State of the Union
A confused Kamala Harris wonders why he’s talking about Iran
Normally, the State of the Nation is boring. Now that Joe Biden does it, there’s real anticipation, generally for the wrong reasons. He didn’t disappoint either, immediately addressing the war in the Ukraine:
“Putin may circle Kyiv with tanks, but he’ll never gain the hearts and souls of the Iranian people”
The Iranian people? If nothing else the statement is true but maybe it missed the mark a bit. Everyone in Tehran was probably delighted. America is finally being nice about them, so perhaps he did make a subtle move for world peace. 4D chess, by Joe Biden.
It’s a top priority now but it does rather conflict with the rest of the agenda. The war in the Ukraine will not help through its impact on oil prices, nor will the gigantic infrastructure spend. Even so, inflation is sufficiently high that it may start falling back before the US mid-terms. I look forward to hearing that “No US President has cut inflation by more percentage points than me since Ronald Reagan”.
Factually correct, but disingenuous. The Federal deficit will still exceed nearly every other in history. Save for the Covid spending and the CARES act he’d be top of the pile for spenders.
Once again, totally ignoring the low base from where employment came. It’s interesting though he talked about minimum wage and moving the Federal minimum from $7.50 to $15/hour. It’s incredibly low as it is and speaks to how hard life has become in some parts of America.
An infrastructure decade, and it will need to be. In China they build airports in six months, in America, it takes them a generation. The Empire State Building took 1 year and 45 days to build and still stands. Those days are long gone.
They will print money they don’t have and continue the gradual destruction of the USD. Every empire ends the same way.
Sit back, buy bitcoin.
The final boss
All video games have a final boss. It is invariably hard to beat them, but they always fall in the end. The situation in Russia and Canada has highlighted the importance and power of sovereign assets held outside the banking system. Whether you are good or evil you can now control your assets as you wish. Bitcoin has collided with real world geo-politics and the fight is about to get very real as a result.
Fundamentally, it is about control. In a fiat currency world, the government controls supply, they control the distribution network and they can control who can use it. Even internationally via the SWIFT network. The old order is breaking down, SWIFT is not what it was. China’s trade with Indian and Russia is conducted mostly out of USD and outside of SWIFT. Cryptocurrency is actually a side-show at the moment in the move away from the USD, but it certainly is not immune from the grab for control.
This won’t be restricted to the ECB either. The USA is right there with them.
All of this is unavoidable. We were always going to face these challenges and you can expect some severe restrictions as a result, including declarations about asset holdings, advanced KYC for bitcoin exchanges and reporting requirement about wallet transfers.
It will result in enormous pain for those exchanges dealing with US or EU clients. Much like the FATFA rules and the awful W8 form that anyone dealing with American assets must complete.
Ultimately though, it will fail. You just cannot red tape your way to victory. You have to be better, offering something that is more efficient and serves its purpose as a best-in-class instrument. Governments around the world are going to have to get used to being another economic actor that must use the universally recognised unit of account. The system of fiat currency has lasted since the early 1970’s but it won’t last forever.
The fight with the final boss normally takes a few attempts though, so enjoy the ride. It will not be dull.
Diem Team raises $200m
Remember Diem (formerly Libra)? It was Facebook’s attempt at a global currency for their platform that would have been backed by a mix of fiat reserves. It was constructed very much like the IMF’s Special Deposit Reserve’s (SDRs) which the IMF uses as its currency of account.
With Facebook’s reach, its currency would instantly have dwarfed the IMF and they would have had to deal with Mark Zuckerberg bailing out bankrupt nations. “Argentina calls in Diem after default”.
The push back against Facebook was enormous. They had signed up corporate backers from all over the globe and one by one they all pulled out under political pressure. Then Facebook pulled out too.
The message is, don’t try and launch a global currency unless you are an anonymous person (or group) who presses go and then disappears off the face of the earth (like Satoshi Nakamoto did). It is an incredibly hard and dangerous thing to do, one of the biggest and most influential companies in the world couldn’t do what bitcoin did.
Still, the team behind Diem has raised $200m to continue the project outside of the purview of the Facebook. It seems Andreessen Horowitz and other major venture capital firms are involved.
It must be said, the former CEO of Diem, David Marcus doesn’t rate their chances.
“Increased compounding relevance over time”. Do anything you want, just don’t be short bitcoin.
The prospects for labour
Every year ARK Invest produces an excellent deck about ideas for the coming year. Hit and miss but fun to read.
I was most struck by one of the footnotes on artificial intelligence that explains many of the issues we face today.
Returns to labour just keep on falling. The issue of course is that as machines get better, labour gets relatively worse, and your only protection is to be able to do something that a machine cannot do. That gets harder with time. Even for elite performers it’s hard if you are in the wrong industry; when Garry Kasparov first played a super-computer at chess, he thrashed it. Two years later it thrashed him. Today, they don’t bother, it’s no contest. The computer could win at chess and control global air traffic at the same time.
The policy solution we see, as Biden mentioned above, is to push up the minimum wage. The issue with that is it makes labour even more relatively unattractive. This isn’t doom and gloom though, the replacement of less skilled tasks is good overall and human time is hugely valuable still. It’s just that directing it in the best possible way is increasingly important.
Personally, I believe the best way to protect the value of your time and your work is in the ultimate proof of work protocol, bitcoin. Most people don’t believe that, even fewer understand why, which makes it cheaper than it should be today.
Our direction of travel will change people’s minds though.
So far, Ursula has not had a good war. On realising the EU is a quasi-governmental organisation that just holds meetings over excellent wine, she has decreed it is time to expand into weapons.
The EU does indeed trace its roots to WWII. The idea was that they would build an economic alliance so tight it would serve no parties interests to go to war. It has been a tremendous success in that regard and they also had excellent wine. It is worrying then, that perhaps the least qualified European leader of all time should make such a huge decision. It is no understatement for her to say that this is a “watershed moment” for the EU, one they will likely live to regret. Where will it stop? Will the EU buy weapons for Taiwan? Other former Soviet states? What will be the criteria for deciding?
Perhaps more worrying though is the ban on Russian media agencies. We are “developing tools to ban their toxic and harmful disinformation”. Which tools? What are the tools? Who will decide what the truth is, Ursula? How can we be sure that when the dust settles the tools will be repealed? It is almost certain that they won’t be and once the ‘tools’ are done with Putin’s war propaganda they will turn on the next unpopular thing.
Late last year we highlighted that Europe would miss its Titans once they were gone. Specifically, Angela Merkel and the former head of the Bundesbank, President Jens Weidmann. Their absence is being felt more quickly than we could have guessed at the time. Should the EU prevail in their ill-defined proxy-war goals it will be a pyrrhic victory, at the cost of European freedoms they have spent 70 years claiming to defend.
Am I suggesting they should just stay out of it? Yes, I am. They have NATO, and all its individual constituent and well-armed members contributing to this effort, there is absolutely no reason for the EU to involve itself at all. It’s like NAFTA declaring war on Mexico, it doesn’t make sense. The EU is just a fancy trade agreement.
Bring back Angela Merkel, or Helmut Kohl or Charles de Gaulle, anyone but this imbecile.