there was much talk that my job was not as hyped about as it was before. However, at the time the bottom line salary after tax for new lawyers was five million won. This still benefitted many people as those with poor grades in the Judicial Research Training Institute, still received these kinds of salaries from small law firms. Conversely, as more lawyers started pouring out into the market I watched the bottom line salaries rapidly collapse in just three to four years. No matter how hard you study, you can’t win against oversupply.
This problem does not only exist in the legal area. There are few high-quality jobs around the world, and it’s easy to hear complaints that it’s hard to find a job even if you graduated from a good university. This can all be brought back to the global phenomenon of little to no demand for oversupply. The number of ships that travel around the world’s oceans has now been significantly reduced when compared to a long time ago. Recession and bankruptcy of shipping and shipbuilding industries are inevitable. With no importance to how high-quality my products are, my inventory will stack if there are no people that want to buy them.
In the past 10 years, China has grown to become a major country of consumption and has somehow managed to maintain its reputation. That’s why there was an issue of Economist with China on the cover as the savior of capitalism. Yet now China is also seeing its limitations. Construction companies in China build apartments which house absolutely no residents. Once the work runs out, the workers will be fired, and the companies know that if their credit rating goes down it will be difficult to secure liquidity and therefore won’t be sold. This causes them to keep building more properties elsewhere. However, this downward economic trend can also be seen in other areas besides just construction.
Our current era of oversupply is similar to that of the 2nd World War. During that time, the newly industrialized countries such as Germany and Japan didn’t have colonies to sell the products that they produced to, and so war broke out. Still our current society is different. Unlike the 2nd World War, we do not currently use the gold standard, but instead we use legal currency based on credit. The policy of quantitative easing can be compared to drug usage. The government has endured by making bubbles and desperately providing liquidity after reduction. The sole purpose of releasing money is to make companies invest and to make people take out loans to buy houses or other products. The abundance that we enjoy is the product of such rich liquidity. The world economy was shaken when Janet Yellen proposed the idea of if “the US should raise interest rates or not.”
Once again repeating myself, bitcoin replaces standard currency and brings back the reissuance of the gold standard. Previously used tactics such as lowering interest rates or artificially boosting economic policies won’t be able to be used anymore. This equivalently renders all of Keynes’ brilliant theories which are taught in economy majors to nothing.
If you thought bitcoin was bad enough until now, you’ll be surprised to find out that it in fact it is just the opposite. Strictly speaking, the policy to supply liquidity to the market through small financial vested rights threatens the idea of national power. Famous economist, Thomas Piketty, says that the current labor force can no longer defeat its capital. Why is that? During the gold standard, the value of personal labor did not change because it was estimated in gold. In other words, it was also possible to make a reversal of wealth by increasing the value of one’s own efforts, because the rate of pay increases by raising the value of one’s own labor force and therefore the rate of capital income is indifferent to one more capital income. Unfortunately, times have changed. Briefly speaking, if the state supplies liquidity to the market and the amount of money on the market increases by a tenfold, then workers’ salaries actually decrease by a fifth even if the salary is doubled.
Let’s assume that the Bank of Korea has just printed 100 million new won, and supplies this to commercial banks. If the bank’s reserve ratio is 10%, this 1 billion won will instantly become 100 million won and spread to the market. If a major commercial bank lends money to a second financial institution and the second financial institution lends money to the private sector, then the 1 billion will quickly become several 100 billion won. In other words, the fundamental value of money instantly drops.
If monthly salary stays the same, but supply of large sums of money is put into the market so that the value of currency drops, deception is caused about the cost of labor and fools people into believing in the value of money and its consumption. There is a reason why companies who got loans from banks and went to gap investments made more money than companies who just worked hard over the past few years. The value of money continues to decrease, but because the quantity of real estate on the market is limited, it is natural that the nominal value of the asset will continue to rise.
In other words, if a person with an annual salary of 30 million won gets a loan to buy an apartment, then a strange phenomenon occurs where the value of the person’s asset will increase faster than a person with an annual salary of 1 billion won per year. Since it was easy for the person with an annual salary of only 30 million won to get a loan from their credit to earn money, then how about someone who originally has enough capital income? This is the reason why we can’t beat property owners even if we currently work extremely hard.
Bitcoin was created to justify the cost of labor provided by workers in our current deformed economic structure, regardless of how deteriorated it is now.
So can the US and other financial powers learn to tolerate bitcoin and recognize it as a replacement for legal currency?
Key currency countries which use globally recognized currencies, like the US receive unimaginable seigniorage and benefits. They can buy anything from all over the world by printing dollars with mortgage on national credit. If money is printed without a set limitation, the currency has to decrease through hyper-inflation (shown in cases such as Zimbabwe), but Henry Kissinger, the best strategist of the 20th century, secretly made a deal with Middle Eastern countries. He made it so that all of the oil had to be paid with dollars so that value would never drop even if lots of dollars were printed. In this way America became a country in which people could live comfortably while printing money, even if they took away manufacturing from Japan, Germany, and Korea.
The inconvenience that people experience when their income is reduced spans from an incredible 10 to 5 million won! Even if individuals feel this inconvenience, would the US aka the biggest consuming country in the world, really give up its seigniorage?
The US will never be able to tolerate bitcoin. The US previously suffered some defeats in physical war, but never in economical war. They will hire their top researchers to find a strategy that will get rid of bitcoin once and for all, and they will continue to act just as carefully as always.
