The Guardian has a breakdown of FEC filings in the Presidential race. Trump raised $273.2 million:
The analysis of new election data from the US Federal Election Commission (FEC) shows the increasingly heavy influence of the tech industry in US elections. Advocates of cryptocurrency were particularly active in this election as they fought to stave off regulation, pumping money into the presidential campaigns and key congressional races.
I really have a hard time writing about crypto with any level of seriousness because it is one of the dumbest fucking things I’ve ever heard in my entire life, most of which has been spent working on technology for a living. Case in point:
Who could have guessed that buying up a token based around the long-past-its-expiration-date hawk tuah meme might turn out to be an unwise investment? Haliey Welch, the originator of the raunchy catchphrase, launched a memecoin that she insisted was not a cash grab but a “good way to interact with her fans”. (The “interaction” in question here was limited to ” fans give money”, because she had no other specific plans for the token).
The token followed the typical pattern of quickly pumping, then crashing spectacularly, losing around 90% of its “value”. This is often an indicator of a pump-and-dump scheme by insiders, but Welch vehemently denied such wrongdoing, blaming the crash on “snipers”.
“I really lost $43k apeing in ‘hawk tuah’ coin,” wrote one buyer on Twitter. Other Twitter users marveled at a wallet that swapped $1.4 million worth of MOODENG (a memecoin based on the tiny hippo of the same name) only to lose it all on the $HAWK token.
Another example is the kid in his early teens who parlayed a $350 investment in his own memecoin into a $30K cash out in the span of an evening. There are many other stories like this on Molly White’s Web3 is Going Great blog
Anyway, here’s the problem Democrats face. We should be laughing at this shit while simultaneously calling for regulations. But that sweet crypto cash is pretty fucking tempting. This graph is from the Guardian article linked above:
So as usual in our big tent, C.R.E.A.M. for a discouraging number of Democrats. We have electeds across the ideological spectrum who want us to be part of the crypto “revolution”, ranging from Kirsten Gillibrand to Ro Khanna. (You can see who the crypto industry thinks is or isn’t in their corner at this link.) As part of our post-election dialogue here, I wonder if anyone has any smart ideas about how the party can disentangle itself from the crypto time-bomb that is certainly coming and might just blow a hole in the entire economy.
(Edit: Forgot to add Bret Terhune’s TikTok video on Hawk Tuah memecoin, which is hilarious.)
KatKapCC
This is why I don’t feel bad about still not understanding the point of it. Having a solid grasp of something that is completely stupid would not make me feel smart
Edit: Interesting, I looked at that “crypto corner” link, and one of my current Senators gets an F and the incoming one gets an A. I hope they arm wrestle over it.
Kristine
Is the worry that Wall Street could get overly involved. Pension funds etc?
How far would it need to stretch to become everyone’s problem?
Omnes Omnibus
At least this is something our founding father would have understood. Bubbles and scams would be very familiar to people in the 18th Century.
Baud
I need to ditch my Soros bucks and get me some of those Moskovitz bucks.
You know who was pretty strong on crypto? Joe Biden.
John S.
@Baud:
As evidenced by how much money was spent by the crypto bros to defeat his ideological successor.
But they also hedged their bets and threw some markers down with Democrats, and we definitely need to nip that shit in the bud.
KatKapCC
President Zelensky posted a video of his meeting with Trump and Macron, and in his post he says, “President Trump is, as always, resolute.” Which is I suppose one way of sounding like you are complimenting someone without actually complimenting them.
Baud
Speaking of Ro Khanna, Bernie Sanders made some nice mouth noises about DOGE, and Ro decided take that same idea and turn it up to 1000. He’s getting slaughtered on Blue sky.
Baud
@John S.:
I’d imagine crypto is locked into the GOP now that Trump has won.
Not sure what we can do about them. The public doesn’t seem interested in fighting crypto.
Xavier
@Baud: Sanders’ comments about DOGE were in favor of trimming the Defense budget, I think.
Elizabelle
At least tulips were pretty. And we have some excellent Great Masters paintings of still lifes and flowers.
Crypto? Ummmm …
I am not going to be sad for anyone who gets fleeced by crypto. Although, as Kristine mentioned upthread: do not want pension funds or reputable investment funds anywhere near it. No no no.
sauron496
@KatKapCC: If by “understanding” you mean how the underlying technology works, you’re absolutely right about there being no point. Ironically, the entire hype machine is making the same mistake the other way.
But understanding the (incorrect) premises promoters are working from is useful. It’s a digital equivalent of a prep bunker (which is why the two often go hand in hand). Money is a social construct — it’s a tool to facilitate exchanges, and we as a society get input into how that tool gets used, including via collective institutions such as central banks. “Intrinsically valuable” money is nonsense — intrinsically valuable goods have been used as money historically, but their usage as money was the result of social agreements.
Some people want to have money that is useful for exchanges but insulated from the wider society otherwise. Not happening. Not with gold buried underground, not with long strings of 0’s and 1’s. Technology can be useful in implementing solutions to social problems, but it almost never can be the solution.
MattF
@Elizabelle: And what about establishing a Strategic Tulip Reserve?
John S.
@Baud:
Under Trump, not much to do. But at some point, meaningful regulations need to come out for both AI and crypto, and that sure as hell isn’t going to come from Republicans.
Otherwise, useful idiots like Ro Khanna should be kept far away from anything having to do with these topics, or at some point primaried for less useful idiots.
Omnes Omnibus
@MattF: Great. Let’s start a trade war with the Netherlands as well.
Mr. Bemused Senior
The best explanation of money
Tha Alice and Bob After Dinner Speech
[ETA follow the link for the punch line]
Spanky
@Elizabelle:
Here’s the Fidelity crypto page. AFAICT it’s completely voluntary participation. I.e. no mutual funds or ETFs deal in crypto that aren’t clearly labeled as such.
