Two powerful and diametrically opposed forces are shaping the economy.
On the one hand is inflationary economic policy, which keeps the price of assets like real estate and stocks rising ever higher, but at the expense of savings as the value of currency depreciates.
On the other is technology-wrought deflation. As technology increases its capacity exponentially, it causes everything it touches to be less expensive.
Jeff Booth is the author of “The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future.” In this conversation, he and NLW discuss:
How today’s system came to be designed
Why policy makers are terrified of deflation
Why inflationary policy punishes savers and forces them into riskier markets
How policy that prioritizes asset holders over savers has significantly exacerbated inequality
Why each dollar of debt is producing less real economic growth than ever before
Why proposed “solutions” like MMT and UBI paper over the root causes of the problem
There is a shared sense that the world has shifted. Now begins the messy work of figuring out what it means for the future we’re headed into.
This live episode of The Breakdown podcast, recorded during Consensus: Distributed with NLW, features four conversations about how the future is shifting before our very eyes.
How We Game and Entertain Now - featuring Kathleen Breitman, co-founder of Tezos and founder of blockchain game studio Coase
How We Identity Now - featuring Muneeb Ali, CEO of Blockstack
How We Bank Now - featuring Caitlin Long, founder and CEO of Avanti Financial Group
How We Event Now - featuring CoinDesk’s Joon Ian Wong
Last week, investing legend Paul Tudor Jones rocked the world of crypto and traditional markets with his full throated entrance into the bitcoin market via his latest letter to Tudor BVI investors.
While the headlines (and the quick price bump on the back of FOMO buying) were great, the story is even more interesting than the soundbite.
In this episode, NLW breaks down Paul Tudor Jones complete case for bitcoin, looking at:
The context and previous attitudes towards bitcoin of both authors of the letter
The “Great Monetary Inflation” thesis driving a focus on stores of value
How money supply growth compared to real economic output growth hasn’t been this out of sync since inflationary periods in the 1970s and 1980s
The “Inflation Race” - a list of 8 potential inflation hedges
The four categories by which a store of value can be judged: purchasing power, trustworthiness, liquidity, portability
A ranked look at bitcoin, gold, fiat, and financial assets in the context of those four categories.
Although some believe bitcoin mining is a wasteful activity, on today's show we dig into the relative world of constant fuel production, lumpy demand and bitcoin based load balancing.
After years of bitcoin mining domination by china-based miners, some US power producers, both professional and incidental, are beginning to get into the game as a way to be more green. It's a narrative reversal if ever we've seen one and if proven successful by the early players could change the bitcoin mining landscape as we know it.
But even without a "Green Bitcoin" narrative in the US, one of China's two major mining advantages has evaporated as Moores Law stretches out the useful lifespan of modern bitcoin miners hardware.
Correction: Before installing miners, Greenidge Generation previously shut down during off-peak season, during the episode Adam incorrectly stated that it previously shut down during off-peak hours.
Today's episode features Andreas M. Antonopoulos, Stephanie Murphy, Jonathan Mohan and Adam B. Levine
This episode features music by Jared Rubens and Gurty Beats. Today's show is edited by Jonas, and sponsored by eToro.com
CoinDesk reporter Leigh Cuen is joined by attorney Preston Byrne, a partner at the Washington, D.C. office of Anderson Kill, to talk about fraud and constitutional rights.
“There is really very little difference, at least in the point of origin...whether something is a scam,” Byrne said, regarding inaccurate blogs and representations of software projects. “Take Ethereum, for example. Ethereum had all manner of promises that were made...the statements coming from the Ethereum Foundation were somewhat more measured.”
Regardless of whether any particular project is an attempt at fraud, it’s likely that online money schemes of every variety will become more common during this coronavirus crisis. According to Thomas Papageorge, head of the Consumer Protection Unit at the San Diego District Attorney’s office, there’s a “clear pattern” of more white-collar crimes since the recession began.
“The rate of incidents, the amount of fraud, does increase dramatically during an emergency situation like this,” Papageorge said. “I’ve heard about new types of scams that involve cryptocurrency … investment scams and bogus advice about protecting your savings or bitcoin.”
Bitcoin evangelist Andreas Antonopoulos tweeted that fraudsters were impersonating him to offer unemployed people fake jobs, identity thieves looking for personal information. Likewise, CoinDesk impersonators are also targeting people across the sector.
According to Carnegie Mellon University economics professor Sevin Yeltekin, the financial stressors people are experiencing today make them “more vulnerable to those scams.” However, there is a silver lining, she said, because businesses that survive the current recession will do so because they reimagined how they operate, including “risk management.”
Even tech-savvy people like Lisa Gus, startup investment lead at the Government Blockchain Association and co-founder of the startup WishKnish, can be vulnerable to fraudsters in such stressful times. Gus said she spent several weeks being led on by a scammer impersonating a Binance employee, before her startup’s security solution MetaCert identified a phishing domain behind the fraudster’s email account, support@communitybinance.org.
“About LinkedIn, I’m not the only one being inundated with fake [investment] offers...the amount of propositions I’ve been getting (is up),” Gus said. “Especially for larger companies, it’s impossible to track profiles that are associated with them.”
With regards to this instance, a LinkedIn spokesperson recommended members “take precautions” in these trying times and “report any messages or postings they believe are scams to us so we can investigate."
