Finding NeyMo [nee-moh]: Cryptocurrencies and Stamped Paper out of Thin Air and/or Shallow Sea (II/II)
Thinking out loud like Ed and making myself lots of questions searching for answers. People fall in bubbles in mysterious ways and maybe it’s all part of a plan. Well, will I just keep on making the same mistakes hoping that someone will understand?
Make money from thin air
In the traditional system, money appears when central banks print papers with numbers and with the faces of dead people on banknotes that their citizens trust (fiat). In the decentralized system supported by Blockchain, when cryptocurrency developers establish a code, they are ‘mined’ and become a token or currency. Both the physical body of Central Banks and the young entelechy of the Blockchain pose a common threat as they are systems so interconnected in themselves: delusions spread exponentially and sanity comes running behind at a logarithmic rate. We have learned something from the speed of virus contagion in recent years!
There is a whiff of strangeness when cryptos, altcoins, stablecoins, and tokens breed like rabbits in heat and the equilibrium is slow to appear like a crippled snail (let’s call it regulations, or perhaps common sense, or context limitations). Permanent anarchy or absolute liberation is implausible and, as Aesop taught in Ancient Greece, the tortoise beats the hare. We could incorporate one more character in this current fable: the foxes. The scammers, the bubble blowers, the anonymous trolls, the ruffians of binary program language, the deceivers of digitally naive who are swallowing hares with admirable constancy.
Will the turtle state or the autopoiesis of the same system come first to punish these cheaters? How and who will define the penalty? What will happen to the pioneers of ‘Smart Money’ when it comes time for outrageous profits (if it comes at all or already came)? What law will judge them? Those rogues, the serial deniers of real and virtual reality, those who know the ins and outs to cheat and deceive must be exposed before it is too late. Because of them, tempters of old time, the orchard of the Metaverse built on the lands of the Blockchain, may be slipping away.
Bubbles are inevitable
Is this a fish tank? Or is it a pond? Or is it the open sea? How much of the financial space does this virtual treasure chest of cryptocurrencies occupy? That is, what volume of global financial exchanges are happening today on blockchain?
“Bubbles… My bubbles!”
“Fish are not meant to be in a box, kid. It does things to you.”*
In June 2021, Álvaro Sánchez published in the Spanish newspaper El País: Cryptocurrencies: the money revolution that (for now) is just speculation. The article reads (verbatim quote): The legend attributes sometimes to John Rockefeller and others to Joseph Kennedy, father of the former president of the United States, the decision to sell his shares when he heard his shoeshine boy comment on the market behavior. He took it as an unmistakable sign that a bubble was brewing. Soon after, Wall Street crashed in the crash of 1929.
There he quotes his colleague from the newspaper Joaquín Estefanía who in 1999 had written Idiot the last one seventy years after the ‘Crash of 1929’. This author shares his opinions on two books (verbatim quote): The first of them, very optimistic (Dow Jones. Fact or fiction) predicts a period of great prosperity that will take the Dow Jones index to 30,000 points at the end of the next decade [2009 for the author] and to 100,000 in the year 2020; the second (Devil take the hindmost) is the other side of the coin and describes — with even greater concern than Galbraith’s classic texts — the catastrophes for the well-being of the citizens that are often caused by swollen bubbles.
The Dow Jones index was at 17,107.65 points in September 1999 when the chronicler wrote his article. In September 2009 it fell to 12,499.77 and in November 2021 it rose to 35,296.07. The predictions were delayed by a decade, among other causes, due to the explosion of a large swollen bubble. The projections without the imponderables are useless. Predictions of the imponderables are practically impossible. Here we are in a dilemma, like the Möbius strip or the Klein bottle. Regarding the latter, Enrique Anderson Imbert explained:
Its neck, without neck, bent and plunged back into the bottle as if, pornographically, it wanted to penetrate his rear. Absurd. And the rear of the bottle, in turn, opened penetrated from the inside by the neck, except that there was no inside. Absurd. The Klein Bottle had no hole, and yet, maddened by space, it escaped inside itself. Absurd.
As well as the eternal return of positive situations, with great expansion, high production and employment, low wages, stable prices, quick profits, inequality, hegemony of the dollar, huge exports, explosion of sectors such as construction and the automobile, increased credit, etc. + low inflation + great technological advances + naivety and disbelief. Is the clearest index of swelling of the financial bubble the difference between real activity and the speculative situation?
There is no worse blind than the one who does not want to see and even worse is as Robert S. McNamara says in his lesson # 7 in The Fog of War: Belief and seeing are both often wrong. We see what we want to see and we believe what we want to believe. Reality takes a backseat to expectations. On Monday, October 28, 1929, the catastrophe occurred. The worst got worse until it was appalling when Black Tuesday rolled around. “There was an escape into the world of the unreal, a fundamental component of speculative economies.” Greenspan has said the bad thing about speculative bubbles is that you can’t be sure they are until they burst, and so far economists have been unable to anticipate sudden changes in investor sentiment or a bubble about to burst. (Idiot the last one, El País, 1999)
Are cryptocurrencies a paradigm shift in the face of the centralized economic system of economies? Are these bubbles that speculators play with to make easy money before it bursts? Are there people raising the values of cryptocurrencies making their use as digital cash impractical? Who should control the money?
Too many questions, so few answers.
- *Finding Nemo (2003)