Spanky
@MattF:
The deer and squirrels are busy working that right now.
Dorothy A. Winsor
To me, crypto is such an obvious scam that I can’t believe anyone takes it seriously. Last night, Chris Hayes talked about how bitcoin wants the US govt to invest in it. I’d say surely not, except who the hell knows with Trump’s dunderheads and thieves in charge.
MattF
OT. CNN reports that someone said that Assad appears to be missing.
Starfish (she/her)
This McSweeney’s article about “We Need to Save Men” is not the best McSweeney’s article, but it is relevant to whatever it is that is going on here.
Gin & Tonic
@KatKapCC: The Ukrainian language has many ways of doing that.
kindness
I seem to keep repeating what a non-fan I am of Rho Khanna.
Ocotillo
My suspicion is that it will lead to the next meltdown that calls for the Federal government to bail it out because the alternative is to let the economy languish it a depression otherwise like in 2008. I don’t understand how it works (really) and I have been around long enough to know the Crypto boys want to steal from our government.
Dorothy A. Winsor
@MattF: Did he fall off a balcony?
Gvg
@Spanky: not to mention fungus. Bulbs cannot be stored indefinitely. They must be planted on their schedule and sometimes they get infested and die anyway. Don’t buy from any but the most reputable sources.
Chris Johnson
@Xavier: He can get right on that, the day AFTER Russia fucking collapses and gets out of Ukraine and for that matter, our politics. Hell, all countries’ politics. The day after that, knock yourself out.
I’m one of his constituents and worked for him. If he doesn’t drop this one he can fuck ALL the way off and I’ll see him primaried. Stick to ranting against billionaires, there’s fertile ground for that.
Martin
I think there is a lesson in crypto for Dems.
You can view crypto at the micro level – like how people get scammed out of their money, but you can also look at it at the macro level. Crypto’s raison d’être is to destroy the US banking system and the role of the federal reserve, and you can draw a straight line from 2008 to the entire crypto industry.
You don’t have to buy into the idea that crypto can do that, and you can challenge whether each individual in the system has that goal, or is just doing some speculative gambling, but if you go into the space you cannot get escape that the aspiration of the larger community is based on a complete loss of trust in the US banking system and the federal reserve, and they see crypto as a way to escape a corrupt system and possibly to destroy it.
And I think the lesson for dems is that when that trust in the financial system was lost in 2008, why more wasn’t done to restore that trust. The CFPB is probably the biggest effort in that I can point to, and while mainline Republicans oppose it because it’s a regulatory body, new Republicans (guys like Vance) oppose it more because while it protects consumers from abuses by banks, it still protects the big banks as the right way to do things, and is generally seen as blocking alternatives to the big banks from being formed. Mind you, those alternatives are almost always created by terrible people that just want to exploit consumers, but nobody is pushing for something like a regulatory system that would break up the banks and replace it with credit unions or other nonprofit institutions that didn’t treat customers like shit, and didn’t have other motives than helping consumers. It’s the absence of good alternatives that keep people chasing bad ones, because a bad alternative is still an alternative.
In a lot of ways, crypto lines up with a lot of leftist (not center-left neoliberal) ideas at least in the perhaps fevered fantasies of the users. But crypto is also taken over by tech billionaires who champion the idea to taking it to the banking billionaires while also fucking the small guys over at every opportunity. They are aspirationally allies, and functionally enemies. Democrats are both aspirational enemies and functional enemies because democrats being institutionalists keep rebuilding the systems that fail after they fail. Democrats helped the big banks get back on their feet – thanks to a lot of capture by lobbyists, despite the fact that democratic voters didn’t want that.
Meme stocks are the same thing but targeting hedge fund billionaires in this misguided attempt to use their system against them, when they absolutely do not stand a chance, because they really fail to understand just how little control they have. But aspirationally, they believe they can take down the billionaires that buy up and ruin businesses. Aspriationally, that aligns with leftist ideas, but functionally it scams a lot of people out of their money and so Democrats are compelled to apply the machine to it and stop it. Again, this could be done via policy, but none is offered. A bad alternative is still an alternative.
And tech is going to throw these things out constantly, a shiny lure with ‘we can fuck over healthcare billionaires on it and they can’t stop us’ because its cast in a lake with no government regulations, and these people who want change bite onto that only to get reeled in by some billionaire tech bro selling some miracle nutritional powder to get eaten. This will never end because government has lost the ability to respond quickly enough to regulate them, and neither Democrats nor Republicans are offering up a reasonable alternative to the problem.
We reject crypto because we can see through the scam, but we don’t necessarily disagree with the aspiration. Go check the front page of this blog in 2008 for evidence. Over time, our partisanship has softened our positions and made us steadily more tolerant of the technocratic solutions offered by Dems that we are more inclined to overlook that no better solution is being offered because a Harris is universally better than Trump, even if she’s not going to fix the problem. So we get acclimated to it not being fixed.
And I don’t even necessarily think that Harris is opposed to the change (this is why I don’t blame individual politicians for not getting better results – I think it’s not possible given the political framework we impose on them). I think she has (like everyone else) simply internalized that the machine is only capable of small change, and so she can only offer small change, because changing the machine to allow it to make big change is off the table for institutionalists. We have a reflexive opposition to any of these agencies being torn down, in large part because they guy selected to do that is a lunatic, but again, a bad alternative is still an alternative. Democrats don’t entertain the idea that these agencies probably should be torn down, constructively, carefully, and rebuilt to work better. That’s not in our political vocabulary.
Baud
@Xavier:
That’s what Khanna is pushing too.
