This is an editorial opinion by Joakim Book, a researcher at the American Institute for Economic Research and a contributor to Bitcoin Magazine, HumanProgress.org and the Mises Institute.
Finding fault with Bitcoin and Bitcoiners is easy. Every schmuck, stick, know-it-all-pundit, wiseass and establishment elite has some complaints available. Bitcoin uses a lot of electricity; fixed money supply schedule makes the intervention of a benevolent central bank impossible; not having enough inflation for a growing economy; used by pesky criminals; and that means, registered technobabbling hurt my fragile sense.
Arguments are so tiresome when they are recycled.
One good example is doomspeaker economist Nouriel Roubini, known for his bombastic and bearish declarations – often nicknamed “Dr. Doom” by the financial press. In his own mind, he was just a “realist”, which is what every crazy person would say about themselves when asked. In his latest book, “Megathreats: The Ten Trends That Imperil Our Future, And How To Survive Them,” he points out that most people don’t know about this well-known nickname:
“Those who call me Dr. Doom don’t know that I examine the upside as rigidly as the downside. Optimists and pessimists both call me contrarian. If I could choose my nickname, Dr. Realist sounds right.
The Bitcoin obituaries site 99bitcoins.com lists the beloved economist 12 times, but Googling finds more Bitcoin denunciations of this outspoken character – in every outlet that will have him, it seems, from Twitter to the Financial Times.
For Roubini, bitcoin is a bubble 2013“Ponzi game” and “no currency” in 2014“giant speculative bubble” in 2017, almost all fake transactions in 2019 and, best of all, in 2020 a little bit of everything:
What he does well in his new book is explain many of the world’s macroeconomic problems. For five mesmerizing chapters, he describes the debt problem, the demographic impossibility of bankruptcy Ponzi (sorry, “pension”) plans of Western nations, the disaster of easy money and the boom-bust cycle that gives rise to. Stagflation in the 2020s is not surprising, and he finds the fault precisely where: “We poured too much money and fiscal stimulus into a financial system and an economy that already had cash and credit.” With a short-term view and political capture of central banks, we have very easy money because “that’s what the voters want and the market has to do to avoid crashing.”
He even came down on the right side of the error of 2022 to use the dollar payment rail to sanction the G8 economy: “This currency weapon to achieve national security goals is the latest frontier of the creep mission of central banks, starting with the Fed” (ignoring that The Federal Reserve does not make sanction decisions).
As a rule, whatever flaws Bitcoin has – as money, as a protocol, as a tool to use, as a community – get better, relatively speaking, when the incumbent monetary system gets worse. Whatever your position on Bitcoin was three, five or 10 years ago, you should look at it better now: the monetary system in place is getting worse, with inflation, anti-money laundering bureaucracy, clown behavior and freezing. the account is only the worst offender. All is not well in the world of money; that makes Bitcoin a more attractive prospect, all things being equal.
So, is Roubini a Bitcoiner now? Has the best Bitcoin bear, diligently for ten years, finally arrive? Seeing clearly the monetary madness of the world, it is not the strangest thing for Dr. Doom is what finally dampens criticism of Bitcoin.
Instead, we got Groundhog Day.
Chapter one dedicated to financial instability spends a dozen or more pages on Bitcoin, unbelievably devoting most of them to “crypto,” “DeFi,” “stablecoins” and central bank digital currency. Hold back.
Still, even here we have potential: The rise of crypto, explains Roubini, “closes to our collective wilting confidence in the ability of governments to generate money issued.” Hear, hear.
Queen Taylor Called
“Ugh, so he calls me and he’s like ‘I still love you’, and I’m like ‘I just… I mean, it’s exhausting, you know? Like, we’re never getting back together. Like, ever.’”
– Bitcoin philosopher Taylor Swift
If you are going to criticize Bitcoin – something you can certainly do – here are some things you should do:
First, manage your monetary attributes.
There are three – store of value, unit of account, medium of exchange – not five. You cannot create a new one and duplicate the previously useless one. Roubini introduced the “single numeraire,” which is exactly the same as the unit of account, and split the store of value into a stable value against “market value” and “price index of goods and services.” Try to carve out the difference. This is a silly play on words.
Second, make sure your criticism is directed at Bitcoin, not “crypto.”
Most people think of bitcoin as just the first “cryptocurrency”, the most famous among tens of thousands of scammy shitcoins. It is not. What holds and happens in la-la land token vaporware rarely has anything to do with Bitcoin: Sam Bankman-Fried’s shenanigans, the implosion of Terra or the Cryptoqueen scam does not detract from the essence of Bitcoin, principles or operations. When Roubini mentions “BaconCoin,” quotes the founder of LoanSnap or reports negative comments by the creator of DogeCoin, he does not undermine the promise of Bitcoin.
