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Here Are The Top Ten Economic Trends Of Our Time – And They’re All Bad For Government.

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It’s been a remarkable year in economics. Here are my personal picks for the top ten economic trends of this year and next.

1. The Chinese model of political economy is under pressure. Two years ago, there was a growing consensus that China had it right: free enterprise with totalitarian political control. Matters of changed. The protests in Hong Kong, the cruel treatment of political dissidents, the massive industrial subsidies, and the implacable rule of the communists have raised serious doubts that the mix is sustainable. Even AIER’s Mises/Marx video went viral in China, despite every ban.

2. The socialist left gets pummelled. The US Democrats swung far to the left, and electoral betting odds turned fiercely against them. In Britain, the Labour Party has been devastated. The contradictions, the anomalies, and the trust in government inherent in progressivism seem no longer to have compelling power.

3. The nationalist right is unable to rule either. Public protests have turned against the new nationalist wave in Europe and, to some extent, in the US too. It turns out that big government under any label is not popular.

4. The failure of protectionism is palpably obvious. For the first time in human history, 60% of global productivity is attributable to international trade. Trump did his best to turn back that tide. The result was domestically disastrous: loss of markets for agriculture products, decline in manufacturing, decline in investment, universal retaliation, no new impressive trade deals, and protests from both producers and consumers. We are lucky to have narrowly avoided recession.

5. People are getting fed up with regulations wrecking their quality of life. It’s glorious that Trump gets cheers when denouncing government-mandated lightbulbs, toilets, faucets, and dishwashers. Finally people are making the connection between government and their bad plumbing and lighting in their very own houses.

6. Media power in the past depending on near-monopoly conditions. No more. It’s been completely shattered. Through startups and mergers, the rise of competitive media is one of the most astonishing trends of our time. We no longer even know what the “news” is, and while that can sometimes feel alarming, it is the reality. Now and in the future, everyone is in a position to curate his or her own understanding of the world.

7. Across the world, whole peoples have shifted their own view of government from trust to disgust. This has profound implications for the status of any ideology that longs for central control and command. It also raises the question: if not government, then what? Eventually we have to revisit the philosophical outlook of liberalism as the only real viable way of managing society – which is to say, we need to admit that society does not need exogenous managers.

8. Exhaustion has set in on the war on drugs and the war on alcohol. Some states in the US have nearly gone full laissez faire, such as New York state where in some areas it seems like every third house has been turned into a distillery, winery, cidery, or brewery. The taboos have broken down over cannabis too and we can only hope that this eventually turns into fewer arrests and jailings for the non-crime of consuming plants.

9. The price of cryptos has softened. So much for “to the moon.” The use case of the top performer Bitcoin (Core) continued to decline and the claim that it can be a “store of value” without consumer use is not viable. In addition, the underlying technology is being widely adopted by mainstream financial markets. We are waiting for the next generation of private currencies.

10. The dollar can be unseated as a world-reserve currency. That process might already have begun. Since the Second World War, the status of the dollar has been unquestioned, but that is due in part to the US commitment to ever freer trade around the world and for generally being a trusted partner in trade. But Trump has pulled out of trade agreements, battered supply chains, tossed around tariffs in tweets, and undermined world confidence in regime stability. To top it off, we now know how to make private currencies that manage themselves. That competition could eventually unseat the dollar.

Jeffrey A. Tucker is Editorial Director for the American Institute for Economic Research.

The Idea Of Alternative Currencies That Are Not A Government Monopoly Is Catching On.

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Mastercard, one of the big players now looking at this new money, is starting a cryptocurrency team.

“Do you have the desire to work at the cutting-edge intersection of payments and cryptocurrencies,” MasterCard asks. Those hired will “monitor crypto currency ecosystem trends” and “develop new products and solutions.”

A credit card expert called it “a smart move.”

Bill Hardekopf, CEO of LowCards.com, says Mastercard “sees there’s a lot of activity in this area. Even if it isn’t going to offer its own cryptocurrency, they know it’s important to have people who understand the subject.”

Others Already Playing the Money Game

Mastercard is part of the Libra Association, which includes Pay Pal, Visa, and other big players. Libra intends to create “a globally, digitally native, reserve-backed crypto currency built on the foundation of blockchain technology.”

There were between 2.9 million and 5.8 million users of a cryptocurrency wallet in 2017, according to a Cambridge University study. Most used bitcoin. Four years before that there were between 300,000 and 1.3 million users.

“Mastercard,” says Panda Analytics CEO Bill Xing, is “trying to build a crypto wallet solution, possibly an alternative to Facebook’s Calibra cryptocurrency, which is supposed to begin next year. It is preparing for the situation when crypto (peer-to-peer transaction) is adopted as the mainstream payment solution.”

Direct Transactions without Intermediaries

Peer to peer means that the middleman in today’s traditional transaction could disappear if cryptocurrencies revolutionize money. Cryptocurrencies are decentralized because there is no intermediary; transactions are party to party through electronic addresses without central banks. In fact, they represent a vote of no confidence in the policies of central banks. They see central banks as consistently devaluing money through currencies that aren’t backed by anything but government promises. Critics call this unbacked currency “fiat money.”

Some countries ban alternative currencies. Others embrace them or acknowledge tax them. In 2014 the IRS ruled bitcoin will be treated as property, subject to capital gains taxes.

Today there are hundreds of cryptocurrencies. Bitcoin is the biggest.

