If you haven’t yet tried artificial intelligence, I can recommend it as a way to spend a weekend. There are many iterations, some for art, some for language and some for text. You can register here for what I consider the simplest version. It is completely free and absolutely amazing. I gave it this prompt:
‘Write a story about the European Central Bank forgetting that they had an inflation target and instead concentrating on the climate, include red wine over a long lunch in Frankfurt’
This is what it returned:
Once upon a time, the members of the European Central Bank (ECB) gathered in Frankfurt for their monthly meeting. As usual, they discussed the state of the economy and debated the best course of action to maintain stability and promote growth.
However, this time was different. The members of the ECB had been so focused on other issues, such as the climate and international relations, that they had completely forgotten about their primary mandate: to maintain price stability and keep inflation under control.
As they sat around the table, enjoying a long lunch and sipping red wine, the conversation turned to the latest developments in the global climate crisis. The members of the ECB were passionate about the topic and spent hours discussing the various measures that could be taken to reduce carbon emissions and protect the environment.
Meanwhile, the economy continued to grow and inflation began to rise. The members of the ECB were so engrossed in their discussions that they didn’t even notice the warning signs. It wasn’t until the markets began to react and the media started to report on the situation that the members of the ECB realized their mistake.
They scrambled to take action, but it was too late. Inflation had already reached dangerous levels and the economy was starting to suffer. The members of the ECB were criticized for their lack of focus and were forced to implement aggressive measures to try and bring inflation under control.
In the end, the ECB learned a valuable lesson: never forget your primary mandate, no matter how tempting it may be to focus on other issues. And, as they say, a little red wine can be a nice way to relax and enjoy a long lunch, but it’s important to stay focused on the task at hand.
I don’t know what to say, other than I have nothing to add.
While we are on the topic, it’s worth noting that some iterations of AI are sponsored by big tech companies like Microsoft and Google. OpenAI, which I used for the EU story above, is not open at all. The source code has been closed for a while and will be used to make profits, sell better adverts etc. which is completely fine but good to be aware of.
There are other AI programs though like Stability AI. They give away everything for free. Their DreamStudio image software is completely free and being integrated with Canva and other tools. Stability’s strategy is simply to give everything away to encourage people to develop on their platform rather than any other. It appears to be working too, the developer adoption curve is making a charge straight up the Y axis.
Open source works. We know that from the internet where the backbone of the infrastructure is built on Linux, an open source operating system. One of the architects of Linux now works on Bitcoin and he had this to say about open source technology:
Why would you care about what someone calling himself “Rusty Twit” thinks? Well he is quite straightforwardly one of the people that built the internet with open source tech.
Personally, I think the open source AI will win too. It will be the one people will adopt, it will achieve critical mass first and will learn at a rate that far exceeds anything an organisation can control.
There is absolutely no reason why this cannot be true of value exchange. Money will be open source. We are brainwashed into thinking it can’t work but it does work and it is working. Every day, like AI, it gets better and you ignore it at your peril.
A case in point
A terrific example here of someone building on top of an open source system. Strike (US bitcoin payments company) now allows US users to send money to mobile phone numbers in Africa. Simply log into their app, enter participants phone number and account number and pay. They instantly receive their value, as in, seconds later.
Under the hood, the US user has a bitcoin balance which is sent over the Lightning Network to the recipient country at which point it is converted into local currency and deposited directly into the recipient’s bank account.
Why is this clever or unique? In a traditional USD transfer the money would leave the US bank and head to the clearing house in New York (taking 1 working day). The African bank would then have the money deposited into their own USD account with the correspondent US bank with whom it has a relationship (another working day). On receiving that money they would deposit money into the local account in their local country (another working day).
The value exchange is not instant. All US dollars clear through New York first before they go anywhere. In this case only the bitcoin moves, it moves instantly and represents the value exchange (the clearing house) although the parties themselves are transacting in US dollars and local African currencies. In essence the USD counterparties are removed from the transaction altogether, saving three days and a huge amount in fees for the user.
Full press-release here. The particular beauty of this is that the UX is such that users do not know they are using the bitcoin lightning network. It just happens. They will select it because it is cheap and fast, not for any other reason.
As a general rule when you borrow money for longer it will cost you more. Why? Raw probabilities mean time introduces more risk. More bad things can happen for the lender and so they charge more.
In the bond market when longer term interest rates are below short term rates it’s called inversion and normally it isn’t good because it implies some other larger risks outweigh those introduced by time.
The chart here depicts the difference between 10 year and 2 year US treasuries (10-2). The annual borrowing for 10 years is lower than it is for 2. This doesn’t make much sense unless the market thinks a bad thing is going to happen and interest rates are going to start falling sharply.
As a harbinger of recession 10/2 inversion has a near perfect record of predicting recessions and the yield curve has never been so inverted for 40 years (since the early 80s).
If the bond market is right you can expect quite a sharp recession, a lot of unemployment and an awful lot of money printing. Looking at US employment statistics they are very strong, but most of the jobs are low paying, so people are taking on two jobs. High paying jobs at big tech companies are getting absolutely massacred. The AI covered earlier is already good enough to replace all sorts of roles around the world.
This excellent podcast interviewing the founder of Stability AI makes clear that Universal Basic Income is coming. Robotics, machines and AI are going to replace so much and we are asleep at the wheel. UBI will be paid in a central bank digital currency and it will be specifically for ‘approved’ things like food, shelter and clothing. Nobody is really pretending anything different either, the World Economic Forum has been talking about this for years. There are two possibilities, one that it is a sinister plot to control your life, the other that they are reasonably intelligent people who when looking into the future see something coming that we need to prepare for. Take your pick, it matters not because the likelihood of it being true is now high.
The real money is going to be the open source money, with that you will be able to do anything, whenever you wish. Once again, I implore you – get some now while it’s cheap.
The ‘road to irrelevance’. It is very unusual for the ECB to directly attack bitcoin. The first author, Ulrich Bindseil has been at the European Central Bank for over 20 years, indeed ever since it launched. His colleague Jurgen has slaved away at the bank for over a decade. I think it would be fair to say their expertise does not extend much beyond central banking but that hasn’t stopped them making some substantial calls.
The report is rather terse, includes no research references and at little over one page long is very unlike the ECB. They conclude, without evidence, that nobody uses bitcoin; it isn’t worth regulating and banks should not get involved with it. That run’s contrary to any documented evidence and perhaps that is why no references are provided.
Strangely, when reading, the following articles are promoted to the reader:
Digital money? Digital Euros? Digital Central Banking? Strange that. As a tactic for grabbing attention though, it worked so maybe the ECB isn’t as stupid as I think.