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In These Times - January 4, 2022

They are called crypto ​“currencies,” but clearly they are not currencies. Their value fluctuates far too much to be a useful medium of exchange. So what are they? They are collectibles, pure speculative objects with zero intrinsic value. If you buy a stock, you own a portion of a business; if you buy a house, even if the price goes down, you still have a house. If you buy a Bitcoin, you have nothing but the title to a piece of computer code that can do absolutely nothing for you except to the extent that someone else can be induced to pay you money for it. In the midst of a mania, as we are now in, the price of these imaginary assets tends to rise, because the collective public sentiment is that the prices will rise. When that sentiment changes — whether due to fear, or some event that causes crypto holders to need to cash out — the price will plummet. This basic dynamic has been demonstrated a zillion times in financial history, often by assets with far more substance than crypto. 

Making predictions about looming social and political catastrophes is a dicey business, because most of the exciting things in history did not happen predictably. You can try to draw historic parallels based on broad economic or cultural trends. In America, in 2022, we have a vicious and spiraling culture war combined with an enormous asset price bubble fueled by two years of stimulus money, all resting atop an incredibly tenuous pandemic-wracked real economy. If you think the Angry White Men were scary during the Trump years, just wait until the crypto bubble pops.

Let’s think this through. The foundation of everything happening now is a sort of late capitalist nihilistic politics fueled purely by culture wars — an almost primitive flight from rationality driven by a half century of rising inequality and crumbling faith in ineffective public institutions. The American dream is dead: Children no longer do reliably better than their parents. The dream of a one-income supported household is over. In its place have sprouted the gig economy, crushing student debt, the death of unions and generalized precarity. The rich are unimaginably richer, and everyone else is spinning their wheels. The Republican response has been the culture wars, in lieu of actually redistributing wealth. This has been effective, ironically, because the sort of healthy institutions that would prevent culture war politics from being so powerful are the very institutions that are withering away. Technological changes and the atomization of mainstream media have intensified our division into warring political camps, identity-based tribes that further radicalize electoral politics, and are in turn radicalized by it in a non-virtuous cycle.

That is the soil of America today. And sprouting from that, in the spring of 2020, was the pandemic. The economy briefly shut down, and there was a panic, and then there was a ton of government stimulus money, which has successfully staved off another Great Depression. That is good. An effect of that, however, is that there is simply a lot more money in America than there was before. That money has flowed into every sort of asset — stocks, real estate, you name it. Its enormity is fueling weird bubbles, the kind of bubbles that happen when people are searching desperately for salvation. Booming ​“meme stocks” like GameStop soared then fell, their up-and-down stock charts standing as stark illustrations of the fact that it is impossible for pump-and-dump schemes to replace a functional social safety net. Even more significant is the rise of cryptocurrency (and, to a lesser degree, NFTs, the ephemeral online artworks whose value is now approaching that of the entire traditional U.S. art market). Crypto is now worth trillions of dollars. All of that value is premised not on some fundamental utility, but rather on the idea that there will always be someone else who will come along and pay you more than you spent on your crypto. This is going to end badly. ...
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