These currencies’ value is volatile. Some investors make millions. Others lose big. But the idea of competition between currencies goes back at least to the 1970s. This was an idea explored by economist F.A. Hayek’s 1976 book Denationalisation of Money.

Hayek contended the “government monopoly of money must be abolished to stop the recurring bouts of acute inflation and deflation.” He also argued that the increasingly outrageous overspending of government — which can now be seen in the federal government’s one-trillion-dollar deficit at a time of supposed strong economic growth — would be restricted if the money monopoly was ended.

“The monopoly in money by government,” Hayek wrote, “has relieved it of the need to it keep its expenditure within its revenue and has thus precipitated the spectacular increase in government expenditure over the last 30 years.” Hayek’s wrote these words back in the mid-1970s. Since then, government overspending, deficits, and debt have progressively worsened. Trillion-dollar deficits are now routinely accepted. Few seem worried about government overspending.

Democrats call for trillions of dollars in new spending. Republicans such as Dick Cheney now defend this massive red ink with the assurance that “Reagan proved that deficits don’t matter.”

Actually, several economists told me in a story I did for the New York Post about a decade ago, that the true amount of federal government red ink was a lot more than what the government was saying.

Central Banks Want to Preserve Their Monopolies

But what if the money revolution succeeds? As in any revolution, today’s top dogs have the most to lose.

“In theory,” Xing says, “if these payment companies don’t study new technology around bitcoin or explore new business models, they could be out of business in the next decade.”

So, a revolutionary money is developing. Some governments are trying to stop it for an obvious reason: human nature. Almost everyone would like to be in a monopoly position but competition prevents it in a functioning marketplace. However, governments have the legal power to make competition go away or prevent it from coming back in the cases of goods and services that were once offered privately but are now prevented by the power of government.

Here in New York, where we have the terrible state-run subways, all major pols agree that the state system, no matter how bad it becomes — and millions of subway riders can attest to their egregiousness — must be continued and no privatization allowed. That’s even though, in the earliest period of the subways, when they were considered “an engineering marvel,” and private transportation companies were an essential part of the system. They were later driven into bankruptcy by government price controls. The subway fares, under private companies, were never allowed to raise above a nickel. That’s something that changed quickly once government took over.

More Money Screwups

The movement for alternative money is the result of the history of government monetary mismanagement.

It is a sad story of government central banks and monetary disasters. The Great Depression, of course, happened on the Federal Reserve’s watch.

And most monetary historians agree that the explosion of the money supply in the early 1970s, just before the election of 1972, was a disaster. The easy money policies, designed by Fed chairman and President Nixon appointee Arthur Burns, bolstered the president’s re-election. This created a Potemkin village effect.

The economy grew in the short term, then blew up creating the 1970s stagflation, ruining millions of lives for about a decade. Interest rates went over 20 percent, a nightmare for interest-sensitive industries.

The Fed’s easy money led to low or no growth along with high inflation rates. That was something that Keynesian economists, backed by a devotion to the Philips curve, had previously said would never happen. It happened.

It is logical that many historically literate people want to take away the money-making monopoly from government central banks. Their records of frequent recessions and sometimes depressions, inevitably lead to a boom and bust cycle.

Those governments that want to ban these new money developments may be fighting those who have come up with a better mouse trap. Canute like, the central bankers and their political allies may be trying to stop an inevitable wave.

Gregory Bresiger (GregoryBresiger.com) is an independent business journalist. Thius article appeared at mises.org on Sept 24, 2019.

It Remains Possible For Cryptocurrencies To Replace State Monopoly Currency, Bringing The Competition Hayek Imagined.

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Cryptocurrencies offer the possibility of breaking governments’ stranglehold over the issuance and control of money. For most bullish observers that means a future where currencies compete and technologies differentiate to meet a variety of needs and transactions.

But a smaller group known as Bitcoin maximalists insists that even freed from state control, a currency monopoly of sorts is inevitable and desirable. Due to its first-mover advantage and radically decentralized architecture, they have no doubt that Bitcoin will be that monopoly.

Bitcoin may turn out to be a better version of blockchain technology than its closest competitors, but maximalists’ steadfast claim that their vision of the future is inevitable is hard for most economists and other informed observers to swallow. At the heart of the Bitcoin-maximalist argument is the importance to currencies of network effects.

One cannot deny that a currency grows in usefulness as it gains more users. But if we move from a world of paper and coins to one of computer code, exchanges and conversions of different currencies might become fast and easy enough to dramatically reduce the importance of network effects.

Past market data cannot predict the future, but it can offer a fresh perspective on an often wildly contentious debate. Comparing Bitcoin and its four closest competitors yields no evidence that the process of Bitcoin monopolization proclaimed inevitable by maximalists has begun. To be sure, Bitcoin has outperformed other cryptocurrencies by measures of price and volatility. But the data suggest a market leader and several smaller but robust competitors.

Best in Its Class

There are thousands of blockchain-based tokens, including many that have already been rendered nearly devoid of value by the inevitable bursting of a bubble in 2018. But the four highest-profile cryptocurrencies behind Bitcoin — Ethereum, Ripple, Litecoin, and Bitcoin Cash — don’t appear headed for extinction soon. At the time of this writing, these four major altcoins had a market capitalization of about $63 billion, a fraction of Bitcoin’s $223 billion but still a major presence in the market.

The chart below tracks the relative price performance of the five cryptocurrencies since the day that the last of the group, Bitcoin Cash, was created by a fork from Bitcoin. It pegs the value of each to be equal on that date in order to show relative returns ever since.