Martin
@Starfish (she/her): To tie the gender dynamic into my previous comment. I think one reason for the split may simply be that women benefit much more from the protections of the current system, as imperfect as those protections are, than men. The prospect of radical change for men is a lot more appealing because there’s simply less risk in doing so. Some of that is real, and some of that is the kind of unearned confidence I’ve spoken of before that we observed in say, college admissions. Go play the ‘what animal could you fight unarmed and win’ game with men, and you can see it in action. If you think you could beat a wolf in a fight and win, you’re a lot more likely to think you can tear down HHS and come out okay.
It’s why crypto is almost exclusively a space for men. They’re the ones that believe they can beat the federal reserve through the mechanism of doing useless math.
weasel
I think it might be helpful, if at all possible, to clearly link crypto to the many crimes it makes possible (and exists only _to_ make possible imo). Human trafficking, money laundering, drugs and ransomware. All those good things! That would help make the case for restrictions.
Math Guy
I am not an economist, but my understanding is that when a government prints money, it is backed by tangible goods and services. This is not true of cryptocurrencies. If I were to create a crypto exchange, it would work something like this: get the servers and some software lined up, then declare that I have created 100 MG coins and you can buy one for $1,000. A few people come in and buy them and we’re off! Each transaction has to be verified in the blockchain, and this is where crypto mining comes in. It takes significant computing power to verify a transaction, so to incentivize other people to keep my books honest, I mint additional MG coins and distribute them to the crypto miners when they verify a transaction. Of course, those coins are also “worth” $1,000 since that was the price I set. At this point, speculation enters the game and the value of an MG coin may rise or fall with the market. The first 100 MG coins are backed by actual dollars (or euros, or whatever government currency was used to buy them), but now the coins I mint to maintain the blockchain ledger are backed by waste heat that is generated by the miners. You’re buying fucking entropy which, if you are smart, you can sell for actual government currencies while the illusion of value can still be maintained.
rationalman
The amount donated by Elon Musk is way too low. His buying of Twitter was mostly to help Trump.
The $44 billion he spent on Twitter should be allocated to buying the U.S. presidency.
—————–
Elon Musk’s X is worth nearly 80% less than when he bought it, Fidelity estimates
By Matt Egan, CNN
Published October 2, 2024
https://edition.cnn.com/2024/10/02/business/elon-musk-twitter-x-fidelity/index.html
—————–
Martin
@Math Guy: Sort of. I think the issue lies in the word ‘backed’.
Typically when you say ‘backed’ you mean what validates it. Goods and services are why money is issued because it’s a more convenient way to conduct business than bringing your livestock to the store to work out how many chickens you need to turn over for a new outfit. So the federal reserve issues enough money to ensure there’s enough in circulation that commerce can take place and they expand that as the need arises. Why a dollar is worth a dollar is because the federal government says it’s worth a dollar, so you want to fight over that? The currency is backed by everything from the cops to the military and if a foreign government turns over something (like oil) for a certain number of dollars, we will always honor that (or invade you). That’s what backs the currency. Goods and services are what justifies the currency – it’s why we have it, not why its worth what its worth, at least not directly.
What makes the value of a dollar go up and down is largely a function of the ratio of dollars to goods and services being offered up. Too many dollars the value goes down (deflation), too few the value goes up (inflation). So scarcity is a function of the system. The fed uses various other tricks to manipulate this besides issuing – high interest rates make people spend money slower so we need fewer dollars, low does the reverse. They tend to use printing money to lubricate the market and then interest rates to calibrate it. So while the system could mean that goods and services drive the value of the dollar, really the federal reserve has all of these other levers to pull to ensure THEY are in control of what a dollar is worth.
Crypto harkens back to when the dollar wasn’t backed by ‘because we said so’ but to when the US government needed to have a stockpile of gold to validate what a dollar was worth. What made the gold worth a certain amount – don’t think about that, that’s nearly prehistorical. Scarcity is a component of that but there are lots of really scarce valueless things. They’re valueless because they have no utility. But crypto seized on scarcity being the driver of value and built a system of knowable, controllable scarcity. What they didn’t have was the utility part – and originally they intended it to serve as currency – buying a new plow using crypto rather than dollars. It was intended that the store could choose to accept crypto in lieu of dollars because the store could then turn around and use the crypto do either convert back to dollars or to buy, say, electricity in crypto. Think of a gift shop across the US/Canadian border that despite being in Canada still accepts US dollars, that they will exchange back to Canadian dollars so they can pay their bills. That was the idea.
The problem is that crypto is distrustful of central authorities (like banks, the federal reserve) because crypto seeks to destroy those systems. And so it is built on a decentralized authority. Everyone carries around either part or all of the ledger of who owns every piece of crypto at any given time, and the way you conduct a transaction involves every other part of the system validating that transaction because, again, there’s no central authority. And that process is expensive because you ultimately need to pay all of those parties to do that work. The result is that transaction are extremely expensive. So expensive, that it is no longer useful as a currency. If it costs that gift shop $300 in service fees to convert 5 USD into 5 CAD, they will stop accepting USD. And if it costs 300 USD to buy a 5 USD hamburger, Americans themselves will stop using USD . That’s where crypto is. It lost its utility. All that’s left is scarcity. But by the time it did lose its utility a lot of money had been invested in it, and so you have a system where people are running around speculating on the scarcity side of it, and the only way to benefit from a crypto windfall is to convert it to a useful currency and pay those fees – which drives the speculation.
So yes, you have the basic idea correct. There are two problems that crypto investors fail to observe:
sentient ai from the future
crypto exists in the very fucking first place as a sort of union-busting activity within the online crime “community” (i refuse to non-ironically use terms like “cybercrime” or “the dark web” because i have fucking standards)
because money-mules, who were charged with moving the proceeds of digital fraud rings and the like across actual physical borders had too much power for the nascent techbros of online crime to tolerate.
