The Crypto Controversy (Is It Really Valuable?)

(c) by Mark Dempsey

Cryptocurrency--bitcoin and others--is very much in the news, but the stories about it often overlook some critical path information about currency design that has been known since currency-as-score-keeping has existed--that's roughly since 3500 B.C.E. 

That date is when obligation/credit became precise, partly because the fertile crescent needed labor to maintain its irrigation system. It was a civilization. You can still see the bar tabs and pay stubs from Uruk (current Iraq) in the clay tablets archaeologists have discovered. Incidentally, credit preceded money (coins) by millennia. This is exactly the opposite sequence of the "invention of money" myth, which says barter led to tokens (coins), and eventually led to credit. But mythical thinking is what guides most orthodox economics currently...

The problems inherent in tracking obligations with precision became evident shortly after credit was invented. One immediate consequence was that while interest on credit extended compounds to infinity, the real economy, which is the basis of repayment, has limits. (Note to history nerds, the word "interest" was not yet invented, but charges for the loans issued still existed B.C.E.)

The consequence of compounding: some loans become unpayable as a mathematical inevitability. This is why there's a biblical prohibition against usury (now called "interest").

So what happens to borrowers who have unpayable loans? Babylon opted for jubilees, society-wide clean slates (bankruptcies) typically announced when a new ruler took over. The Jews in Babylonian exile adopted jubilees too when they were repatriated to Judea (see Leviticus 25). 

The alternative to jubilees or bankruptcies was to turn ever-larger sections of the population into debt slaves. The big question then: Who would defend against the barbarian invaders? If everyone were debt slaves, the answer to that question would be: no one.

Part of the current debate seems to be about whether economic (not magical) currency should be commodity-backed, whether it's with gold and silver, or with energy-intensive calculation (e.g., crypto). 

The limitation on the commodity, whether gold, silver, or energy, makes the currency scarce, which makes it inevitably tend toward deflation. If compounding approaches infinity and the currency has built-in limitations on issuance, then it's not difficult to anticipate a deflationary train wreck. As bad as inflation can be, deflation is much worse, so that's why central banks in most advanced economies can issue fiat currency--Dollars or Yen or Pounds--literally without limit. If the economy makes more valuable things--which is the point of having an economy in the first place--and the amount of currency doesn't expand accommodate added value in the economy, a deflationary train wreck is the consequence.

Since crypto is, in effect, a commodity-backed currency, it behaves like gold, restricting the money supply and creating a chasm between creditors and debtors that, often enough, is unbridgeable. Political economist Mark Blyth says states can either have commodity-backed currency or democracy, not both. 

Such currency design sabotages anything like citizen equality, and society becomes divided between an oligarchy of creditors and the debtors, who are often historically debt slaves or debt peons. 

This is especially relevant now: BLS data shows the bottom 80% of Americans spend 105% of their income on basic necessities. The bottom 20% spend 181% of their income on essentials - food, clothing, housing, transportation, education, and healthcare. They're surviving only through government subsidies and debt.

If that's not enough to dissuade you from supporting cryptocurrency, its background in speculation, gambling criminality should provide an extra boost to disfavor it. (See this article for details)

Often, the not-so-hidden agenda of cryptocurrency is to bypass anything resembling government supervision of markets. As David Graeber reports in Debt: The First 5,000 Years, in all of human history, there have never been economic markets without some supervising authority, whether the temple or the king, or the state. It may be possible to invent some non-state market enabler, which is what the crypto fans want to do, but it hasn't happened in the 5,000 years or so markets have been around.  

Here's a comment from a Naked Capitalism account of "Abundance": from "redleg" who recounts his experience as a supervisor/regulator, and the reason deregulation is so strongly resisted.

July 23, 2025 at 11:14 am 

As a former regulator who had to issue and enforce permits, I can describe that 95% of the job is telling rich people and richer corporations no. During my time as a regulator for a US State, some of that 95% was informing local governments that the permits they were about to issue violated their own laws. We even sued a city and issued a citation to a county for following through with their permits (that only benefited rich people, of course).

The minute “red tape” regulations are weakened, and I mean minute as in 60 seconds, the squillionaire class and their class-adjacent 1%-ers will embark on building sprees of ridiculous vanity that will utterly trash entire regions. For example, a water pipeline from the Great Lakes to the US southwest (or wherever). “Red Tape” is currently the only thing preventing this, not the $5B price tag, as that’s bus money for someone like Elon.  