Behind the wild day-to-day fluctuations in all five cryptocurrencies are several important points. First, Bitcoin has significantly outperformed its closest competitors over the past two years, though the margin would have been much lower even a month ago. Second, the overall pattern of ups and downs in the price of each cryptocurrency broadly track each other. Clearly, the market views at least the most prominent cryptocurrencies as a class of assets, with common factors affecting their value.

The Least-Shaky Ground

Extreme volatility renders widespread practical use of a currency nearly impossible, and the chart above does not paint a pretty picture. In previous work, we’ve shown that Bitcoin’s average daily price movements are several times greater than those of fiat currencies such as the pound, euro, and yen. The chart below, which also updates an earlier analysis, shows that Bitcoin in turn is less volatile than its closest contenders.

In the first half of 2019, Litecoin and Bitcoin Cash had average daily price movements of 4 percent (either up or down), about double that of Bitcoin, with Ripple and Ethereum in between. Volatility is another measure by which Bitcoin is the clear winner among the top five cryptocurrencies. But once again, these are assets that track each other in performance. Since 2016, this measure of volatility moved in the same direction each year for all five cryptocurrencies. Again, this looks like a class of assets with better and worse performers, without an inevitable march toward monopolization in sight.

When You Plan, Markets Laugh

Based on recent past performance, one can reasonably conclude that among cryptocurrencies Bitcoin is the most robust asset with the best chance for widespread adoption. But wise observers know that in markets, past performance often doesn’t predict the future.

The idea of inevitability does not mix well with the logic of markets. We need markets and competition precisely because as human beings we have nowhere near the information or capacity necessary to make deterministic statements about the future. The future of money will likely look nothing like any of the possibilities we currently imagine.

Max Gulker is an economist and writer who joined AIER in 2015.

Devaluing The Dollar Is A Horrible Tax On The Investment That Spurs Economic Progress. Facebook’s Libra May Be A Significant Step Forward.

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Though politicians and economists continue to presume otherwise, money is a veil. Changes in its value cannot change the real price of anything. That’s one of many reasons why the devaluation so routinely cheered by politicians and economists brings certain pain beyond the loss of purchasing power for everyone who is paid in the devalued currency.

Considering the dollar, when Treasury makes devaluation its policy, it’s explicitly shrinking what the dollar can command in the marketplace. This harms typical earners, but also corporations when it’s remembered that global cooperation is required for the production of anything, including the prosaic pencil. If the currency is debased, imported inputs increase in currency cost, thus erasing any supposed “export advantage.”

But the much bigger story concerns investment. Stating the obvious, investment, not currency devaluation, is what renders businesses most competitive globally. Investment is the failure-laden process whereby businesses learn what does and doesn’t work when it comes to producing more and more goods and services with fewer and fewer hands. Investment is expensive precisely because it generates so many proverbial dry holes. But there’s no progress without those dry holes, which speaks to the horrors of devaluation.

Specifically, investors who invest dollars in intrepid fashion hope to achieve impressive dollar-based returns in the future. More on this in a bit, but when it’s understood how investors seek returns in currency, it’s hopefully understood that devaluation exists as a horrid tax on investment. Why put money to work if the exchangeable value of future (if any) monetary returns is being shrunken by monetary authorities?

Yet economists say devaluations make country economies more competitive. Yes, economists believe what is absurd. Let’s just say that this near monolithic view within economics says a lot about the economics profession, and very little about prosperity other than how to shrink it.

Which brings us to Facebook’s recently announced crypto or private currency, the Libra. Time will tell, but currency types may look back on this development as the beginning of something much bigger.

It could be simply because no one trades money. Please read on. With trade it’s always and everywhere products for products. We can’t eat money or sleep with it, rather we can just hope that “money” will maintain its reputation in the marketplace so that it’s exchangeable for something else.

I make bread, I want the vintner’s wine, but the vintner looks longingly at the butcher’s meat. Money can’t alter the terms of trade for the three producers mentioned as much as it, in its proper form, is an agreement about value that facilitates exchange among producers with varying wants.

Crucial here is that producers logically don’t want to exchange their real production for money that floats around in value. To do so would be for a producer to occasionally get ripped off, or alternatively, for the buyer to be ripped off. With money that’s no longer an agreement about value top of mind, is it any surprise that trade disputes among countries have soared since the 1970s when money’s (specifically the dollar to which global currencies were pegged) commodity link was severed?

That’s what’s so intriguing about the Libra. Facebook seems to be acknowledging that floating money can’t as effectively serve its sole purpose as a medium of exchange precisely because its value is a moving target. Let’s once again never forget that it’s products we’re exchanging, not money. So long as the currency varies in terms of value, losers are needlessly created even though trade is all about both sides entering a transaction in order to improve themselves. Similarly, and when money floats, losers are needlessly created with the investment process as investors get back soggy dollars, or those invested in give up more of what they’ve created thanks to monetary uncertainty.

Facebook’s answer is pegging the Libra to a basket of currencies. That it’s doing so is very important in consideration of the company’s implicit acknowledgment that money isn’t very useful if its value is once again indeterminate. At the same time, there are obvious problems with the currency basket peg. For one, all major currencies float today. For two, despite the dollar’s own unfortunate volatility since the ‘70s, it remains the world’s currency. Every other currency has at least a vague peg to the greenback, and in some instances an explicit one. Translated, the Libra likely won’t get too much of a stability advantage from its basket peg. Better yet, the only peg that matters is the one to the currency that factors into just about every global trade. And the dollar’s value is very much a moving target.

