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This week on The Econoclasts, Yanis Varoufakis and Wolfgang Munchau challenge two global orthodoxies: Europe’s cynical strategy in the Ukraine war and the alleged freedom of the cryptocurrency world. Are European leaders actively frustrating any Ukraine peace plan to buy time for re-armament? And did last week’s crypto winter confirm that the digital currency universe has been taken over by an unholy alliance of Big Government and Big Finance that will guarantee future global financial chaos? Prepare to see the world’s strategic priorities—from Kyiv to Bitcoin—in a new and alarming light.
The Econoclasts is the podcast from UnHerd in which Yanis Varoufakis and Wolfgang Munchau each week pick pillars of the economic orthodoxy – so-called ‘settled facts’ – and shatter them. Why? Because, while they don’t always agree politically, they’re united in one conviction: the consensus is rotten and the establishment’s model is failing.
The discussion on stable coins failed to mention a number of key facts:
Stable coins currently do not pay interest so they are immensely profitable for the organiser which is why US banks like JP Morgan want to issue them. The US government will not benefit from that.
The principal benefit of stable coins is anonymity and buyers who want that are willing to forgo interest. Their hope with US based stable coins is that they can onshore funds but the Genius Act is very specific in saying that funds must do all the money laundering checks and done properly that removes anonymity. That of course renders blockchain technology pointless.
To fully benefit from blockchain technology you have to invest at a node and you get a bearer instrument. If it is stolen, lost or damaged you have lost it completely. Most investors invest through an intermediary with all the normal fiscal risks plus the fact that proving your claim depends on their records. They do not benefit from the blockchain.
Stable coin issuers do not issue stable coins and then seek investors. They issue stable coins when investors deposit with them.
Banks are naive. They will lend to get a high interest rate, which raises earnings and bonuses, without regard to a higher risk in realizing their security. There will be a sizeable demand for loans secured on bitcoins because the investor leverages his upside. The banks will trigger sell the security if the loan becomes uncovered but bitcoins can only be sold if a new investor wants them. There is no issuer with liquidity ready to buy them. Forced sales will drive the price down leading to more forced sales.
The price of bitcoin is an uneasy alliance between greed and fear. If fear dominates it is zero. All the money piled into it has been transferred to the low cost sellers, It is in stable coins and other funds. They will not be buying it back.
Thank you
Excellent podcast. My very simple take-away >>> stable coins are a convenient way of holding suitcases-full of paper money. People sell these interest-free IOUs to you and use your money to buy assets that attract interest. Ker-ching !
In the future China will clean up. Do our banks and politicos care ? Why would they ? since they will be dead.
Strange adverts… Does anyone know what smoke-free products are ? Lubricated condoms ?