The verbal joust between economist Jean-Marc Daniel and Tobam founder and president Yves Choueifaty was one of the highlights of the Surfin' Bitcoin conference. Here is a summary of this exchange rich in lessons.
“The Currency War: Bitcoin vs. Currencies”
Both contenders began the debate by starting with competitive currency devaluations.
Yves Choueifaty summed it up by explaining that it is a question of “to lower the value of its currency so as to discourage imports and encourage exports. The problem is that your neighbor will start doing the same thing. We then end up with a currency war which is ultimately destructive of value. In the end, only the disadvantages of currency devaluation remain.”
For him, a third currency has entered this war: bitcoin.
Here is a link to the debate :
Jean-Marc Daniel finished setting the scene by emphasizing that the transition to floating exchange rates (end of the Bretton Woods agreements in 1971) did not resolve the imbalances in the balance of payments on a global scale. The abysmal trade deficit of the United States is problematic.
Indeed, since the dollar is the international reserve currency, Americans can shamelessly borrow and run a chronic trade deficit without the greenback collapsing.
Unfortunately, the conversation quickly moved away from this essential fact. Too bad. The rest was nevertheless very interesting. Both speakers wondered whether, deep down, bitcoin can really replace fiat currency.
Jean-Marc Daniel doesn't believe it. The BFM TV columnist has repeatedly stressed that the initial project – replacing central banks with bitcoin – is no longer taken seriously.
Your servant is of the same opinion. To assert the contrary is nonsense. This false hope is propagated by the essayist Saifedean Ammous and the Austrian economists. Our article on the subject: “Austrian” economists are slowing down bitcoin adoption”.
How to protect yourself from inflation?
Jean-Marc Daniel prefers to rely on the good old recipe of globalization to keep inflation at a minimum. However, this is to quickly forget that inflation has been terrible over the last three years.
Not to mention the geopolitical and energy tensions which point rather towards the deglobalization. Let's not forget that it was the conventional oil peak of 2006 that caused the 2008 crisis. Inflation (and/or recession) would have been much worse without the “miracle” of American shale oil.
Oil is THE limiting factor in the economy since it powers 95% of global transportation. Unfortunately (or fortunately, depending on your point of view), global oil production has stopped increasing for five years now. The decline is in sight. However, less oil = less transportation = less production = more inflation.
Can Bitcoin help? No. Replacing fiat currency with Bitcoin will not magically make oil appear. Even Yves Choueifaty conceded that he does not see Bitcoin replacing fiat currency entirely:
“Whether we call bitcoin a currency or not, I consider it a detail. We can make the concession that it is not a currency. But we cannot deny that it is an asset with a very strong legal reality in the United States.”
You can't type a ponzi
For Jean-Marc Daniel, bitcoin will not impose monetary discipline on States either:
“Bitcoin is not yet perceived and perceptible as something capable of structuring a dynamic of commercial exchange and monetary and financial discipline. […] In my opinion, the real challenge of the economy is to create savings. With the idea that, behind it, there is a dynamic of long-term investment. It is about forming capital leading to productive work, which is not the case with bitcoin. […] Gold and bitcoin have no social utility. Savings should instead be invested in the stock market”he said.
This argument doesn't hold water. Fiat money invested in bitcoin doesn't disappear… It just changes banks. Bitcoin could be worth $100 trillion and it wouldn't change the fiat system's ability to finance the economy. Rather than paying dividends to investors, multinationals will simply pay interest to banks.
Then there remains the role of store of value. Yves Choueifaty and Jean-Marc Daniel agreed that bitcoin is gold. Better for one, worse for the other.
Here are the three arguments put forward by our opponent in favor of gold:
1) “All technology is under threat. Gold is not under physical threat. Gold exists, it is there. It cannot disappear.”
2) “Gold has been proven for 7,000 years. There will always be someone to buy it from you.”
3) “Buying a gold Louis is accessible, not a bitcoin.”
Bad faith or lack of knowledge about bitcoin?
Let us retort that it is of course possible to buy a fraction of a bitcoin. This is its great advantage over traditional reserves of value such as real estate and works of art. You have to be already rich to buy a luxury apartment in a capital city, while anyone can buy bitcoin for 20 euros. Bitcoin is the poor man's store of value.
Bitcoin's digital existence actually offers three major advantages over gold. The first is the ability to cross borders with your entire fortune in your head. All you have to do is memorize 12 words.
The second is to transfer any amount instantly to the other side of the world for next to nothing.
The third is that an absolute limit (21 million bitcoins) is precisely possible only in cyberspace. 94% of bitcoins already exist. On the contrary, more than 3,000 tons of gold are unearthed every year.
To sum up, the thesis that bitcoin can replace fiat currency has been shot down. The tool of debt is essential to any advanced civilization. After all, the rules of the game are the same for everyone (except the United States…). Each nation is responsible for its finances and too bad for those who believe they can print their wealth.
Finally, while bitcoin does not have to replace fiat currency to succeed, it is nonetheless designed to replace the dollar as an international reserve currency.
It is also the simplest option for mass savings. Savings destroyed by increasingly acute inflationary crises. Don't miss our article: “What Bitcoin Will and Won’t Be.”
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