But that’s nitpicking at this point. To see why, let me offer you 1 bitcoin per month over the next year – 12 in total – to remodel my kitchen. Your response will logically be “which Bitcoin? The one that traded for $5,000 a month or two ago, the one that trades for $9,000 at present, the one exchangeable for under $1,000 a few years ago, or the one that fetched $22,000 in early 2018?” Since Bitcoin has no peg, it’s not very useful as a currency except for in the most short-term of transactions. Facebook should be cheered for once again acknowledging the importance of stability.

Will it succeed? It’s hard to know. Exciting is that given the global nature of the Facebook brand, it’s not unreasonable to foresee a future in which Libra is an increasingly accepted and circulated medium of exchange. Even better would be if Facebook eventually jettisoned floating money for currency definers known for even greater stability. One can dream.

Still, Facebook’s announcement speaks to progress about private measures used to facilitate exchange, along with acknowledgment that money is best and most circulated when its value is broadly agreed to thanks to stability of the value. The Libra has the potential to mark the start of something because if widely used, it will open the eyes of the global population to a truth about money: it works best when its value is stable, plus it needn’t be a government creation.

A version of this piece ran at Forbes.

John Tamny is editor of RealClearMarkets. A version of this piece ran at Forbes.com.

Welcome To Turn-Key Capitalism And Functional Markets In A Box!

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Adapting to change is the key to survival. Social systems must be able to serve people in periods of stability, by creating predictable patterns of rules and expectations, and to serve people in times of disruption, by fostering innovation and entrepreneurship without breaking down.

In evolution, the tension between these two imperatives—the need to match features to specific settings, and the need to adapt quickly to unpredictable changes in circumstances—is the driving force that explains survival. The dinosaurs ruled much of the planet because they were adapted to the environments they lived; mammals took over because their smaller size, fur coats, and fast metabolism let them adapt to changing circumstances.

In human societies, disruptive changes are internally generated. Competition among societies, and innovation within societies, generates change that has to be managed by institutions. Since these institutions are often the products of the need to generate stability and predictability, managing fundamental change can be a problem.

The Ottoman Empire lasted for more than 600 years; it was stable and internally peaceful. On the other hand, this stability was purchased at the price of economic stagnation, and retarded progress in the sciences, of a dozen nations.  As my Duke colleague Timur Kuran argues, stability and coherence alone are not enough.

On the other hand, the activities of Enron Corporation  showed that rapid adaptation, moving ahead of the ability of market institutions or property rights to adjust, can be catastrophic. The Industrial Revolution wiped out social and cultural institutions and traditions on a wide scale.

Some analysts (including me) are now arguing that we are on the threshold of similarly disruptive changes. The nature of work, our sources of income, and the way we own and use things may be profoundly different in just a few decades.

Saltation

One kind of disruption, which in my book Tomorrow 3.0 I called “saltation,” is mostly—though not entirely—good, because it means that the institutional and legal preconditions for development in poor nations will no longer be necessary. The word “saltation” is rarely used in conversation.  It means an abrupt movement or transition, or (in evolutionary terms) a sudden discontinuous jump in a line of descent.

Much of what we think we know about development, entrepreneurship, and the function of government and markets is based on certain assumptions about institutions and preconditions.  Software will allow even a nation with a corrupt government and police force, rudimentary banks and broken capital markets to produce useful services. Development economists have long told developing nations that they must follow a particular path of rule of law, independent judiciary, financial system, and so on. This essentially material, marginalist notion of “stages” of development is clear in Karl Marx, who said “The country that is more developed industrially only shows, to the less developed, the image of its own future.” (Capital, p. 13).

But what if blockchain apps and cryptocurrency could simply operate on top of a corrupt system? Turn-key capitalism!  Functioning markets in a box! Or an “app,” at least. The reduction in prices, and the availability of an increasing variety of services and activities for free, or for a very low cost, is likely to provide a platform for leapfrogging the traditional stages of development and the usual institutions required for starting and running a business. This jumping will disrupt the banks, the courts, the political entities that try to regulate and control business activities, but it will also allow people in nations that lack financial intermediaries, a system of law, and state capacity to provide infrastructure to become competitive.

Separation

The other kind of disruption, which is already commonly called “separation,” is mostly—though not entirely—bad, because it means that many people will be left behind, in most cases through no particular fault of their own, and will be relegated to second class status in wealthy nations.

I’m not convinced that separation is inevitable; much of the discussion of the “stagnation” of the total compensation of the middle class has ignored the dramatic decline in prices for many goods and services, especially on-line platforms such as Facebook, Twitter, and Wikipedia. Still, it’s true that software is replacing a lot of service jobs, and this may continue for years to come.

I have argued that the key feature of the new economy is the commodification of excess capacity. Like the commodification of labor in the 18th and 19th centuries, this may result at first in a “stretching” of the income distribution.  Those without knowledge of how to gain access to programming skills, and who don’t have durables, such as cars for Uber or houses for AirBnB, may find themselves in a difficult position economically.

The three most important impacts of the new “sharing” economy are likely to be:

(1) a dramatic reduction in the amount of physical stuff, in the form of consumer durables, being produced in factories by workers.