Bitcoin is a one-off monetary invention, separated from every other money or “crypto” by the Great Wall of categories and concepts: it has no running company or founder, like every other shitcoin; it has no counterparty risk or subject to censorship like every other fiat currency. Bitcoin has no CEO and no marketing department; has the strongest Lindy and the highest hash rate.
Third – and this is hard – make sure your points haven’t been disputed, answered and relegated to the dustbin of unpleasant and incorrect jabs at Bitcoin.
Repeating outdated accusations makes you looks stupid, not Bitcoin. Roubini goes for the vast wealth inequality in Bitcoinland, believing it is “worse than North Korea.” It is not, and as flawed as these investigations, UTXO ownership seems to be less and less unequal over time – as you would expect to develop money will be distributed in use.
Unsurprisingly, it consumes a lot of energy, like a small country and therefore “will eliminate important climate initiatives to reduce global warming.” No and never will: if anything, Bitcoin unlocks stranded energy, contributes to balancing the grid and miners are more renewable than the main economy.
Fourth, make sure that the Bitcoin property you’re attacking isn’t worse in legacy systems.
Warren Buffet often makes this mistake, thinking that hacks, fees or the fact that bitcoin does not generate “yield” dooms to failure. Don’t forget that paper money doesn’t exist (unless you count seigniorage to the central bank); never mind that the derision of bitcoin as a Ponzi also applies to apartments or Uncle Sam’s pension scheme.
The most absurd accusation comes with Roubini’s idiotic soda shitcoins: If you need Coke coins to buy Coke and Pepsi coins to buy Pepsi, how can you ever determine (relative) value?! How do you know if one of them is worth it?
Makes you wonder how Americans can ever buy it when they are abroad, how pound-based customers (IE, UK residents) can ever get anything sold in euros or spend the melted currency on Fifth Avenue. There is a publicly displayed market price for you to “convert” the value to a monetary system you are familiar with; and there are publicly traded markets where banks on either side of your transaction and your vendors can trade and settle so that international trade can work.
amazing.
The example of currency risk is illustrative – and rude. Apparently vendors can’t “price” things in bitcoin because “an overnight drop in price can wipe them out [seller’s] profit margin.” That’s true so far, but it’s the same with cross-currency transactions in the legacy world: imports or exports or supply chains that are more complex than your local currency area. Additionally, if you are concerned about currency exposure on your sales, there are liquid markets that provide you with a hedge. Many stores that accept bitcoins through various third-party solutions immediately exchange them for dollars, thus reducing the risk.
In the very next sentence, Roubini considers the downside of the opposite risk:
“If someone writes a mortgage with principal and interest in bitcoin, a spike in the value of bitcoin will cause the real value of the mortgage to increase. If it fails, of course, the borrower loses money, and the borrower loses the home.”
It seems that no American owns property in New Zealand or Mexico, no European has a debt contract in US dollars. This is not a new risk, but a regular financial risk that companies and households already face.
What is surprising is Roubini’s lack of symmetry: If the margin can be eliminated with an overnight drop, then profits can also be doubled with the same overnight increase. Symmetric risk. If the exchange rate of bitcoin to the dollar falls – which Roubini is certain it will – bitcoin-denominated mortgages will eliminate themselves by being easily paid off by the appreciation of the dollar. This is not to say that they misrepresented the risk, but rather reduced it to what economists call “risk aversion.” Bitcoin transactions or undisclosed debt contracts are not good if households are worried about the downside more than the upside – which, in the real world, seems to be few and far between.
The honest conclusion is not “bitcoin can not be money” Roubini, because many established currencies with volatile values between each other can perform this function, but the developing bitcoin economy will increase, a small layer of business risk.
It’s like Roubini went out of his way to update all the other macro worries, just to lay down the criticism of Bitcoin that was outdated when he first voiced it in the mid-2010s.
Most damaging of all: Can anyone be taken seriously when they pronounce the plural “s” in the uncountable word “bitcoin”?
The better you understand the mistakes of the current way of doing monetary things, the better Bitcoin looks.
When you see the many macro ailments that Bitcoiners can deal with, the pit of your stomach must be worried. When you look at debt (public and personal) that rampage the system, you should feel nauseous. All this Roubini took expertly, and many of his writings may have been shown on this page. Hater our beloved economist can problem, better and more vocal than most. Still, no dice.
It’s impossible to tell if anyone is attuned to the world’s catastrophic macro problem because Roubini can’t see the key solution that is Bitcoin.
This is a guest post by Joakim Book. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.