This article was originally published December 18, 2020 on DeFi Today.
The week of new highs. Bitcoin’s chart revealing the start of the new cycle to much higher prices, the „Stock to Flow“ in its right timing and the fact that anyone who had an amount in Bitcoin, without selling it, did not lose money. An accomplishment to prove to those who were skeptical, and a moment of maximum focus on the entire Crypto industry.
It has been rumored for a long time that institutional investors could not ignore Bitcoin. Now every day we hear of new groups that do not want to be left out of the new monetary phenomenon that they themselves once mocked.
It is wise not to stay out of it. There may be no better protection of crypto than the economy of terminal capitalism, of 20 years of unfavorable industrial relocations, of irresponsible consumer credit, of unbridled creative finance, of manic and unlimited money printing.
It is ironic how JP Morgan reacted with the entry made with 100 million on Massmutual’s Bitcoin.
„This is a sign that institutional players will grow Bitcoin.“
The same group whose CEO, as we know, said that Bitcoin is a scam. The same group that will not fail to increase exposure in the crypto world, to make money and to protect itself.
Ruffer Investment Company has made this clear, with its entry into Bitcoin not light on 2.5% of the portfolio.
„We’re doing this to protect ourselves from the devaluation of traditional currencies.“
A run on Bitcoin with big names: Black Rock, Microstrategy, Stone Ridge, Sky Bridge, Square, Guggenheim, Northern Trust, PayPal, American Express.
Bitcoin to protect themselves from the galloping and inevitable devaluation of fiat money which, looking to the future, makes the „price of the moment“ insignificant.
The rush of institutional investors are a precise indicator that cannot be ignored in the traditional economic reality and after the damage it has brought.
It may be this indicator that raises the awareness and adoption of Crypto Revolt to the next level, offering the possibility of a new and promising distribution of wealth, aimed at everyone.
Bitcoin can be interpreted as an anti-globalization event
It is useful to recognize some differences in principle.
Bitcoin increases in value over time due to its deflationary monetary line. The currency is a global reference that therefore benefits those who own it. Wealth is unstoppably distributed as time goes on, as demand increases. Its very mechanism is also unstoppable: no master, no one can severely intervene to stop it or change its destiny – the 21 million and the numerical release established. Decentralization is like a new standard that everyone will have to irrevocably accept, if one does not want to risk being excluded from it, as institutional funds seem to have realized.
The monetary regime of globalization, on the other hand, has an opposite effect. It impoverishes western populations. The time that passes brings them a reduction in purchasing power, a devaluation of the currency and an increase in the cost of living. Contrary to the fundamental principle of Bitcoin (central power does not exist to determine monetary destiny), globalization has taken away from the many to give to the very few, centralizing power further with control bodies, for the exclusive benefit of those who are close to those centers of power.
With Bitcoin and Crypto, accessible to anyone, it is not the privilege of the social position of proximity to those who print money to determine an advantage, as happens with the „Cantillon effect“ for the well-placed of the globalized world, but it will be the normal possession of the currency, the positioning, the natural flow of money that from an economy full of internal contradictions and bearer of heavy crises, pours into the world of Crypto and Bitcoin, structured for a growing interest and increase in value, in repeated economic cycles, initially volatile, until the achievement of greater stability in the eventual future.
Future that fulfills the new distribution in favor of the individuals who decide to be part of it. The opposite of the internal principles of the economy of globalization.
The most incredible disparity in history
The 2008 crisis was the result of globalization and its banking system.
In a phase of waning economy and progressive impoverishment, mostly due to relocations, consumer credit (mostly for the purchase of houses) was promoted by exasperatingly indebting people who (they knew) would soon become insolvent.
But the banks, obviously, did not take the risk of the hyper-indebted. Their debt was „securitized“, i.e. given to others as an instrument on which to earn an interest, with the complicit support of the rating agencies and the American regulator. This is creative finance, which passed on risks to others, in the phase preceding the subprime crisis.
First the boom, then the real estate bubble and the gigantic debt, then the showdown.
Result: millions of people on the breadline and social catastrophe.
The American State should have intervened severely to prevent finance from passing on to others the debts incurred by the mother-girl and the Mexican immigrant, and other subprime debtors. As Roosevelt had done, succeeding with difficulty against the financial establishment of that time, in the 1930s. He had imposed the Glass Steagall law, which distinguished for banks the activity of deposit from that of speculation. A law that lasted for decades until 1999, then repealed by Clinton, the president who most decisively initiated globalization.
Instead what had been done?
Trillions of dollars created out of nothing were injected with the apparent intent to heal the effects of the crisis now triggered. Only on one part of the economy: the part that was deemed necessary to cure all the other parts, namely the stock market.
In the end, of those injections of money, nothing came to the aid of the real economy and the people overwhelmed by the crisis.
But there were absolute winners. Shareholders who became billionaires for hundreds of billions, for having invented companies that for the real economy do not even produce anything. Like Amazon, like Google.
An unprecedented disparity had started in this way, to last in time. Gigantic numbers for very few, at the same time as the devastation of many, too many people left without anything.
A drastic moment in history, the beginning of a new goal of distribution of wealth taken away from the people, without measure and without justice. From that time until today there have been no government interventions to re-establish a balance, or at least an attempt to protect the economy in Western policies.
There was a time when this would never have been possible. Capitalism before globalization had statesmen of a very different kind. A world that now seems ancient.
It is surprising to know that in the period between 1950 and 1963, in America, the super rich were taxed in a way that may seem draconian: 90% for the top fraction of the wealthiest incomes.
In government were presidents who were far from being classified as socialists. There was Harry Truman, Dwight Eisenhower and John Fitzgerald Kennedy.
Personalities who had lived through the Great Depression, and knew the Soviet enemy they faced. So the American dream had to be alive and within reach.
Several years later, Ronald Reagan, together with Margaret Thatcher, had eased taxation on the very rich. The reason for this was the certainty that private individuals could allocate capital more efficiently and more skilfully than the state. It was therefore good to allow millionaires to become billionaires and trillionaire, because they would have activated „trickle down economics“, the drops of money that from the very rich fall on all the others. That too was a promise of redistribution, but it anticipated the possibility granted some time later for an unrestrained radicalization and decline towards the tremendous inequality of ultimate capitalism.
By the beginning of this year 2020, the 12 richest men in America had already reached the record of their wealth. Then came the lockdowns. The general slowdown of the world and the economic halt. An unprecedented deflationary vortex.
But just during the lockdowns, always them, billionaires born with the previous crisis of 2008, since mid-March have found an increase in their wealth of 283 billion dollars.
Jeff Bezos alone has become $76 billion richer.
Forbes showed that the world’s top 400 billionaires had 8% increased wealth during 2020. This in America where 48% of small businesses are at risk of permanent closure at the end of 2020, while the Fed plans to print $6.5 billion in money, and the ECB $1.2 billion.
Trend started in America and extended to Europe. The ECB has created in the last 10 years from nothing 5 billion euros, in a world without growth. Money created and distributed in a cumbersome way but without benefit to the real economy, causing the wealth of an absolute minority to the detriment of all others.
It is an economy with unsustainable implications that needs historical events to counteract them.
Crypto economy counteracts this trend by creating a new distribution, with the passage of time, maintaining the right importance of being able to accumulate wealth within a system in favor of the individuals who are part of it, but avoiding the sense of injustice and general counterproductivity.
Joseph Stiglitz, Nobel laureate in economics in 2001, predicted it: „the top 1% controls 40% of the national wealth. The top 1% have the best homes, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: the understanding that their fate is tied to how the other 99% lives. Throughout history, this is something the top 1% eventually learns. Too late.“