The “New York Times” hosts a new intervention by Paul Krugman on croptocurrencies. This time the Nobel Prize does not address the issue from an economic point of view but from a political one. Um, maybe he's not as good at politics as he is at economics.
It is true: since their appearance, Bitcoins have established a close correlation with some cornerstones of a certain American political thought, the one that refers to libertarianism and the theories of the minimal state which has one of the cornerstones in the currency. In some ways, Bitcoins seem like the realization of these thinkers' theories. Basically power returns to the people and runs away from the control of institutions. It's kind of the dream of anarchists of all stripes.
Krugman, however, goes beyond this known and declared filiation, to glimpse a new karst alliance between the alt-right strategy and the American new right and what Bitcoin can represent for it. Basically the speech concerns the concept of trust in democratic institutions.
However questionable, and even partial, Krugman's speech deserves careful consideration whether it is rejected or shared.
THEINFATUATION WITH BITCOIN
Josh Mandel, a Trump supporter running in the Republican Senate primary in Ohio, tweeted his agenda: “Ohio must be a religious, family-supporting, Bitcoin-promoting state.” .
Indeed, there has long been a robust link between Bitcoin and the new right – evoking the historic one between the conservative world and gold. But today the infatuation with Bitcoin is even stronger than that with gold.
What is this phenomenon due to?
Now, the fact that many Bitcoin enthusiasts use them for extravagant speeches, in itself, does not mean that cryptocurrencies are a bad thing. People can support right causes for wrong reasons.
For example, I'm sure that many people accept the unanimous support of vaccine science not because they are convinced of the results of scientific research, but because they are fascinated by people in white coats who work in laboratories and who speak difficultly.
This is why it is important to understand the reasons behind the cult of cryptocurrencies.
DIGITAL MONEY IS ALREADY HERE!
First of all, a little economics.
I am constantly reminded that we live in a digital age and therefore we should use digital money. But we already do! Like many of you, I pay for most things with the click of a mouse, using a credit card or pressing a button on my phone. I used to keep a few dollar bills in my wallet to buy fruit and vegetables at the stalls that dot the sidewalks of New York, but now they accept too PayPal.
All these payments are based on trust: people accept credit cards like Apple Pay, VISA because underneath it is on a checking account guaranteed by the bank.
The purpose of Bitcoins, as stated in the "white paper" that established them in 2008, was precisely to eliminate that type of fiduciary guarantee: they would have validated payments using cryptographic methods - that is, through a string of code.
Bitcoins aimed to create a peer-to-pear payment system, totally independent of any third party financial brokerage.
WHY BITCOINS?
But why introduce such a thing? Maybe the banks are so trustless? I have attended many meetings where cryptocurrency skeptics have asked, in the most respectful way possible, for simple examples of things that can be acquired more effectively with cryptocurrencies than with other forms of payment. I still haven't received a single clear example that doesn't involve illegal activity – which can, to be honest, be carried out more easily if cryptocurrencies are used.
And the truth is, while Bitcoin has been around for a long time by internet standards – 13 years! – they and other cryptocurrencies have made very little progress as currencies, i.e. as means of exchange to purchase goods and services. The precise figures are not there, but it seems that a large proportion of cryptocurrency transactions involve speculative activities rather than the ordinary affairs of life.
WHAT ARE BITCOIN USED FOR?
However, Bitcoin and its competitors have now reached a market valuation of more than a trillion dollars. So, what goals are cryptocurrencies supposed to achieve?
One could be to find shelter from the erosion of wealth by the government. As noted in a recent Bloomberg article, some billionaires are buying cryptocurrencies in case the value of the money “goes up in smoke”.
In fact, there have been 57 hyperinflations in the world. However, all have occurred in the midst of political and social chaos. Now can anyone really think that in such a context one could go online and collect one's Bitcoins?
Then there is the FOMO – which stands for “fear of missing out”. Bitcoin has caught a kind of weakness in the market: it looks like something high-tech and futuristic, and at the same time it gives vent to some political paranoia.
Bitcoin's success has led many apolitical investors to descend into politics, and it has also caused public figures like Eric Adams, the new Mayor of New York, to promote Bitcoin because they imagine it makes them appear forward-thinking.
But these confused and incoherent logic inherent in Bitcoin will lead to the implosion of this technology? Not necessarily. After all, gold has stopped functioning as a medium of exchange for generations, but its value hasn't collapsed.
And we shouldn't underestimate either the importance of illegal activities. There are approximately $1.600 trillion in circulation in $100 bills which make up 80 percent of all US currency. It is very difficult for large denomination banknotes to be used by ordinary consumers. What do you think people are doing with all those "big bills"?
THE ALLIANCE BETWEEN BITCOIN AND THE RIGHT
But let's leave market forecasts aside and ask ourselves how can we explain the increasingly close alliance between Bitcoin and the new right that supports Trump and his agenda?
The answer, I would argue, is that Bitcoins aim to create a monetary and payment system that is independent of trust in an institution – and the modern right aims to promote distrust. Covid is a hoax; the elections have been snatched; California's forest fires have nothing to do with the climate, but were caused by Rothschild-controlled space lasers.
In this context it is perfectly natural for right-wing politicians to call for an end to a monetary system that runs through the banks – we all know who controls them, right? – and which is based on a currency that is linked to the institutional system. Even if there is no evidence of widespread monetary abuse, for the far right this is not very important.
The point, then, is that while there are real economic issues associated with cryptocurrencies, their growth has a lot to do with the crazy political environment more general that keeps American democracy on the edge of a precipice.
From: Paul Krugman The Strange Alliance of Crypto and MAGA Believers, The New York Times, January 10, 2022