(2) an equally dramatic decline in the cost of having access to a variety of stuff, and a sharp reduction in costs of storage.

(3) an ambiguous, but unsettling, effect on real wages, with both the direction and variance of real wages very much in flux.

Over the last twenty years, two things have happened in U.S. manufacturing: The total number of jobs in manufacturing has fallen from about 18 million to just over 10 million. But the total value of manufacturing has increased steadily.  This increase in productivity is good; in fact, it’s great!

The problem is that it means that there are fewer people working in these kinds of jobs. In the past, the service sector has taken up the slack, but it’s not clear that will happen this time. The reason is that, as Marc Andreessen famously said back in 2011, “Software is eating the world.”

I don’t have a crystal ball, and I have shown in the past that I am terrible at making predictions. So I won’t make you laugh by drawing conclusions. But I will say this: if there is a way to encourage saltation,  because it levels the differences between developed and less developed nations, we should explore. And if there is a way to mitigate the harmful political effects of separation, we should explore those, too.

People fear change, because they don’t know what to expect. As a society, if we can ease the adaptation to changing circumstances, we may be able to do a much better job of accommodating a future that is coming whether we like it or not.

 

This article appeared at AIER.org on May 1, 2019.

Sorry Paul Krugman, Cryptocurrency and Blockchain Are the Future

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Economist Paul Krugman has made no attempt to hide his skepticism about cryptocurrency and blockchain technology over the last several years. In 2013, he even penned an article titled “Bitcoin is Evil” in which he lambasted the cryptocurrency as a weapon created by libertarians with the specific intention to disrupt the central banks. And while the latter may be at least partially true, Krugman’s arguments against Bitcoin always sound more like the rantings of jealous schoolboy left out of an inside joke than that of an economist.

And yet, no matter how much Bitcoin, blockchain, and other cryptocurrencies have proven their worth, Krugman still chooses to condemn and dismiss them. In his latest attack, he accuses Bitcoin of setting the monetary system back by 300 years. While Bitcoin has arguably launched the economy into a future where currency is digital and free from government intrusion, Krugman’s fears ultimately boil down to a fear of a decentralized economy.

Past or Future?

When he speaks of setting the monetary system back 300 years, Krugman is referring to a time when money was backed by gold and other precious metals rather than the government’s word. This, of course, made it much harder for central planners to manipulate the money supply as they could only circulate currency that could be backed by something physical.

While this is preferable to those of us who believe that money should have intrinsic value, Krugman disagrees. And he views this affection for gold-backed currency as nothing more than irrational nostalgia. In fact, he believes that real monetary innovation came about when we abandoned gold-backed currency in favor of fiat money— a “milestone” he attributed to the rise of central banks.

He even goes as far as to say that government-issued currency is more legitimate than cryptocurrency simply because the government is more trustworthy than the unknown creator of Bitcoin. In his new article he states:

“Banknotes worked because people knew something about the banks that issued them, and these banks had an incentive to preserve their reputation. Governments have occasionally abused the privilege of creating fiat money, but for the most part governments and central banks exercise restraint, again because they care about their reputations.”

I am not sure what planet Krugman is living on, but the government is constantly meddling with our money supply. In fact, this is precisely why major financial crises arise in the first place. And every time their intervention goes horribly wrong, they use taxpayer dollars to bail out “too big to fail” entities. And it this behavior that has led so many people to distrust government-backed currency and opts for a more decentralized option.

Decentralization is the Future

While gold-backed currency and cryptocurrency are very different, they both make it harder for central planners to manipulate the money supply. When each paper dollar must be backed by gold or another precious metal, you have a fixed supply. The same is true of Bitcoin, which has a set number that can be mined. But Krugman doesn’t like being bound by these rules and believes that fiat currency has value simply “because men with guns say they do.”

He writes:

“But you’re supposed to be sure that a Bitcoin is real without knowing who issued it, so you need the digital equivalent of biting a gold coin to be sure it’s the real deal, and the costs of producing something that satisfies that test have to be high enough to discourage fraud.”

Instead of creating something as complex as the blockchain, where each transaction is anonymous, verified to prevent double spending, and then placed on the public ledger, Krugman thinks we need only trust that those in power are virtuous and know what is best for us.  

And by creating a decentralized system where individuals no longer have to rely on governments to issue mediums of exchange, he believes we are returning to the dark ages of monetary policy. In other words, he fears we are moving into a future where central planners are losing control of the monetary system. And while most Keynesian economists inherently fear a world that they do not imagine they can control, many individualists have cause for celebration.

He states:

“…cryptocurrency enthusiasts are effectively celebrating the use of cutting-edge technology to set the monetary system back 300 years. Why would you want to do that? What problem does it solve? I have yet to see a clear answer to that question.”

While it may not be obvious to Krugman, Bitcoin’s appeal comes from very fact that it is not controlled by governments or the central banks. It could also very well make the role of central banks completely irrelevant in the near future.

The problem it solves is the very thing Krugman praises: it allows individuals to bypass corrupt governments and central banks in favor of decentralization.

Cryptocurrency Does More for Teachers and Students Than Governments

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Recently, I wrote about how the cryptocurrency boom is making many young and idealistic investors exceedingly rich. And with this newfound wealth comes the opportunity to pursue passions projects. And this is exactly what one ICO is doing for public educators.