A Final Comment: Context is important! Midas Disease is everywhere!

Overlooking for a moment its use in such criminal activities as ransomware, crypto enables transactions between willing buyers and sellers with as little supervision as possible. Anyone who brings up those inconvenient truths about how such commodity-backed currency favors creditors, or enables thievery, is immediately discounted with an assertion that bitcoin is somehow valuable despite its problems. It's valuable! (A variation on "only gold is valuable").

Such assertions of value discount the context. Imagine the Castaway Tom Hanks played in that movie had a stack of gold bricks, or a thumb drive with lots of crypto on it. What good would it do him?

If we destroy the society--or indeed, the planet--that provides us with the goods and services we need, having a bigger stack of gold bars, a larger 401K, etc. will do us no good. We need the real wealth, not just the symbols of wealth--which is what all that public and private money is. Even the ten commandments prohibit giving one's devotion to a symbol (idol). It's pointless to discuss value without context. 

Update: AI-fueled crypto scams are booming, up 456% — and no one is safe, expert warns NY Post

 

 

Corbin Trent's Broadcast Touts "Abundance," But Mentions Accurate Things Too

Watch now

Excerpt:

Noah Smit and I chat it up: The Math of Middle-Class Life No Longer Adds Up
He tells me that economic progress 'utterly indisputable' while families spend 181% of income on necessities. This is the expert-reality gap breaking American politics.

I just spent an hour with economist Noah Smith, who declared generational economic progress "utterly indisputable." Meanwhile, I'm looking at BLS data showingthat the bottom 80% of Americans spend 105% of their income on basic necessities. The bottom 20% spend 181% of their income on essentials - food, clothing, housing, transportation, education, and healthcare. They're surviving only through government subsidies and debt.

Noah's response? We're "living like kings" compared to the 1950s because we have bigger houses and more food.

This conversation showed me it's not a policy tweak problem - it's about understanding how far from affordable life actually is. If politicians don't understand how far from affordability people are, there's no chance of them fixing the problem because they won't understand the scale of it.

It's like the difference between a candle you can blow out versus a house fire that needs the fire department. The scale of the problem determines the scale of your solution. But according to most economists, we don't really have a problem at all. When they talk about affordability, they mean minor price adjustments, not making life actually affordable again. There's no real solution required because economically speaking, we're in a prime spot.

When families spend more than they earn on necessities while experts celebrate progress, you get Trump. You get January 6th. You get people willing to burn it all down because the math of their lives doesn't add up, and the people who understand economics keep telling them they're wrong about their own reality.

The purchasing power of the median income has collapsed across every necessity. Housing now requires 5.6 years of median wage to purchase, compared to 2-4 years from the 1940s through 1970s. Healthcare costs have increased 10-fold per capita relative to median income. College costs have risen 252% in real terms since the 1960s. Childcare now consumes 27% of typical household income, nearly four times what experts consider affordable.

But here's what makes this crisis deeper than individual household budgets: we're also facing a public affordability crisis. Healthcare exemplifies both problems simultaneously. Those costs don't just hit families directly - they're dispersed across multiple sources: personal payments, employer contributions, government programs. Combined, our healthcare system will cost $77 trillion over the next 10 years, reaching 20% of GDP by 2033.

...

[Conclusion]

The growing unrest we see - from Trump's election to January 6th to widespread protests - reflects working people's recognition that the old promises no longer add up. But that discontent could be mobilized toward prosperity if people believed there was a real path forward for their families, communities, and nation.

The math of middle-class life is broken. We can't sit around hoping the market fixes things - it won't. These interconnected crises require coordinated solutions at the scale of our greatest national mobilizations. The question isn't whether we need a Mission for America. The question is whether we'll build one that serves working families or continue to think we're living like kings while everything falls apart.

 

The US Central Bank: The Federal Reserve (AKA "The Fed")

Many people believe the Fed is somehow a private entity. In some sense, that may be technically true, but presidents report Fed leaders, and the Fed follows the dictates of Congress to the letter. Yes, it has private shareholders, and it often does things congress and the public don't like, but it always creates the currency at the direction of Congress.

