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Decentralization drives progress Stock news

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Remember the lessons of American history, and you may remember how you were taught the difference between federalism and anti-federalism.


On the one hand, there were the founding fathers of the Federalists, led by statesmen such as Alexander Hamilton and John Adams, who believed in a strong central government. On the other hand there were anti-federalists led by Patrick Henry with the fame “Give me freedom or give me death” who believed in a weak central government.


Today, almost 250 years later, we could think of this ideological split in terms of centralization – strong central government – versus decentralization – a more distributed system. In fact, I would go so far as to say that the push of these two forces is a great competition of our time.

And I believe that decentralization wins.

The global trend towards decentralization did intensify six years ago when the United Kingdom voted to leave the European Union. Brexit involved a redistribution of power from the bloated centralized power of Brussels and its return to London. Admittedly, the UK has faced a number of expected challenges since it officially left the EU in January 2020, including a decline in trade and foreign direct investment (FDI), but I believe these challenges will be smoothed out over time, and the country is stronger than that.


Russia and China are showing nonsense in extreme centralization



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The truth is that the world is a safer, richer and more transparent place when power is shared between more actors rather than fewer.


Consider what is happening in Eastern Europe. Russia’s efforts to seize Ukraine are a very centralized step that will ultimately fail. In the meantime, Moscow is paying the price for it tough international sanctions.


And then there is China. Tens of millions of people in Shanghai, Beijing and other cities have become prisoners in their homes because of the country’s broad policies without Covid. As of last week, every fifth container ship all over the world are waiting for a berth in a Chinese port, with the worst still ahead in terms of disruptions to the global supply chain, all because of the tough approach of the centralized Communist Party of China to contain the virus.


The economic and financial impact was significant. In Shanghai, shares were sold to two-year lows, and the country’s manufacturing industry, as measured by the Purchasing Managers ’Index (PMI), has shrunk over the past two months.



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What’s more, the Chinese yuan has just been one of the worst months against the U.S. dollar, falling 4.5% to its low.



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Thanks in large part to the actions of these two highly centralized countries, the world has the highest inflation rate in decades. In March, world food prices reached a new all-time high, dating back to 1961, which I’m sure everyone who reads this is experiencing.



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Progress is made possible by decentralization


Meanwhile, here in the US, decentralization still persists, even if it sometimes doesn’t seem to. This is thanks to founders such as Patrick Henry, who fought to include the Bill of Rights, which, as the name implies, gave certain freedoms to individuals and states that the federal government could not take away.


Americans also enjoy separation of powers as well as checks and balances, so no branch of government can make all the decisions. A good example of this type of decentralization in action was when a federal district court judge recently dismissed the White House masks a mandate for mass transitincluding commercial flights.


Last week I was in sunny but cool San Diego, attending and speaking at the 24th Annual Investment U Conference, sponsored by the Oxford Club, and flying there was the first during the pandemic that did not require passengers to wear a mask. As a person who had to wear a mask during a full 14-hour flight to Dubai last October, I am relieved that the U.S. is finally leaving the worst days of Covid.


But I’m not just talking for myself. While Chinese families are prohibited from going outside and grabbing food for a week, Americans are free to travel, gather, and do business in person. In addition, I believe that the lack of a mask will encourage more people to fly long distances, and this has been made possible by decentralization.


Bitcoin is the most American of all assets


Perhaps some of you have already guessed where I am going with this. In Investment U, I talked in detail about bitcoin, which, in my opinion, is a tough American asset that is imbued with everything that Patrick Henry advocated and more.


If he were alive today, Henry would be horrified to think that the Federal Reserve, the country’s central bank, has full power over monetary policy. Since 1913, when the Fed was formed, the dollar has only lost value, and the decline has accelerated even more in the decade after the gold standard.


Bitcoin is said to fix this. As a fully decentralized asset, it has no president, no CEO, no governor, no central bank, no board of directors. Like gold, bitcoin is the currency of choice for those who love freedom and private property, which, in my opinion, describes not only every American but every person, no matter where he lives. This includes even people in Russia and China.



Frank Holmes is CEO and Director of Investment US global investors.


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