Bitcoin is beefing with the global financial mafia
Janet Yellen has been selected as Joe Biden’s Secretary of the Treasury. Let’s call a spade a spade — there is a deeply entrenched financial establishment, and it needs to go.
Janet Yellen has received millions of dollars in speaking fees since her time at the Fed. “Speaking fees”. Conflict of interest or not, this is the latest example of the rampant nepotism and technocracy that govern the world economy. Too many unelected officials have far too much power over our economic lives, and we need to take back our economic sovereignty.
Bitcoin offers a way out. I’m going to discuss three aspects of the global financial hegemony that are being challenged by cryptocurrency, and how we can (and perhaps should) modernise our entire financial system accordingly.
1. Credit: no banks = everyone’s a winner
Innovative financing solutions are not exactly brand new, and have made a name for themselves that is not yet tethered to crypto or Blockchain tech. Systems like Innovative Finance ISAs (IFISAs) here in the U.K. are enjoying some mainstream adoption, with an estimated inflow of £1bn between April 2016 and February 2020.
In the traditional model of credit, banks hold our money for us and lend it out, charging interest on loans and giving us a cut of that profit. With decentralised lending, we loan directly to borrowers. Without someone trying to make a buck in the middle, both borrowers and lenders benefit from improved interest rates.
Blockchain solutions abound here: smart contracts and oracle systems (think Ethereum + Chainlink) allow for automated and super-secure loaning protocols, and effective securitisation of collateral. Many IFISA platforms require large pools of capital to secure against defaults — if collateral can be locked into a smart contract through an oracle then this is not necessary.
Furthermore, crypto wallets are about as secure as you can get, and with innovative saving systems like Compound, maybe we can do away with old fashioned savings accounts altogether.
2. Microeconomics: free-flowing capital
We live in an age of demonetisation and deplatforming. Big Tech bullies like Google censor freely and decide whose content is “appropriate” for monetisation through advertising. If your views are deemed inappropriate by an institution made up of humans who are inherently and inescapably biased, your content is demonetised, or you are deplatformed entirely.
Furthermore, financial institutions such as PayPal, Visa, Stripe, and Patreon determine which financial channels are open, and to whom. This means that if people want to support individuals who represent their interests, and thus signal to the market, they are at the mercy of more inherently politically biased institutions. If we continue down this path, we could see the emergence of a Black Mirror-esque “social credit” system, with its arbitrators becoming almost omnipotent given the financialisation of our society.
Bitcoin offers us a totally decentralised payment system, meaning that anyone can receive funds from anyone. Although the unregulated movement of capital poses a host of its own problems, it does allow for a much better functioning market. It prevents unelected private entities from monopolising control over the flow of capital between individuals. This allows for a more truthful representation of people’s intentions in the market.
Money laundering and the funding of bad actors are serious issues here, however we must remember that these crimes predate the internet, let alone crypto. As mentioned in my last piece, major investment banks were last year implicated in $2 trillion’s worth of money laundering (double crypto’s entire market cap). And the Iran-Contra Affair is a stark reminder that nation states have a history of sponsoring terrorists and questionable regimes with ease, decades before cryptocurrencies were even dreamed of.
Are we to believe that the entities that regulate the flow of capital — “the good guys” — are squeaky clean in light of these revelations? If not, who are they to tell us who is allowed to receive money? This financial establishment, a cadre of bankers and politicians, has plenty of skeletons in its own closet. Maybe this is why they are so vehemently going after crypto.
3. Macroeconomics: money printing
Money printing involves central banks — the unelected private entities that control national money supplies — buying up assets and monetising debt with newly printed money. By temporarily averting crises with funds plucked out of thin air, fundamental problems are nudged further down the road, but not solved. The relative increase in the amount of currency in circulation does not accompany an increase in productivity, thus leading to inflation.
Bitcoin, the largest crypto by market cap and that which seems most poised to realistically challenge for a position as a reserve asset, has a finite supply. When all 21 million coins have been mined, there will be no more created. The dollar value of a Bitcoin may fluctuate, but its supply cannot become inflated. This has earned it the moniker “digital gold”. Due to the nature of Bitcoin’s supply, critics have said that a BTC-standard money supply would lead to deflation, due to a lack of money supply corresponding to increased productivity. This piece by Conner Brown, however, puts these concerns to bed, and is well worth a read. Bitcoin intends to do naturally what traditional monetary policy strives eternally towards: to cause neither inflation nor deflation.
Concluding remarks: towards cryptonomics?
Central banking stooges will argue that an unregulated monetary system is dangerous, or that cryptos are too volatile to be a reserve currency. Firstly, crypto’s volatility is highly correlated with its relatively small market cap and the fact that it is still very much in the early stages of its adoption curve. Stability is far more likely when holders have figured out their positions. As for the dangers of an unregulated economy — this statement assumes that the economy we see now is functional. It is not! Our economy is predicated on enormous government bailouts that prop up malfunctioning businesses and institutions, plans for trillion-dollar stimulus packages, and corrupt big players conducting dirty deals for bad people. So for all its potential flaws, is a crypto-based economy really any more risky than what we have now?
For more on risk asymmetry, please see Nassim Nicholas Taleb’s Medium series, “Incerto”.
