Think Bitcoin™ Issue #31
My journey from Bernie to Bitcoin; Bitcoin and national security; Environmental misinformation; the IMF teasing a dystopian future; Dante's Peak
Hey friends, welcome back to Think Bitcoin™ for issue #31. Special welcome to the new subscribers. I’m glad you’re here. 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:
Long Reads: “In Search of the Revolution: My Journey From Bernie to Bitcoin” Part 1
Content Round-Up: 3 podcasts, 1 article, 1 video
Headlines: IMF teases dystopian future, Congress cites debunked research (again)
Miscellaneous: An analogy for those who love 1990s disaster films
As always, if you find this newsletter interesting or useful, please share it with others who might find it interesting or useful, too!
Long Reads
In Search of the Revolution: My Journey From Bernie to Bitcoin
Part 1: The Thing About Trust
“Political questions are far too serious to be left to the politicians.” -Hannah Arendt
“What good would politics be, if it didn't give everyone the opportunity to make moral compromises?” -Thomas Mann
In mid-to-late 2019, as the 2020 Democratic presidential primaries were heating up, I did something I’d never done before: I made my first contribution to a political candidate. This candidate was one Bernard Sanders, who I will simply and affectionately refer to as Bernie, his avuncular mononym, for the duration of this piece. I made a small contribution to his campaign, and then I kept making additional, subsequent contributions.
I was drawn to Bernie’s campaign because I believed, and still believe, that this country has fundamental flaws and problems that have not been addressed and were clearly not going to be addressed by insider candidates like Joe Biden. Most importantly, I trusted Bernie. His steadfastness, his unwavering and longstanding commitment to his ideas, was (and remains, in my opinion) laudable and compelling. In a world of grifters, opportunists, charlatans, dilettantes, and power-seekers, Bernie always seemed different. You could point to a set of principles for which he stood. All of this made me feel I could trust Bernie to use the tools at his disposal to effectuate the type of change I thought necessary.
I’d always been someone who believed, perhaps naively, that if we could just elect the right person; if we could just install the right group of people, that we could get to seriously addressing, or at least credibly confronting, the many grave and pressing issues facing this country and the world. In other words, if we could just put someone in office whom we could trust not to make harmful compromises, trust to possess a firm working knowledge of all issues, and trust to be able to steward an agenda through the labyrinthine machinery of the legislative process and its divergently interested parties, then we could make some real progress.
This idea of trust, though, is fundamental and deserves examination. In the U.S., as a representative democracy, our politics is largely premised on trust. I myself do not vote on pieces of legislation and neither do you. Instead, we entrust these decisions to the judgment of our elected officials. We ostensibly empower these officials with our trust. It is for this reason that so much of political campaigning focuses on establishing the trustworthiness of one candidate and juxtaposing it with the asserted, comparative lack of trustworthiness of the opposing candidate. This takes many forms, and preferred forms differ somewhat depending on what side of the partisan aisle you’re on.
Democrats tend to appeal to authenticity and/or ideological purity. Hence Joe Biden insisting, ad nauseam, that he’s just a simple, working-class kid from Scranton. Which, decoded, really just means “Trust me, because I’m not one of these rich, silver-spoon insider types.” Another example is Bernie proudly stating he received no donations from billionaires or CEOs. The focus on campaign donation sources, generally, is a way of soliciting trust on the grounds that a candidate receiving only grassroots donations cannot be compromised or captured by special interests. Note these are but a few examples of many.
Republicans, on the other hand, tend to play the authenticity game from a slightly different angle, namely highlighting one’s remove from or relative inexperience in politics as evidence of authenticity, as if to say one’s adjacency to or years in politics is itself a negative thing. This is the Trumpian political outsider angle. Republicans will, like Democrats, also engage in class signaling, which often manifests as the oft-repeated contrast of rural, fly-over folks and the dreaded “coastal elites.”
The point of all this, though, is to solicit, inspire, and secure trust. There are multiple important and intractable problems with this trust model, however.
First, individuals and political parties can be compromised. Commitment can waver or halt. Ideas can ossify, devolve, or fail to appropriately meet changing facts. Errors can and will be made. Special interests can prove more insidious and insurmountable than originally anticipated or promised. And, more bleakly, power can (and often does) corrupt. Candidates can and do lie. Which is all to say individuals are single points of failure. Trusting that none of the aforementioned phenomena will occur is, as I have indelibly learned, naive.
“The truth is that all men having power ought to be mistrusted.” - James Madison
Second, you are implicitly trusting individuals to have (or be able to swiftly acquire) requisite knowledge about the myriad and numerous topics upon which they would legislate and about which they would make crucial decisions. The sphere of human endeavor over which Congress is tasked to preside is ever-widening and self-perpetuating. It is comical to think that these lawmakers, many of whom are quite old, can cultivate an adequate command of each and every issue about which they make law. And this fact is increasingly alarming. It has led to negative outcomes in the past (think the Iraq War, the bailouts of the banks and bankers in 2008, the uber-inflationary monetary policy that has widened the wealth gap, the hollowing out of our manufacturing capacity, the bungled exit from Afghanistan, the failure to keep up with China, etc.) and, if not addressed, will continue to yield negative outcomes in the future.
