Make it so,crypto!

JOHN Kenneth Galbraith once said (amongst many other things) “The process by which money is created is so simple that the mind is repelled”.

And it is – we only have to think about Quantitative Easing and how all that money was created at the drop of a hat.

That expression, incidentally, probably originated from the good old Wild West, when the dropping of a hat or its downward sweep started a race.

I think esteemed readers of The Digital Commonwealth don’t need me to draw parallels or conclusions. He also coined the phrase “The Affluent Society” which I suppose we all aspire to be part of.

That other famous economist, John Maynard Keynes, said “ When the facts change, I change my mind. What do you do, Sir?” – except he didn’t. That was Paul Samuelson, another economist, who won the Nobel prize for Economics in 1970. What Keynes actually said was "When my information changes, I alter my conclusions”. 

So I pose the question – “What do you do?”. I have to admit that I’m with the conclusion changers, but there are many who are not. I attended a lecture given by John Sergeant (I suppose most famous for his incredible run on Strictly, which overshadows his decades as a highly respected journalist) where he said that the problem with the world today was that each of us has our own “truth”.  You may think the world is round but I know its flat, kind of thing. No argument or other given fact will shake my belief.

And here we have a position where our present Chancellor has publicly stated the world has changed. The problem is she hasn’t changed her stance one iota – or her thinking despite what she may say.

If we now turn to crypto, Galbraith’s maxim is turned on its head. Yes I know the technical feat of a blockchain and crypto is now commonplace, but cryptocurrencies are massively controlled by their very own truths.

Just to take Bitcoin, its algorithm can’t be changed. So Bitcoin creation is set in stone. To a large extent this is also true for all the other cryptos. To exist they have to live within rules, whether that be creation through mining or being pre-mined.

These parameters cannot be changed, unlike every fiat currency where the central authorities can just say hey we’ve created another $1 trillion and it is so, as Captain Jean Luc Picard might have said.

Not least, our Chancellor should stop the effective £30-billion-a-year subsidy to UK banks. This arises from the interest paid by the Treasury for the gargantuan sums of QE money that was “sold” by the BofE – and then not sanitised.

Quite a large chunk of the interest rate pile the UK has is covered by these bond sales (so called but hardly true in reality).

But to return to crypto once more – do you prefer a monetary system that can simply create money out of thin air, or regulated by mathematical rules?

It may be that crypto is coming into its own as people realise the fundamental difference.

And talking of changing minds, how do you think the proponents of “digital gold” are feeling? In case you have forgotten Bitcoin hit $108,000 within the last three months, but is now around $85,000, having been as low as $81,000, a drop of as much as 25% (though that isn’t unusual).

REAL gold on the other hand has steadily advanced from around $2600 at the start of the year to around $3150 now. That’s a gain of about 16 or 17%.

But the world being what it is, I wouldn’t bet either the Digital Golders or anyone else will change their minds. They have their “Truth”.