Summary: Bitcoin and its cousins are the latest symptom of the cancerous growth of our financial system. Once useful markets have become casinos. Now we are literally burning resources to create nothing of value to society. But we still can regain control.
Bitcoin is in the news a lot lately. As usual, journalists see only the small story. But a few point to larger issues about Bitcoin.
- NPR: “How The Tiny Nation Of Georgia Became A Bitcoin Behemoth” by Andrew North.
- Quartz: “Iceland will use more electricity mining bitcoins than powering its homes in 2018” by Akshat Rathi.
- MIT Technology Review: “Bitcoin is eating Quebec” by Kathryn Miles — “A Canadian hydropower operation put out the welcome mat for bitcoin miners. Shortly thereafter, it was overrun.”
- Recode: “Bitcoin is the greatest scam in history” by Bill Harris — “It’s a colossal pump-and-dump scheme, the likes of which the world has never seen.” Harris is the former CEO of Intuit and founding CEO of PayPal.
The big story: Bitcoin and its cousins are the natural development of our out-of-control financial sector. When small, it provides vital services. But it has become not just parasitic but cancerous (much like out health care system). Bitcoin consumes ever-increasing resources but provides no value to society (there are ways to provide fixed value currencies that are easier and cheaper). Just profits to speculators.
Investment markets are valuable mechanisms. They provide price discovery, risk transfer, capital raising services. But in our current mad system, profits to speculators are the driving force. Markets have become casinos. Everything is a token. Everything is bitcoin.
We have been warned.
CNN: “Bitcoin boom may be a disaster for the environment” by Daniel Shan.
The Guardian: “Bitcoin’s energy usage is huge – we can’t afford to ignore it” by Alex Hern.
Grist: “Bitcoin could cost us our clean-energy future” by Eric Holthaus — “Given its rapidly growing climate footprint, Bitcoin is a malignant development, and it’s getting worse.”
New Republic: “The Environmental Case Against Bitcoin” by Emily Atkin — “Mining the cryptocurrency requires a staggering amount of energy – contributing to global warming and providing little public benefit. …One transaction can use as much energy as an entire household does in a week.”
I planned to write my usual thousand words explaining this problem. But by now anybody who does not see this either does not care or is part of the system. The rise of Bitcoin and its cousins is just the latest – and maddest – manifestation of this cancerous growth in our society.
Sadly, like so many of our problems, the well-proven solution is obvious (again, like health care — where our peers use several forms of systems, all superior to ours). Some sectors require regulation. Finance is one of those. Effective regulation was created by the New Deal. Updated forms of that would work for us today.
Getting there will be difficult. Our massive cancerous financiers have used their vast profits to buy both major parties. Each election we get an echo, not a choice, of ways to coddle Wall Street.
Their corruption is a gift to reformers, providing a popular issue to rally the public around. The Tea Party movement briefly did so, before being quickly and easily co-opted by the Republicans. We can look at our history for more successful examples. Such as the various populist movements, for whom hatred of banks for a core value.
We need not supinely accept the power of the banks. The machinery bequeathed to us by the Founders remains intact, decisive when energized by citizens’ energy.
For More Information
- Bitcoin, the deep web, & the big conflicts of the 21st Century.
- Today’s mythbusting: the Fed is not suppressing interest rates.
- FDR explains one dimension of our problem: bankers own the government.
Books about economics
Most of those commenting here about economics would learn much from these guides. The series is quite excellent!