A writer, Panos Mourdoukoutas, over at Forbes published an article entitled “The End Of Easy Money Could Crush Bitcoin Prices”. The message therein seems to be the idea repeated ad nauseam: Bitcoin is in a market bubble, though it’s anyone’s guess how long until the bubble bursts. Despite its fear-mongering title, it didn’t induce any fear at all when I read it.
Quite the contrary: it illuminated just how critically important cryptocurrencies are for the fairness of society going forward.
Before I expound on why, allow me to quote and add emphasis to the article’s 7th and 11th paragraphs respectively.
To be fair, it isn’t known whether an investment is in a bubble territory until the bubble bursts and investors lose a great deal of money. What’s known is that bubbles usually burst following several Fed interest rate hikes. Especially when Fed tightening begins from ultra-low levels.
Simply put, the early stage of Fed’s tightening is when bubbles grow bigger. And that’s when most of the money is made — provided that investors are in the right assets that fit into the popular investment theme which supports the bubble.
Does it hit you with the weight of all the world’s inequity? No? Fair enough, maybe that’s just my own visceral response.
This article let the cat out of the bag. The Fed itself is the mechanism for creating and bursting bubbles. I need to repeat that, because you need to understand…
The Fed itself is the mechanism for creating and bursting bubbles.
It’s not just the American Fed. The histories of central banks around the globe are inseparably interwoven with the euphoria and inevitable pain of myriad bubbles. To be sure, these central banks were adopted by policy-makers on the advice of economists, ostensibly to quell such booms and busts. Clearly this has failed… bubbles have obviously not stopped reoccurring.
In reality, the very best that a central bank appears able to do is to manipulate the timing of the bubbles they create when they manipulate the money supply. Oh, wait, that’s not all they are theoretically capable of doing. Because of the revolving door that exists between the Fed, the Bankers, and the Policy Makers: the Fed has the power to determine who should know more about the bubbles than anyone else. Thereby affecting who is affected more or less than the rest of the participants in the economy.
Why should the power to make “easy money” – to create and to burst economic bubbles – be concentrated in the hands of a few? Why should only a few have even the possibility of creating economic winners and losers that can affect generations of wealth?
If we must endure bubbles, wouldn’t random bubbles be better than manipulated ones? In the worst case, shouldn’t we all be oblivious to where and when the proverbial ax should fall? Why did we hand over the “edge” to a handful of decision makers? And what does the world have to show for that decision aside from an ever-widening chasm between the ultra-rich and the rest of us?
The Fed had their chance at fixing the bubbles. The “economic leaders” had their chance at making the economic landscape more egalitarian, or, at the very least, not allowing it to become more and more dominated by a small number of the population.
Now the rest of us get to try. And cryptocurrencies, via blockchains, are the best chance we have for determining our own economic futures.
TL;DR: For the bankers, for the elites, and for their friends in government – there is the Fed… For everyone else, there’s the blockchain.
Don’t get so involved chasing the get-rich-quick cryptocurrency crowd, that you miss the profound importance of what’s happening right now. Instead, educate yourself about the blockchain, cryptocurrencies, and smart contracts.
As you begin to understand what’s really possible, then you’ll come to realize that your investment in blockchains is a powerful vote. It is a vote for a less centrally-controlled, more transparent, more democratic world.