How cryptocurrencies will change the current economic structure (Part #1)
After recent developments, it is becoming increasingly clear that cryptocurrencies will abandon their marginality within the economic environment and will play a more active role. The propulsive drive that will fuel this transition will be the continued desire of the current monetary and economic system to commit suicide. This has become clear when we saw QEs in Japan, US and Europe. That was the definitive signal that there is no longer any hope of restoring the fiat money system and that the current society will live a preponderant inflationary spiral as soon as the broader economy will be invaded by the gigantic amount of money and credit created ex novo until now. Even in this way, however, the phenomenon of cryptocurrencies could still escape the many. In this regard, we are of the opinion that it is necessary to understand the philosophy behind these new technological tools, otherwise one ends up believing what the media mainstream says without having the knowledge of cause.
In 1965 Gordon Moore enunciated his observation regarding the number of transistors on a silicon computer chip. I’m talking about the utterance of Moore’s Law. The number of transistors would be doubled every 18 months or so. Year after year, Moore’s Law has truly revolutionized the world, reducing information costs.
Moore’s Law is the extension of a process that we can trace back to the invention of the telegraph. Since then, the information has increased its propagation speed. The cost of information has continued to halve in a predictable way, and today it happens about every year. The question is not the number of transistors on a silicon chip, but the cost of information continues to decline. And with this comes the increase in productivity and the decentralization of information transmission. This is the fundamental process of the modern world, and has overwhelmed the socialist economies.
There is a fundamental law in economics: when the price falls, the demand increases. The price of information is going down. Information becomes increasingly decentralized, and now the cost of communication has decreased to such an extent that the greater the interaction is, the more information is exchanged and the greater the cooperation is. With this decentralization comes the inevitability of the triumph of capitalism. Mises was right in 1920 when he predicted the disintegration of the socialist economy in Economic Calculations in The Socialist Commonwealth. Hayek was right in 1945: The Use of Knowledge in Society. There is only an institutional structure that exploits the productive use of decentralized information: the free market economy. Only with the free market prices we are able to coordinate our activities in the world around us.
Prices are driven by supply and demand. These two forces govern the market signals that are sent throughout the economic environment. This is economy 101. The intersection of the demand/supply curves represents an a priori law in the world of economics that cannot be altered. What cryptocurrencies remind investors are “two-way markets”, governed by risk and personal responsibility. Not the nowadays markets governed by a deus ex-machina who, in the event of an error, socializes losses by robbing common people (e.g. price inflation through monetary inflation): the ECB, for example, which has completely destroyed any semblance of honesty and healthy determination of prices in the secondary government bond market. The ECB’s balance sheet exceeded €4 trillion, but in this case no one should be careful to enter the government bond market. Oh no! The “traitors” would be the short sellers. In this manner are justified lots of prohibitions and obstacles to anyone who wants to safeguard their investments. Instead cryptocurrencies, through the words of an official of the gigantic European bureaucracy, are “only” determined by supply and demand. And from what else should they be determined? Yet another proof of how the European cage is only a socialist experiment, having nothing to do with the principles of freedom.
Central bank cancer has so deeply permeated the current society that it is impossible to live without it. That without central banks, crises could not otherwise be avoided. Nonsense. The boom/bust cycle is exactly due to the distorting nature of central bank actions.
=> Click the following link to read Part 2 of this series: https://medium.com/@melis.io/how-cryptocurrencies-will-change-the-current-economic-structure-part-2-a09d23a3c6d6
