Naivity in finance

Monday, 24 August, Year 7 d.Tr. | Author: Mircea Popescu

When the Cypriot banking system collapsed, there was a lot of clamor in Bitcoin that lo, this means Bitcoin will grow in Cyprus! I ignored the nonsense at the time, on the rationale that a major scam was underway and the "confused" were probably just shills aiming for a low footprint.

Later, when the oh-so-sovereign Argentina went to begging session after begging session asking a US judge to take mercy on their very stupid heads, there was a lot of clamor in Bitcoin that lo! This means Bitcoin will grow in Argentina. I explained then why not so, and why so, and who's doing what and so forth.

Perhaps it's time for a more general discussion of this "collapse drives adoption" nonsense. To begin, we won't be discussing this in terms of money, as you have absolutely no experience with moneyi and so any "understanding" that'd promote would be merely you listening to the sound of silence and coming up with noise. Instead, we'll discuss this in terms of an invading Mongol horde. I'm aware you don't have any experience with that, either, but the very sore asshole of your foremothers did actually convey enough blood wisdom upon you that I trust you can, instinctively, manage. Let it not be said that any case of violent mass rape was ever without its attendant benefits downstream.

So, suppose you live in Vienna, and the barbarians are at the gates, which are thereby welded shut. You've had that epic "Remove your foul demons from our lands" moment a while back, the fun's gone and the elation well chilled by now. And so is your house, which is the only reason edible food still is to be found, but once the summer comes - that's it.

Suppose the head of the Mongols doesn't have the fucking manners to die later, but dies right off. This is a catastrophic event for your enemy. What happens now ? Here are some possible alternatives :

  • A. A number of mongol soldiers de-mongolify and de-soldierify, and instead become lawful subjects of the emperor in Vienna. They also give up their hunting and pastoral traditions, for which really Vienna doesn't have enough space, and instead move to a settled life of farming. Except all the farms are already owned, so they just go die in a sewer while trying to learn the language and waiting patiently for someone to take pity on them, screaming Gott erhalte Franz den Kaiser! all the way.

  • ~ or ~

  • B. A number of Austrian soldiers pop out of nowhere, because God himself was too lazy to edit the figure of "total soldiers around Vienna" and so as the Mongols leave freshly baked Austrians spring forth from the frozen ground. Just like that.

  • ~ or ~

  • C. The Mongols leave en masse, rushing to get to whatever Chtulhu town they sprang from, pulling out with them most of the very scant stragglers that had, for instance, taken the habit of fucking the same local girl every night, as well as that girl's brother and his best friends. Leaving behind a smaller, quieter, sadder Vienna.

Here's the scoop : if you picked A you're a type-A idiot, and if you picked B you're a type-B idiot, which is ever so slightly more advanced.

In the practice of money, the type-A idiot is a chimp that sees from its place in the zoo how people drive up to an ATM, so one day when he escapes he goes there and pushes the buttons to get the colored papers to make confetti with!

Whereas the type-B idiot actually goes to church to pray god to give him money. Because totally, that's what god's line of work is, giving idiots money. Might as well go to the dentist to ask him for some jawbreakers or something - heck, one day you might even actually get some. If you're "lucky".

The correct answer is C. As a fiat economy collapses, no matter which one, the fiat money supply contracts. Necessarily and always, no matter how exactly the actual finance backing that economy is structured. If money issuance is backed by precious metals, the money supply contracts through hoarding. If money issuance is backed by the present day FED, the money supply contracts through futures destruction, and so forth.ii

Once the money supply contracts, the ability of that culture to transact with other cultures diminishes, and it doesn't diminish on any sort of normal distribution. In particular, the ability to transact the money of another culture is strictly decided by the relative political positions of the two. At a time everyone around Europe wanted to be in Europe, the reserve currency for them in case of crisis was the Euro. Before that, it was the Deutsche Mark. At no point was the reserve currency the ruble, even for countries still factually, or then nominally part of the ruble lands. This wasn't because of better or worse "management" of one currency or the other, but strictly for cultural supremacy reasons. The Mongols wanted to move to Berlin, not to Moscow. That is all.

So : while it's true that net inflows from all fiats to Bitcoin will remain positive in perpetuity, it is plainly untrue that the rate of flow works backwards for some reason now. It does not : it will be highest when the fiat economy in question is expanding, and lowest when it's contracting, up until that point when we achieve cultural supremacy over that zone, after which the discussion is moot anyway. And that point is, to quote our very colorful Mr. Myself, "after i've taken a piss on the ruins of the white house". Or, if you prefer the equally immortal words of Beyazıt Yıldırım, the man promised to feed his horse on the altar of St Peter's. Same principle at work, and no, this isn't a military discussion. It's a purely cultural consideration. This, in fact, is what culture is.iii

There is a very good reason #b-a is engaged in a cultural supremacy war, rather than dicking around trying to make friends and influence people on WS, or herpderping with repackagings of other people's tools.

You're welcome.

  1. This is a fact, you do not. You think you do, yes, on the basis of having on occasion in the past cashed a paycheque. That was not money. You might as well pretend you have experience in showbiz because you've been watching TV religiously. []
  2. You will note that in either case the wilful attempt to counteract contraction of money supply in a crisis is nigh on impossible. Which is why the QE stuff fizzled, during the crisis. It hit recovery with its huge tail later, and wiped it back into the sea, it's true, but also unrelated. []
  3. You might have been misusing the word. Much like she was misusing "class". []
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