It is starting to look like China is going full blockchain with plans to issue a central bank stablecoin, presumably to regain power from WeChat et al which controls the vast majority of payments in the country.
They’re going so far as to remove articles that say blockchain tech is a scam. Freedom of speech so being a luxury in China.
Like Russia before them, they too now claim they want to be at the forefront of blockchain implementations, with it unclear whether they can and/or what effect this might have.
In this editorial we look at the big picture under the assumption that blockchain tech, directly or indirectly, can spur a digital industrial revolution with potential strategic implications.
If that is so, then as with any advancement you’d think those first gain most. In which case, though many now claim they want to lead, who is actually best placed to do so?
Russia, The Big Error of History
Russia’s president Vladimir Putin has gone so far as to even ordered the central bank to step down when the latter hinted at a dislike towards this space.
That they want to orchestrate a drive towards blockchain integration is clear, but whether they can is a different matter.
As always, though bitcoin is popular in Russia, the country doesn’t quite have the knowhow to the same extent as Europe or US primarily because its vast land is quite barren, so its wealth can’t quite support “intellect” to the same level as Europe, although it can support plenty.
This crude and simplistic analysis of very complex matters may not be true, but it’s at least an explanation for why they appear to always be behind.
They’ve basically made the error of expanding too much, attracting the economics of anti-scale, instead of just sticking to a European Russia.
At just a look at the map, Russia’s problem is obvious. A far too big hostile terrain surrounded by icy seas from above and rigid mountains from below except for the valleys of Europe on the left.
Naturally you’d think what they have to do is use the other parts to basically subsidize Moscow and St Petersburg, but the empire is so big, the other parts are a drain even if used to subsidize European Russia.
So the country can’t lead to the full extent, but the land of Tolstoy of course has plenty of talent, talent that should be integrated with Europe proper.
The above would have not been mentioned if the lack of sophistication was not illustrated both in the case of the Venezuelan Petro and in the case of Iran’s plans to launch a gold backed token, then a stable coin, with it unclear what happened to those plans.
In both cases you’d logically think Russia was behind it and in both cases the idea was/is good looked from Russia’s perspective, but the implementation left a lot to be desired.
Logically therefore you’d think Russia is not really a threat strategically. It’s a mutual opportunity instead if Europe and their Russian counterparts can grasp it.
Not that Europe needs the latter, but both can be stronger, both in prosperity and in peace, if they recognize the dual nature of Russia.
China, The Open Markets Dilemma
A a simple trajectory of the blockchain starts in London, then USA, Russia, France et al, Venezuela and Iran on one hand, Saudis on the other, and now to China.
China has many very smart men and women who enjoyed and still enjoy fairly close relations or at least have interactions with western talent.
The problem is China’s firewall, which in this case is an almost physical firewall in that they have banned crypto exchanges, and thus any western interest in the country where the crypto or blockchain aspects are concerned.
It’s unlikely they’d be able to lead. It is perhaps even impossible realistically thinking because China might have surface knowledge but not the deep knowhow that comes from being at the forefront of the computer revolution during a period ranging from the 70s to the 90s when the latter went mainstream, and then at the forefront of the internet age thereafter.
That can change in two ways. China’s elite might realize the need to open their market, but that might risk their grip on the market. They may instead think they can go it alone, a big gamble because there can be no actual firewall on the blockchain.
That last bit is important because a big use case for the blockchain is international transfers. That’s a chicken and egg problem, solved by Satoshi Nakamoto through adding a big speculative element to bitcoin: “get some just in case.”
If it is a CNY blockchain instead, the rest would have to adopt it same as they have to adopt current CNY, which they don’t and thus probably won’t.
So bitcoin or something global like it would have to remain the conduit as it currently is for China related international trade where merchants there apparently offer discounts if you pay in bitcoin.
If bitcoin has to be the conduit, or something like it, then naturally you’d think where bitcoin is free, is where innovation will be, and where there’s innovation there’s the talent, knowhow, leadership and perhaps even control.
