There's a very interesting op-ed piece by Greg Barker at UnHerd, shared by W.G., that I want to pass along, because there is something in it that leapt off the page when I read it. It's one of those very obvious things one does not think about, until someone - in this case, Mr. Barker - point it out to you. The story itself is simplicity itself: Mr. Barker is arguing that the emergence of crypto-"currencies" has not lived up to its oft-touted claim to disenfranchise the financial elites and return monetary power to ordinary people. But the reason why - and it's an obvious reason - is what is the real nugget in this article:
Mr. Barker frames the argument by recalling a bit of the historical propaganda surrounding cryptos:
Wall Street, the Federal Reserve and the financial arm of Silicon Valley can’t believe their luck. The cryptocurrency movement, the very rebellion that set out to defeat their hegemony, has provided them with the necessary technology to become even more dominant.
When Bitcoin, the first ever cryptocurrency, was launched in 2008, it was hoped its “Blockchain” technology — which records transactions and cannot be hacked — would spark a digital revolution. If a transaction could be carried out securely without the need for an established bank, it would, we were promised, mark the end of corporate capitalism — and the dawn of a new era of decentralisation.
Just over a decade later, however, Blockchain has become the centre of the financial elite’s new-age banking system. Indeed, behind the scenes, they’re going all in on crypto.
Commenting on the current - and highly "unusual" - rapprochement between big crypto behemoths, Wall Street, and central banks such as the Federal Reserve, Barker is even more to the point:
Fast forward to today, and the crypto elite have mimicked Thiel’s change of direction. Rather than simply throwing in the towel and admitting the game is up, they have abandoned their cyber-libertarian roots and merged with their enemy: the financial behemoths of Wall Street, the Federal Reserve and Silicon Valley.
It’s easy to see why this would seem appealing; a number of crypto elites are already reaping the rewards of cosying up to the establishment. Jeremy Allaire’s Circle — the company behind the huge, unaudited cryptocurrency USDC — has partnered with Silicon Valley payment giants, Mastercard and Visa. Meanwhile, Brian Armstrong, the CEO of cryptocurrency exchange Coinbase, revealed in a tweet in May that he’d held meetings in D.C with high-ranking state officials, including Congresswoman Nancy Pelosi and Federal Reserve Chair Jay Powell.
All of which raises a peculiar question: Why is the Federal Reserve’s head honcho, Bitcoin’s supposed arch-enemy, collaborating in undisclosed meetings with the CEO of crypto’s main cashier? In Bitcoin Gospel, that’s heresy.
The answer lies in what I suspect are the crypto elite’s real intentions: namely, that they were never really in it for the freedoms Bitcoin could offer, but more for the untold riches it promised. Now they’ve succeeded, it’s all about wealth preservation, and in the age of bailout capitalism, becoming “too big to fail” is the ultimate protection. That is why getting in the good books of Wall Street and the Federal Reserve seems to be the top priority for crypto billionaires. If a crisis emerges, and they threaten to bring down the existing power structure’s financial order, guess what? They’re first in line for a taxpayer-funded bailout. (Boldface emphasis added)
Well, such a result was predictable for anyone paying attention to the phenomenon. Indeed, I strongly suspect there's a hidden "crypto" agenda behind such phenomena as the Texas State Bullion depository, though I hope I'm wrong. But prescient as even these observations by Barker are, they still do not approach his central argument as to why crypto-"currencies" ultimately were destined to create a new financial elite which would eventually ally with the old one.
That central argument is encapsulated his following remarks:
But in reality, the crypto rebellion has failed to liberate us, or achieve anything else its founder Satoshi Nakamoto envisioned. Rather than producing a more open, more liberating, more financially free society, the crypto movement has empowered not just another cabal of corrupt financiers, but a hidden cartel of criminals, Wall Street rejects, and what U.S Senator Liz Warren has described as “shadowy super-coders”. (Boldface and underlined emphases added)
It's quite a rare thing when I find myself in agreement with Senator Elizabeth Warren about anything, so when I do, I sit up and take notice. In this instance, the Senator is correct, for by creating a system of transaction based on blockchains, the ability to transact is essentially not democratized, but rather, handed over to a technocratic class, in this case, "coders" and "programmers", which bypasses the very group that Nakamoto, blockchain's alleged creator, intended to help: "ordinary people," i.e., the truck drivers, farmers, assembly-line workers, and so on. It creates a medium of exchange restricted to those who create it and know how to run it.
And the bottom line here is, that means it is not a genuine medium of exchange since it requires specialized knowledge to be able to use it. To put it more bluntly, for many years I've been cautioning people about the dangers of markets - be they equities, securities, or commodities markets - being run by algorithmic trading for the very simple and basic reason that algorithmic trades are not, at root, reflective of basic human market activities. The same holds true here, and in spades: trading in computer blips is a far cry from going to a local farmer's market and negotiating a trade for certain types and amounts of produce in exchange for so many ounces of silver. The one creates a new middle man - the crypto-traders - and the other avoids them completely.
It strikes me also that the bankers are slitting their own throats, for the time may - and probably will - come when the bankers find they are no longer able to make monetary policy for their institutions, investors, and depositors, having handed over the business of trade and finance to a group of programming technocrats... who made have other ideas than what the boards of those banks have... Who sets the value of those corporate coupons? Not the CEOs or the boards. It's the programmers. And if they unionize, that could spell big trouble for the "old ways of doing things"...
Regardless of whether or not that high octane speculation actually occurs, however, the bottom line here is that Mr. Barker is correct: it's merely the creation of a new elite, not the disempowerment of the old one.
See you on the flip side...