How Bitcoin Could Be the End of the IMF
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How Bitcoin Could Be the End of the IMF

Critics of the IMF say the fund does more harm than good. Some Bitcoin maximalists say they have an answer.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Bitcoin is becoming an international monetary force, borderless and leaderless. As such, it can counter other, more established financial forces. By understanding why they even exist, all the pieces of the puzzle fall into place.

Wrong Lessons Adopted from the Great Depression

The validity of any theoretical framework can be judged by its predictive power. You may be aware that our entire economic reality stems from Keynesian economics, but not many are aware of its big predictive blunders just as it emerged on the scene as the dominant economic framework.

John Bernard Keynes became a monetary star as an autopsy economist regarding the Great Depression. His solution to prevent it from ever happening again is followed to this day – the economy must be centrally managed to remain stable. You may have noticed that everything – from politics to the stock market – is drastically influenced by a central committee – the Federal Reserve.

It has been completely normalized to closely examine every word uttered by the Fed’s Chairs. Its moves then become “signals” for market players to receive and react accordingly. Just recently, the Fed put forward a signal when it announced the selling of corporate bonds.

Keynesian Failure to Perform

It is now broadly accepted that governments must increase their spending to create growth and manage inflation and unemployment. Within the Keynesian theory, economy has no inherent mechanism to adapt on its own. However, one Keynesian prediction for the post-WWII era was another great depression due to the demobilization of millions of personnel involved with the war effort.

At the time, top Keynesian economists held a firm belief that such a sudden influx would spike double-digit unemployment which would destabilize the economy because it can’t adjust on its own. Unfortunately for the reputation of the Keynesians, nothing of the sort happened. It took until September 1982, after decades of massive government spending sprees, for the unemployment rate to enter a double-digit range.

Source: U.S. Bureau of Labor Statistics

When that prediction didn’t pan out, Keynesians resorted to “pent-up demand” as an alternative explanation. In other words, consumer spending had compensated for the lack of government spending. However, that too didn’t make any sense. When you look at the numbers, by 1947, government spending fell by 75% at the same time as federal tax revenue only dropped by 11%.

Therefore, both pent-up demand and unemployment invalidated the critical aspects of Keynesian theory at the onset. And that is just one of its predictive validation failures. Unfortunately, facts don’t matter when central control gears have already been put in motion – setting up the International Monetary Fund (IMF) in 1944 – explicitly based on Keynesian economic musings.

From Keynes to Modern Monetary Theory (MMT) to IMF Crashing Countries’ Economies

Constant disruption of market signals, centralized micro-corrections and the funneling of tax money into government spending has inevitably led to the current state of affairs:

  • Unprecedented consolidation and concentration of corporate power, directly or indirectly subsidized by tax money.
  • Fusion of governmental and corporate power, the latter accepted as superior central managers.
  • National debt that is so enormous that it is not worth pondering anymore.
  • Emergence of MMT to cope with the debt – it’s just untaxed spending that is not problematic as long as the nation has sovereign control over its currency.

When the United States embarked on this project of hyper-centralization, the IMF was established as a stabilizer of currency exchange rates during the Bretton Woods period that lasted until 1971 when President Nixon abolished the gold standard. A more direct way to look at its mission is that the IMF subsidized American surplus capital in foreign markets.  

Since then, the IMF has become an international debtor for developing low-income nations. Its lending budget comes largely from member quotas, currently filled up to $1 trillion.

source: imf.org

Contrary to its stated goal, wherever the IMF exerts its lending influence, it tends to leave behind indebted and impoverished nations. In reality, there is limited evidence to be found that IMF leaves nations in a better state.

Just look at the contextual details of a recent IMF proposal. The IMF offered Belarus a loan of $940 million, under the condition that the country enacts certain measures to “fight the pandemic”:

  • Implement mask-wearing, which some studies now suggest have a very limited benefit.
  • Implement lockdowns and curfews, for which there is legitimate evidence suggesting such measures cause much more harm than good.

Belarus’ President ultimately refused the IMF’s offer.

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Bitcoin as an Escape from Dystopia?

To no one’s surprise, when El Salvador announced its ground-breaking legislation to make Bitcoin legal tender, the IMF was displeased.

IMF spokesman Gerry Rice said,

“Adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis.”

Indeed, those issues relate to Bitcoin going contra IMF’s version of stability, which some have argued look like crashing economies, to then buy their debt. Instead, Bitcoin is about deflationary growth.

Max Keiser, well-known Bitcoin maximalist, investor and entrepreneur, already percolated an idea of founding a Bitcoin-based $1 billion lending facility to counter the IMF’s stranglehold on international lending.

Given that Bitcoin has become a target of what many consider to be ‘questionable’ environmental concerns, Keiser further suggested that El Salvador could issue Bitcoin Mining Backed Volcano Bonds (BMBVB). This refers to the nation’s energy output composition, of which 25% comes from geothermal sources.

This may come to fruition sooner than some may have expected, as President Nayib Bukele already instructed the country’s geothermal company to plan for green Bitcoin mining operations.

One is left to wonder whether or not Michael Saylor has seen this all along. Through various entities, Saylor has acquired 111,000 BTC. Through MicroStrategy, a major aspect of his business model has included leveraging Bitcoin against monetary inflation. Could he also be preparing for the IMF to be ousted from the international debtor scene?

How do you see the future of the IMF playing out? We’d love to hear from you in the comments below.

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