If therefore there’s this crypto “firewall,” there would probably be what can be called the crypto deficit. Always copying, never innovating.
This firewall can be broken by “forcing” innovation through pouring money at it while, crucially, hoping those best placed to lead do not actually lead. That being the second way, that others squander their chances.
United States, The Complacent
The United States has one very big problem. It is ruled by bankers. That’s a generalization and perhaps not a fully correct statement, but that banks have immense influence is far too clear.
Banks of course are not a monolithic entity. In addition, there’s a generational divide. The older generation which thinks this blockchain stuff is complete nonsense, and the younger one that sees the need to adapt.
This generational transition of power has just begun, but the older generation is in many respects doing much to slow down innovation and in the case of Libra they’re thinking of stopping it entirely.
The other big transition in the United States is a very slow but noticeable change in power balances between the techies riding the wave of the digital revolution, and the old finance.
Plenty of the latter will adapt, but their instinct naturally has been to slow down digitally native finance.
We pass no judgment on whether these are right decisions or not, at least not in this editorial, as going a bit slowly may well be to the benefit of all in the United States for now.
Yet just how slowly, can be very crucial because that would give China a window of opportunity in what American historians would probably call the great mistake if it came to pass.
That it is being articulated makes it less likely, not least because the young will naturally want to go faster, but politically they have almost no influence unless they decide to have such influence as arguably they did in 2016.
How that will work out is perhaps too early to judge both for UK and US. The former has a very big opportunity, an historic and unique opportunity. Its civil service and the British people, are very sophisticated, immensely astute, and in many ways are proud of this space.
As Theresa May showed, however, those elected can have decisive say. In her case for the worst where this space is concerned. In the case of Boris Johnson we won’t pre-judge for we made that mistake once already.
That was with Trump who we were told would be very pro-bitcoin, pro-freedom, will clean the swamp. Immensely unfortunately, none of it was true.
Yet, although the 2020 election is set to be close, America and the world may have four more years of Trump who publicly has said he does not like bitcoin.
Four years in this space can be four decades, during which time China may take advantage of what could be a window of opportunity, but they may still find it very difficult because at times Americans do not care much about their government.
Meaning they may push forward regardless of what the regulators or the elected say, with the American people and enterprise quite advanced, but it isn’t too clear whether their elite can adapt.
Europe, The Great Rise?
The necessary on-going structural changes in Europe represent an immense challenge and the greatest opportunity in more than a century.
The continent can best be described as slightly less federal than America when states had actual say, before it was all concentrated in the Whitehouse.
This state of affairs will probably continue with a gradual concentration of bureaucracy that could begin with an EU wide strategy on the blockchain.
What such strategy should be is for the civil service to say, but Amsterdam has finance, Ireland has tech, London has both, Germany has industry, Paris has the civil service, Italy has the ambition.
Naturally each nation state has all of those, but it would be nice to put Germany, rather than Italy, in charge of blockchain for industry, for example, with tech assistance from Zurich, Ireland, London. While France with Netherland can handle the finance aspects.
This division of labour to achieve a common aim can be a great strength that initially may well give Europe a boost, provided of course that it is all handled well.
The ingredients are there. It’s just mixing them. A very difficult task. Yet one of necessity lest Europe is to be practically colonized by its far or near neighbors.
The opportunities are there too, but the elected make the mistake of both interfering too much and not interfering enough.
The understanding of past generations and the current generation is that of a division between the government and the public or the market, a clear line, a rulers and ruled.
The understanding of past generations and the current generation is that of a government as a service.
The two are almost fully contradictory with such contradiction usually addressed through competition, but with some things, like hospitals, you obviously can’t have five hospitals in a neighborhood competing with each other. There’s just not the resources, the number of doctors to serve in all these hospitals, even if the idea was good.
Likewise you can’t have five governments competing with each other. That was the way of the past and it generally meant constant war, or a great sacrifice as religion would put it.
However another way to address that tension between ruler and service provider, might be the far greater use of the public as an advisory arm.