Third, the machinery of Washington D.C., replete with its entrenched polarization, has reduced politics to the mere performance of politics and an increasingly esoteric game of bipartisan virtue signaling.
Most avid Bernie supporters, myself included, believed that the Senator from Vermont was uniquely equipped, both in character and ideology, to overcome all three of the aforementioned challenges.
Bernie has more or less believed the same slate of ideas for the duration of his political career, which, compared to someone like Biden, whose stated political beliefs repeatedly seem, over time, to coalesce around those most likely to win reelection, is and was quite refreshing. Bernie’s commitment to his ideas was (and remains) authentic and unwavering. It made you think he, unlike so many others, was impervious to outside influences seeking to compromise his vision. We will of course never know, as he obviously did not win, but it certainly felt that way at the time.
In fact, I would argue that Bernie’s authenticity bona fides were so strong, and so strong in comparison to his opponents, that less attention was paid to how well he understood some of the problems he sought to solve. After all, as I’ve written before on many occasions, it is precisely the kind of Modern Monetary Theory approach to deficits and monetary policy advocated by folks like Bernie that tends to exacerbate the wealth inequality those same folks seek to address. I’ll explore this further in Part 2 of this piece in two weeks.
There was also the, in hindsight, quaint belief that Bernie could somehow cut through or transcend the insoluble gridlock of Congress through his sheer, implacable will.
We will of course never know how Bernie would have fared as President. But I think it’s clear from subsequent developments that there is no one-person solution to many of our national problems. The infectious, passionate faith that was placed in Bernie by so many was, I now think, powerful evidence of our collective, desperate capacity to believe in this kind of one-person solution.
It’s worth noting, on the other side, that much of the enthusiasm around Trump is grounded in this same idea that one exceptional actor can cut the Gordian knot, a sentiment ironically articulated by that campaign as “draining the swamp.” In other words, our capacity to believe in the one-person solution is not confined to either Democrats or Republicans.
This piece is not one about Bernie’s failures (or Trump’s), however. It’s about how our political system invites us to place more and more trust in individuals to solve more and more problems in an environment more and more hostile to problem-solving of any kind.
One reaction, typified by my own support of Bernie, is to find someone you can trust even more vigorously, the idea being things are so broken that only someone who is ideologically unimpeachable can fix them. In essence, this is just ratcheting up the table stakes without changing the nature of the game in any way. Incumbent, special interests still win. This is, to quote Ambrose Bierce, politics as “a strife of interests masquerading as a contest of principles.”
There is another way, however. And this is where Bitcoin comes in.
What if, instead of increasing the amount of trust we placed in lawmakers, we decreased the surface area of their legislative purview. This would decrease the scope of damage that could be wrought by ill-informed decision-making, and disincentivize moral compromises by reducing the degree of its payoffs.
But we can’t just decrease the surface area of legislative purview without replacing it with some other mechanism. After all, just because the scope of power shrinks does not mean the issues over which that power was formerly exercised go away. At the same time, we don’t want to encounter the same three problems with trust we enumerated above with whatever replacement mechanism we choose. We want to find something that is effective but also trustless. Before Satoshi, such a thing did not exist.
Adopting Bitcoin takes some, though obviously not all, of the monetary issues over which Congress, in conjunction with the Fed and the Treasury Department, customarily exercises power and judgment, and makes them immune to human error. It would establish and enforce a monetary discipline that could not be abused to achieve various short-term ends at the expense of long-term sustainability and promise.
Bitcoin is exceedingly difficult to corrupt, particularly as compared to the corruptibility of the average human being. Its adoption would obviate the need for politicians to aspire, sincerely or not, to meaningful expertise about topics as abstruse as monetary policy and thereby limit the negative consequences of not achieving said expertise.
Currently, there is simply too much surface area for governmental incompetence, ignorance, and, worse, outright malevolence. I’m not suggesting that we should have no trusted individuals or politicians. But I am suggesting we should be ruthlessly realistic, pragmatic, and clear-eyed about what is within the sphere of accomplishment for these trusted individuals and political parties versus what could be accomplished by outsourcing some of our problems (namely the integrity and equity of our monetary system and our money) to a protocol that does not require trust of anyone.
The first major breakthrough for me on my journey from Bernie to Bitcoin was confronting this idea of trust in politics and wondering how Bitcoin’s trustlessness could be leveraged toward a positive political end via its potential to constrain lawmakers.
My next, and perhaps most perspective-altering breakthrough, was understanding that politicians on both sides were mislocating the causes of the problems they were purportedly trying to solve.
I’ll explore this in Part 2.
