This is Charles Hoskinson broadcasting live from warm, sunny Colorado. Today is March 22nd, 2023. It's always warm and always sunny here in Colorado. I have hot-off-the-press news: the economic report for the President of the United States. Let me go ahead and share that and show you some interesting things in the report, also known as a hatchet job.
I have to be real careful because these reports are written by bureaucrats who are completely unaccountable to anybody. They are transmitted to Congress and essentially form talking points that get parroted and turned into law and policy. Previous reports were a bit more friendly to crypto, suggesting it was a very promising thing. This one, however, dedicates all of Chapter 8 to digital assets and takes the position that digital assets are relearning the economic principles from the 1907 banking crisis.
Let’s get into some of the statements in this hatchet job of a document. It states that multiple financial crises have struck the United States during the last two centuries. Many of these crises have been caused by institutions that function like banks but are not registered or regulated as banks—so-called shadow banks that collapsed, like in 2008 or during the S&L crisis in the early '90s. For example, the 1907 crisis, then called a panic, was mainly caused by trust companies, which were state-chartered entities competing with banks for deposits. Because these trusts were not part of the central payment systems and processed only a small amount of payments, they did not hold large amounts of cash relative to deposits.
What you might be saying is that fractional reserve is a problem. Didn’t the Federal Reserve lower the reserve requirements to nearly zero in 2020? Oh, okay, but we’re going to completely ignore that. Thanks to hacks who earn profits, they made as many loans as possible. That’s what current banks are doing today, just through structured financial products. But let’s not pay attention to any of that.
After a series of events in October of 1907 set off a rush for withdrawals—kind of like SVB and Signature and the rest of these things and Credit Suisse—several trusts faced a run and were forced to suspend credit and liquidate assets, acting as a catalyst for a larger fire sale in the financial markets. Kind of like today. To save the financial system, JP Morgan, owner of the eponymous bank, and a small number of other financial leaders individually chose which banks to bail out. This helped government policymakers realize that when faced with a crisis, the financial system, as then constituted, would rely on a privileged group of individuals seeking to maximize their own profits rather than on institutions that had an obligation to protect the public interest. Has anything changed?
This realization helped lead to the creation of the Federal Reserve, the centralized entity that first aimed to serve as the lender of last resort. Over time, it also obtained the exclusive power to issue U.S. dollar notes and manage the nation’s monetary policy. Fast forward, and by the way, 99% of the value of the dollar is gone after they created the Federal Reserve. It’s gone. They created it; they destroyed the value of the dollar. But let’s keep going.
Fast forward 100 years, and digital asset proponents are now aspiring to create a decentralized financial system without relying on governments. You’re damn right, because we can’t trust their regulatory frameworks. That’s not true; we have a better regulatory framework: trust the code, not the people. These frameworks were shaped by important lessons learned from multiple previous crises, including the corruption of those crises, but let’s ignore that too.
Digital assets are electronic representations of value and operate as part of a complex and interconnected digital ecosystem. Crypto assets are a subset of digital assets that use cryptographic techniques and distributed ledger technology but exclude central bank digital currencies. Yes, because you want to create one to take all our freedom away, but that’s fine. DLTs rely on networks to store and process transactions. This chapter primarily examines crypto assets, whose proponents have been relearning the lessons from previous financial crises the hard way. We’re doing pretty good; we’ve recovered from every single one without a bailout or government oversight.
In addition to the decentralized custody and control of money, which is a good thing and creates resilience, it’s been argued that crypto assets may provide other benefits, such as improving payment systems. You damn well right they do. Increasing financial inclusion? Absolutely. Talk to the users of Cardano in Nigeria. Creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries who extract value from both the provider and the recipient? Hell yeah! Look at the NFT space, for example. You don’t have to go to Hollywood anymore.
Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits. Meanwhile, the costs generated by several other aspects, such as those for consumers, the physical environment, and the financial system, are not only substantial but are also being accrued in the present. Indeed, crypto assets today do not appear to offer investments with any fundamental value, nor do they act as an effective alternative to fiat money, improve financial inclusion, or make payments more efficient. Instead, their innovation has been mostly about creating artificial scarcity to support crypto asset prices, and many of them have no fundamental value.
