In today’s Money Morning…the reasons the bitcoin price barely reacted to the news…Hasekamp’s commentary is FUBU (for us, by us) for central bankers…because crypto transcends borders it will force the hands of nation states…and more…
Pieter Hasekamp — the director of the Netherlands Bureau for Economic Policy Analysis (CPB) — published an article on Friday arguing for a total ban on crypto.
I’m not going to dismiss his argument straight off the bat though.
Scrap that, I am.
Here’s what he said:
‘Cryptocurrencies are unsuitable as a unit of account and means of payment outside the criminal circuit; its use as a store of value is based on the hope that cryptocurrencies will one day replace real money. But that’s not going to happen… Cryptocurrencies are essentially neither money nor a financial product, but an example of what Nobel laureate Robert Shiller calls a contagious narrative: a contagious story in which people believe because other people believe in it.’
‘The ultimate collapse of the crypto bubble is inevitable … The Netherlands must ban bitcoin now. [Because] cautious regulation can also backfire: it legitimizes crypto as a bona fide financial product. Recent developments show that it is time to act: the longer we wait, the greater the negative consequences of the eventual crash…The ultimate step is a total ban on production, trading and even possession of cryptocurrencies.’
And here’s what the Bitcoin [BTC] price thought of the article:
Not much, clearly.
Let’s take a look at the reasons the bitcoin price barely reacted to the news.
Hasekamp’s commentary is FUBU (For Us, By Us) for central bankers
Here’s a bit of background on Hasekamp (emphasis added):
‘Hasekamp has been the director of the CPB since March 1, 2020. He was previously director-general for tax affairs at the Ministry of Finance and director of health insurance at the Ministry of Health, Welfare and Sport… The CPB is a part of the Ministry of Economic Affairs and Climate Policy. Its director is appointed by the minister, in consultation with other members of the government. However, the CPB is fully independent as far as the contents of its work are concerned, the bureau’s website states. As the country’s central planning office, the CPB does scientific research aimed at contributing to the economic decision-making process of politicians and policymakers.’
Former tax minister says government-controlled money is the only real money…
In other news, the sky is blue, and water is wet.
I’d also note that in quoting Nobel laureate Robert Shiller to make his point, Hasekamp forgot that Shiller himself is undecided on bitcoin/cryptocurrency at this stage.
Shiller said, ‘The ultimate source of value is so ambiguous that it has a lot to do with our narratives rather than reality.’
Which brings me to this point — at a meta-level Hasekamp’s commentary is largely just another attempt at narrative control. An exercise of power.
Power is a ‘thin’ concept. Meaning it doesn’t tell you much about what should be, rather, it tells you a lot about what is and what could be.
So, when it comes to money, power is pretty much all that matters to you as an investor.
Remembering that as an investor, ‘shoulds’ better not cloud your view of ‘what is’ and what a likely future looks like.
Here’s what a likely future may look like…
For starters, a total ban on bitcoin or cryptocurrency in the Netherlands would just trigger a crypto-capital flight.
Just like exorbitantly high taxes in France, ie: the ‘75% wealth supertax’ that Holland tried to put in place lead to emigration and actually lowered their tax revenue.
While this is no time for debating the Laffer curve — the point remains that if you try and squeeze the tax lemon too hard, people will tip over the lemonade stand and bail.
Which brings me to one of the key features of cryptocurrency.
Because crypto transcends borders it will force the hands of nation states
Countries will need to think long and hard about how to treat crypto.
Ham-fisted tactics will likely backfire because we are now entering what I call a ‘techno-monetary competitive environment’.
Consider these hypotheticals…
What if the Dutch banned crypto?
A Dutch ban would suddenly make say Bulgaria or some less well-off European country fling open the doors to crypto-capital.
But what if the entire Eurozone or the ECB instituted a ban?
Then another continent would soak up the crypto-capital.
What if every country in the world banned crypto?
Guess what? New countries would form.
And herein lies the problem for central bankers — they must sleep in the bed they made.
They didn’t just throw out the money rulebook.
During the GFC, they torched and replaced it with a new, even more rubbish playbook.
Now that playbook is expanding exponentially, while getting whackier by the day.
If you’ve got any reservations about what the current and future playbook will look like, be sure to check out what Greg Canavan and Ryan Dinse are telling their subscribers in New Money Investor.
I’m certain you will find it a valuable resource as you navigate a rapidly changing world of money.
For Money Morning
Lachlann is also the Editorial Analyst at Exponential Stock Investor, a stock tipping newsletter that hunts for promising small-cap stocks. For information on how to subscribe and see what Lachy’s telling subscribers right now, please click here.