Crypto Policy | Learning by Proxy

Money has been the fiefdom of governments for a long time. If that changes, many countries stand to suffer.

Jun 11, 2021

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Learning by Proxy is a weekly newsletter that covers things happening around the world, along with some context that helps you understand it better.
This is the 63rd edition of the newsletter.

The story of money is one that has been poorly presented and even poorly understood. A few months ago, I had written a blog that was filled with the same garbage that is the popular theory of money.

Man needs stuff —> Barter —> Money

Because of this improper understanding, we are walking down a path where history will repeat itself.

Crypto Policy

Debt came before money.

The story we are told is that the farmer who produced rice or wheat exchanged those goods for shoes or something else that he required. There is one issue - there is no historical record to prove this ever happened. People living in small groups borrowed and remained in debt to one another till such time that the person from whom they borrowed required something.

In fact, debt became money. In ancient Sumer, debts were recorded on tablets, and the tablets were broken in two. The holder of the creditor side of the tablet was owed money. Often these tablet exchanged hands as a form of currency. In Ireland, they would practice the same with hazelwood sticks that were broken into two halves. The creditor held onto one side which was called the stock and hence the term stockholder and the debtor held on to the other part called the stub.

Money, the way we know it today, developed around armies. If you were giving something to a soldier and he refused to return the favour, what were you planning to do? Threaten?

Also, soldiers were constantly on the move and therefore it became essential that you settled the debt then and there.

Kings needed money to go to war and they ran up a lot of debt. At the fag end of the 17th century, the need for such a debt forced King William III to take a loan from a group of wealthy merchants who housed the debt in an institution that was granted the power to issue currency under his name. He took a loan of 1.2 Million pounds and the currency equivalent to that loan went into distribution. Not very much unlike the counter halves of the tablet, the currency provided assurance that the king would repay the loan.

We know of that institution today as the Bank of England. That loan was never repaid. The entire financial system of England depends on that loan never being paid back.

Barter does not rear its head until the middle ages, because you needed to be well versed with the concept of money and price in order to engage in any kind of barter. Barter is not possible without the discovery of equivalence of value.

The history of money is convoluted. It has appeared and faded several times; often in the face of public reprisal against the debt that is created. From ancient Sumer to Mesopotamia, Rome, Greece, and the Arabs; all have seen their currencies rise, fall and disappear. No other country has seen this play out more than China, which has the longest unbroken history.

So it comes as no surprise then that

After barring the use and trading of cryptocurrency, Beijing has indicated that it will turn next to cryptocurrency mining.
China’s vice-premier Liu He last Friday said the government would clamp down on bitcoin mining and trading to achieve financial stability but stopped short of revealing specific policies. This week, Inner Mongolia, an autonomous region in northern China, issued draft guidelines on its plans to ban crypto mining, offering the first details about how authorities intend to execute this latest stage of the crypto crackdown.
Source: Quartz

A currency that the state does not have any power over can reduce the state to having no power at all. This has happened a few dozen times across the world over the last 7000 years.

Also, with the Climate starting to heat up; China is beginning to realise that Bitcoin mining is just outsourcing pollution to another country while Elon Musk goes around publishing foolish memes and playing with the price.

China banned the trading of cryptocurrencies in 2017, but so far the “mining” of the assets, a process whereby people use enormous power-hungry computers to solve algorithmic puzzles and in return get rewarded with the virtual currencies, has been tolerated. As of April last year, around 65% of the global average monthly bitcoin mining capacity, or hashrate, was based in China due to its cheap electricity, according to the Cambridge Bitcoin Electricity Consumption Index, an online tool developed by the British university.
Source: Quartz

In the meantime, Indian which has left crypto-currencies in the legal grey area and has constantly punished or pushed back on those who are seeking to trade in it is looking at building legislation for it. This week the RBI notified that none of its communications was to be construed as banning crypto-currencies.

India's opposition to crypto has more to do with money laundering and terrorism finance than control over the currency.

