NO REASON TO TRUST BANKS AND, THANKS TO BITCOIN, WE DON’T HAVE TO
Trust in central and commercial banks is diminishing quickly. The internet and social media are oil in the fire and Bitcoin is the survivor.
Julian Liniger, co-founder and CEO of the bitcoin-only trading app Relai, located in Switzerland, has written a commentary.
- ‘TRUST US, BRO’ IS THE LAST TOOL.
Only when there is confidence does banking function. It is essentially predicated on the notion that the financial system is reliable and powerful enough to safeguard your funds. However, this trust-based structure has demonstrated that this security is advantageous to the wealthy and influential. The normal citizen is footing the cost, as was evident in 2008 and since.
Ironically, Credit Suisse, one of the survivors of the 2008 financial crisis, is one of the first institutions to fail in the current one. Many controversies, ongoing legal disputes, poor risk management, and never-ending theatrics have all contributed to the gradual erosion of confidence in a once-respected organization between 2008 and 2023.
Who then must bear the cost of this? It’s true what you said: Everyone in Switzerland does! It is predicted that the Credit Suisse rescue will cost Swiss citizens an astounding 109 billion Swiss francs ($13,500 for each man, woman, and kid in the nation), though no one is calling it a “bailout.”
The effectiveness of central bank choices and actions, like those of private institutions, depends on public confidence. Many other central banks around the globe, including the Federal Reserve and the European Central Bank (ECB), have also made audacious statements that have later been disproven. Inflation has repeatedly been understated by officials like Christine Lagarde, Jerome Powell, and Janet Yellen. Even worse, they mocked anyone who warned about the negative effects of COVID-19’s unbalanced balance sheet growth and years of ultra-low interest rates.
The arguments they used to reassure us are now coming back to harm them. Lagarde was hesitant to discuss how to deal with inflation in a talk show and just said that inflation will come down in “due time,” only to now stress out due to the “monster” that is inflation, while Yellen notably declared in 2017 that we would “never see a financial crisis again.”
While lawmakers and central bank officials like to inform the public that they have a variety of tools at their hands, it is becoming increasingly clear that the only strategy available is a continuous “Trust us, bro.”
- THE ‘CONFIDENCE TOOL DOESN’T WORK IN THE AGE OF SOCIAL MEDIA
It is not surprising that the instability of it all only grows as belief in the banking system and potentially the financial system at large declines and audacious assurances are shown to be empty platitudes. Given this information, it should also come as no surprise that Tweets and WhatsApp communications, among other things like a continuous decline in the image, caused the Credit Suisse bank run. Similar to how prominent figures from the startup scene, like Peter Thiel, issued public cautions that helped spark the run of the Silicon Valley Bank (SVB).
What might seem like a bad accident is a sign of a larger confidence problem. It is much more difficult to establish a shared story, a shared conviction, and a common path in 2023 than it was, say, in the 1970s. News now spreads quickly online, replacing dailies and monthly periodicals. Additionally, skeptic viewpoints and professional opinions quickly gain popularity on Twitter, Reddit, and other websites.
We can see that bank robberies have changed in the digital era. Scared people don’t need to go to an office and beg for money. They can conduct that from home. The fact that tens of thousands of individuals can do that at once makes it worse for institutions in the age of fractional reserves.
Will this cause banks to become more centralized as a result of the rapidly declining confidence in banks, particularly smaller ones? After SVB’s demise, Yellen sent a crystal-clear message: We assess each lesser bank’s viability individually. To be secure, use a big bank like JPMorgan Chase because we won’t let those institutions fail. The tendency for lesser institutions to be swallowed up by the large beasts is increasing more quickly than ever.
This demonstrates that organizations and the Powells, Yellens, and Lagardes of the world are unable to keep up with the speed and intricacy of their environments, in addition to demonstrating that our currency is unfit for the internet era.
The solution cannot be more central planning or continuous market intervention. It is foolish to think that those who brought us here can show us the path out.
Politicians and central bankers globally are in a bind despite (illegal) government rescues like the one we witnessed with Credit Suisse. They must strike a delicate balance between increasing interest rates to control inflation and keeping the financial system’s solvency.
They must, on the one hand, increase interest rates. They need to find a way to control inflation and burst the “everything bubble” that has been driving up the cost of NFTs and thousands of “crypto” projects over the past few years, in addition to expensive timepieces, real estate, and equities.
On the other hand, they must guarantee that the financial system has enough money to keep the cogs turning. Even though after 2008, no government spokesman will use the word “bailout,” this is exactly what is occurring with Credit Suisse in the United States and Switzerland. The main issue is that banks know they can take dangerous wagers, so they do it. This is what angered people in 2008. And public money is used to save them when sh*t hits the dust.
The money generator will spin once more, raising even more questions about the pledges made by lawmakers and central bankers. The reason is straightforward: In the age of unrestricted paper money supported by nothing more than pledges and lofty statements, central bankers have no other options in their toolkits.
The only issue is how fast, not if our currency will lose worth. In any event, even in the wealthiest nations in the world, like Germany, the present pace is incredible. In the Federal Republic of Germany, where price inflation is presently 8.7%, it will take eight years (!) for the worth of money to decrease by half. within the UK. In nations like Argentina or Turkey, where hyperinflation (price inflation of over 50%) is the norm, as well as in Austria, we are presently seeing inflation rates above 10%.
- EXIT COUNTERPARTY RISK BY OPTING OUT OF BTC
Credit Suisse’s CEO from 2015 until 2020, Tidjane Thiam, famously referred to bitcoin as a bubble in November 2017 when he said: “From what we can identify.
The cost of a bitcoin was around $7,000 at the time. Everything else is comedy and history.
Thiam didn’t seem to grasp why people purchase a commodity like bitcoin: they want to withdraw from the above-described trust plan. They are trying to figure out how to wager against the market and leave the banking system entirely. Ironically and tragically, we need things like the failure of once-respected organizations like Credit Suisse to make the case for Bitcoin to skeptics like Thiam.
People are starting to understand the value of Bitcoin and what it can do for them, including allowing them to store their money in a currency that neither the government nor a CEO can debase. A commodity that is impossible to control, difficult to seize, and cannot simply disappear during a crisis.
During the 2008 financial catastrophe, political groups like Occupy Wall Street grabbed media attention. We are aware that it had no effect fifteen years later. On the other hand, as a cause and a technical advancement, Bitcoin is stronger than ever. Bitcoin is more than just an idea held by researchers and advocates. Anyone with access to a bank account, whether they reside in an autocratic nation that is suffering hyperinflation, or whether they simply want to keep wealth for the long term, can use it around the clock.
People have come to realize that Bitcoin has solved counterparty risk after a decade of irrational conjecture and thousands of pointless cash-grab trials in the “crypto” sector.
Although price changes in euros or dollars make news, Bitcoin’s true worth rests in its capacity to conduct transactions and keep value outside of the financial system. It’s digital gold with added features, a glimmer of optimism in an unsteady financial environment.
In conclusion, Bitcoin is a practical option for those wanting financial freedom as confidence in government-run and private institutions keeps declining. With additional functions, it is a digital treasure. A solution that can survive the stresses brought on by the internet, possible global tectonic shifts, and the social media era is needed; Bitcoin and the principles of solid money it symbolizes could be a part of that solution.