So, the Facebook Coin, the Libra, or whatever, I really don’t care, has brought a lot of attention to the crypto space. That’s cool. What’s not cool is that we, the American public (I do not really include me in this, I’m just pretending when I say “we” to be nice), are so easily swayed. Facebook says that the Libra is good, then, of course, Facebook said it, so it must be good. So, maybe all this crypto stuff is good, buy, buy, buy… Now, the Government (with a capital “G,” like in God) says the Libra is bad, and crypto is just for terrorists and drug dealers, basically baby killers and the like. So, maybe this crypto stuff is bad, sell, sell, sell.
First, the Libra coin, or whatever, was going to be a centralized stable-coin controlled by an institution, you know like the dollar. Most people that are involved in cryptocurrencies would not consider it a cryptocurrency. At best, it was going to be a token. My understanding was that it was going to be backed by the dollar and the Euro and a few other things, all of which are backed by, well, nothing. Maybe there were some precious metals in the mix, so that’s a real thing, right? What makes that a real thing? You can hold it, so it’s real. Gold is a precious metal, right? You can hold gold. Maybe we could back the Libra with gold and then it will be real, like the dollar. If you think the dollar is backed by gold, just stop reading.
Now, let’s pretend the Libra (and the dollar) would have been (is) backed by gold. That’s good, right? Sure, as long as we think gold has value. However, should someone or entity like Facebook, or the government, or Mr. Mnuchin (more on him later) tell us that gold is just used by terrorists and drug dealers, basically baby killers and the like, then, of course, it would have less value.
On a relevant side, … cryptocurrencies, briefly. I think someone recently said that cryptocurrencies are only backed by air. Now, I’m pretty sure that I would be ok, at least for a while, if you took all my gold away. However, if you took all my air away, well, think about it.
And, now … Mnuchin and protectionism. Recently Mr. Mnuchin, the 77th United States Secretary of the Treasury made a rambling speech that touched upon the Libra and, at times, cryptocurrency in general. Let’s talk about Mnuchin. Mr. Mnuchin was a Yale graduate who spent 17 years working for Goldman Sachs before founding a few hedge funds. For those of you who are interested, Goldman Sachs is a multinational investment firm and financial services company that after being a part of the cause of the subprime mortgage crisis of 2007-2008 was deemed to big to fail and was the recipient of a $10 Billion dollar investment (bail-out) from the United States Treasury. Soo, not cool. But, Mnuchin left Goldman Sachs in 2002, so he is still cool, right? I guess so. I mean he left to form hedge funds and hedge funds were partially to blame for the crisis, but without more research, I guess he gets a pass. However, he is clearly a part of the “current financial system.”
So, let’s say that Mnuchin was, instead, a basked weaver. He spent his whole life, together with his friends, weaving baskets by hand. The basketweavers are doing pretty good and start making donations to people in government that support basket weaving by hand. Eventually, some of them even take places in government that solidify their relationship with all that is good about patriotism and the current basket weaving way of life. Now, some cat comes up with a new way to make baskets, a better way. It’s all open-source, but the basketweavers think its nuts and discredit it. Maybe they even say that the new baskets are just for terrorists and drug dealers, basically baby killers and the like. So, most people stay away from the new baskets and stick to the traditional handmade baskets. However, ten years later, everyone starts to realize that these new baskets are pretty good. The handmade basket weavers realize that they were not forward-thinking enough and should have found a way to control the new basket industry a long time ago. However, they still control the government.
Got it?
Mr. Mnuchin said a few things in his speech that stink of protectionism and maintaining an industry that has been good to him (and his friends).
First, just funny stuff … “I will focus primarily on the serious concerns the Treasury has regarding the growing misuse of virtual currencies by money launderers, terrorist financiers, and other bad players.” Granted that cash is harder to carry, but also harder to track, which may be why black bags full of cash to tribal leaders and government officials in other countries “may” still be a thing. “Cryptocurrency such as Bitcoin had been exploited to support billions of dollars of illicit activity like cybercrime, tax evasion, extortion, ransomware, illicit drugs, human trafficking. Many players have attempted to use cryptocurrencies to fund their malign behavior.” Once again, I’m pretty sure cash has been used for the same purposes. “Bitcoin is highly volatile and based on thin air.” That’s where I heard that. Funny. I guess thin air might be harder to breathe, but it’s still better than no air.
And, now, protectionism … “We are concerned about the speculative nature of Bitcoin and will make sure that the U.S. financial system is protected from fraud.” Wow, he actually used the word “protected.” “That being said with respect to Facebook Libra and other developments in cryptocurrencies our overriding goal is to maintain the integrity of our financial system and protect it from abuse.” “Treasury takes very seriously the role of the U.S. dollar as the world’s reserve currency and we’ll continue our efforts to protect our country and secure the U.S. and global financial systems.” So, he is not talking about protecting you and me. He is talking about protecting a system that uses money and monetary regulation to control you and me and to pressure both our friends and enemies around the world.
If the Government or any government tells you that you need to be afraid of something its probably because they are afraid of something, or, it may be that the people that support them the most are afraid of something. Cryptocurrency, in some form, is the future of finance. The “Goldman Sachs” types throughout the Government are going to try to control it or try to delay it. But, it’s not something that is going to happen; it’s already happening. The old guard of the U.S. financial system is rightfully scared, but that does not mean that you need to be.
Thanks for stopping by.
Wednesday, July 17, 2019