So the Duke of Deceit wants to establish a "Strategic Bitcoin Reserve" and a "Digital Asset Stockpile." Since the US government is already one of the largest environmental offenders on Earth, this is completly in character. But it is far from clear exactly what "strategic" benefit will derive from this amassing of climate-busting ones and zeroes, other than boosting the "value" of the holdings of people who already own these cryptocurrencies. And after all, he is the president of that lot. So, again, in character.
The first and most important thing to remember about the current cryptocurrency craze is that all money everywhere has always been a matter of shared fictions. Even when money has been tied to a "precious" metal, still that depends on everyone agreeing on the "value" of that metal. For example, the ancient Egyptians valued silver over gold in some eras of their long history. Or consider silk, which functioned as currency on the ancient Silk Roads for centuries in part because it was simpler than maintaining complex calculations among the relative values of the many currencies traveling the routes. It's all about what people think is valuable.
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| bbc.co.uk |
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| Fickle fiat currency* |
Cryptocurrencies will always be subject to the same human realities as fiat money, because they are fiat currencies themselves, and indeed money itself is a human psychological construct. Do not be fooled by the fantasies of some economists: There is nothing like a “natural law” that governs it all. There is nothing “objectively” valuable. All is governed by the fickle human attribution of importance to things and ideas. As culture changes, so does economy. Consider all the Roman coins made of gold and silver that are today only as valuable as what someone is willing to pay for them. Most of their value lies, not in the gold or silver itself, but in the perceived value of their having been minted two thousand years ago. Otherwise, they are worth almost nothing.
So let's not cling to illusions: Any currency is only as "good" as people think it is. What makes fiat currency relatively stable is the fact that behind it lie huge economies that people find reliable. The volubility of cryptocurrencies shows this clearly: The failure of one broker —
just one — nearly crashed the whole system because there is at present no economy behind it large enough to support a value beyond the very limited reach of the crypto-world itself. Yes, huge profits can be made by people with enough liquid wealth (as valued in traditional currencies, mind you) who can jump in and then jump out in time. But the wealth created always translates into the ability to buy resources evaluated by some number in a traditional fiat currency…which the entire rest of humanity considers valuable.
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| Block chains are not for blockheads ** |
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Moreover, cryptocurrencies come with their own costs — to the environment, for starters — which are very, very substantial. The “computing power” (ultimately, the electrical power) necessary to execute one crypto transaction is around 850 KW, about equal to one US household's electricity use for a month. The total for crypto transactions is staggering — currently estimated to be between 155 TWh and 172 TWh annually, roughly equivalent to the energy consumption of the nation of Poland. Why? Because that is the only way to ensure the privacy (i.e. the security) of the transaction itself. Maybe somehow, some day, an alternative to the elaborate “block chain” technology that makes cryptocurrencies possible will emerge. Maybe. But for the foreseeable future, investment in cryptocurrencies is an investment in massive energy expenditure. So, how do you value that?
And then there are the social costs. Any economic engine that concentrates wealth at the top of the social ladder exacerbates the already huge disparities between the super-wealthy and everyone else, and that's dangerous. According to one estimate, just 1% of Bitcoin owners own more than 90% of the total Bitcoin supply. That's mostly financial companies and the ultra-wealthy who can afford to speculate at that level. Now, those financial institutions do offer various "products" that lower-level investors can buy, but since middle-income families own just 5% of all investments, it's pretty clear that crypto-finance serves primarily the people who already have a lot of money.
Having that much wealth concentrated in so few hands creates instability and promotes economic injustice. The super-wealthy are not generally famous for investing in the rest of us. Rather, with a few exceptions, they tend to look to their own interests first, and too often consider the rest of us mainly to be valuable sources of income for themselves. As long as we produce wealth – and not cost – for them, they like us.
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| Class traitor extraordinaire. (Credit: NPR) |
It took a class traitor like FDR to rescue the US economy from the Great Depression, and even then, he could not accomplish that in the face of elite resistance without the help of a global war that forced the super-wealthy to open their wallets. Some classic cases to consider: the end of the Roman Republic, the French Revolution, and the Russian Revolution. All cases where the super-greed of the elite spurred popular uprisings led by men who promised the people revenge. Sound familiar?
My point: We have to ask ourselves whether the huge investment in resources entailed by any cryptocurrency transaction offsets the vast expenditure of resources involved in the "traditional" fiat money-based economy. Moreover, what does the society at large — the people you will actually be trading/exchanging with — value, and will it value that enough so that you can get the resources you need to survive? Or is it just another sandbox, just another artificial domain for generating “valuable” numbers on some computer somewhere that people who already have a lot of wealth can use to generate more? What is its value to you? And what will it be a year, five years, twenty years from now?
In a very real sense, the marketing of cryptocurrencies is no different than the marketing of any other consumer product: How many new televisions do you need? Do you need that new iPhone? Really? What benefits, real or imagined, do you believe you are buying, and what will the cost to the environment be? And how will that be shaped by changes in the technology that are sure to come?
I don't have an answer for any of these questions — it's up to the individual, I think. But we should be clear that that is what is going on. Cryptocurrencies will always be only as stable as the size of the economy behind them and the capacity for the environment to sustain their use. If one has the luxury of pouring one’s resources into that medium of exchange, at least be clear about what you are doing to the environment in the process. And be prepared for the limits that choice involves; do not be dazzled by the “freedom from the fiat economy” bamboozle used to sell the thing: It’s all fiat. Every last byte of it.
And, perhaps most importantly, it is certainly not free from the exploitative structures that characterize the fiat-currency economy. Because it is itself a fiat currency. Always always always there will be people who have more and consider their wealth to be part of a zero-sum game. Because at bottom, it is: The amount of economic value — wealth — available at any one time is as finite as the imagination of humanity as a whole (which history shows is pretty limited).
In a very real sense, at the moment cryptocurrencies are one more vehicle by which the wealthy classes in wealthy countries can exploit the fantasies for profit. Who is creating the value of these currencies? Only the people who invest in them. And should the cryptocurrency market begin to collapse, you can bet that the “big boys” will exit immediately, pocket their profits, and turn to other mechanisms for “earning” wealth by contributing nothing material of their own. And everyone else will be left holding the virtual bag. The cryptocurrency system is no more or less exploitative than the “analog” economy. And it will remain tied to that “analog” economy because the economy behind it is not large and stable enough to support stability outside the traditional economy.
Bottom line, this is all very much a "first-world" issue: Do the people who really need to step away from the exploitative global financial system — the ones most negatively affected by it — have the actual option to do so? Hardly. They don't have the web access (they don't even have the computers) necessary to free themselves. And even if they did somehow develop a local cryptocurrency economy, they would find themselves having to plug back into the global system in any case to obtain most of the resources they need from outside their immediate locations. Despite what is claimed by the cryptocurrency carnival barkers, there is nothing particularly liberating about them. They are only as good — or as bad — as the economic structures they were created as alleged alternatives to.
* Some ancient fourée (“bogus”) coins from CoinWeek.com (https://coinweek.com/bad-money-ancient-counterfeiters-and-their-fake-coins/) Left front: a counterfeit gold semissis from the time of Theodosius II, mid-5th century CE; center: a tetradrachm from Athens, 5th century BCE; right front: a “nugget” from ancient Lydia, ca. 7th century BCE; right rear: an iron die for a Roman denarius, ca. 101 BCE.
** One of the bazillion such graphics at Freepik.com.
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