Think Bitcoin™ Issue #26
Late-stage capitalism vs. late-stage fiat; how fiat facilitates the financing of war; why Russia won't use Bitcoin to evade sanctions
Hey friends, welcome back to Think Bitcoin™ for issue #26. And a special welcome to all the new subscribers. Glad to have you on board! As always, if you have any questions or comments, feel free to reach out. You can also find me on Twitter (@TheWhyOfFI).
In this issue:
Headlines/Insights: Late-stage capitalism vs. late-stage fiat
Content Round-Up: 1 podcast, 2 articles
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Headlines and Insights
Late-Stage Capitalism vs. Late-Stage Fiat
Never in my life have I felt a more pressing sense that we are approaching the end of something; that, to paraphrase Yeats, the metaphorical center cannot and is not holding. I think this sensation of approaching finality, of historical transition, and of fraying order has saturated and informed our politics, as well.
The collective imagination and will of our two political parties is limited to revivifying FDR or Reagan, respectively, with increasingly diminished (or even counterproductive) results. Each party wants to return the country to its preferred trajectory, but these paths have converged and ended. Hence the creeping sense that we have reached some terminal point.
Many, particularly those on the Progressive left, refer to this state of affairs, this liminal phase, as “late-stage capitalism,” a phrase rooted in (but not coined by) Marx. The term’s meaning has evolved over time but has recently become a kind of nebulous catchall term, a meme of lament for the yawning wealth inequality and the absurdity of everyday life.
Current events have only intensified the lament. This has led some to speculate (or boldly assert) that we have reached the end of capitalism as a viable economic system; that capitalism, left to its own devices, will continue to remove or degrade our societal Jenga blocks until everything collapses. Capitalism is homicidal, they say. Its natural end point is either a neo-feudalism in which ultra-rich overlords mete out crumbs to the destitute masses or a collapse that, in its wake, will beget an anarchic, balkanized state of nature in which the strong will continue to trample the weak.
So, in light of this bleak outlook, why not preemptively intervene and chart a course into a different system? Why not grant the state more power to coordinate economic activity? Why not redistribute the wealth before it all ends up in the hands of the already powerful few?
I think most of us understand the impulse, here. The idea that something is fundamentally broken and something fundamental must change is pervasive. But the answer is not to conjure the senile ghost of Reagan, nor is it to just play the greatest hits of FDR on a loop. And it is certainly not to abandon capitalism altogether. But too often our discourse seems confined to these three ideas.
Why is this? I think a couple of things are going on. First, I think we’re trying to jam round reality pegs into square partisan holes. Second, I think we’re mislabeling the moment (and misdiagnosing its flaws) because our language has not developed beyond Cold War binaries of capitalism and socialism, bourgeoisie and proletariat, workers and capitalists.
I posit that we are, indeed, in the late stages of something, but this “something” is not capitalism. Much of what we malign as or take as evidence of late-stage capitalism, I would argue, is symptomatic of something else: late-stage fiat. Consequently, our efforts should not be marshaled toward the jettisoning or transcendence of capitalism, but rather toward error-correcting the introduction and proliferation of the fiat monetary order.
As noted above, contemporary conceptions of late-stage capitalism are primarily based or born out of the accelerating and intensifying inequality of wealth, which is seen as the inevitable and inescapable result of capitalism. These results, the argument goes, are inherent to and thus predetermined by a capitalist system.
But this is simply not as axiomatically true as we’re led to believe.
What these charts show is an inequality of wealth that has become increasingly acute since 1971 (when we formally abandoned the gold standard and went to a full fiat system). From this point forward, we started expanding the supply of money at an accelerating rate, culminating in the COVID-19 liquidity infusions.
Increasingly, a rising tide does not lift all boats. This is because the bottom 50% of boats are not even exposed to the tide. They’re not even in the water because they don’t own assets. This has only gotten worse in recent decades.
These are not the inevitable results of capitalism. These are the results of a fiat system in which those closest to and exercising the most influence over the rules of the monetary network reap the most benefits.