(there was one particular coordinated multinational ATM theft ring i recall hearing about in the early aughts that was mindbogglingly widespread, i’m sure that was a nightmare. nowadays these nitwits just load their crypto tokens into the equivalent of the 90s’ mixmaster anonymous remailers and wash their ill-gotten “gains” with the click of a mouse.)
and i guess at some point, wall street finance bros looked at that and said “you know what, everything else we run is essentially a fucking casino, we should set up a table of this crypto shit too”
like it’s so virulently stupid i just dont want to get up in the morning sometimes.
sentient ai from the future
@Martin:
@Math Guy:
i mean, no, fiat currency is the term and yeah, the money isnt backed by anything tangible. but what it is backed by is the promise of the government.
cryptocurrencies aint got that. and the fash want to tout crypto as artificially-scarce tokens while simultaneously undermining the promise of the government that actually makes real money worth something.
it’s the world’s biggest bust-out and i’m not sure where my own assets need to be in order to try and avoid the worst of what’s coming. because i’m pretty sure it will be very bad.
Another Scott
@Martin: There are simpler ways to get finance, etc., under control than giving billionaires public backing of magic beans. Magic beans that are setting the atmosphere on fire… :-(
Dean Baker (from November 14, 2022):
FWIW.
Best wishes,
Scott.
p.a
Click my nym and read the top post (graph) in my tumblr and the included blurb abt Fairshake
Martin
@sentient ai from the future: I disagree that it exists for that purpose. I agree that community saw the opportunity and immediately rushed in to exploit it, though.
I remember it in the beginning reasonably well – when it was the fringe tech media reporting on it. The first block carries this text: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks“. I probably first started reading about Bitcoin a week or so after launch. My son knows one of the two bitcoin pizza guys. He’s very nice.
The early focus was anti-bank, anti-central currency authority – very hacker/fuck-the-system. And that lasted a long time and is still quite present today. As to my comment above regarding the utility of crypto – money laundering is a utility of crypto, but it certainly wasn’t the operative intent even quite far into things. I would argue even today where the aspiration is metastasizing into a get-rich-quick/anti traditional work kind of thing.
Aspirationally it was never focused on criminal behavior, though it certainly was hijacked for that purpose. And most of the people that engage with crypto don’t seek or use it for criminal activity, though it’s possible that the largest transfers in the system are criminal.
But that’s also true of a lot of other systems – real estate, banking, art.
sentient ai from the future
@Martin:
yeah, i was there too. there is more than one story. the one that gets all the press is the fuck-the-system satoshi bullshit. at the same time the digital criminal world was undergoing these changes, and there was an astonishing amount of overlap in that community, as there still is.
Martin
I’ve been saying that all along. Shame nobody is committed to doing those things.
My argument all along is that if you want to rein in crypto, first introduce a system that addresses the problems that crypto identified as needing to be fixed. Then you have a good alternative to start to dismantle crypto.
The parallel was that DMCA crackdowns didn’t stop Napster. iTunes Music Store did. The problem trying to be solved wasn’t stealing music, it was buying music online in a reasonable manner. Until iTunes showed up, everyone was fighting that problem. Apple solved it, most Napster users jumped over and happily paid their $0.99 per track, and dismantling the bad system proved pretty easy to do after that.
The way to tackle a bad alternative is to build the good alternative first, and then work to move people to it. Nobody wants to build the good alternative. Even the CFPB doesn’t seek to build the good alternative – it just seeks to enforce the status quo as the right way to do things and punish the bad alternative.
And I think this is why it backs Trump. Trump doesn’t promise to build the good alternative, but he promises to break the bad status quo system, and let the bad alternative occupy that space. And I think voters are resigned that that solution, because no better one is being offered because Democrats are defending the bad status quo system as being better than the bad alternative, and still not offering the good alternative.
Martin
@sentient ai from the future: Right, but that too speaks to the problem that the institutional machine is too slow to react to the criminals and profiteers. Regardless of the aspirations of the crypto community, the bad people found the solution to their problem faster than the good people could stop it. Remove crypto and they’ll instantly pivot to the art market, or something else.
The institutions need to figure out how to work a lot closer to their speed.
Another Scott
@Martin: Made me look.
Nakamoto’s paper (11 page .pdf):
[ rofl ]
Stop it, you’re killing me!!
[ groucho-roll-eyes.gif ]
It was magic beans from the beginning.
A bitcoin transaction costs nearly $6 at the moment, and the cost varies by orders of magnitude depending on who knows what. It doesn’t hold its value, it is a slow and expensive medium of exchange, and it’s not safe from fraud and scammers and all the rest.
It’s stupid.
It exists to scam people and help criminal enterprises (like North Korea and Russia) avoid the banking system. That’s it.
My $0.02.
Best wishes,
Scott.
Martin
@sentient ai from the future: another way of saying it – with every new media form the very first occupants of that space, in fact the majority of the early content, is pornography. Every single time.
Just because that’s who is fastest to recognize the opportunity doesn’t prove that Sony intended for the DVD to empower the spread of pornography. No, Sony had very different aspirations and probably recognized that their first customers would be porn, but that was just an unavoidable cost to building a new movie distribution system.
Another Scott
@Martin: There doesn’t need to be an “alternative” to the financial system, there needs to be sensible regulation of the system including the “non-bank banks” that blew up the world in the housing bubble bursting in the 2000s.
As Baker says, a financial transaction tax would be a very good first step.
Getting distracted by talking about magic beans is not going to fix anything.
My $0.02.
Best wishes,
Scott.
sentient ai from the future
@Martin: this is what i’m saying. yes, the illicit economy will find other methods of shifting money, just as smugglers have historically had fingers in the rare coins and stamps markets (direct experience there), the reason cryptocurrency took off was that those all require additional people to be involved who are not implicated in the illicit activity and those people both require payment, and can be turned by law enforcement, potentially.
the whole anti-government, anti-banking shit was always a ruse, from the very beginning. the most charitable thing you can say about whoever satoshi was is that they might have simply been a useful idiot rather than a PR flack for genuine criminals.
coin operated
@Martin: Just wanted to say you’re one of the reasons I come to this blog. Wonderful explanation…thank you sir!
