Despite massive price volatility, many bitcoiners remain unscathed and continue to hold their ground on how Bitcoin is the best form of money. Sydney-based Bitcoin podcaster Stephan Livera talks to CULT on why more and more people will opt for Bitcoin as an investment safe haven in the years to come. Excerpts from the interview:
Could you explain what quantitative easing (QE) is and the ramifications it has on the average person.
Quantitative easing is an unconventional central bank policy where government securities or other securities are purchased from the market, increasing the money supply and encouraging lending and investment. In terms of the average person, I’d say it has the impact of weakening normal market feedback mechanisms—e.g. poorly performing banks should go out of business, and the resources should be repurposed elsewhere or used by better performing banks. However, because of the overall environment we live under being a fiat monetary standard, the government functions to try and ‘smooth out’ volatility, which they might be able to do temporarily—this is essentially ‘kicking the can’ to the future. It places all of us at greater risk in the future because it can create future financial instability, and also represents a loss in the economy’s ability to effectively use resources productively.
Can this ever stabilise the economy?
Here’s a relevant quote by Dr Joseph Salerno: “There is no possibility of ever truly “stabilizing” any economic quantity, without falsifying or abolishing monetary calculation and undermining or destroying the market economy”. So in other words, the government and central banks attempt to stabilize the economy and the banking system, but in doing so, they harm the ability of individuals to perform rational economic calculation.
Bottom line, instead of resources being used by effective entrepreneurs for the benefit of society, QE by central banks helps maintain the status quo of politically connected businessmen and bankers.
And what do you think of the QE being proposed right now?
Central banks have created an overall fragility in the system and market, because they (combined with other government monetary interventions), have fostered an environment of malinvestment. What we are seeing now is the chickens coming home to roost. However, central banks and governments may attempt to reinflate the ‘everything bubble’ as this is more politically palatable than letting it all come down.
Whether it’s QE or not, it’s likely that governments of the Western world continue along the inflationary pathway as this is much more politically palatable than the other scenarios. In some countries like Switzerland this means the central bank buying equities. Another view might be considered the “Japanification” of the world, as monetary policies designed to stimulate the economy merely end up allowing zombie companies to persist.
“It’s likely that governments of the Western world will continue along the inflationary pathway as this is much more politically palatable”
According to you, why isn’t fiat money sound money?
Fiat means ‘by decree’. Sound money has a more bottom-up, emergent origin in the marketplace of people. There doesn’t need to be an edict from on high, merely people interacting and figuring out over time which good is superior for use as an indirect medium of exchange.
And why do you think BTC can be sound money? I will not take this as financial advice. But for argument sake, tell us why Bitcoin is a safe haven against Gold and Silver.
Consider Bitcoin’s “deep safety” as articulated by Nick Szabo: “what happens to your assets upon underlying failures? e.g. how would your digitally centralized assets fare against sanctions or cyberwar?”. Consider for example, what happens if you keep your value in something that can be centrally inflated or controlled? Even with physical property, this can still be impacted by politicians playing games via other angles: property taxes, rules and regulations about what you may build or do with the land, eminent domain and other forms of seizure. With gold, understand that it can’t easily be sent overseas (or you’re relying on trusted third parties)—and these third parties can be commandeered or co-opted to control the system.
What makes it different to the others…
Bitcoin is different from the others in that it offers deep security—when you participate in bitcoin holding your own bitcoin private keys, and running your own bitcoin full node software, you don’t have to trust a third party. You are not reliant on any bank or gold custodian to give you the bitcoin or permit you to send it (no AML or Sanctions screening or transaction monitoring/blocking in bitcoin’s protocol).
Additionally, Bitcoin has a programmatic limit on its supply, which acts to reduce the incoming supply of bitcoins—making it even scarcer than gold. Gold typically ‘inflates’ at about 1.5% per year as gold miners are incentivised to mine more. With Bitcoin, no matter how much bitcoin mining hashpower is pointed at the network, there will still never be more than 21M bitcoins. As the world wakes up to this reality, more people will adopt Bitcoin.
Imagine if you didn’t trust somebody but you both wanted to transact with each other and ‘trustlessly’ verify that you had sent / received a payment from one another—Bitcoin would be a great choice in this scenario. It’s for this reason that some bitcoiners such as Tadge Dryja call Bitcoin, “The money of enemies”.
“Gold typically ‘inflates’ at about 1.5% per year as gold miners are incentivised to mine more. With Bitcoin, no matter how much bitcoin mining hashpower is pointed at the network, there will still never be more than 21 million bitcoins”
Despite all the mayhem in the markets, the property markets in Australia saw a surge in price—especially in Melbourne and Sydney. What’s your perspective on it?
I think the government and many connected industries do not want to let the bubble pop, so they will likely continue monetary and other interventions to try and keep the house of cards going for as long as possible. While they may be successful in propping up various markets by spurring on more lending, this will ultimately hurt the AUD. Savers will continually lose out and will be less inclined to try and save in AUD. This may also drive them to ‘save’ in other things like shares and properties, which can also experience bubbles. Over time, we should anticipate that people will gravitate towards harder money candidates such as gold and Bitcoin. I believe Bitcoin is likely to be the winner longer term because it simply has the best characteristics and strongest scarcity.
Moving towards India, what is your take on the Reserve Bank of India lifting banking ban on buying bitcoin.
I think it’s bullish medium and longer term on Bitcoin. It will take some time for people to get comfortable with buying and holding Bitcoin there. Ultimately, the world is slowly but surely bitcoinising.