So how will they accomplish this? I believe the highest possibility is that the US will keep bitcoin in check by raising the value of ripple as centralized electronic currency. Western banks are now actively supporting ripple. Even the Wall Street investors, who are annoyed with bitcoin, don’t like ripple. Lately, Ben Bernanke, who is renowned for his helicopter money speech and is an avid advocate of quantitative-easing, attended the ripple technology demonstration.
Ripple was designed from the beginning, with the purpose to become a currency that supports the benefits of financial vested rights.
Wall Street, which is a powerful stakeholder in the US dollar, also doesn’t have any nice things to say about bitcoin. Will the greatest beneficiaries of the money printing business give up their profits and gladly go back to the gold standard where their currency power will be taken away?
However, what might surprise you is how difficult it is to actually control the price increase of bitcoin. The United States is a superficial democratic country, so they can’t outlaw bitcoin. Some people could assume that bitcoin was listed on the future exchange as a means of short selling, but now bitcoin’s market capitalization is enormous. Additionally, there have been several times in the past where percent profit could be witnessed after a price slump had occurred. If something goes wrong, it could be the worst short covering in history and it may even lead to the collapse of the dollar.
Furthermore, bitcoin is not the only decentralized electronic currency. It is impossible to completely eliminate blockchain technology even by a power of financial domination, and it becomes more difficult to stop the distribution of various types of electronic currencies all at once. Already in cases such as Monero, drug rings in Latin American use this method for illegal business. It already entered a field in which it is impossible to ban legally.
The US was able to stabilize the value of dollars by dropping the price of gold and silver. They were able to do this because they had the most amount of gold. However, unlike gold and silver, most electronic currency is held by civilian. This makes it much more difficult to decrease the value of bitcoin when compared to dropping the price of gold.
Then what is the easiest way?
This would be electronic currency, but it is fact that making electronic currency is essentially similar to that of making credit currency.
The answer is ripple.
Once again emphasizing, that is bitcoin is gold than ripple is dollar.
Ripple Inc. can solely be held responsible for ripple’s token issue. Unlike other electronic currencies that distribute risk through algorithms, they use an operating entity. This means that the operator of ripple can act as a central bank.
Moreover, since the mining of ripple is already over it impossible for an individual to mine anymore. How many ripples have been mined? A whopping 100 billion XRP! This corresponds to twenty times as much bitcoin that has been accumulated as of late.
Why did they decide to do it in this way? Did they issue a lot of ripple without calculating?
I don’t think so.
The astronomical quantity has been released as a deliberate use of calculation. In the electronic currency era, it will enable monetary policy such as quantitative easing in conjunction with the maintenance of the state’s monetary power and individuals’ financial vested rights. Not long ago, the operator of ripple locked up half of the ripple released onto the market through escrow, and artificially raised the price of ripple.
Doesn’t that sound familiar to something we’ve heard before?
The policy of the commonly known central bank is to raise interest rates and reclaim liquidity in the same way that ripple does, as opposed to bitcoin. The escrow lockup of ripple will progress and the quantity of ripple will continue to decline; unlike electronic currency which is gradually distributed to the market. In contrast, the price of ripple will continue to rise. On the outside, it may appear that the supply is decreasing and that the price is rising. However, if my hypothesis is correct, then the increase of price in ripple will be more official and organized. This is all so that ripple can overtake bitcoin.
So whom does the reduced ripple go to?
Alles ripples are taken by the operator. If this person is owned by a country, then the central bank of that country will be the overall owner of the ripple. By raising the price of ripple through market capitalization, and reducing the quantity, the operator of ripple can easily acquire several tens of hundreds of units.
The most important part comes now. If the amount of ripple is reduced, and most of the ripple is handled by a central back, then we will quickly be reverting back to the use of financial policy on the market as we do while using the dollar. We can supply liquidity to the market by releasing leftover ripple to try to boost the economy, or we can recover it by taking out a loan.
Most ripple is not released to the general market, but its ownership belongs to the central bank. This means that the state can maintain its large amount of wealth through market manipulation without having to rely on taxes or labor.
If you reduce the number of ripple to 100 billion and make most of the transactions into decimal units, and let monetary economy run by only 1 billion ripples, what fears does the country have who has the rest of the 99 billion ripples? This is the surest method in which a country monopolizes its financial power easier than in the petrodollar era, which doesn’t get their power taken away on the market in a block-chain era.
When the US finds a reasonable time, they will partially ban bitcoin because it can be exploited for spreading of crime (as we have already discussed the US is a superficial democratic country). Simultaneously, companies such as Amazon will allow individuals to use ripple as a currency during online transactions, overall giving it the same status as the current legal currency.
Ripple operators already own a significant amount of shares in Wall Street capital, including Google’s founding company – Alphabet. Is this correct or does something seem a little off?
Of course, the US may directly issue electronic currency such as bitdollar. However, fundamentally speaking, electronic currency is born from the fact that it returns the issuing authority subordinate to the nation and the market, so the bitdollar will likely bring much public resistance. On the other hand, ripple is the fourth largest electronic currency in market capitalization.
Although this is once again merely a hypothesis, it is quite obvious that if the US decides to fund electronic currency than it will be in the form of ripple while being centrally controlled. If so, it would be a much more probable scenario for the state to take over ripple, or to give it the status of a legal currency, rather than taking the risk of creating an entirely new one.