Martin
@Another Scott: I don’t understand what you’re arguing against. Above I describe all of those things. I’m not defending crypto. Throughout I describe it as a bad alternative.
My only defense of crypto is the assertion that much of the aspiration behind it is that the current banking system is bad and exploitative and that is a problem in need of solving.
If you want to argue that the current banking is not bad and exploitative, make that argument. If you agree, then what good alternative exists to that system?
If you agree that there is no good alternative, then I point you to the crypto system as a bad alternative, which will continue to get support because a bad alternative is still an alternative. Build the good alternative and you have the conditions to tear it down. Refuse to build the good alternative and increasing amounts of support will build for crypto until it collapses and is prove to be worse than the banking system.
I’m making the argument that the existence of popular support for crypto proves that the current banking system demand reform, and that reform is not forthcoming. That’s the thing do to, and isn’t being done.
It doesn’t matter about the transaction costs or the criminality (as if the current banking system isn’t awash with that as well). It doesn’t matter if it’s shitty and exploits people. (as if the current banking system doesn’t do that as well). What matters is that we as voters expect elected officials to look out for our interests and that’s not happening. Thats’ what matters. Point to the system that doesn’t suffer form those problems and then you’ll have proven my argument wrong. I contend that system doesn’t exist, and I contend nobody is trying to build it.
sentient ai from the future
@Martin:
I can’t say what scott’s issue is here, but my issue is that what you are describing is not a bad alternative to a bad system, but a bad system designed from the ground up to enable bad actors (cryptocurrenies), and a system that is serviceable but has a number of bad actors working within it towards bad ends (banking).
by way of analogy, you would premise that “medicine is bad, and it’s understandable that some people would reject it and become homeopaths, we just need better systems of alternative medicine” when cleaning up the willful bad actors and existing shitty incentives in medicine would be much preferable to trying to build a new system of alternative medicine.
Martin
I should expand on this point:
If you buy into the role of government to do this, there are two ways to look at the 2022-23 inflation spike’s role to the election:
So I think voters say 1) a lot and feel but don’t state 2) more than we acknowledge.
BellyCat
Epic fucking rant. BRAVO! I’m totally with you. The fact that the leadership of big banks did not do SERIOUS jail time for the 2008 shenanigans (and instead, got bailed out!) gave power brokers permission to do anything the fuck they want from here on out. No different than letting the south off the hook for the Civil War. Same shit, different century.
CONSEQUENCES. Serve them up or get walked on again, and again and again…
Jinchi
I once talked about the crypto and NFT fads to my younger son and when he looked at me completely confused by it all, I pointed out “It’s not supposed to make sense, that’s how you know it’s a fraud.”
The astonishing thing is how many people in politics and the media have fallen for it, but I guess they’re paid well not to see the obvious.
BellyCat
@Martin:
So… succinctly, what’s the problem in need of a solution here? Genuinely curious.
Math Guy
@Martin: Would love to sit down over a beer and talk to you about this. I think we are on the same page re your point 1, but I would like to pin down the definitions of value and utility. Thanks for responding.
BellyCat
Fascinating discussion. Ultimately, Martin, it seems that the profit motive of banks is a core problem. What if everyday consumer banking (and maybe more, such as all lending) became a regulated utility — would that stem the tide?
Martin
I’m not disputing that. I said exactly that in 27:
But the people buying into the system (and early crypto is a little different because it was originally a ground-up system so it was a lot of those people), don’t see it that way – which is why they get scammed. You’re trying to advance the argument from the viewpoint of the billionaires and I’m trying to advance it from the viewpoint of the users (who in this case were essential to building the system), because I’m trying to draw out a perspective of voters or the broader public. If we agree a lot of people in crypto get scammed, is their motive to go in to be scammed? I don’t think so. What’s their motive? For some it’s to commit crime, for many it’s to get rich. So why not get rich in the market, or through some other vehicle? They’re making a choice, and the reason for that choice is worth understanding because it’s informative. If they think the market is rigged (see wallstreetbets) isn’t that something we should acknowledge, especially once these things hit the broader culture?
It speaks to my point regarding whey so many people are fine with the UHC CEO hit. I think pretty nearly all of these people when asked ‘what should be done about exploitative health care’ you’d get some form of institutional response – regulate them, nationalize them, sue them, convict them. But they’ve given up on those producing results, so ‘shoot them in the head’ becomes a reasonable answer, even with all of the terrible social consequences that come from vigilante murder. The answer isn’t in ‘what makes murder so appealing to most americans?’, the answer is in ‘why did they reject all of the alternatives?’ Why do crypto people reject the alternatives? I know why the billionaires are in there. You’re speaking to why the elites are there. Why did the guy who lost $45K, his life’s savings, on $HAWK do that? He wasn’t trying to commit a crime. He thought that was a sensible idea. Okay, it was stupid, but stupid people still have motives. What was he trying to achieve, and why did he reject the conventional mechanisms to achieve that?
I’m not saying it wouldn’t be preferable. It is preferable. So why in the last century of that being a problem hasn’t it happened? And you’re going to make a bunch of excuses here about greedy corporations or republican intransigence. But that doesn’t matter. It just means that the system is unable to respond to those problems. Maybe the solution to willful bad actors is a parliamentary system that gives more freedom of policy positions. Maybe it’s socialism. But it’s not tweaking the reimbursement rates of Medicare. That’s not cutting it, stop offering it.
Lots of good ideas have been offered up as ‘easy solution to the problem’. It’s not for a lack of ideas. It’s for a lack of execution. That’s the vacuum that the techbros are going to keep stepping into with their shitty solutions. Fucking get it done.