Courts came up with that idea many centuries ago to reach far more sound decisions. That no government on earth extended that invention of a jury, save for arguably and in a very watered down way to having an elected parliament, may well be just further proof of the dictum that power corrupts and absolute power corrupts absolutely.
All that mentioned to point out how the opportunities can be addressed if the political will is there, as it may be in Europe.
Having a “beautiful partnership,” as FCA used to say when under better leadership they orchestrated the crowning of London as the finance and fintech capital of the world, can give Europe something America does not have – political will – and something the rest don’t have – the technical ability/drive to implement it.
The Strategic Relevance of the Blockchain, OR, What Chessboard?
As a new invention it is natural to be very skeptical of the blockchain, even as a strong supporter, because theory and reality can be two very different things.
The blockchain however can be seen less as a specific design or method to do something, and more as the digitization of many processes.
Blockchain theologists are free to argue whether a Bill of Landing entered into some form on an iPad is really using a blockchain or it’s just a replicated immutable database or whether it is really that immutable at all.
The laity, on the other hand, now has a quick way of completing what previously was a fairly complex process and doesn’t have to bother anymore with moving paper around.
Naturally there would be problems, but you’d think digitization would bring efficiency if for nothing else then due to speed.
The blockchain thus is or can be merely some sort of a lightbulb, that we can do this thing, that we can digitize these processes, with whether it is actually a blockchain less relevant than the fact it can be done and doing it has presumably obvious benefits.
If that is the case, this base infrastructure can facilitate further infrastructure. It can be connected to machines, for example.
This is in industrial aspects, where China wants to focus with the potential benefits, perhaps even strategic benefits, obvious to most.
The real tension however is in finance and that’s where the greatest opportunity is too.
The Power Struggle
It is said Amsterdam as a financial powerhouse, the land of the Tulip bubble, fell when they kicked out certain financiers, who made London their home, and thus the current financial powerhouse.
History, of course, should be judged with skepticism for it is quite mutable, and very easily so due to no convenient way of establishing a full picture.
Yet that finance has had a great role to play in the rise and fall of nations is indisputable, and that its advancement or innovation contributed to both, is also hardly questionable.
Money, it rules us, usually fully by consent. The greatest innovation many would call it, the tool of enslavement would say plenty.
Where such enslavement useful, it generally would be accepted, as it has throughout much of history. Yet at times what was useful becomes not so useful any longer. Change, the only certainty, more certain than even death for we do not truly know whether we do die or just have a very long sleep.
Poems Lanny! The attribution of value, unlike the neighborhood hospital, can be and many would say must be subject to competition for as complexity increases so must necessarily coordination ability based on the instinctive understanding of what logically and objectively is right.
That does not necessarily mean the replacement of national money with market money, something unlikely for decades if it happens at all, but it does mean the replacement of gatekeepers with market participants.
Not in a day, nor even a decade, but gradually it will probably be necessary to move from grandmas’ pensions being concentrated in a handful of hands, to it more directly being used towards value creation in a way whereby barriers or inconveniences are minimal.
Money, The Ruling Service
Money has two purposes at a national, or forest level, as opposed to at an individual level. One is for the state to circulate it so that it incentivizes citizens to be productive and thus provide their own comforts and even pleasures. Two, for individuals to circulate it for pretty much the same purpose.
Many focus on the former because taxes are very visible and court the fear of loss, even though those taxes, that money, goes back to the same people.
That’s of course the arena of politics. Over how much money should the government be the one deciding on how to circulate. Something in this editorial we don’t care about at all, except to point out it doesn’t matter what form of money this is. It used to be a slice of cheese, produce share, it can be anti-matter itself, it’s irrelevant, point is they decide over how to circulate a certain percentage of the abstract value unit of account we call money.
The second aspect is the market circulation of money, and here we have in mind a very specific sort. Not buying bread, but the decision of individuals to do pretty much what the government does, although for their own gain rather than to win votes.
Savings rested are value burned. Savings moving are value producing. The reason is simple and yet immensely complex. Money creates money. More correctly said, providing the means to create value does obviously create value assuming there is the drive.