Larger companies often charge early stage blockchain projects for working together, whether it’s cited as marketing costs or listing fees. In Gus’s case, the fraudster had due diligence paperwork and non-disclosure contracts, which made the scammer’s request for a bitcoin deposit less suspicious.
As for retail users, ShapeShift CEO Erik Voorhees has “definitely seen more phishing attempts” since early March. Likewise, a Binance spokesperson said so far in 2020 the company saw an average of 180 scam reports per month, which dwarf the unreported instances. So the exchange offers a public verification tool to check whether websites, phone numbers, emails, Telegram and WeChat handles are actually affiliated with Binance.
That’s why the blockchain explorer Etherscan launched the “EthProtect” program in April, to tag wallet addresses reportedly used for fraud. Etherscan CEO Matthew Tan said the company uses internal “circuit breakers” to minimize false positives and aims to provide users with “actionable data” to make “informed choices” about who they transact with.
As for the attorney Byrne, he said in some cases cryptocurrency projects may run afoul of consumer protection issues, even if they are not considered unregistered securities or frauds.
“There’s a range of representations of things, what you can say about things, that aren’t necessarily true but aren’t fraudulent,” he said.
The fact is, cryptocurrency now exists. People will use it unethically, the same way they do with all other forms of money. But there are lawful and constructive ways to use the technology as well.
“You can operate a bitcoin business in a regulatory compliant fashion,” Byrne said. “However, it requires a lot of work and advice and design to do that correctly.”
Want more? Read my article about how the University of New Hampshire Law School is capitalizing on demand for blockchain expertise in the legal industry.
“Some of the greatest theorists about money…thought it better to be multiple competing currencies rather than a single global standards, and there were plenty of periods in history where that was the case. Standardization of money came relatively late to the world. One of the lessons of history is that with globalization comes a tendency for a particular currency to become the number one dominant currency for transactions, for trade, for international reserves. A great question to ask is: globalization enters this phase of crisis: will there be some other transition from the dollar to another currency? Or could we see a reversion to a multipolar, multi currency world?” - Niall Ferguson
On the first episode of Money Reimagined, we looked at the strange paradox of the US dollar. On the one hand, massive stimulus fueled by money printer go brrr should suggest for inflation. At the same time, however, there is no denying that the dollar is stronger than ever, rising in value compared to other currencies in spite of that inflation potential.
There is a sense among many, however, that this strength is relative, temporary, and above all, unsustainable. In a world where a global dollar based monetary system does not serve the interest of the world, what replaces it?
This episode is about the sovereign contenders - in other words, the currencies that would work through existing power structures and paradigms, but replace the dollar with something else.
We look first at the Euro. Created in the wake of the Cold War to bind a newly reborn Europe in shared identity and economic destiny, it entered the COVID-19 crisis in a beleaguered state. Brexit had taken the most valuable economy out of the union and flagging economies within it created significant fragility. What’s more, Europe simply doesn’t have the monetary tools available to a country like the United States. Peter Zeihan, the geopolitical strategist and author of Disunited Nations, explained it like this:
“There’s nothing that the Europeans can do in terms of stimulus spending without raising debt. Even if they decided to do something like QE - which last time took years - they would now have to have the debate over who gets how much. The Europeans are having a hard time raising the capital necessary for dealing with this crisis, whereas the US can just flip a switch.”
CoinDesk’s Chief Content Officer Michael Casey pointed out that the EU is also dealing with questions of political validity, with COVID-19 exacerbating a fundamental issue.
“The capacity of the EU to act in unison and the common interest the EU is supposed to represent kind of fell apart. All of a sudden, borders got shutdown and it was each nation to him or herself. So the EU’s validity to manage this has been challenged. COVID is a force for decentralizing power. From a currency perspective, the value of these currencies are political questions. Therefore the EU’s political validity is being questions right now. I’m not sure that’s going to be a very positive environment for the Euro.”
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The next contender profiled is the Libra project. While much of the initial conversation about the Libra focused on the past transgressions and potential political illegitimacy of its founding organization of Facebook, for economists and system thinkers, the most powerful idea contained in the project was the idea of a global currency standard backed by a basket of the world’s fiat rather than pegged to any single currency. In many ways, this harkened back to John Maynard Keynes’ Bretton Woods proposal for a bancor - separate from the individual currencies of nations around the world. Indeed, in many ways, the most interesting impact of Libra initially was getting global central bankers like Mark Carney to propose their own ‘synthetic hegemonic currencies.’
Finally, we look at China’s digital currency or DCEP. Is it an unbelievable surveillance honeypot? An attempt to front run the West on a key technological innovation? A method of extending economic spheres of influence? Or is it all of the above?
The bitcoin halving is just a few days away and the growing excitement is palpable. On this episode of The Breakdown, NLW argues that the excitement is also legitimate, and looks at nine reasons why bitcoin has never been stronger going into one of its every-four-year issuance reductions:
Price
Hash rate
Mining competition
Accessibility and Services
Infrastructure
Institutional awareness and participation
Narrative relevance
Perceived and real resilience
Lindy effects
Oh, and let’s not forget. Paul Tudor Jones just disclosed that he is invested in bitcoin and sees it as a hedge against ‘great monetary inflation’