Martin
@BellyCat: I think in banking it’s that they charge us 25% to borrow and pay us 0.5% to loan and if we fuck up even a little, here’s a $50 service fee on top of that.
The system is to put it simply, unfair. Unfair is a terrible word because there’s no objective measure, but we have a sense of it.
And when the financial system blows up the economy, there is no consequence to it because the government is too reliant on it. I think that’s why ‘too-big-to-fail’ hurt so much. What do you mean? How can the banks be so big that the government is dependent on them? Doesn’t that fundamentally break the idea of a democracy? And yeah, it does.
BellyCat
Yes to varying incentives. The underlying incentive structure is that the mad money that was made in the 90’s during the tech boom is believed to be “just right around the corner again“. This is believed by both the underdogs and the over dogs.. So, the Tech Bros ™ keep inventing “the next corner” for the unsuspecting. This includes our next president.
What most do not realize is that a full century of peak industrial revolution was basically crammed into one decade in the 90’s. Computation was the third industrial revolution. What the fourth will be, nobody knows, but it ain’t AI. That’s just an extension of computation. My guess for the next big wave is reliable extensions of life span (either on or off an overheating planet).
BellyCat
@Martin: Agreed. Care to speculate on a better alternative (a la iTunes analogy) that isn’t equally rapacious as what exists now? (Keeping in mind that some [not me] believe that the iTunes model is rapacious in its own right).
Martin
@Math Guy: Value is what people perceive it to be worth. There’s cost, price, and value. Cost it how much you spend to make it, price is how much you spend to buy it, and value is how much the person buying it thinks its worth. In normal systems cost <= price <= value. In a perfectly elastic, free to enter/exit market, everything, no matter how overpriced people may say it is, is priced below its value – otherwise people wouldn’t buy it. Is a Ferrari worth $250K? to the person who buys it, it’s worth at least $250K.
Utility is the work left behind. You can do this for a road – it costs the contractor $1M to build it, it cost the city $1.5M to buy it, the value to the city is $2M. The utility is the work the road performs – how it allows people to get to and from work, and therefore have income and therefore pay taxes, and so on. The utility of a hamburger is it keeps you alive for x hours. Part of the utility of commerce is that it provides value for labor – I make a thing, you pay me – part of it is that is leaves residual value, the computer you make I can use for all manner of things once I own it. Crypto has no utility (well, apart from the remaining criminal uses, which is utility but undesirable utility) as it only serves to take money from one person and give it to another with no services performed between them. It’s not like I got my hair cut in exchange for that – that’s all vanished because of the transition costs. It got transferred because you wanted to sell it and I wanted to buy it, and the value of that exceeded your price plus the transaction cost. (I guess there is a kind of utility in the energy consumed doing the transaction that made some energy company money. Whether that is undesirable or not is up to how you view climate change.)
The reason that GDP grows independently of population is that it’s constructive in nature. It leaves things behind – factories, tools, knowledge, etc. that we can leverage to make the next bit of economic activity a little bit more efficient, easier, available to more people, etc. It’s a wealth creating machine for the entire populace (that isn’t necessarily distributed fairly, but averaged across all players it goes up) Crypto doesn’t contribute to this apart from the computer and energy that are needed to run the system – in the end it can only spit out as much as it took in, never more, and leave nothing behind to build off of. If instead of doing pointless math problems it was building a road, you could make a case for it, but it doesn’t seek to do those things and cannot in fact do those things.
Another Scott
@sentient ai from the future: Thank you.
I’m on Team Baker here.
The financial system does some things very, very well. Bad actors have figured out ways to collect rents from the rest of us and are damaging the system. The way forward is to fix the system, and there are simple things that can be done to start fixing it – as Baker outlines. In contrast, Bitcoin and the like has never done anything well. It’s stupid. Time thinking about replacing the financial system with magic beans or something like magic beans is a waste of time. It’s a distraction. If would make people even more cynical to spend excessive time thinking about it. (Why? Because the true believers will continue to be true believers no matter the evidence, and the weakly informed will be even more susceptible to affinity fraud and the like (“people are talking about it, it must be important!!”) and conspiracy mongers would have a field day.)
My problem with Martin spending so much time on this is that he seems to believe that there’s some overwhelming desire from normal people to replace the financial system. I don’t think there is. And I don’t think that spending time trying to seriously think about crypto solves any real problems with the financial system.
Saying “crypto is bad and used by scammers and people outside the law, but it’s important and a way to replace the financial system that everyone hates” seems to me to be mixing up too many things that shouldn’t be mixed together.
As with much of life, if we want less of something – like, say MotUs having too much power and influence and taking too much out of the economy – then we should tax it.
Shouldn’t we instead be commenting more on how to build a groundswell for something like a sensible financial transactions tax? In 2022 CBO analyzed a simple, tiny one that would raise almost $264B over 10 years. Isn’t an incremental attack on the problem an easier lift than somehow getting a majority willing to throw everything out and starting over?
My $0.02.
Thanks again.
Best wishes,
Scott.
Martin
@BellyCat: Oh, it’s not to defend iTunes as an ideal solution, just that if Tower Records was a bad solution (because of overhead costs and inconvenience and inability to provide a per-song experience) and Napster was a bad alternative, iTunes was a good alternative in the sense that it sufficiently met the needs of the market and eliminated the theft of art. Of course there were better alternatives than even iTunes – Spotify eventually displaced iTunes but it needed time for that to even be possible. And surely there are morally better solutions possible (see Nebula for a content creator owned media company, for example) but someone needs to not just dream up the idea (those are easy) they need to build the damn thing. Nobody built a less rapacious iTunes alternative. Or Spotify one after that, which met consumers need.
