On Cryptocurrencies

I'm late to the party. I've been continuously postponing writing about my take on Bitcoin for years, and now, with the whole crypto-market crashing through the floor, it will look like I'm just projecting hindsight wisdom back in the past.

But on second thought, religions never really die out. And Bitcoin has had crashes before and always bounced back stronger. It might not be the end yet.

So, why do I think that when the end comes, it won't be pretty?

I owe my antipathy towards Bitcoin at least as much to gutfeel as to rational argument. The former can be summarized quickly. Every second crypto-advocate I stumbled into on Youtube or in real life came across either as a second-hand car dealer, or a fresh convert to a cult - where the leader is an ex-second-hand car dealer. With all the unbearably irritating mixture of smugness and ignorance.

That was the gutfeel part. On the rational side, I never understood what exactly cryptocurrencies are good for. What problems do they solve? They are inferior substitutions to fiat money in almost every respect. According to Economics 101, money has three functions. Medium of exchange, store of value, and unit of account.

A bitcoin is a unit of account, that's alright, but as a medium of exchange, cryptos have very limited use. With Bitcoin, I could buy almost nothing I need on a daily basis. Food, books, petrol, clothes, paying the bills - I need local currency for all of these. As a store of value cryptos would need to be stable. They are anything but. If I had converted my savings to Bitcoin half a year ago, I would have lost half of them. If to Terra, they would have been just wiped out.

I've heard two main arguments from crypto fans. One, cryptos are anti-cyclical, two, their built-in scarcity prevents inflation. 

Anti-cyclical means that in times of financial turmoil, cryptos would be safe havens - like traditionally gold has always been. That theory has been just crushed, along with the markets. Everything is in free fall now, but nothing falls faster than cryptos. I have no idea why, but even if I knew it wouldn't make me feel better, had I invested my wealth in them.

The scarcity argument is not convincing either. Whenever I heard someone extolling Bitcoin's virtues, they were always depicted against an apocalyptic view of today's financial world. "Governments will start printing money any day now and we are accelerating toward a new Weimar!" Yeah, sure. 

One, governments don't print money, central banks do. 

Two, independent central banks and fiat money are actually two of the great inventions of humankind. The amount of money in circulation has to be aligned with the size of the economy. The ability of central bankers to control the money supply can be misused, but that possibility doesn't automatically turn a country into Zimbabwe. Rather, it provides tools to mitigate economic turmoils, which central bankers have used quite effectively during both the Great Recession and the pandemic. And didn't use during the Great Depression - hence there was a Great Depression.

So, contrary to libertarian fanatics, who see crypto as a way to freedom from government tyranny, central bankers are not bloodsucking monsters whose only purpose in life is to rid you of all your savings, but professionals whose job is to keep the economy running. They make mistakes, but the last 70 years were, by and large, the most stable and prosperous period in human history. 

Three, the general wisdom is that deflation is even worse than inflation. I'm really out of my wheelhouse here, but if the money supply was constrained and in the growing economy constant amount of money chased a growing number of things, that would lead to deflation. I guess.

But leaving all theory aside, babbling about the inflation-resistance of an asset that loses 10% of its value in a day of its value whenever Elon Mask wakes up on the wrong side of the bed? If a South-American country's currency had this kind of volatility, it would be a laughing stock even in the region. Who are these guys kidding?

Even if cryptos didn't have these shortcomings, I'd have a long list of doubts. What if I invest my savings in Bitcoin, then it falls out of vogue, and another crypto takes its place (which might allow for more than 3-7 transactions per second - just for comparison, for Visa, the number is 1,700)? What if I forget my master password? Normal banks will never seize my money even if I lose all my papers. Speaking of safety, is my money insured by the state? Who I go to complain if I'm the victim of fraud? If I accidentally sent money to the wrong place? What about the unknown unknowns that would manifest only once we moved to a crypto-based financial world? 

Long story short, I think cryptos are Ponzi schemes. You make a profit if more people buy into it after you than the ones before you. The rest is techno blah-blah, hype, FOMO, and libertarian fever dreams.

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What makes Putin tick - The Myth of Russian Greatness

Time for another session for some armchair expertise. Coming to think of it, New Vac Times engages in this kind of punditry so often that it merits its own tag. Created.

Much has been said in the media and on public forums about what made Putin launch the war against Ukraine. The intellectual bottom comprised of arguments like "Ukraine used to be part of Russia, didn't it?", or "the USA started it!". One rung up on the sanity ladder came those who, just having left the pandemic behind transformed themselves from epidemiologists into geopolitical experts (but not historians) overnight, claiming confidently that what forced Putin's hand is "the aggressive encroachment of NATO".

