Posted on March 26, 2020
Money is worthless! What now?
Coronavirus has taken a huge hit, bringing our societies to their knees. All over the world, at least in the developed world for that matter, economies have been reduced to a minimum. With the economic engine stalling or even coming to a complete standstill in many places, a worldwide recession seems inevitable.
The predicament of the real economy is exacerbated by the fact that financial markets have also gotten their come-uppance. Several trillion US dollars of financial assets have vanished into thin air, and financial market prices around the world have been tumbling into the abyss for days.
Central banks, above all the US central banks, are trying to halt this wave of selling off. In the style of helpless firefighters, they are flooding the system with liquidity. The proportions are many times greater than in the last crisis. In comparison to the most interventionist week in 2008, when the Fed monetized a total of 162 billion dollars in securities, we are currently looking at a new record of 307 billion dollars in monetized assets in just one week.
What the Fed provided in the old “QE order” in terms of liquidity over months, it now does in a single day. The dimensions are immense. All the more problematic when one considers that the helpless firefighters at central banks are actually trying to put out the fire with more and more gasoline.
Crazy times for sure
When events like now are really tumbling over, one is inclined to agree with the former revolutionary leader Vladimir Ilyich Lenin in his statement: “There are decades in which nothing happens; and weeks in which decades happen. In so-called exceptional times, hardly anything is valid, especially in politics.
Approaches, principles or even laws are thrown overboard in order to react pragmatically. What might be considered the right move at this very moment ultimately shows how politics in normal times is just a farce or trivial noise. The actual course in politics is set in a state of emergency. Just as we see it happening now: The Trump administration is currently frontrunning even the most left-wing of democrats, in trying to paying out helicopter money to US citizens in the style of a basic income. What is announced as a temporary measure will become permanent. Remember the closing of the gold window, which was also just temporary?
In such crazy times as these, many people are paralyzed by what is happening. They are afraid of losing their own job, not being able to provide for one’s own family. So any state intervention and any central bank injection of money are fine as long as it helps protect you and your family for the moment. Such a reaction is deeply human and therefore understandable. From a long-term perspective, however, such indifference and egotism are naturally devastating for society at large.
A world without Bitcoin?
Today’s money-interventionist mess always has to be paid for by tomorrow’s generations. Monetary interventions are never neutral, but they are also never instantaneous. Apart from a few aging gold bugs, hardly anyone has been willing to accept this causality.
But the central bank interventions around the Corona crisis have not only unleashed a whole lot of new cheap money into the markets, but they will also encourage the birth of more and more Bitcoiners. Certainly, Bitcoin does not know any generational segregation. Nevertheless, the digital cryptoasset encourages young people, in particular, to get informed about the money interventionist events of our days. The fact that ordinary money, i.e. state fiat currencies, is being expanded endlessly in its quantity does not augur well for the subject of money.
Even if the actual consequences of the interventions on society and money itself are incredibly complex and therefore difficult to determine clearly, the infinite money-quantity spiral (an economic effect to be defined according to the already existing concept of the wage-price spiral) will provoke an ever-increasing amount of Bitcoin refugees. At the same time, it should not be a big surprise if the exponentially increasing money supply is accompanied by a proportionally growing number of Bitcoiners. We are already postulating another socio-economic law for this: the iron law of the money-supply-Bitcoin relation.
The bitter reality is that despite all the newborn Bitcoiners during these times, many people will still hardly think about what is happening to money currently. All the more decisive and emotionally comforting is that those who do worry have a psychologically safe haven. As an antithesis to the endless growth of the money supply, Bitcoin postulates the opposite: a network limited to 21 million Bitcoin units only. There will never be more Bitcoin. That is the message of it all, and in a world in which scarce money in the form of state fiat currencies will soon only be suitable for flat jokes, such a message is more important than ever.
So if Bitcoin didn’t exist, it would have to be invented – as a psychological elixir of life, so to speak, it will give comfort and confidence to many more people in the light of the crazy money interventions of our time. What would we do without Bitcoin…