The state, banking and Bitcoin

Currently - since most prominently the days of Bill Clinton, but in all the chief points since Roosevelt - banking exists as a fully owned subsidiary of the state while the state exists as a wholly owned subsidiary of the banks.

This may sound like an absurd arrangement, on the face of it. In fact that's exactly what it is : an absurd arrangement. Absurdity has its advantages however.

Consider a situation where Company A owns 100% of the shares of Company B, and company B owns 100% of the shares of Company A. What is then the value of these two companies ? Perhaps you'd imagine that zero is the correct response, but consider your situation : were I to declare that in fact Company A is worth 50 dollars, you'd find yourself unable to bring proof to the contrary. Indeed, if A is worth 50 then B can be valued at 50 on the strength of that, and thus A indeed is worth 50. Problem solved.

Nauseating, perhaps, but consider the organisation of our modern court system : a politician (ie, state representative) or a financier (ie, bank representative) can not be prosecuted unless someone can bring proof that they've lied. Well... you can't, now can you. Problem solved.

Absurdity has the significant advantage that it solves problems, which makes it the most important thing in politics. And so, suddenly it makes sense why Company A (I will dispense with the pointless bank/state distinction, as it's completely meaningless) will buy 30 billion worth of worthless Company B paper : it's not worthless if A says so. And this is how the worthless 30 bn of Company B paper once bought by A (for 30 bn of worthless company A paper) will actually result in 30 bn worth of payments, plus interest. As they say, the entire system rests on faith.ⁱ

This perhaps also explains the fundamental logic of the so called "revolving door", ie this situation where policy makers are ex bankers and ex policy makers receive jobs in banks. The soviets called it "cadre rotation", a clunky term typical of Stalinist as well as current American lingo, but basically if the value of Company A derives from its ownership of Company B and the value of Company B derives from its ownership of Company A it makes no longer any difference where in either one "works" or what exactly they're doing. The only point of import is whether you're living inside the absurdity or outside of it, and you can readily find this out for yourself : if your life makes no sense you're out.

Obviously this nonsense doesn't work in Bitcoin, which means that all the effects of this state-bank conglomeration are already gone. Sure, a shadow of their former existence still lingers, an impression of their presence still pervades the atmosphere, sort of how in your sleep you still feel the woman's body in bed long after she's gone to make the coffee. Nevertheless, it's all gone. The ability to tax coercively ? Gone. The ability to snoop and spy on people, and limit or direct their consumption ? Gone. The ability to redistribute resources to make it "more fair" ? Gone. The ability to push society towards "goals" and "shape" the future ? Gone.

'Tis all gone, shadows of the past, things like the Hindenburg waiting for their 1936. The question before us today is whether we wish to rescue any of this past for the future. From what I can see that question is receiving two major types of answers.

One type, that doesn't particularly care about the state but hates the banks obviously proposes that in no case will the banks survive. These are the people who loathe fractional reserve, who dislike social hierarchy, who think they have ideas and are personally very valuable but lack any experience, skill or ability worth the mention. We could call these the populists, and shorthand their post-Bitcoin world as a sort of pre-roman Celtic or Viking type of commune.

The other type, that doesn't particularly care about the banks but hates the state obviously proposes that in no case will the state survive. These are the people who loathe entitlement, who dislike social equality, who think the others are at most a resource and in general not a very valuable one at that. We could call these the elitists, and shorthand their post-Bitcoin world as a sort of Industrial Revolution England and US, with punishments for idleness and bringing forth artillery regiments to break up strikes.

In a sense here's the Hamilton - Jefferson debate all over again. We know how the original sorted out, and I have little doubt that the current version will sort out along the same lines. The result will make us all rich and prosperous, and consequently we'll spend too much time doing things and too little time ruling the household and educating the wives, who will in turn miseducate the children, who will in turn become less and less cool than we were at their age, generation by generation. And by that natural decay of the rich and prosperous through their unworthy descendents in a century or two some other people will wipe our remains just like we're wiping these remains and on and on.

The best part is that all the downslopes will be calling themselves "progess", and all the degenerates will be calling themselves "progressive". The people actually pushing things back up don't need to be calling themselves anything, for what they are is quite obvious just by watching them at work.

1. This, incidentally, is not an imaginary example. Maiden Lane LLC were three limited liability companies created by the Federal Reserve Bank of New York in 2008 as a financial vehicle to facilitate transactions involving the former Bear Stearns company and the lending and default swap divisions of the former American International Group (AIG). Last year about this time the NY Fed announced that its loans to Maiden Lane LLC had been fully repaid, with interest. What magic occurred between 2008 and 2012 that turned billions of worthless paper into valuable investments capable to repay investors with interest ? Faith. It's a substance. [↩]