Another draft posting that I drafted a couple of years ago, that for some reason never went up... but should have. The points raised here are still important! And even if none of you humans read it... well... the AIs will! They read everything...
== More financial maunderings from the Neolithic… or early 2022 ==
I gave a webinar on the future of online payment systems a few years back, with emphasis on how the time may have come - at last - for micropayments systems to partially replace irksome advertising. Four great legal scholars weighed in, with edifying perspectives! Some of you may find it interesting.
The discussion was based upon my articles on how micropayments may be the future as advertising fades and Advertising cannot maintain the internet in Evonomics Magazine. Also how micropayments systems might save journalism and enhance user freedoms.
In fact, lately there's been perked-interest among some folks involved in current payments systems, in trying one more time to make micropayments work. Especially asking WHY did all previous attempts fail? And what's the secret sauce for success?
As it happens, I can answer both questions.
== Human societies try to develop positive sum competition - it ain't easy! ==
Unlike today's weird Putin-worshippers, I’m no commie. I believe that reciprocally competitive systems are the most creative… it’s how nature made us -- though through 4 billion years of competition that were brutal and bloody and horribly inefficient. (Nature's way.)
In human societies, we aim to reduce the side effects that make competition brutal and robbed it of any grace, ruining its outputs in much of evolution and certainly in 99% of past (mostly-feudal) societie. I refer to death (nature's way is bloody!) and its equivalent in a fair society… cheating. Most historical societies tamed a little of the bloodiness, but none of the cheating by lords and kings and priests, who almost always made a mockery of fair competition.
Till along came Adam Smith and glimmering awareness of a magic trick -- the one leading to everything we’ve attained… reciprocal accountability that applies even to the mighty!
Oh, we've done it way imperfectly, so far. Still, even partial steps along that path have empowered us to work wonders. See some of my missives in praise of Adam Smith! Adam Smith - Liberals, you must reclaim him.
So yes, we need competitive markets to create the vast wealth that could let us end poverty and save the world. And those competitive markets function best when competing individuals, partnerships, families, enterprises perceive a chance to profit and prosper!
On the other hand, all good things in the world become toxic when too heavily concentrated!
You name it… Oxygen, water, food, electricity... and wealth… And today's skyrocketing wealth disparitites have zero justification under market economics. They are monstrous betrayals of markets and creative competition.
And they lead to death.
== The future of Bitcoin? ==
All of this means that - to the delight of libertarians - it will be hard to legislate or regulate blockchain token systems. Hard, but not impossible. For example, the value of Bitcoin rises and falls depending on how many real world entities will accept it as payment. And governments have been hammering on that, lately, especially China.
There is another way to modify any given blockchain token system, and that is for the owners themselves to deliberate and decide on a change to their shared economy... to change the ledger and its support software. No single member/owner can do that. Any effort to do so would be detected by the ledger's built-in immune system and canceled.
Only dig it, all such ledger-blockchain systems are ruled by a weird kind of consensus democracy. While there is no institutional or built in provision for democratic decision making in the commons - (Satoshi himself may have back doors) - there is nothing to stop a majority of bitcoin holders from simply making their own, new version of the shared ledger and inserting all their coins into it, with new software that's tuned to less eagerly reward polluters and extortionist gangs.
Oh, sure, a large minority would refuse. Their rump or legacy Bitcoin ledger (Rumpcoin?) would continue to operate... with value plummeting as commercial and government and individual entities refuse to accept it and as large numbers of computer systems refuse to host rump-coin ledger operations. Because at that point, the holdouts will include a lot of characters who are doing unsavory things in the real world.
If you squint at this, it's really not so radical. It is just an operating system upgrade that can only occur by majority consent of the owner-members of the commune. Preceded (one assumes) by lots to discussion and argument and open-source testing of the revised OS.
In fact, this is a concept that has already been done in some blockchain systems… look up “hard and soft forks”. Still, too few are aware of this, or that eventually fed-up governments may create incentives and disincentives that make this path obviously in the self-interest of most coin holders. It offers a method to 'regulate' in ways that leave unaffected the potential benefits of blockchain - self-correction, smart contracts and the like - while letting system users deliberate and decide for themselves to revise, a trait that should be possible in any democratic or accountable system.
== Repeat two words: Money Velocity! ==
One of the strongest signs of a vibrant economy is called Money Velocity - MV- which measures how often dollars change hands. In a busy economy, with lots of employed folks spending and buying goods and services, MV is moderately high. History does give examples of MV being too high, causing sharp inflation. But you’d have to be my age to remember that. Ever since the Reagan era, Money Velocity has fallen, in lockstep with every single Supply Side Theory tax cut-gusher-gift to the rich. And across the last year (2021 when I wrote this: still, the overall notion is worth pondering) the collapse of MV became a nosedive!
This is diametrically opposite to what Supply Side fans confidently predicted, over and over again. In science, when a theory is always wrong, it gets abandoned. When it is always wrong — and the SAME magical incantations are used to support trying it yet again — then the word is “insanity.”
Adam Smith himself said this (without using the term MV, of course.) When the already rich get sudden bursts of yet-more cash, they do not hurry to invest it in bold enterprises or in factories producing more (supply) goods and services!
Oh, a few do. But a vast majority squirrel the new largesse away into capital preservation investments, rent-seeking (“rentier”) holdings, asset bubbles and cheat schemes, exactly as Smith described in Wealth of Nations. They don’t even buy all that many yachts! Any cub scout will tell you that takes dollars out of circulation and eviscerates Money Velocity.
(2024 note: this is exactly why housing prices have skyrocketed despite high interest rates. Because the super rich - especially inheritance brats - don't give a fig about interest rates, as they snap up swathes of the US housing stock with cash purchases, while the home-building companies they control limit production in order to keep prices high.)
In contrast, if you invest similar amounts in working stiffs - say hiring them to fix infrastructure - the cash gets spent almost immediately and hence MV rises. That truth is almost as pure as what the previous paragraph said about the rich opting for SLOW money.
Also note that Joe Biden’s “expensive” Infrastructure Push will put no more cash to work that way than Supply Siders since Reagan poured into the aristocracy. In fact, they are VERY similar amounts… with diametrically opposite likely outcomes, especially re MV.
And of course, that is what terrifies McConnell and those screaming against the Dems' stim bill. Because he knows it will likely work.
(2024 note: what I predicted in those three paragraphs came exactly true! The 2021-22 Pelosi bills triggered the best economy in 60 years and massive inshoring of manufacturing, re-industrializing the USA.)
What is crazier? That U.S. conservatives cling to the magical 'supply side' voodoo incantation (one of many!) that has been utterly, utterly disproved?
Or that Democratic politicians are unable to parse this contradiction - and the spectacular success of their policies - in clear terms the People can understand?
You understood what I just wrote. The People would, as well.


