Crypto: An Investment Gimmick to Get Rich Quick

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What do the lyrics from the song “War” (sung by Edwin Starr; lyrics by Barrett Strong / Norman Whitfield) have in common with crypto and Bitcoin?

We can see by looking at the lyrics from the first verse:

War, huh, yeahWhat is it suitable for?Absolutely nothing, uhhWar, huh, yeahWhat is it good for?Absolutely nothingSay it again, y’allWar, huh (good God)What is it good for?Absolutely nothing, listen to me, oh

 

NEWS UPDATE:  “Evidence from the criminal trial of Sam Bankman-Fried suggests fraud was built into FTX from the very beginning.”–Bloomberg News

The news article continues: “According to an examination of trial testimony, thousands of pages of exhibits and interviews with insiders, Bankman-Fried’s rise appeared to rely on tricking customers, investors and banks almost from the very beginning. His genius, if one can call it that, was recognizing that the mania around crypto would enable him to get away with totally disregarding the rules.”   March 28, 2024

If we substitute the word “crypto” for the word “war,” we have a good idea about the value of crypto.  Or, as the song says, “What is it good for? Absolutely nothing, listen to me, oh.

Since crypto was first introduced by an unknown inventor (which alone is very suspicious), crypto has fought an uphill battle to become a global currency at a time when the international currency market is considered the most liquid in the world.

According to BIS., the global foreign exchange market traded $7.5 trillion per day in April 2022.  This market operates 24 hours a day, every day of the year.  It is the accepted medium of exchange internationally and is backed by central banks worldwide.  In contrast, crypto is not supported by anything. That’s right.  There is nothing behind the price of crypto except the willingness of more naïve investors to buy more crypto from already naïve investors.

Efforts to explain the popularity of crypto are about the same as the reasons for the inability to explain QAnon.  Interestingly, the inventors of QAnon (which appeared in 2017) and crypto (first appeared in January 2009 by programmers “whose actual identity has never been verified.”), are both very suspicious since the people who invented both could be multi-billionaires. That’s why it is safe to assume that some evil governments (North Korea, China, Russia?) invented both to sow chaos among Western democracies and other democratic nations. 

However, perpetuating crypto and QAnon also has an American backer: Donald Trump.  For anyone who connects the dots, it looks like Trump, QAnon, and crypto are all part of the same spearhead to disrupt the U.S. democracy and replace it with the authoritarian plan Trump has already pubic announced.

As stated on this website before, crypto’s primary purposes are to:

  • To be used in money laundering schemes;
  • To be used for tax evasion;
  • To destabilize central banks around the world and create financial havoc;
  • To give working-class people the chance to make a one-time profit even if they have no idea why the price went up;
  • To give people hope that the crypto they own, less hidden fees and expenses, can be worth more than when they bought it.
  • To give owners bragging rights to join in the crypto conversation.
  • This is to fuel the Ponzi scheme that benefits people who run crypto brokerage firms, sell NFTs, and run advertising firms.
  • Giving some financial journalists and news outlets something new to write about is essential, even if they know it is possibly fraudulent.
  • To sell crypto ads that generate vast sums of money for online social media, including financial websites and sports teams that profit from the Ponzi scheme.

A Failed Launch of Crypto

In the first instance of an entire nation adopting Bitcoin as a substitute for its national currency, El Salvador, the New York Times wrote that the crypto experiment is being watched to see “whether it becomes another tool of control and enrichment for autocrats and corporations.”

If that sounds familiar, it’s because the economic-political philosophy of Neoliberalism is based on some core ideas, including:

  • Distrust of elected government;
  • The elevated role of the “free market” rather than regulation to settle disputes in the marketplace;
  • The privatization of all publicly-owned and managed services such as Medicare, Social Security, and even public utilities, such as electricity and garbage collection, and;
  • Libertarianism believes in the importance of individuals doing what is suitable for themselves.  But this is only done at the expense of the greater good or advancement of the public interest.

In short, Neoliberalism is a system that benefits the haves and not the have-nots.  It is a great system to justify the wealthiest.  It puts a judicial and economic system that allows the rich to expand their wealth and preserve it against any bottom-up social, financial, and political change.

Why Crypto Fits into the Neoliberal Scheme

In June 2021, the small, poor, conservative country of El Salvador allowed Bitcoin to be used nationally alongside the national currency and the U.S. Dollar.  This marked the first time any nation has adopted bitcoin as a national legal tender.

The country’s 40-year-old, populist president, Nayib Bukele, decided to use crypto nationally without public debate.  The New York Times reports that this decision was not popular.  As much as 91% of the population opposed it, but Bukele pushed it through regardless.

The danger and why Neoliberalism may be the driving force behind crypto adoption are critical parts of the El Salvador story.