This raises the question of the role of regulation in protecting consumers. They have to protect you—not from the banking crises they create, the hyperinflation they create, or the wage slavery they put you in—but from the system trying to get you out of it. Investors and the rest of the financial system need protection from panics, crashes, and fraud related to crypto assets. By the way, they’re trying to blame us for this banking crisis they created. That’s what’s happening in these reports right now.
We didn’t create this big money-backs-tiny-loans situation that leads to debt despair and even suicide. This is straight from Bloomberg 2022. We didn’t create this. If you look through this article, they talk about the microfinance industry, where the infusion of capital continues despite annualized interest rates that can top 100% and aggressive debt collection tactics that have left some borrowers homeless.
Let’s look at the World Bank report right here: remittance prices quarterly priced to move. The national average for $200 is 6.3%. They give you bank failures, money laundering, nepotism, and corruption. They give you 100% interest rates and 6% costs to move money around the world for the poorest people. The three billion poorest people. Then they write a piece of garbage that says everything we do hasn’t accomplished anything. Aave doesn’t exist, Compound doesn’t exist, Uniswap doesn’t exist, Goldfinch doesn’t exist, and all the Cardano equivalents—none of these things exist. They’re not referenced; they’re not discussed. Instead, they say there’s no fundamental value.
Meanwhile, the same group of people they praise in their pathetic argument—the Federal Reserve System as the savior, the lender of last resort—went and told us that interest rates should be zero or perhaps negative, then raised them five thousand percent, crushing the banks, all the while printing money out of thin air. We don’t have it, destroying your savings. And that’s how we’re going to get out of this? It’s a joke. It’s a pathetic joke.
Reports like these are a silent danger because these are the things—not speeches from Biden or Trump—that work their way into legislation, policy, and oversight. These are the things that are taken as canon, and nobody pays attention to them. Nobody reads them. Five hundred pages right there, up for grabs. Anyone can look at it, but everybody ignores it, and that’s by design. The bureaucracy is unaccountable; it doesn’t work for you. The bureaucracy works for itself.
They know that you can’t have an honest cop with all the bad cops because he starts telling people the secrets of the corruption. You can’t have full reserve banking with fractional reserve banking because it exposes the problems of fractional reserve banking. You can’t have transparent, honest money because you can’t print it out of thin air. You can’t have the people in charge of their identity, their money, and the innovation of the monetary systems because all the people who signed this report—all these powerful people—lose their power. They’re no longer in charge; they no longer have a say.
And damn it, why should they have a say? What have they done for us? Is it safer today than it was yesterday? Are we more peaceful? Is your money worth more? Is the economy on good footing? Do you feel, honestly, like things are running the right way? No. And then we do something about it. We don’t complain; we try to solve the problem ourselves. It’s hard because no one helps us. Every damn regulator tries to burn you to the ground, and you have to figure out how to rebuild an entire financial system from the ground up in real time while everybody’s watching and criticizing.
Then, when we finally make some progress to chip away at this, which harms the poorest people in the world, and this, which causes the poorest people in the world to kill themselves, they write a report basically saying we’ve accomplished nothing and this industry should be regulated out of existence. So you guys can be wage slaves, and when you put your money in the bank, you get no interest, and the bank collapses. The people who run it get all the money; the shareholders get rich, and the debtors get nothing. Too big to fail gets bigger. That’s the world they want to put you in.
It’s damn pathetic. Whenever I see it, I’m going to be the first to mention it, talk about it, and shout about it from the highest tower. This is an industry created out of necessity. We didn’t start it; it started itself on the back of 2008. Now we are looking down an even worse situation than 2008, and they have the gall to say we’re not part of the solution. Trust us yet again.
We’re going to figure this out. It’s pretty sad; it really is. And you know what? We’re not going to let them do it. We will keep building, and we’re going to keep showing and demonstrating that this is a better way of doing things. It’s a better way of having your identity, your voice, your vote, your money, your payment system. The world works better when everybody’s equal and everybody’s in charge instead of a small group of unelected bureaucrats who are unaccountable for the mistakes they make again and again.
That’s the promise of crypto. That’s why we’re here. That’s why you’re here. Let’s keep firing; let’s keep going.
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