There have been many negative developments in the ten years following the Lehman crisis. Logically, you would expect the authorities would have been rethinking monetary and fiscal policies to ensure that the errors that led up to the Lehman crisis are not repeated. You would be wrong, both for the current credit cycle and for the next. The problem is one of not knowing who is responsible. And this is an economic theory matter.
Modern economists insist that the state should have primacy over free markets. They argue that free markets have shown a track record of periodic booms and slumps, which can only be alleviated by the state. This belief has evolved from the Keynesians’ original proposition that the state should run a balanced budget over the business cycle, instead of all the time. The original idea was to increase spending by running budget deficits to create money during the slump in the hope of recouping government finances later when the recovery generates surplus tax revenues. The classic economic theory was replaced by a state theory of economic planning.
Some say the first sign of madness is to believe you are right and reality is wrong. It’s a problem that afflicts central bankers. They call the rhythm of boom and bust a business or economic cycle on the supposition that its origin is in unfettered free markets. The last culprit to be considered is monetary policy itself. Alright, we make mistakes, the central bankers say, but we are refining our monetary policies and tightening bank regulation to bring the business cycle under control. They fail to realize that the cycle has its origins in a cycle of credit, which is entirely their responsibility.
The state blames the private sector all same, and when it employs experts to support policy, it attempts to make itself unchallengeable. The Fed employs over 300 Ph.D. economists “who represent an exceptionally diverse range of interests and specific areas of expertise.” And they still get it wrong. It shouldn’t take a genius to twig that if central banks stopped messing around with money, and stopped banks issuing it out of thin air as bank credit, the credit cycle would disappear and with it the business cycle. Ten years later Lehman crisis, the economic errors of the past have become bigger, while new ones have arisen: no deleveraging, Main Street economy hasn’t seen any increase in its wealth, financial engineering fed by easy credit has gone wild engulfing the latest clean budgets on the markets (medium/large companies).
This saturation of the various budgets of the economic actors will make any new stimulus totally useless, because even though we can add further debt to the gigantic mountain already present, it will only increase the unproductivity of its use and consequently the continuous erosion of the basis of real wealth. In fact, this time there will no longer be a debt crisis, but one in fiat currencies. This is why they are trying to shield them through their “tokenisation”.
But not only in the US, also in Switzerland and in France. The most traded merchandise in a fiat environment is trust, and during the next credit crisis this will be decidedly clear. Pegging fiat currencies to cryptocurrencies will be the evolution of the current economic environment, but this decision brings with it undesirable consequences (for central planners), because it will endorse Hayek’s thesis exposed in his essay, A choice in currency.
In reality they are stable tokens that are the opposite of Bitcoin and the other 4 or 5 decentralized and “free” cryptocurrencies. We are dealing with a strategy of spreading the fiat currencies 2.0 using part of the blockchain technology, but in a centralized way. Eventually you will get more control, while the mass will think to use something new and very cool that will transform them like rabbits in a cage. In fact, there are many clues pointing this way:
BITCOIN AIMING FOR TRILLION DOLLAR MARKET: MORE THAN 4 REASONS TO BE BULLISH
They say institutional interest in crypto has slowed down. With the way things are going, the situation seems quite different. One after another, giants like ICE, Nasdaq, Merrill Lynch, Morgan Stanley, Citigroup and many more keep on entering the crypto market that means big money will come pouring into the market as well.
BAKKT BY NASDAQ’S PARENT COMPANY ICE
The biggest news of the year has been Nasdaq’s parent company ICE announcing the launch of Bakkt that will go live in early November, this year. With Bitcoin as the underlying asset, contracts will be released without any margin. According to the experts, it is even a bigger news than the Bitcoin ETF. Bitcoin Bull, Brian Kelly has insisted, “Buckle in because this is the biggest bitcoin news of the year.” There are many things planned out for this platform that might also involve custody solution and then branching into customer and merchant applications. This just might forge a path for Bitcoin ETFs’ approval as well.
MORGAN STANLEY LATEST TO JUMP ON THE BITCOIN TRAIN
Though it is yet to be confirmed by the institution, Morgan Stanley is planning to offer trading in complex derivatives that will be tied to the Bitcoin. Investors will be provided synthetic exposure to the Bitcoin price movements. This further means, investors will be able to go long or short on the leading crypto. MorganStanley will be charging a spread for each of the transaction. Having already prepared to offer Bitcoin swap trading, this service will be apparently launched once institutional demand is proven which will involve an internal approval process.
MERRILL LYNCH DOESN’T WANT TO BE LEFT OUT
Reportedly, MerrillLynch, a division of Bank of America is also set to develop a Bitcoin product. With the giants from the WallStreet has taken the Bitcoin route, Merrill Lynch doesn’t want to be the only one which isn’t getting a taste of this market.
CITIGROUP TO OFFER DIGITAL ASSET RECEIPT (DAR) PRODUCT
After Northern Trust, Citigroup has moved into custody solutions for crypto. New York-based bank will launch a product Digital Asset Receipt (DAR), through which institutional investors will be allowed to invest in cryptos in a regulated and insured manner. “The bank will alert the Depository Trust & Clearing Corp, a Wall Street middleman that provides clearing and settlement services, once it’s issued the receipt”, it has been reported. Similar to ETFs, the investors won’t be actually owning the cryptocurrency as it will be rather represented by DAR.
Goldman Sachs is very much on the crypto track and is further planning to offer crypto custody solutions. Though it is not clear yet when the product will go live, the plans could also move to services like prime-broker services. Moreover, Fidelity, Nasdaq, and JPMorgan are also jumping into the Bitcoin fray. With these big Wall Street names riding the Bitcoin wave, as put by Alistair Milne “Institutional money took the hedge fund industry from ~$300 billion to ~$6 trillion,” Bitcoin market can be so expected to skyrocket as well.
Who is smart and aware of these epochal trends will catch both the epochal turning point of stable coins and fiat currencies transformed into pseudo-cryptocurrencies, and will also seize the boom that will consequently have the real cryptocurrencies such as Bitcoin, which will become more and more reserve of value/ alternative way to trade. The few aware will play both matches trying to reach the best result. A nice bet that only a small percentage will seize.
In this way, the competition will reward the true and free cryptocurrencies, not the pseudo-cryptocurrencies born of a small group of individuals with special interests. Who has studied the Austrian School of Economics and its intellectual tools has intuited the potential of this epochal trend, and will position himself/herself in advance. On the other hand, those who will follow the mass and will realize Bitcoin’s potential too late, will pay a higher price for their oversight.