There is no doubt that in spite of the large amount of money being funneled into the department of education through taxation, many public schools fail to get the supplies and resources they are in need of. As is the nature of all government bureaucracies, taxpayer money is spent primarily on the salaries of high-ranking administrators and not on actual education costs. That is why many teachers have stopped relying on the government and have instead turned to crowdfunding sites to have their needs met.  

The “Largest Donation of Cryptocurrency”

Last week, the crypto-based payment network, Ripple, donated $29 million to the site DonorsChoose.org. DonorsChoose.org is a crowdfunding site that helps connect teachers with donors in order to meet their various classroom needs. To date, this donation on behalf of the ICO is the “largest donation of cryptocurrency” on record.

The donation itself was made in cryptocurrency, but the site will convert the donation into US dollars over the next few weeks Ripple’s token, XRP is currently only worth about $0.53, but when looking at its market cap, it is the third highest ranking cryptocurrency. XRP will be used to fulfill over 35,000 funding requests on the site. In a statement released to the press, Ripple stated:

“Approximately one million students are receiving books, school supplies, technology, field trips, and other resources vital for learning through DonorsChoose.org.”

But just how far can $29 million go towards fulfilling the teacher’s needs? Thanks to Ripple, every single teacher on the site was able to have their needs met. 

A Different Way

One of the true wonders of ICOs and blockchain is the fact that this technology is making decentralization easier than at any other time in history. This is largely because this technology is continuously showing us that private entities can solve problems that governments cannot. And in many cases, these problems were started by governments in the first place.

Whether it is stealing data from its citizens or failing to secure it against hackers, the government is horrible with our private information. But where the government is constantly trying to see what we are up to, the blockchain is making it easier to transfer data anonymously and without the fear of having it confiscated by the government. But the power of this technology does not end there.

Because so many early crypto adopters have made a fair amount of money, they are able to show us that the government need not be relied on for funding every program under the sun. for example, when Puerto Rico was devastated by the latest hurricane season, many called for government aid. But crypto investors stepped in with their own plan. The project, “Sol” was started by crypto investors and focuses around helping rebuild the Puerto Rican economy. Wealthy investors are now moving to the island with their newfound wealth and are creating new jobs for the locals while also helping the island become a major crypto hub.

Many people who have traditionally seen the government as the only medium through which public programs can be funded are now seeing that there is another way. But cryptocurrency is showing us that we do not need the government in order to have financial needs of educational facilities met. 

Blockchain Could Completely Reshape the Human Resource Sector

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Blockchain technology has the potential to completely change our day to day lives. And while many people view the blockchain only as a platform for cryptocurrencies, there is so much more to it than that

In fact, many entrepreneurs are using blockchain technology to completely reshape certain industries. Smart contracts facilitated via the blockchain, for example, have the potential to cut out the need for any mediator or middleman when it comes to enforcing signed contracts. Until now, third parties were always needed to facilitate the terms of a binding agreement. This usually meant having to deal with mediators and lawyers to make sure that both independent parties lived up to the terms of the arrangement.

But now, innovators are moving this outdated model to the blockchain. In the digital space, an algorithm is responsible for enforcing the terms of an agreement, rather than a human being. And while this has the potential to change how we have previously thought of formal contracts, this is just one example of how blockchain can positively disrupt certain sectors. And with this disruption comes the opportunity for entrepreneurs to cash in on new opportunities for innovative concepts. One example of this comes from the company, The 4th Pillar.

Disrupting the HR Sphere

The 4th Pillar believes it can reduce the human component of human resources by moving many HR duties to the blockchain. Currently, the primary task of HR departments is to ensure that professional profiles of various employees are maintained as well as making sure that each employee receives their compensation in a timely manner. But with the blockchain, all this can be can be stored and managed digitally. 

We already know though that blockchain is making it easier for individuals to send and receive money at much lower rates than traditional financial institutions. Not only is this more convenient for its users, it also has a certain amount of anonymity around it as well, something banking institutions cannot promise.

The 4th Pillar would act similarly, as far as sending payroll checks to workers is concerned, but it can actually do much more than that. Bringing HR functions to the blockchain would also allow the company to streamline the recruitment process, making it easier for both the employer and the employee.

As explained by the Bitcoinist:

“The 4th Pillar plans on replacing CVs, old-school references, and clunky databases with its next-generation all-in-one platform. Work-related documentation can be securely sent and organized, as well as controlled directly by the user.”

Since the user controls his or her own information, they will be able to manage the data that is stored on the blockchain, as well as build their savings and their professional identity, making networking easier when the time comes to find a new job. On the employer’s end, they will be able to manage payroll payments, manage confidential data, and reward employees for their achievements, all via the blockchain.

But what is perhaps most exciting about this new frontier of human resources is that it will make job recruitment far easier than ever before. As the Bitcoinist explains:

“Lastly, recruiters will now have the ability to comb databases, check verified work history against an immutable ledger of activity, and throw out their traditional, clunky documentation processes.”

How Does it Work?

The 4th Pillar will be fueled by the organization’s own token called, the FOUR Token and powered by Bokky’s token teleportation service, a site that facilitates smart contracts. Once the FOUR token is used to gain access to the platform, funds can be sent out in any value that is most convenient to the user. While the FOUR token holds its value mostly within the realm of the 4th Pillar, it is hoped that internally it can be used to incentivize early adopters to sign on to the concept.

The company plans to have its development process complete over the next three years. It ultimately hopes that it can add more user-friendly features, like a digital wallet, the ability to distribute documents, and other management features. But what makes this entire concept intriguing is that it was designed by those who have spent their careers in the HR world.