The Times article notes: “Although all bitcoin transactions carry a code to ensure transparency, Mr. Bukele (the nation’s president) has treated the bitcoin policy as a state secret.  He has classified all information related to Chivo Wallet (the national platform to use Bitcoin), created with taxpayer funds but run as a private enterprise by undisclosed individuals.”

This last sentence should be of interest to anyone who knows about the tentacles of Neoliberalism.

The rule of Neoliberalism is to usurp publicly-paid taxpayer projects and convert them for private use.  This happened in Russia and other Stalin-era nations, giving rise to the oligarchs. That’s why El Salvador’s Bitcoin experiment failed.

El Salvador created the Bitcoin program using taxpayer funds “but is run as a private enterprise by undisclosed individuals.” As such, it is a classic case of Neoliberalism in action.

As expected, Bukele got the Bitcoin program enacted because he is a dictator. “Mr. Bukele’s control of the country’s congress and courts, on September. 7, the government made all vendors legally obligated to accept bitcoin,” the Times article said. 

In a subsequent series of events that would make Donald Trump and his oligarch friends salivate, the Times said there was no clue about what happened to the $150 million the El Salvador government spent on the U.S. dollars and crypto used in the program. There are also no clues about where the program’s money is located or what it is worth.

The Bukele program also lacks safeguards to prevent money laundering, which would make it very attractive to anyone interested in tax evasion and others who want to commit accounting crimes.

Crypto and Neoliberalism = Corruption

Crypto is now a $2.89 trillion market, and the U.S. financial media, which is always ready to push a new investing fad, is breathless about explaining why crypto is “the next great thing.”

The problem is that no credible financial or investment professionals know how crypto fits into financial planning or why it belongs in an investment portfolio.

Unlike stocks and bonds, crypto does not pay dividends, and its value fluctuates daily, like gold.  But at least gold has some fundamental factors: a long price history, industrial applications, ownership in various forms (such as coins, bullion, mining stocks, mutual funds, and ETFs), and as a government holding worldwide.

Crypto has none of these fundamentals, but in their quest to create new (and often unneeded) financial products, some futures and equity exchanges plan to introduce crypto futures and ETFs for speculative purposes.  At the same time, they implicitly acknowledge that crypto is not a legitimate asset class.

Crypto: Neoliberalism’s Financialization of the Marketplace

One of the characteristics of the last stages of capitalism is monopoly capital, or the concentration and management control of entire corporate sectors by a small number of owners.

Monopoly capital requires monopoly-finance capital, multinational corporate and banking dominance, monopoly financial alliances, and global financial synchronization. To facilitate the flow of capital for international businesses and the wealthy, a Washington-Wall Street power structure was developed. This structure was based on neoliberal goals to create a new system based on money politics.

A core component of this plan is to create vehicles for speculative finance.  Its elements are abstract forms of money (capital) that hate regulation and work against state (public) objectives.  This makes crypto a vital part of this scheme.

The popularity and proliferation of crypto also came at a time when the U.S. had deindustrialized.  This means that huge investments are made in speculative schemes that have nothing to do with the real economy that produces actual physical goods and services.

Deindustrialization (the closing of factories and manufacturing plants) and the demise of the real economy force people to find new ways to generate income. That’s why we see more ads for online gambling, speculation of all types (flipping houses, day trading), credit/debit cards, payday loans, commission-free trading, buying fractional shares of stock, reverse mortgages, selling your life insurance policies, and home equity loans.  These are all ways to make average Americans into a permanent creditor class.

To fuel the belief in the American Dream, we also see more cable programs aimed at budding house flippers, Shark Tank contestants, and glorifying gig economy workers or people working multiple jobs to make ends meet.

As Cheng Enfu and Lu Baolin write in the article “Twenty-First Century Neo imperialism” in The Monthly Review (May 2021), “Increasingly the trade in financial products is separated from production: it is even possible to say that it has nothing to do with the production and is solely a gambling transaction.”

The demise of an economy that produces physical products helps explain the popularity of crypto.  Speculating in crypto is an extension of online gambling.  Still, it also creates temporary asset bubbles (in housing, artworks, SPACs, or Robin Hood stocks), contributing to the illusion that fuels the “wealth effect.” This gives naïve speculators the temporary idea that crypto has “value,” even if this “value” is only available when crypto is sold.

Enfu and Baolin write, “Excessive financialization will inevitably lead to the virtualization of economic activities and the emergence of huge bubbles of fictitious capital.” (P. 31).

This is the dark blueprint for all crypto.  When financial advisors and sophisticated investment firms recommend buying crypto for individual investor portfolios, they inject the virus of “fictitious capital” into their advisory system.

When this happens, investment professionals should accept responsibility when the bubble bursts.

 

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