[DISCLAIMER: NOTHING IN THIS POST OR OTHER MATERIAL ON THE WEBSITE SHOULD BE CONSTRUED AS FINANCIAL ADVICE, BUT ONLY COMMENTARY.]
The image for this post is one slide in the 3-minute presentation recently given by Michael Saylor (Microstrategy Inc) to the Microsoft board. Many of the classic categories of risk are listed.
In this blog series on Enterprise Risk Management, I would be remiss to omit writing about what is probably the most urgent risk – or rather, extant condition – that is afflicting your corporate treasury: the fiat (government-decreed) currency. This is the essence of Saylor’s message.
It is now becoming embarrassingly apparent that monetary reform is no longer a fringe interest, as investment funds and organizations of all types are desperately seeking both yield and a store of value. Even if assets are denominated in the world’s strongest currency, confidence is likely melting as fast as the ice cubes in which the trust is placed. In my country we are relatively fortunate in having to spend only 1.37 (1.412 with the bank fee) of our ice cubes to buy the best one, which itself loses purchasing power at a much higher rate than the government-specified consumer price index.
Back in January 2023 I reached out to Jeff Eder, a monetary reform researcher in Canada, and offered to interview him and produce a series of podcast episodes. My goal was both to educate myself and to help him get his message out. Our cursory discussion of Bitcoin in that podcast does not get past the common objections; i.e., that Bitcoin is too volatile; that it might get hacked by quantum computers; that it uses too much electricity; that it isn’t used for transactions; that it is too technical, etc. I realize now that each of these arguments is specious. But the enduring value in that podcast series is the discussion that politely points to an egregious moral and economic problem: certain interests have extraordinary privilege, and have had it for a long time.
In my experience – and I see this echoed in commentary online – the people who do not appreciate Bitcoin are usually not aware of the gravity and profundity of the problems it solves, nor how, exactly, it solves them. I don’t feel too bad in having rejected Bitcoin upon my first encounter with it, for now I see this is a common pattern, even among finance and tech specialists and (as Jeff also laments) especially among academics. But I will give myself credit for having turned my attention to alternative and revisionist history, including the story of the manufacturing of public opinion. This prepared me to understand the current situation and the relevance of Bitcoin.
Through several generations, monetary reform advocates have invented a variety of solutions, some merely proposed, others enacted. Jeff Eder, for example, has a ready program for legislative reform in Canada. Others are keen to make alterations to the commercial banking system. Others have created a false monetary reform movement in order to lend credibility to the current dysfunctional system and detract from genuine critique. Others in recent history have actually re-engineered the country’s financial system from the ground up and achieved extraordinary results. These innovators have not met a kind fate. Others focus on commercial exchange and credit clearing houses to sidestep the fiat system, with limited success. Many have tried in vain to implement local currencies in the hope that self-issued credit tokens would achieve universal adoption.
While the monetary reformers present a kaleidoscope of potential alternative systems, their identification of the core problem is quite consistent. It is encapsulated in this book title: The Monopoly of Credit (1932). Its author is C.H. Douglas, a particularly astute monetary reformer whose program was actually implemented with success in Japan in the interwar period.
This brings us back to Bitcoin. It joins a long line of attempts at monetary reform. However, by contrast to other monetary reforms, it has significant market capitalization, high transaction levels and unstoppable network effects, all on a global scale. It is suited to digital commerce. It de-funds as it outperforms traditional asset classes, including real estate, treasury bonds and gold. By contrast to many of its predecessors, it has no central locus of control to be shut down, nor a visible founder to be assassinated.
Important actors have realized all this, and now want in. The big institutional players have found that they cannot ignore or destroy Bitcoin, thanks to its unique properties, so they wish somehow to co-opt it, or control it through proxies. Meanwhile, other players at the institutional level (i.e., entire countries) are exiting the fiat system and adopting a Bitcoin standard. This is creating a new, parallel practice that seems at first only to reform the legacy system, but is actually displacing it.
In history, only the currency perceived as the best, even if not perfect, prevails. And only the monetary system (i.e., the protocol for issuance and control of the currency) that is supply-capped, robust, voluntary, permissionless and decentralized can prevail against a faltering one whose adoption relies on coercion.
We are witnessing history in the making. What is the result of adopting the world’s hardest asset? It chases out of the system many things, even ultimately the war chests that serve only the interests of those who finance weapons and reconstruction (on both sides of the conflict). Bitcoin is bound to chase out all types of overpriced or completely valueless performance; poor quality products; shoddy services. And why does the hardest asset chase out these things? Because very few will let slip from their grasp the extraordinarily scarce money that is truly value-laden, in exchange for worthless and destructive things.
All of a sudden, the principles that conscientious people have always pursued – good risk management; due diligence; value-for-money; cost-benefit analysis and project management – will become extraordinarily meaningful and pertinent in all enterprise operations. Yes, the maxim “fix the money” has a lot of truth to it. And Bitcoin is injecting truth into the financial and economic system, one organization at a time.
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