To find out about this institution, you can read William Greider's Secrets of the Temple: How the Federal Reserve Runs the Country, but without a framework of understanding, it comes across as just historical gibberish--both too much information and too little connecting the dots.

A better look at the Fed and its recent history is Matt Stoller's column about it "Federal Reserve  Independence is Bad" Subtitle: "Donald Trump wants to fire Fed Chair Jay Powell. He should be able to do so. The Fed needs to be controlled by elected leaders, not Wall Street. Even if those elected leaders are bad."

Stoller is no Trump fan, but he notes that this important institution has for too long been immune to electoral accountability for things like encouraging exploding derivatives, or bailing out banks despite legislative attempts to put an end to that (e.g., Dodd-Frank). It's supposed "independence" is a smokescreen for favoring the financial sector repeatedly.

Says Stoller: "I think we should respond to bad leaders by electing different leaders, not by removing important areas of politics from political control. I also think Trump, yes even Trump, will do a better job at managing the central bank than a leadership group insulated from political control.

"When it is not, there are three problems. First, Americans lose faith in democracy as a meaningful system. They want their elected leaders to deal with prices, but their elected leaders have foregone any control over the institution tasked with doing so. Second, the Fed operating without direction from elected leaders gives politicians bad habits. For instance, Joe Biden’s administration was crippled in part by his refusal to take control of monetary policy, giving him an excuse not to even try addressing inflation. And third, Federal Reserve leaders and the institutional culture, without political control, become dedicated to consolidating financial power."

Stoller then puts history in context, recounting the Fed's misbehavior, and its relatively recent independence from more political control. 

More Stoller: "Since the Federal Reserve became “independent” of political control in the late 1970s, America has not coincidentally undergone a period of dramatic financialization. And that was intentional. Remember, Fed Chair Paul Volcker used to carry around a card of union wage rates, as a reminder that his goal in achieving low inflation was to break union power. The Federal Reserve is responsible in part or fully for the legalization of derivatives, the explosion of subprime lending during the 2000s, the great financial crisis, a trillion dollar transfer of wealth to big banks as interest rates increased, the institutionalization of crypto-currencies, the merger explosion of the early 2020s, and the failed regulation of Silicon Valley Bank, among other problems. It’s also a highly political institution, pushing free trade and defending large banks; in the 1990s, Fed officials secretly bailed out Mexico so as to protect Citibank and pass NAFTA. " 

..."In 2020, I noted that every single board member of the central bank is a multi-millionaire. This institution is organized to represent creditors and debtors, and yet what “independence” really means is that millionaires make choices out of the limelight of anyone but Wall Street."

Steve Keen on the Fed:

1. Evaluates Fed policy (and it doesn't bode well for continued "independence"):

 

 2. Evaluates Powell's motivation.

 

Today's Bee letter: Utilities

Responding to Sacramento Bee 7/17/25 p.20

Editorial writer Tom Philp wrings his hands over a Chamber of Commerce study that says solar incentives may cost 14% of a "typical ratepayer bill." Heavens to Betsy!

This is straining at a gnat while swallowing a camel. Publicly-owned SMUD is 35% cheaper than privately-owned PG&E. The savings from publicly-owned utilities beats the solar "cost" calculated by one of the most conservative organizations in the country by more than double. 

We'd save big from public ownership, and wouldn't have an incentive for executives to boost profit by skimping on maintenance. PG&E executives were concerned they would have to face negligent homicide charges for their maintenance failures like the exploding pipeline in San Bruno and the fire that burned down the ironically-named town of "Paradise."

Priorities, please.

Copaganda part II

 Alec Karakatsanis, author of the Copaganda book in a brief talk (from here)

 

 

 Here's an excerpt from the text in which the video was embedded:

 

"As I suggest in the video, our civil rights work is about many things, including getting as many people as we can out of cages. But the work we do in courts and jails across the U.S. is also about something else: it’s about ensuring that, no matter what kinds of grotesque stuff starts to become normalized in a society that imprisons Black people 6 times the rate of South Africa at the height of Apartheid and all people 5-10 times other comparable countries, there are always people prepared to say “2+2=4.” The moment people stop saying this, everything is lost.