While the product itself has not fully launched yet, it is well out of the conceptual stage. In fact, the 4th Pillar already has early adopters who have signed on to use the product. And while it may not be helpful to those who are already confused by the intricacies of Blockchain technology, the 4th Pillar has put together the following graphic to help explain how it all works.

 

Why Does This Matter?

When the internet went mainstream, entrepreneurs were given even more opportunities for innovation. Not only did this connectivity create demand for entirely new sectors, it also allowed for new ways to advertise to a wider audience.

As the blockchain begins to be embraced by more people, it is opening up a new frontier for entrepreneurs. The 4th Pillar is just one of many organizations that have identified a way in which the blockchain can be used to make our lives easier and more efficient. 

Road to Individualism: How Crypto Is Helping the Middle Class Get Ahead

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Thirty-five-year-old Ryan Williams may not be able to explain the intricacies of Bitcoin or tell you how the blockchain works. But that hasn’t stopped cryptoassets from improving his life.

As a bus driver and father of two, Williams understands the plight of middle-class Americans all too well. When the summer heat became too much for his children to endure, they began to beg him for an above ground swimming pool. “I said I can’t afford it,” Williams told NBC News. But that was before Williams remembered that he had invested some money in Bitcoin a while ago.

Transferring his cryptoassets from his digital wallet to his Bitpay debit card in only a matter of minutes, Williams was able to buy the $150 pool his children had been wanting. And as the neighborhood gathered around the new pool for their Fourth of July festivities, his neighbors and family were dying to know how he was able to make this purchase.

With pride in his eyes, Williams let his friends and family know that Bitcoin was to thank for this holiday success. Now, everyone, Williams knows wants in on the crypto rush.

Google Bitcoin

At the moment, Bitcoin is by far the most recognizable cryptoasset. In fact, there are now more Google searches for “Bitcoin” than there are for “Beyonce,” proving just how mainstream it has become. And while many average Americans have heard murmurings about it for years, few understand what exactly it is or how it works. And that is completely fine.

The beauty of Bitcoin and cryptoassets, in general, is that their potential is not limited only to the tech-savvy. One does not need to work in Silicon Valley or understand blockchain technology in order to utilize these transformative mediums of exchange. All you really need is a digital wallet.

For middle-class participants of the crypto economy, the decentralization and anonymity of the blockchain world may not be a primary motivator like it is for libertarians and other decentralization enthusiasts. But what does resonate with this crowd is the ability to invest and make money outside the world of established financial institutions: the same institutions that have been stacked against them for far too long.

Better Than Stocks

Before the 2008 financial crisis hit, there was a widely-held belief that if an individual could learn to play the stock market, they would be financially set for life. But after these sacred and seemingly bulletproof institutions began to crumble, faith in the stock market and other traditional financial institutions quickly diminished.

Without precise inside information as to how the game is played and how automatic trading algorithms work, average Americans were not able to make a lot of money from these market investments unless they paid dearly to consult with someone with more experience.

Similarly, accessibility to these markets was severely limited if you weren’t able to shell out the cash needed to make a substantial investment.

For many millennials, like Williams, who came of age during the financial crisis, the stock market was not viewed as a surefire way to invest and make money, as it had been in our parents’ day, especially since we saw many of our own parents and family members lose so much.

But cryptocurrencies allow those from all classes and backgrounds to invest in something worthwhile at a moderate price.

As Greg Salerno, an ironworker from Hoboken, New Jersey says, “It’s like being in Apple at 10 cents.” Salerno himself invested $1,600 in Bitcoin, an amount now worth $20,000. “In five to 10 years you could be sitting on something nice,” Salerno stated.  

And while not everyone can afford to purchase one Bitcoin, which is now worth $8,718, the price is completely irrelevant for market entry. All crypoassets are divisible without limit, so you can be an owner even if you only have $1 to spend.  

Consider, too, what it means to hold money that increases rather than falls in value. For decades people are generally used to having the money fall in purchasing power; in fact, this is what the Fed attempts to create with its target inflation rate. But what if you could make money by not spending money, as has been the case with crypto for years now?

What does this reality do to family finances? It actually incentivizes savings. Whereas current financial markets are nearly barren of opportunities to earn interest above inflation, and hardly anyone trusts real estate as they did, crypto offers a reward for frugality. This means building personal and family capital rather than living on debt.

The implications of this for individuals and for the entire macroeconomic structure are profound. Savings and capital investment, and the prosperity that follows could again become a norm.

Everyone Loves Crypto

It has become increasingly hard for middle-class Americans to get financially ahead in our current economic climate. Single-income households are not as common as they used to be and almost everyone is looking for a side hustle. Many people are asking themselves: why not choose cryptoassets?

While cryptoassests may not make you a millionaire overnight, they can help you make a plan for your financial future. As Williams commented, “Always keep grinding. It’s about having those extra funds on the side. Thanks to Bitcoin, Williams and his family will also be able to take the vacation they had been talking about for years, but never had the means to take.       

Williams’ wife is still slightly unsure how this whole Bitcoin thing works, but as her husband said, “My wife doesn’t fully understand it, but she does enjoy that we go out to dinner and I say, ‘I got it.'”

Crypto Entrepreneurs Now Have the Power to Change the World

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One of the most intriguing aspects of Ayn Rand’s Atlas Shrugged is that the novel’s protagonists actually have great wealth and thus the power to really change the world. It was precisely this wealth, born of value creation, that allowed Rand’s heroes to leave behind their booming industries and establish Galt’s Gulch. And by doing so, our heroes instigated the formation of a new society, one that valued individualism, entrepreneurship, and decentralization.

