Rocket ship builder and electric car promoter Elon Musk let his Dogechildren down. Musk hosted the unfunny and pretentious American so-called comedy show Saturday Night Live this past weekend. He called himself the Dogefather, after the made-up joke cryptocurrency invented in 2013.
In the lead up to the show, traders bid the coin up as high as 75 US cents. At one point, it had a market capitalisation of over US$72 billion — larger than Kraft Heinz (an actual company that makes food, something people eat to survive). Dogecoin fell over 30% during Musk’s appearance on the show. Why?
Dogecoin is a Hustle
Musk played a fake financial advisor named Lloyd Ostertag in one sketch. Reporters kept asking him what Dogecoin is. He hemmed. He hawed. He ducked. He dived. He dodged. And finally, he conceded it was a ‘hustle’.
How disappointing. The highlight of the sketch was when the fake news reporter pulled out a dollar and showed it to Ostertag. The newsman said, ‘This is a dollar. It’s a real thing. Right?’ ‘Sort of,’ Ostertag replied.
That’s where the real comedy gold is — that paper money is a real thing. It’s not ‘sort of’ real. It’s just paper.
It’s only more real than Dogecoin in one important respect. Dogecoin is backed by the self-fulfilling belief of the people who buy it. Some of those people are buying it as protest — a statement that the government money system is fake. Some are buying it because they are morons expecting to get rich.
But if government has taught us anything over thousands of years, it’s that legal tender laws are enforced with the implicit or implied violence of the State (laws, guns, jails). Money can’t be anything you want it to when the State is involved. Even if it’s just bits of paper with pretty designs and colourful ink, it’s backed by the full faith, credit, and violence of government.
Given a real choice between the two, Dogecoin is the least psychopathic form of money. But it WAS started as a joke. And money is a serious business. For money to do its job as a medium of exchange, unit of account and a store of value, it has to have certain characteristics.
One of those is scarcity. There aren’t very many forms of money today (or things that claim to be money) that share that property. Gold is scarce. You have to find it, and then raise money to buy machines to mine it. Bitcoin makes the scarcity claim too, achieved by the programming which limits its supply and requires computing power to ‘mine’ it.
Real money requires real resources. But in a fake world, with fake money and fake news, the race is on to redefine what money is — so that it is literally no object. This is what all those acronyms — UBI, QE, MMT — are all about. If money can come from nothing, we can spend an infinite amount of money to create a better world, right?
Quantitative easing allows central banks (like the Reserve Bank of Australia, the Bank of England, the Bank of Japan, and the US Federal Reserve) to ‘print’ money and buy government bonds. This keeps bond prices high (for investors) and interest rates low (for borrowers, the biggest of which is government). QE is magic money to fund the relentless expansion of government. It’s a hustle with some menace.
Universal basic income is a hustle too. You can say that everyone deserves the right to a living wage. But something doesn’t come from nothing. Friday’s dismal payroll numbers in the US proved that if you pay people not to work, they won’t. Millions of jobs are unfilled in the US because the government is training people to do nothing and go on the dole. It’s a hustle.
Modern Monetary Theory (MMT) is the biggest hustle of all — but it’s one you might learn to like. Why? MMT says the government can spend money into existence. It doesn’t have to borrow it. Therefore, debt doesn’t matter, nor do deficits. There are no real limits to the power of government to do good things with fake money.
Here’s why you might learn to like it: if the government can spend money into existence to accomplish anything it sets its cold black heart to, why should anyone pay taxes, ever? If we don’t have to use government money to pay taxes, because the government doesn’t need to fund itself from our pocket anymore, can’t we just keep our money?
This is why MMT is such a dangerous idea to the monetary authorities. Taken to its logical conclusion, it will destroy what little belief people have in government money. People don’t really think about money much. Ask most people what a dollar is, and they’ll tell you it’s money, or a dollar, or something you can trade for other things.
If you live in a society where people have to think about what sound money is, you live in a society where the money is going bad. And if you were watching Saturday Night Live this weekend, you now know our money’s gone bad. It’s a punchline. A joke.
In the next monthly report for subscribers to The Bonner-Denning Letter, Bill and I are going to look at four ways to escape being the butt of a monetary joke. When it’s your retirement and quality life at stake, money is no laughing matter. Not even for fools.
Editor, The Rum Rebellion
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