Content Round-Up
1. “Michael Saylor: Bitcoin, Inflation, and the Future of Money,” an episode of the Lex Fridman Podcast. This episode, at nearly four hours in length, is not for the faint of heart, but it is a gold mine of insight and mental models for Bitcoin. The first hour alone is a masterclass on inflation, how we should think about it, and what economists miss in the methodology of their measurements.
2. “Bitcoin and U.S. National Security,” an episode of the Progressive Bitcoiner Podcast, featuring Matthew Pines. Pines discusses “Bitcoin and U.S. National Security,” a research report he authored and published through the Bitcoin Policy Institute. In this report, Pines argues that Bitcoin can support three key strategic objectives for the United States: it can drive economic growth, counter strategic adversaries, and promote American values. He discusses each of these with Mark Stephany, the show’s host.
The show begins with Pines elucidating exactly how we got to this current state of affairs, one in which the post-1971 dollar system is noticeably fraying. He then goes on to articulate the geopolitical advantages that would accrue to the United States, in light of this fraying economic order, if it were to adopt a strategic, pro-Bitcoin posture and policy.
He also explains why Bitcoin is not an optimal method for evading sanctions, as some have feared. I personally have a few friends who have told me their respective views of Bitcoin have changed slightly because they see it as a way for hostile, bellicose nations to escape what is perceived to be the effective deterrent of sanctions. Pines, an experienced national security expert, explains how and why sanctions are, historically, actually pretty ineffective, and why the existing fiat system is far more conducive to money laundering and sanctions evasion than Bitcoin.
It’s a fascinating conversation, and Pines is a must-follow in the space.
If the interview and the research report around which it revolves interest you, you can catch more of Pines in this interview, via C-SPAN.
3. “Bitcoin’s Energy Consumption is a Feature, Not a Bug,” an article by John Belizaire, CEO of Soluna Computing. Every time I encounter a clear-eyed assessment of Bitcoin’s energy usage that articulates why it uses energy and jettisons the environmental fear-mongering common in certain spheres of the mainstream media world, I share it, as a rule. And this is one of those pieces. It’s short, to the point, cogent, and insightful. Check it out.
4. “Check Your Financial Privilege,” a short animated film, put together by the Human Rights Foundation. It highlights the fact that much of the vitriol directed at Bitcoin is being spewed by those living with and under the most financial privilege, a fact we ought to critically examine and not overlook.
5. “Bitcoin Adoption in Brazil,” an episode of the Anita Posch Show, featuring Carol Souza. It’s easy to unintentionally confine one’s view of Bitcoin adoption to the developed Western world, particularly the United States. In reality, however, there is lots of infrequently covered and under-acknowledged adoption afoot across the globe, particularly in the Global South. Anita Posch is an important voice covering Bitcoin’s development in different parts of the world. This particular episode is about Bitcoin in Brazil, which I found really compelling, especially some of Souza’s discussion about hyperinflation and freezing of savings accounts in Brazil in 1990. We in the developed West often think this sort of thing could never happen, but I think we ought to take note. Mechanisms like CBDCs, and the programatic capabilities they entail, certainly lay the groundwork for a kind of absolute control over money (see, e.g., the IMF piece below in the Headlines section).
Headlines
The IMF Cheerfully Teases a Dystopian Future
Two weeks ago, the IMF published “The Future of Inflation Part III,” the final part of a series on inflation. In it, they discuss how “electric money,” which is to say central bank digital currencies (“CBDCs”) will allow them to utilize negative interest rates by eliminating the arbitrage people could perform between money in their bank accounts (which would be earning negative interest) and cash. The idea is that obviously if interest rates are negative, folks will just take money out of the bank and hold cash. But CBDCs could allow central banks to program a “time-varying interest rate” that “moves in line with the official policy rates” into cash. In other words, the IMF is advocating for a world in which your cash can be programmed to have a negative-interest rate if that’s what the powers that be want. The potential downstream effects and the specter of more fiendish implementations of government-programmable cash are pretty Orwellian. Yet another pressing reason for us to work toward a Bitcoin future.
Congressional Letter to the EPA
Last week some members of Congress wrote a letter to the Environmental Protection Agency, citing concerns with Bitcoin’s energy usage. The letter features only two citations, both of which reference work by a man named Alex de Vries (the screen shots are below). It’s a notable example of why, as I write above, it’s dangerous to trust that lawmakers have even a passing expertise of the issues on which they legislate. Alex de Vries is a former Dogecoin blogger who is now a PhD candidate employed by the Dutch Central Bank. His “research” has been debunked on multiple occasions in academic journals and rests more or less entirely on the factually, verifiably erroneous premise that Bitcoin has a per-transaction energy cost. This is not how Bitcoin’s energy works, and anyone with a respectable modicum of Bitcoin knowledge knows that. Nevertheless, the United States Congress continuously bases its own understanding of Bitcoin solely upon the erroneous, debunked, amateurish work of a man who formerly ran a Dogecoin blog. This is obviously an unacceptable level of education and subject-matter expertise from those whom we elect to make decisions about said subject matter.
Miscellaneous
A metaphor for those who, like me, enjoy a good 1990s disaster film:
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