While Atlas Shrugged may be a work of fiction, the rise of cryptocurrency has presented a new opportunity for real-life heroes to truly enact change.

Over the last several years, and especially over the last few weeks, I have watched some of my closest friends become abundantly wealthy as a result of crypto investments. And while I could not be happier for their financial success, there is something deeply significant about this newfound wealth.

As Bitcoin grew to become a household name over the years, articles were written cautioning against this burgeoning cryptocurrency. But the concern was not necessarily with Bitcoin itself, or even blockchain; it was about the people who are naturally attracted to such technology.

In 2013, Forbes wrote about “crazy libertarians” flocking to Bitcoin. This sentiment was echoed by the CEO of Reddit in 2014 when he said, “The user base for Bitcoin is basically crazy libertarians.” And of course, economist Paul Krugman has routinely warned that this new technology is “evil” specifically because its primary users were eager to find ways to bypass the Federal Reserve and the United States’ disastrous monetary policies.

And while it may be true that your friend who just made a million dollars from Bitcoin also frequently dons an “End the Fed” t-shirt, this is hardly a cause for concern. On the contrary, it is a cause for celebration.

For decades, many liberty enthusiasts have dedicated themselves to academia, think tanks, or grassroots activism. And while each of these roles is essential to spreading the precepts of liberty, they do not often come with outrageously high salaries.

There is absolutely no shame in choosing to pursue your passions rather than to seek only financial gain. But there is also no shame in choosing to do both.

When Paypal founder Peter Thiel donated $500,000 in seed money to start the Seasteading Institute, he was able to do so without batting an eyelash. Coming in at number 12 on Forbes’s 2017 “Midas List,” Thiel has been the poster boy for libertarian success.

As a prosperous venture capitalist, Thiel has been able to use his vast wealth to fund projects he believes in. Many libertarians advocate political decentralization and seasteading allows individuals to voluntarily choose to live in permanent dwellings in the middle of the ocean, free from government interference.

And while the non-libertarian reader might think this idea crazy, what really matters is that because of his net worth of $2.5 billion, he was able to give a total of $1.7 million to the Seasteading Institute.

But thanks to Bitcoin and other cryptoassets, Thiel is no longer one of the few libertarians with the means to fund decentralization projects.

Erik Finman was fourteen years old when he purchased as much Bitcoin as he could for $1,000. Given to him by his grandmother, he used the money to buy the cryptocurrency when it was only $12 per bitcoin. Now 19, that investment is currently around $5 million. Finman, who has expressed pro-decentralization sentiment on Twitter, has also decided to use his wealth to fund projects that he believes in.

Finman dropped out of high school after the public school system failed him. As described in the Bitcoinist, “Finman had a terrible time going through the school system. He was bored and unmotivated. He says one teacher even told him that he would never amount to anything, so he should just drop out of school and start flipping burgers at McDonald’s.”

But it was this extreme disappointment in the public education system that inspired Finman’s latest project. Committed to creating new privately-funded alternatives to public education, Finman founded Botangle, an online educational platform, in 2013.

Since then, he has expanded his vision and is now planning to build the “world’s best university” in Dubai. Finman, who believes college has become a waste of time, plans to use his wealth to create the type of school he wished could have existed for himself. But because Bitcoin allowed him to obtain this tremendous wealth, he is now able to impact future generations by funding schools he truly believes in.

For liberty activists who have been eager to enact change but frustrated by the stumbling blocks presented through the legislative process, they now have the chance to enact real change.

And this change doesn’t necessarily mean creating something new as Thiel and Finman did.

As mentioned earlier, think tanks are also integral to spreading liberty. And since most libertarians are opposed to government funding in the form of grants or subsidies, most think tanks and other nonprofit organizations of the liberty persuasion choose instead to raise funds from individual donors.

Just last week, FEE received one full bitcoin from an anonymous donor. At the time of the donation, that one Bitcoin was worth around $14,000. Whether or not this donor was one of the many liberty activists who just became wealthy from crypto is unknown. However, these types of donations are becoming more and more common as activists now have the money to back their ideas. And that is really where their power lies.

So many idealists want to change the world. But the unfortunate reality is that many lack the resources to bring about substantial change.

On an application for an internship I applied for years ago in college, I was asked how I would spread liberty if I had access to large sums of money. Talking through my response with other liberty friends, we imagined all the vast ways we could change the world, if only we had the means to do so.

Now, one of those friends has made a small fortune thanks to the crypto economy and has used that money not only to donate to causes he believes in but to also start his own company through which he can spread the message of liberty.

By using his money to put his beliefs into action, he is, to borrow from Randian speak, stopping the motor of the world, as is Thiel, Finman, and countless others. Since the government has a monopoly on force, we may never be able to achieve success through the legislative process. But each time a crypto activist uses their money to further decentralization, liberty wins. Any doubt of this can be cleared up by considering the fear expressed by many regulators and statist economists every time crypto breaks through another barrier.

Bitcoin and other crypto assets are tipping the established balance of power. And where so many other ideologies demonize wealth, libertarians understand how this can be used to promote change.

As the fictional Atlas Shrugged hero Francisco D’Anconia says in his infamous “money” speech, “Your wallet is your statement of hope…”

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