For banking, I would do two things:
There are lots of ideas here. That’s not the problem. How to you execute on them. How do you get Goldman to not buy your lawmakers and block them, how do you get the Supreme Court to grant the authority to do these things as they have blocked so much government authority, etc. These are MUCH harder problems.
sentient ai from the future
@Martin:
@Martin:
so what i see here, is you taking the word of credulous nitwits about crypto, other credulous nitwits about the “need” for it, couched as kneejerk anti-authoritarianism, and are explicitly disclaiming that the bad actors here, republicans and the thieves and mountebanks that they cape for, have no agency or ability to address the problem.
You are Murc’s Law and i claim my five pounds.
BellyCat
@Another Scott: Not seeing as much disagreement with Martin as you seem to be identifying. Using iTunes as a reference, an organic change took place resulting from introduction of a more desirable alternative. There was no “tear it down and replace it with *something*” My take is that Martin is arguing that the free market be better able to or allowed to invent within the existing market. And that regulatory capture lags consumer desire.
Martin
That idea is a sound one. Didn’t get done. And that it raises money doesn’t address why the average credit card rate is 25%. Why so many people don’t have access to banks. Why so much of the financial system can operate on products that the government has seemingly no understanding of, and lacks any ability to regulate because there’s probably some guy in Treasury who figured out how that instrument works and dangerous it is and is screaming for someone to listen to him and nobody is listening. Yes, the financial system does do a lot of things well. But it does a lot of things wrong and government appears powerless to change that.
And you think I’m advocating for getting a majority willing to throw everything out and starting over. No, no. I’m warning against that. I’m arguing that’s happening right this second, and the person in charge of that is Donald Trump and Elon Musk. That’s happening now, and its bad.
I’m arguing against uncontrolled reform of these systems by having Democrats step up and offer real, significant controlled reform of them (the good alternative). The idea above – sure. But it’s got to be a lot bigger than that to right the system faster than it’s getting out of hand. That’s still a small technocratic incremental policy. Democrats need to embrace large scale structural reform. My problem is that I’m not sure the constitution allows for it – be it the electoral college, the absence of campaign reform, unrestricted lobbying, and so on. My fear is that we’ve put the US government in an increasingly non-functional state that it is incapable of correcting for.
I’m saying that crypto is a sign of how much voters feel the system doesn’t work. I’m saying our response to the UHC CEO getting shot is also a sign of that. If we believed these systems could work for us average voters wouldn’t be investing in crypto and we wouldn’t be cheering on a vigilante assassination. They are a measure of how badly the system is busted. I’m arguing that at least some voters chose Trump over Harris because Trump is more likely to do large structural change (albeit uncontrolled) than Harris is and that’s what they’re setting about to do, but mainly for their benefit, not ours.
Another Scott
@BellyCat: Itunes was a way for Apple to do things in its own ecosystem that it controlled. The US financial system is much, much more than that. I don’t think the analogy works.
And I think Martin and I are on vastly different pages on this topic.
Go back to his #27.
I don’t buy the premise.
I don’t think humoring the people (as he apparently is willing to do) who want to destroy the US financial system, as if they have some good ideas, is worthwhile. Many of those of us who wanted the US Government to do more to punish the bad actors in the housing bubble bursting realized that a big problem was that many of the things that were done by the bad actors were legal. So we supported things like Dodd-Frank to fix many of those things. And we advocated for more to be done. And we realized that other things that we thought could and should have been done did not have enough support in Congress (or among the public) so they didn’t happen.
The solution wasn’t to burning it all down and start over, because we know best about what needs to be done, or spending time thinking about burning it all down and starting over. The solution is addressing the abuses and making thing incrementally better.
Martin is a very smart guy. He likes thinking and talking about ways of doing things that others sometimes don’t. He knows a lot about a lot of things and generally explains his thinking very well. We benefit from his sharing his ideas here. But I think he’s missed the boat on this topic.
Just my $0.02.
Thanks.
Best wishes,
Scott.
Martin
I’m arguing that is what will invariably follow, not that it’s desirable. Basically, the government is too weak to prevent a cascading series of ever shittier alternatives from developing out of the free market. Voters are choosing those alternative because they give the illusion of reform. My argument is that government needs to re-establish supremacy over the free market and actually deliver solutions. Some of that problem is regulatory capture, but it’s also being institutionally slow and antiquated, it’s being hamstrung by a host of other measures – USSC assault on the administrative state, etc.
The larger thesis is that capitalism, in part due to technological advance, has escaped its regulatory captors and is running amok and democracy in particular is so entrenched in 20th and 19th and even 18th century rules and operations that it is wholly unequipped to recapture and restrain it. And this is why democracies around the world are struggling, and incumbents unable to make the creaking machine catch up to the beast, no matter how well intentioned or hardworking they are because they too are captured by those same old rules, are getting voted out for authoritarians who while they have terrible ideas tend to be effective. If the Biden/Harris HHS or DOJ are unable to bring United Health Care to heel, and we can’t rely on our assassin benefactors to reliably solve that problem, Trump might just take them down because they say mean things about him, or refuse to pay him off. It’s an absolutely horrible alternative to the problem, but in the absence of effectiveness by the left, voters are taking it.
Martin
Thank you for saying that. And I may be missing the boat. I do often.
I’m not advocating for burning it down. I’m saying that if you don’t execute on addressing the abuses, that’s what will follow. My warning is often this: ‘problems have a way of getting solved’. If you don’t execute a reasonably good solution, someone will burn the problem down. If you don’t address the abuses of large health insurers, someone will shoot the CEO in the head.
I don’t advocate for those things. I advocate for the good alternative. I don’t even advocate for a particular alternative – but it better work, and it better show up fast.
My message is that I think Trump is enough of the public saying ‘times up’. I don’t think it really is, but I think Democrats are in serious denial here and ill prepared to respond to that.