If you have the money to buy a field upon which you grow apple, now we have new apples that can be sold off for that same money and hopefully a bit more. While if you don’t have the money, there is no field, there is no apple, and there is no progress.
Governments and Governments
That the government has problems we all know. That’s the great arena of politics. Yet that there is another government is only expressed in great metaphor in folklore, and thus arguably we do not know.
We of course do not mean a cabal and all that, nor do we think any man or woman is evil in the true sense of the word. There are mistaken views or beliefs as experience eventually proves them, and actions based on those can be called evil, but vacuuming those aspects leaves what we’d like to think is a rational man or woman who may engage in what can be called evil acts, but does not, we’d like to think, do so with the intention of being evil, at least not knowingly.
Putting that metaphysics aside, that it is necessary for the government to do what it does is difficult to dispute, but that it is necessary for a handful to do what the government does in addition to the government, is indefensible.
In other words, there must be a market, as except in those areas where it is necessary for the government to provide services, it can’t be anyone else but the great mass of individuals who decide value attribution based on their own best judgment.
That we currently have a market is disputable. We do in many ways, but the unfairness of how private money circulates, and its immense concentration, is far too obvious.
This stealth control by four (or however many) private entities does not just suck value, it destroys value by not allowing it to be created.
As value is not created to the extent it can be, especially intellectual value which at this stage of humanity is utterly crucial, progress is slowed down, stopped, or even reversed.
The latter sounds unthinkable, but osmosis is the natural state of energy, of humans thus, and of civilization, with that unmovability when everything moves so leading to regression.
All that said to make a case for the liberalization of investments. The unlocking of private money by removing or reforming the piercing investment prohibitions that keep the great public into a state of osmosis.
And the above said, a stroke of pen removed thus such prohibitions stand, can make one think the task done and very finely. Yet that’s to underestimate the rigidness of man. The slave who so freed still behaves exactly as a slave for that is all he has known. Meaning, nurturing is necessary, not just the removing of chains, but the lifting of man.
The Movable Fixed Instrument
Finally we come to what you’d think is the most important matter, but it doesn’t have to be if much of the above is addressed. It is however the most difficult matter.
The apples we grew above came from money already circulating but we created new value, yet not an increase in the number of the abstract value measurer.
That means the value measurer now values more than it did before these apples were created. There’s a change, it’s not a fixed unit of account.
This change means money not moving benefits from value it itself didn’t produce but someone else took the risk to produce.
Money itself thus becomes value. A power trap. A tension between ruler and service provider.
With the government at least conceptually the solution is at least proposable, some jury style feedback. Here, resolving the tension is very difficult, if at all possible, presuming competition is not a factor.
That’s because you can’t quite have a jury to consult. How would they know better than the FED whether an abstract 1% or 2% interest rate addresses this inherent tension between money as a ruler and money as a service?
With the government, obviously they’re directly affected by concrete proposals, while here it is abstraction upon abstraction.
One solution thus so being just leaving the unit of account unchanged, like bitcoin does, with the task then fully to the government to force the circulation of bitcoin money, but arguably not that of the market to do its part in moving money save for the crude aspect of buying bread.
Or the task being that of the market to decide just how many new units of account should be created for these new apples with the aim of keeping the fixed measurer a moving instrument.
In that case we’d have the government, the savers, and that’s all there would be in some sort of objectivity where the unit of measurement itself is not an interference on value itself.
That is not an easy task, but if you have a better mechanism of attributing value, and assuming value itself creates value, then presumably there would be more value, or progress.
At least that’s the theory, with its implementation having many moving parts, but with the potential to unlock value by touching that most rarest of things in financial inventions, fairness or the sense of it or the appropriate attribution of resources to where it creates the most resources.
More correctly said, by attributing value better, so that those with the potential are not hindered by a handful of unaccountable and unelected entities, and thus can provide with far less effort for those without the same potential.
Editorial Copyrights Trustnodes.com