But Russia invading its neighbors and playing the victim is nothing new. This is a recurrent pattern that existed before Putin, before NATO, and before even the Soviet Union. 

There is a long tradition of Russian thought, according to which the Russians are a chosen people. Russia is not merely a nation-state like any other, but a civilization itself, a land with a destiny. Moscow is the Third Rome, and Russia as a whole is the successor of the Roman Empire. The bulwark against the heathen hordes of the past and the Western decadence of the present. Even without the theological/cultural charge, it is a superpower rivaled only by the United States, that deserves a place in the highest decision-making circles.

This grand delusion gives the Russians a superiority complex that immediately crashes when they look beyond their borders and get confronted by the fact that Russia is inferior to the West in everything that counts. Military might, economic clout, soft power, cultural influence. 

The West dominates all major international institutions from the IMF to The Hague, American military budget and might dwarves the rest of the world combined, Western countries are the richest, most envied places on Earth. People all over the world chose English as their second language, not Russian. They watch and listen to American products, and they go for their news to the BBC, not Russia Today. Artists, scientists, and media personalities of all kinds measure their success by the extent of their breaking into the Western consciousness. The land of dreams for people from poorer countries is America and Europe, not Eurasia. Even Russians choose to school their children in Swiss or English boarding schools and send them to American universities. They park their money in London, go skiing in the Swiss Alps, and spend the summers on the French Riviera.

Russia has a GDP just below Italy's, and in the words of Barack Obama, the Russian economy "doesn't produce anything that anybody wants to buy", except oil, gas, and arms. In the even blunter words of the late John McCain, "Russia is a gas station masquerading as a country".

The gaping chasm between the grand delusions and reality yields resentment, envy, jealousy, and anger. If we are the chosen people, how come it's not us who are calling the shots here? They just start a war, and don't even bother to ask us anymore? Why do nations that used to belong to our sphere of influence choose Western alliance over us? Ukrainians, Estonians, Poles, the rest. Love us, you ungrateful scum, or else...!

When the trollish Russian Foreign Minister Sergei Lavrov publicly opined that NATO had "become a purely geopolitical project aimed at taking over territories orphaned by the collapse of the Warsaw Treaty Organization and the Soviet Union", former Polish Foreign Minister Radek Sikorski retorted, as our age demands, on Twitter: "We were not orphaned by you because you were not our daddy. More of a serial rapist. Which is why you are not missed..."

The "conversation" exposes not only the characteristic ghoulish cynicism of Russian leaders dating back to at least Stalin, but also a yearning to be seen both as a victim and great power simultaneously. A great power that has the right to "protect" its neighbors.

And like any other country with a serious inferiority complex, Russia explains away its failures by blaming them on the meddling of malign foreign powers. 

When the Soviet Union, after brutalizing every land it could lock in its sphere of influence for 40 years, fell apart - due to its own incompetence, corruption, and bankrupt ideology, it wasn't invaded by its former enemy, nor by the countries it has trampled on for decades. Nor were reparations demanded. Instead, Russia received billions of dollars worth of foreign aid. Gorbachev and Boris Yeltsin were celebrated as heroes in the West. In 1994, Russia joined the Partnership for Peace program, and in 2002 the Russia-NATO council. In 1997, Russia was invited into the G8 - despite that it didn't meet the standards required for joining, and in 2012 it gained membership in the WTO. In an effort to integrate Russia into the international order, the US has made constant gestures, London (disgracefully) offered its money-laundering services, and Germany chose to unilaterally increase its own dependence on Russian energy.

Even beyond economical and political nurturing, Russian leaders have been in constant need of ego-stroking. Tony Blair's advice to George Bush in the early 2000s was to treat the Russians as a superpower. French presidents, who seemingly fancy their country as a diplomatic superpower, have been running regularly to Moscow to ask what the West should do so the Russians feel better about themselves (ironically, France is a country that also has an inflated view of its own importance and probably not accidental that in the strength of anti-American sentiment in Europe, it is second only to Russia).

And yet, in the Russian narrative, they were disrespected and mistreated. Putin is reported to engage frequently in hour-long monologues reciting his grievances to anyone who cares to listen. The West lied to us, deceived us, bullied us, and the rest, on and on.

Even when Putin disappears eventually, I don't see how this ugly side of Russian national character would go away. The only effective salve on bruised ego is success. The structure of the Russian economy and the endemic corruption prevents an economic one, and in the absence of that, Russian leaders will only measure their accomplishments in military achievements.

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