A formal board comprising eminent jurists, technical specialists and fintech compliance specialists is being set up to oversee the implementation of this Self-Regulatory Code, IAMAI-BACC said in a statement
The self-regulatory code, which is already in place, includes voluntary compliance with anti-money laundering, combating against financing of terrorism, and know your customer regulations, and other company and taxation law
Source: Inc42

And then at the other end of the spectrum, a poor country makes a poorer decision!

El Salvador became the first country in the world to adopt bitcoin as legal tender after Congress on Wednesday approved President Nayib Bukele’s proposal to embrace the cryptocurrency, a move that delighted the currency’s supporters.
Source: Reuters

Imagine having your income fluctuate based on what Elon Musk tweets! 🤦🏽‍♂️

Rage Machine

Barack Obama rose to the presidency because of the way he utilised social media and spread his message. Then Donald Trump used the same technique to deliver the same result. He pushed his luck too far on January 6th 2021.

He was banned.

Last month, Donald Trump started a site very imaginatively named "From the desk of Donald J. Trump". 25 days later the site was shut down.

Former president and former “king of social media” Donald Trump decided this week to shut down his month-old blog, due to abysmal readership. According to an analysis by The Washington Post, Twitter and Facebook engagements with the blog, From the Desk of Donald J. Trump, plummeted from a first-day peak of a modest 159,000 interactions to fewer than 30,000 on the second day, and haven’t exceeded 15,000 interactions on any day since. Trump is reported to have decided to shut down the blog because he believes that the low readership has made him look small and irrelevant.
Source: Wired

Even if you are the former President who has been spewing lies to no end, driving engagement to your own blog is work. Also, you need to offer something of substance to keep people coming back over and over.

The fact is, this further proves what a rage machine social media can be and how critical the algorithms are in amplifying one message over the other.

Even the people who were willing to run over the Capitol on his word were not visiting his blog every day.

By monopolising our attention and then making the choice to show one message over the other, social media today wields incredible power that is not subject to any legislation. Two people sitting in California should not have the power to cause regime changes across the world.

Some Weather Update

Reims is a place that one passes if they are going from Paris to Southern Belgium. The city is underwater. Storms have flooded the city. Video

Parts of California that got roasted crisp last year due to the forest fires are now facing some of the worst droughts in centuries.

Source: Guardian

Boston, a city known for the number of feet of snow that falls, is facing a heatwave. Temperatures are expected to reach the mid-30 degrees.

Mayor Kim Janey has declared a heat emergency in the City of Boston beginning Sunday and lasting through Tuesday with temperatures expected to be in the mid-90s for several days.
“It will be the first time this year that we’ve seen heat and humidity like this for an extended period of time. We are opening our cooling centers so all residents have an option to come inside and cool off in air conditioning,” Janey said. “I’m urging everyone to take precautions and find ways to stay cool over the next few days. Please watch out for each other. If you see someone out in the heat who appears in distress and needs help, call 911 immediately.”
Source: NBC

Delhi summers have been interrupted by rain which has been welcome and both the coasts in India have been subjected to one cyclone a piece.

And

Russia and Canada are struggling with heat!

It’s only May, and temperatures near the Arctic Circle in northwestern Russia are approaching 90 degrees. In Moscow, temperatures have shattered records on consecutive days.
It has also been unusually warm in central Canada, where raging wildfires in Manitoba are sending plumes of smoke across retreating ice in Lake Winnipeg.
Summer has yet to begin in the northern hemisphere, but temperatures in high latitudes are already alarmingly warm, portending another brutally hot season while signaling more climate troubles.
Source: Washington Post

The "developed countries" have escaped the worst effects of climate change till now because most of them have been in the northernmost latitudes and therefore immune to the amount of heat as well as the consequent weather activity that the heat unleashes. Those days are finished.

What this will affect is agriculture. Growing crops that the farmers are used to, will become more and more difficult. People will migrate. From California to further north. I want to see what kind of border wall Canada plans to build in 20 years!