Trust in central and commercial banks is eroding quickly. The internet and social media are oil in the fire and Bitcoin is the extinguisher...
TRUST US, BRO’ AS THE ONLY TOOL LEFT
Banking only works when there is trust. It’s fundamentally based on the belief that the banking system is strong and resilient enough to protect your money. But this trust-based system has shown that the rich and powerful benefit from this protection. As we saw in 2008 and since, the regular taxpayer is paying the bill.
It’s ironic that Credit Suisse, which emerged as one of the winners of the 2008 financial crisis, is among the first banks to bite the dust in this current crisis. Between 2008 and 2023, we’ve seen many scandals, constant litigation, terrible risk management,and never-ending drama, slowly eroding trust in a once prestigious institution.
So, who has to pay the price for this? You guessed right: Everyone in Switzerland does! The Credit Suisse bailout (though no one officially calls it a “bailout”) is estimated to cost Swiss taxpayers a staggering 109 billion Swiss francs ($13,500 for every man, woman and child in the country).
Like those of commercial banks, central banks' decisions and actions are only effective when people trust them. The Federal Reserve and the European Central Bank (ECB) (among many other central banks worldwide) have made bold claims, only to be proven wrong. Officials like Janet Yellen, Jerome Powell and Christine Lagarde have consistently underestimated inflation. They even ridiculed anyone warning of the consequences of years-long ultra-low interest rates and unhinged balance sheet expansions during COVID-19.
Now, the claims meant to calm us are back to haunt them. Yellen famously said in 2017 that we would “never see a financial crisis again.” Lagarde was reluctant to explain how to tackle inflation in a talk show and just said that inflation will come down in “due time,” only to now freak out because of the “monster” that is inflation.
It is becoming increasingly evident that, while politicians and central bank officials like to tell the masses that they have many tools at their disposal, the only means left is a constant “Trust us, bro.”
THE ‘CONFIDENCE SCHEME’ DOESN’T WORK IN THE AGE OF SOCIAL MEDIA
As confidence in the banking system and possibly the financial system at large wanes, and bold words of reassurance are proven to be nothing more than hollow phrases, it’s no surprise that the fragility of it all just increases. Given this fact, it
Political movements like Occupy Wall Street made headlines during the 2008 financial crisis. Fifteen years later, we know that it went nowhere. On the other hand, Bitcoin is healthier than ever as both a movement and a technological solution. Bitcoin is not just a theory in the heads of academics and activists. It can be used 24/7 by anyone around the globe, no matter if you have access to a bank account, live in an authoritarian country experiencing hyperinflation or just want to store wealth for the long term.
After a decade of wild speculation and thousands of stupid cash grab experiments in the “crypto” space, people realize that Bitcoin has fixed counterparty risk.
While price fluctuations in euros or U.S. dollars grab headlines, the actual value of Bitcoin lies in its ability to transact and store value outside of the financial system. It's digital gold with extra features, a beacon of hope in an uncertain economic landscape.
In conclusion, as trust in central and commercial banks continues to erode, Bitcoin is a viable alternative for those seeking financial sovereignty. It’s digital gold with extra features. The challenges posed by the internet, potential geopolitical seismic shifts and the social media age call for a solution that can withstand these pressures — Bitcoin and the principles of sound money it represents could be part of that solution.
warnings from influential people within the startup scene, like Peter Thiel.
What may sound like an unlucky coincidence is a symptom of a broader crisis in trust. Establishing a joint narrative, a common belief and direction is a lot harder in 2023 than it was, say, in the 1970s. Instead of newspapers and weekly magazines, we now have news spread within seconds. And expert opinions and contrarian views go viral on Twitter, Reddit and elsewhere within minutes.
We can see that bank runs in the digital age are different. Frightened people don’t need to walk to a branch and ask for their money. They can do that from their homes. What makes it worse for banks in the fractional reserve era is that tens of thousands of people can do that simultaneously.
Will this lead to a domino effect of centralization of banks because the trust in banks, especially smaller ones, is quickly eroding? The message Yellen sent after the collapse of SVB was loud and clear: We decide case by case if it's worth saving smaller banks. Go to large banks like JPMorgan Chase to be safe because we’ll not let those banks die. The trend of smaller banks getting absorbed by the big fish is accelerating like never before.
This shows that not only is our money not fit for the internet age, but also that the institutions and the Powells, Yellens and Lagardes of the world are not able to keep up with the pace and complexity of their surroundings.
More central planning and constantly intervening in markets can’t be the answer. Assuming that the people who brought us here can show us the way out is naive.
Political movements like Occupy Wall Street made headlines during the 2008 financial crisis. Fifteen years later, we know that it went nowhere. On the other hand, Bitcoin is healthier than ever as both a movement and a technological solution. Bitcoin is not just a theory in the heads of academics and activists. It can be used 24/7 by anyone around the globe, no matter if you have access to a bank account, live in an authoritarian country experiencing hyperinflation or just want to store wealth for the long term.
After a decade of wild speculation and thousands of stupid cash grab experiments in the “crypto” space, people realize that Bitcoin has fixed counterparty risk.
While price fluctuations in euros or U.S. dollars grab headlines, the actual value of Bitcoin lies in its ability to transact and store value outside of the financial system. It's digital gold with extra features, a beacon of hope in an uncertain economic landscape.
In conclusion, as trust in central and commercial banks continues to erode, Bitcoin is a viable alternative for those seeking financial sovereignty. It’s digital gold with extra features. The challenges posed by the internet, potential geopolitical seismic shifts and the social media age call for a solution that can withstand these pressures — Bitcoin and the principles of sound money it represents could be part of that solution.