BellyCat
(Sorry… had to put kiddo to bed)
This. My Trump loving good friend is no dummy. Nor is he wealthy. Nor is he a religious whacko. He’s been a Fuck You To Authority figure all his life. Worked in academia all his life. His dad was a WWII vet. Not just a mason, but the grand Poobah for some time in a major city. He hated his dad. His dad hated his long haired hippy son.
My friend is just pissed.
He’s tragically confused WHY he is pissed, but nothing works like he thinks it should or could.
Is Kamala’s heart in the right place? No doubt! But as much as I WANT to believe The Government is THE SOLUTION, here is one simple example of why NO MATTER HOW MUCH SHE WANTS TO FIX THINGS, HER HANDS WILL BE LARGELY TIED:
I get hundreds of emails from the DNC mail list (shared among countless organizations I enthusiastically support) that do NOT have my correct first name.
I could give a shit, personally, but my last name is fairly unique. And the name I am being directly addressed by is the next alpha-numeric after mine. It is my cousin.
Play this out… somebody mistakenly imported millions of names at some point (4 or 8 years ago), using the (wrong) first name from the next record, but everything else is from the correct record (meaning: actually mine). I have no idea how to correct this. Nor do I imagine anybody else does. While I don’t care, how many millions of people “on the fence” are getting pleas to support Dems, personally addressed to somebody they are not, promising them that Dems are going to FIX things for “THEM” (read: “NOT them”) for the better?
THE PHUCK OUTTA HERE (as one of my favorite commenters might say).
I’m with Martin on this one. Our institutions’ glacial pace in the face of technological advance/rapid pace is not “sobriety”. It is the doe staring at the car bearing down upon it, wondering if that whistling sound they hear is worth being concerned about.
Chacal Charles Calthrop
@BellyCat: post office banking: https://www.investopedia.com/what-is-postal-banking-5217341
Thks to everyone for this great discussion. The last gilded age ended with a world war, a communist revolution, the Great Depression, & the rise of fascism, which required another global world war. It would be nice if we could do better this time around but it’s not looking good.
BellyCat
Agreed on USPS banking. (Hell… let USPS compete with Amazon, too!)
DMV Banking? HELL NAWH!
Martin
Yeah. My perspective is that people go to therapy because they feel bad, they’re angry, they mischaracterize the world around them, and there’s usually something that happened to them that they never processed properly and buried, and because of that they come up all of these alternate explanations for why people treat them they way they do, who is out to get them and all that. We’re pre-wired to invent details to fill in gaps between observations and worldview. And one of the points of therapy is to get help to find the core of the problem so you can remove all of the invented details you use to reconcile what you see with what you believe, and replace them with a more accurate understanding of why you are being treated like that, why you are unhappy or angry.
Voters do this too, and voters don’t have election therapists. We struggle with our confusion and we insert answers – usually simple answers – it was racism, it was sexism, they hate us, they’re evil. And that’s probably correct for some of them, but I really, really don’t think that’s generally correct. I think they’re confused and angry (and I think we’re confused and angry) and sure, they’ll fill in ‘the immigrants are the problem’, and we’ll fill in ‘they’re racist’, but I think that’s just inventing details because people don’t really know why they’re angry because, well, there’s this line in the Big Short: “Look at yourselves you know you pass yourself off as cynical people but you still have some faith in the system don’t you?”
We still have faith in the system because how can you not, right? It’s our government. It’s our economy. So when it doesn’t work, it can’t be because it doesn’t work – it’s got to work. It’s axiomatic. So your friend struggles to come to terms with why he’s confused, why he’s pissed.
I’m sure I’m pretty wrong in a lot of ways about the scale and motives and whatnot, but I think I’m generally right about the shape of it. I don’t think it’s quite as dire as it feels, but I also think the solutions are a lot harder, as in, I’m not sure the current political structure can get there. I can only find dynamics that maybe slow the decline, but none that reverse it, and a lot that accelerate it. That’s why I’m preoccupied with the public reaction to the CEO getting shot. That feels like a revelation on just how angry, like, everyone is.
Martin
@BellyCat: I raise it because I don’t think the feds can get there. But states might be able to. States might be the way out. I haven’t quite gotten there in my thinking.
BellyCat
Bingo. But they do have election saviors. The desire for The White Knight is evergreen.
As for States possibly getting us to a banking solution, that’s a wickedly double-edged prospect. No doubt the current USSC would champion a creative proposition from, say, oil-drenched Texas.
Martin
@BellyCat: I’m pushing it here in CA.
Gloria DryGarden
@Baud: I can’t tell how much if this is sarcasm, and how much is what’s going on. I’m really not up to speed.
( trying to shovel through a pile of challenges at home on the personal fronts)
Jay
@Gloria DryGarden:
You really don’t have to do a deep dive into crypto.
It’s basically a scam (Multilevel Marketing Scheme) that has allowed the Crypto Bro’s/Tech bro’s to amass billions in suckers bets, that they are spending, (when they don’t bust out and go to jail) to try to buy the Government.
It’s few actual real world uses are for criminals.
Another Scott
@Martin:
My take is that most of the public is just numb to gun violence in the USA.
I mean, DJT was nearly assassinated, then a few weeks later there was another gunman who got close to him. Just this week, the House was having “Task Force” hearings about how it was everyone else’s fault.
And just about nobody cares, AFAICS.
My take is that there’s no great lesson about the American People thinking that cosmic karma is coming for the MotUs and the monsters. It’s mainly that people have other things they care about much more. “Oh that? Meh. How’s that new F-150 treating you? Are you coming over to watch the game this Sunday?”
A counterpoint is that when things are closely divided in politics, small changes can matter a lot.
I could very well be wrong about this, of course – I’m one of the least plugged-in people I know… ¯\_(ツ)_/¯
Thanks.
Best wishes,
Scott.