"One reason various institutions are crumbling and the people in charge of them so unpopular is that the material reality they defend is so different from their own professed values. They claim to value the “rule of law” but only enforce some laws against some people some of the time. They claim to value “public safety” but pursue policies that make most people less safe. They claim to value liberty but jail hundreds of thousands of society’s poorest people solely because they lack access to cash. They claim to value equality but ensure a small number of people control nearly every major decision. They claim to value evidence but pursue policies that defy evidence. They claim to value health but let us all be regularly poisoned and then destroy the opportunity for most people to get quality health care. They claim to value merit but ensure that fealty to power is what gets rewarded in elite institutions. As a result, establishment politicians, university presidents, and pundits are constantly speaking gibberish instead of being real with people."

" 

Warren Mosler Evaluates Trump's Policies

 (The graph is the unemployment rate)

Not anywhere near 'crash' levels but early stage evidence of DOGE cuts, Federal dismantlings, mounting tariffs, business uncertainty, reluctance to fill low paying jobs openings, etc. All consequences of Trump policies: pic.twitter.com/qFrF2FqoLT

— Warren B. Mosler (@wbmosler) July 13, 2025

Links 7/14/25 - Too good to overlook

First, there's Matt Stoller's analysis of the Trump administration's refusal to release the Jeffrey Epstein files.

Excerpt: "Over the last twenty years, a larger-than-life myth has floated around the American political scene, that of Jeff Epstein, a wealthy New York City-based sex trafficker with a murky job and deep connections to some of the most powerful men in America, England, and Israel. Continual revelations around Epstein have fueled MAGA suspicion of big media, big tech, and big government, fostering a mini-ecosystem of Donald Trump-supportive podcasters and influencers. Trump would, they posited, finally expose a Deep State conspiracy, the center of which was this man, Epstein.

Epstein with Uber-Neoliberal "Economist" Larry Summers

"Last week, however, Trump did something I thought was impossible - he managed to turn his own core supporters against him. He did so by denying that there is anything conspiratorial or hidden about Epstein’s life or the circumstances of his death. Specifically, Trump said there were no government files worth releasing around Epstein, and the idea of such files was a Democratic party plot. I looked at the replies to his post on Truth Social, as such posts are always full of supporters offering praise. This time, it wasn’t. His most hard-core supporters did not take it well." 

Then, there's actual economist Michael Roberts' evaluation of crypto entitled Crypto corruption and un-Stablecoins.

Excerpts:  

“Bitcoin is a speculation and not an investment. Not regulated, not backed by any asset, only worth what someone is willing to pay.” — Matthew Stephenson

“It’s totally absolutely crazy, stupid gambling” — the late Charlie Munger, speaking in 2023.

“Cryptocurrencies are highly volatile and therefore not really useful stores of value and not backed by anything,… It’s more a speculative asset that’s essentially a substitute for gold rather than for the dollar. ” Federal Reserve Bank chair, Jay Powell

“Bitcoin, it just seems like a scam…. I don’t like it because it’s another currency competing against the dollar.” Donald Trump, June 2021.

"It’s crypto week in the US. And the price of the leading cryptocurrency, Bitcoin, has hit a record $120,000 as the US Congress prepares to consider bills aimed at creating clearer regulatory frameworks for digital assets. In the next five days, US lawmakers will consider the Genius Act, the Digital Asset Market Clarity Act, and the Anti-CBDC Surveillance State Act. The aim is to make “America the crypto capital of the world”....

"From the start, cryptocurrency craze has been riddled with fraud, criminality and corruption – the cases of which are too numerous to mention all. In an annual report last September, the FBI revealed that fraud related to crypto businesses soared in 2023 with Americans suffering $5.6bn in losses, a 45% jump from the previous year. Sam Bankman-Fried, who founded the now bankrupt FTX crypto exchange, was sentenced to 25 years in prison in March 2024 by a New York judge for milking customers out of $8bn. Last month, the US Securities and Exchange Commission charged Unicorn, an investment platform that promised cryptocurrencies backed by real estate, with a $100mn fraud that misled more than 5,000 investors.

"The dream of the techno enthusiasts that cryptocurrencies would replace state-issued currencies like the dollar or the euro and so free individuals from the ‘heavy hand of state regulation’ in a new free world of money has never materialised. Instead, what has happened is that the mega financial institutions have taken over control of these currencies and are turning them into what they hope will be a highly profitable set of financial assets to suck in investors."

 

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