Crypto-Current (056)

§5.66 — Liquidity is valuable, uncontroversially.[1] It has a price. This is to say, reciprocally, that illiquid assets trade at a discount. Financial systems therefore automatically assimilate the concept of liquidity to that of risk, which configures illiquidity as negative investment quality. The essential – and innovative – macroeconomic contention is that liquidity preference, beyond a certain threshold, becomes excessive, malignant, and self-contradictory. Rather than returning to equilibrium, it feeds positively upon itself. Generalized investment aversion drains the pool of liquid assets, on a spiral into depression. Spending, then, is a social obligation, whose collective importance justifies suppression of private discretion. In this way, macroeconomics provides a specific model for the tragedy of economic liberty. This is its most profound counter-modernist theme. It is an argument translatable without remainder into the language of contradiction. On such lines, macroeconomics can be configured as an elaborated sub-plot within the critique of political economy initiated by Marxian historical materialism.

§5.661 — When configured in terms of mass social psychology, the thirst for liquidity expresses distrust, or negative confidence. Conceived economically, it is disinvestment. Conceived politically, it is dissent. Only liberalism, of the old type, would dissuade a regime from seeking to suppress it, and Macro – which is always Macro in power – means that liberalism is dead. The point can be made more strongly. Macro is the death of liberalism, in power.  

§5.662 — All earnest pretension to ‘counter-cyclical policy’ notwithstanding, the systematic asymmetry is manifest. Politics tends to soft money. Governments – especially democratic governments – do not pass marshmallow tests. “In the long run we are all dead,” Keynes famously quipped, and in doing so the voice of the state – now channeled by macroeconomics – was immediately audible. Delayed gratification was being explicitly re-modeled as a bourgeois vice. Created to ‘manage’ long-wave capitalist down-turns, and then to economic contractions of even minimal severity – its interventions scaled down by an order or magnitude to the pulse rate of (roughly) five-year business cycles – Macro tends to configure itself as the correction to capitalism in general. Globalization is deflationary, because it operates to control prices, through arbitrage. Technological efficiencies are an even stronger driver, in the same direction. The relation of macroeconomic stimulation to the capitalistic mechanization and globalization of production can therefore be understood as compensatory. Macro tacitly legitimates itself as an antidote to deep deflationary dynamics inherent to the modern economy. It is designed to make money soft.

§5.663 — While it requires a portrait of Macro – as a consummate regime – to see where we are, the picture takes us away from money, rather than toward it. Crypto-currency is the negative of all this.[2] It shorts political economy in general. The broad contours of a Micro Counter-Revolution are for the first time definitely indicated. Macro is essentially oriented against saving. In striking contrast, Bitcoin invents the ‘hodler’ who disdains short-term market interventions.[3] This is nothing less than the synthesis of a new bourgeois mentality or its substitute. A fierce re-animation of prudence accompanies the cryptic Micro insurrection. It understands, this time around, that it has dedicated enemies, true opponents, and not merely feckless villains indifferent to its virtues. Since Keynes, incontinence has been a cause, and then – almost immediately afterwards – a regime. All capacities for prudential self-protection outside state guarantees have been targeted explicitly for destruction. This is the framework within which money has been increasingly understood. Everyone should know, by now, what happens to ‘hoarders’ under socialism. Macro is only very slightly more subtle. Stigmatized liquidity preference is legible enough. The cultural importance of the intrinsic Bitcoin ideology follows from this. To ‘hodl’ is to hoard defiantly, in explicit recognition of the socio-political game being played. It is to save, not merely for the future, but for an impending revolution in the order of time. The value of Bitcoin, in this critical regard, is that of an option for liquidity preference that cannot be politically neutralized. It is the anti- New Deal. In other words, it is the Old Deal, but this time capable of protecting itself. No one is any longer relied upon to keep it. It keeps itself. That’s what algorithmic governance means.

§5.664 — As money has ‘evolved’ the axis of inflation-deflation became ever more strongly determining. Money’s dimension of variance through depreciation or appreciation is the carrier of its macroeconomic control function. As a good tool, it keeps the potential distractions of ulterior features to itself. Value is the message it is trained to focus upon. Also ever more, it seems ever thus. Yet ‘inflation’ is only superficially a trans-historical economic category. Over the past half millennium three distinct – if over-lapping – phases are identifiable. These can be related to the very different dynamics of monetary asset (bullion) glut, excessive (private) credit creation, and national macroeconomic relaxation. In each case there is an expansion of supply, which becomes inflationary when it results in a comparative abundance of money (relative to the general level of economic production). Such formal equivalence, however, offers little concrete guidance to the specific working of each monetary regime. Insofar as fractional reserve and then central banking can be seen to obey pre-existing economic laws, the insight is overwhelmingly retrospective. Neither innovation was discoverable through such compliance. On the pattern of the synthetic a priori, their necessity was found late. This – alone – can also be expected from what comes next.

§5.665 — Crypto-currencies initiate a new phase in the history of inflation. Bitcoin, crucially, structurally forecloses inflationary processes of the three dominant antecedent types. Its absolute abundance is rigidly constrained, fractional reserve multiplication is invalidated (as ‘double spending’), and absolute ‘policy neutrality’ excludes macroeconomic laxity.[4] There is no tried-and-tested method of doing inflation with Bitcoin. This is not, however, to reach the end of the question. In the era of crypto-currency, appreciation-depreciation becomes ecological. It occurs between coins. Monetary pluralization, rather than monetary expansion, becomes the leading phenomenon.[5] After Macro, the deflationary dynamic reverts to a properly capitalistic – which is say Darwinian – distributed mechanism.

[1] Alfred Marshall’s variable k defines aggregate liquidity through the ratio of broad money to economic output. While the formula acquires a certain rigor through its approximation to sheer tautology, both of its productive terms are notably elusive. Neither ‘money’ nor ‘output’ can be realistically conceived as simple, elementary, unambiguously measurable, or categorically delimited. Each is as plausibly captured by the processing of the other through k as by some supposedly primary factual apprehension. Macro, of course, fully – or at least very substantially – understands this. It takes perverse institutional (i.e. guild) pride in the inadequacy of its foundations, when inspected from the inside.

[2] The realization that Bitcoin is an implicit threat to the entire edifice of the reigning macroeconomic order had been refracted, by end-2017, into Internet clickbait. “Dutch national newspaper urges people to sell all their Bitcoins as it undermines the government, could destabilise the economy and reduces the power of central banks.”

[3] To hodl is to hoard bitcoins, based on the presumption that they are radically undervalued relative to the eventual near-equilibrium level when they have come to denominate the principal terrestrial money system. The term seems to have been coined in late 2013, with the word freezing a comic misspelling. (“Hold on for Dear Life” is a subsequent humorous acronymic.) See:

[4] Pierre Rochard describes Bitcoin’s “non-discretionary monetary policy” as “asymptotic money supply targeting (AMST)”.  

[5] It should perhaps be noted that within the world of crypto commentary, this thesis is highly controversial.

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