The anti-capitalism chorus reached fever pitch in the run-up to the 2020 election, as the fortunes of many of the world’s billionaires grew exponentially during the course of the COVID-19 pandemic.
Almost entirely left out of this discussion was the role played by monetary policy. Let’s use Elon Musk, who is seemingly everybody’s bogeyman these days, as an example. He and Jeff Bezos were made the poster boys of this growing wealth inequality throughout COVID. But their fortunes were increased primarily by the Fed’s monetary policy. We flooded the economy with new money, which, because of the Cantillon Effect, went first to the most creditworthy institutions and individuals (e.g. the wealthy), who then poured them back into assets, juicing the prices of those assets, which are disproportionately owned by the wealthy. You get the idea.
Here’s a chart of Tesla’s stock. Look what happened from March of 2020 onward:
Here’s Amazon, which basically doubled after March of 2020:
And so someone like Musk, who owns a ton of Tesla stock, is made obscenely wealthy on paper. It’s not because he was just ramping up exploitation over the pandemic. It’s because we printed a shit ton of money that, as is always the case, ended up pooling in assets and creating asset price inflation.
The ability to print money at will (and remember, 40% of the dollars currently in circulation were created in 2020-2021), is an inherent feature of fiat currency. It is not an inherent or necessary feature of capitalism.
I would argue other phenomena often attributed to late-stage capitalism are uniquely enabled by a fiat system. The ability to wage war entirely on credit, which distances the average citizen from the reality of war and thereby diminishes resistance to engaging in war, is enabled by the fiat system. This is elucidated in the work of Alex Gladstein, linked below in the Content Round-Up section.
The working class has been crushed by an off-shoring of labor and manufacturing capacity facilitated and necessitated by the dollar’s position as the reserve currency, a fiat-world designation.
I would lastly argue that the broad and ubiquitous breakdown of trust in institutions is related to fiat currency, as well. In a fiat-currency world, money itself is a liar. As Jeff Booth has said, when there’s misinformation at the base layer of society (which is the money), this misinformation leaks out everywhere. And we’re only at the beginning of this process.
But this is not a capitalism problem. It’s a fiat currency problem. The binary is not capitalism vs. socialism. It’s fiat vs. sound money. Much of our politics now is concerned with solving the wrong problem and jamming our very real systemic flaws into completely inapposite Cold War binaries.
Content Round-Up
1. “The Economics of War,” an episode of the What Bitcoin Did podcast with Alex Gladstein. In this episode, Gladstein explains how fiat currency, by allowing governments to finance war without taxation or direct accountability to their citizens, facilitates a distancing between the average citizen and these wars. This, in turn, enables forever-wars, paid for with credit.
2. “The Invisible Cost of War in the Age of Quantitative Easing,” an article by Alex Gladstein. This is the piece Gladstein discusses in the podcast above. It’s characteristically fantastic. If you want a deep dive into the subject (and how Bitcoin can fix it), I highly recommend spending the time to read and think about this piece.
3. “No, Bitcoin Won’t Save Russia from Western Sanctions,” an article co-authored by Matthew Pines and David Zell. You’ve probably already heard the murmurings from certain lawmakers about how and why the Russians may turn to crypto to evade sanctions. This is used as grounds for imploring authorities to “crack down” on crypto. Pines and Zell explain why Bitcoin is not sanction-evasion technology for Russia, and why those who argue otherwise are incorrect.
As always, thanks for reading! If you enjoyed it or found it useful, share this newsletter widely and freely!
“Civilization is in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.” -H.G. Wells
See you next week,
Logan
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DISCLAIMER: I am not investment advisor and this is not investment advice. This is not, nor is it intended to be, a recommendation to buy or sell any security or digital asset. Nothing in this newsletter should be interpreted as a solicitation, a recommendation, or advice to buy or sell any security or digital asset. Nothing in this newsletter should be considered legal advice of any kind. This newsletter exists for educational and informational purposes only. Do your own research before making any investment decisions.
© Copyright Logan Bolinger
"Senile ghost of Reagan"??? You are an ignorant POS!!