Part 4/11:
The Mechanics of Collateral and Credit
Livingston dissects the concept of credit as "borrowed future productivity," highlighting that leverage is fundamentally trust in collateral's future worth. The current system relies heavily on assets like government bonds and real estate, which are on shaky ground due to inflation and market distortions.
Bitcoin disrupts this hierarchy, replacing fragile collateral with an asset that is inherently trustworthy. Its auditability, global acceptance, and resistance to political meddling make it the ideal candidate to elevate the reliability of collateral. He points out how recent milestones—such as JP Morgan publicly accepting Bitcoin as collateral—signal a turning point, where traditional banks recognize Bitcoin's potential as a secure backing asset.