According to Sen. Warren, the problem with Bitcoin is there's no "thing" to back it up, like "platinum," or, um, "a government."
There's no thing that backs [Bitcoin] up it's just belief
But [the dollar] has something that backs it up it has a government...
The government!
Let's break this down a bit.
First, the notion that Bitcoin isn't platinum, and has no "thing" to back it up.
That is true. You know what else it's true of?
The dollar.
From Investopedia:
Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver...
So the distinction Warren was trying to make, like the distinction she tried to make between being indigenous to Europe and being indigenous to America, is not a material one.
Continuing with Investopedia:
...but rather by the government that issued it.
Warren is right that the dollar is "backed" by the United States government, but it's not clear she understands what that actually means, particularly when she likens it to a commodity such as silver.
(It should be noted that there was a time when American currency was either backed by gold and silver, such as paper silver certificates, or was actually made out of gold and silver, such as Double Eagles not to mention various denominations of pocket change, before that was phased out starting after 1964 as a consequence of the passage of the Coinage Act of 1965.)
Speaking of air, I will present this little graph for your amusement.
While Bitcoin is backed by "belief," as Warren asserts, so too are fiat currencies like the dollar.
The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it.
As to the first part, yes, supply and demand. Just like Bitcoin. Heck, just like Dogecoin for that matter.
As to the second part, indeed, the "stability of the issuing government" is critical, but what does that mean?
It means history to some extent, it means responsible stewardship of the currency (not running the printing presses, etc.), and it means a sound underlying economy that makes running the printing presses unnecessary, unwise, or counterproductive.
With this in mind, let's first compare Bitcoin to Dogecoin. Bitcoin has a history. Short, yes, but comparatively longer than Dogecoin. It's also a much more serious undertaking, unlike Dogecoin, which was literally started as a joke and still suspected of being little more than a meme coin.
That is why Bitcoin is valued in the tens of thousands of dollars and Dogecoin is valued in the tenths of dollars.
How does Bitcoin compare to the dollar by this metric?
It definitely does not have the same lengthy history, and as such is extremely volatile. People are still trying to figure it out.
As for not having the "government" to back it up, that can be considered a feature, not a bug.
Bitcoin cannot be meddled with and it cannot be hijacked for political purposes, which is the biggest issue with central bank fiat currencies. Returning to Investopedia again:
Fiat money gives central banks greater control over the economy because they can control how much money is printed.
One danger of fiat money is that governments will print too much of it, resulting in hyperinflation.
Sound familiar?
Warren then reveals her complete ignorance of how any of this works.
Back to the Chuck Todd interview:
But that has something that backs it up, it has a government that says at the end of the day, there's a run on this stuff, everybody wants theirs out, the United States government promises there will be something to back it up and that's what banks are about. There will be somebody there to back it up.
Back it up with what?
Air?
A traditional run on banks has nothing to do with a collapsing dollar, but rather a collapsing financial system, in part fed by the very same federal reserve charged with saving it, and a system in which bailouts are assumed.
I would argue it is the Federal Reserve's ability to manipulate the currency that results in it needing to manipulate the currency to solve a problem it – together with the Congress – created.
But at the end of the day, if the currency collapses (not mortgages or investment banking firms, but the currency itself), what is there to save it?
You can't print yourself out of a problem brought on by trying to print yourself out of your last problem.
There's a possibility Warren understands all of this. Perhaps what she's most interested in, and made clear in the interview, is not protection but control.
She notes in the interview that if you want speed, if you want near-frictionless money transactions, you can do that with a central bank digital currency.
I think of it as, what problem does Bitcoin solve for? If it's fast, almost frictionless [transactions], around the world, a central bank digital currency works for that.
Many of those who support Bitcoin say 'I don't want the government to be the one who manages the currency. I don't want the government to to be able to be the transfer medium to be sending money.'
No, they don't.
Todd interjects:
A decentralized financial system.
Warren responds:
Well its more than decentralized, it's a non-governmental no-ability-to-penetrate, and this is where the digital world starts to divide.
There are those who say 'independent of government but regulated.'
You have to do what banks do, know your customer so you know that you're not doing drug money laundering right? Or you are not helping out tax cheats or helping Russia under financial sanctions.
Another part likes the anonymity.
...get away from the prying eyes of the government. Opening up the door to the money launderers, the tax cheats, etc.
And Freedom Convoy contributors, Trump supporters, and you know, all the bad people.
Let's give Treasury the tools for, to say that any of the crypto exchanges that are not following "knowing your customers" and not blocking people evading sanctions... [they are not allowed to do business in the United States].
She adds this, perhaps the most chilling part.
If crypto really is not being used by human traffickers and tax cheats, you shouldn't mind if these exchanges have to do "know your customer."
Likewise, if you aren't committing a crime, you shouldn't mind the government tracking your every move, right? Right?
In fact, a digital dollar, particularly were it to become widely used, would permit the government unprecedented access to your every expenditure, your every financial transaction.
Issues regarding money laundering and sex trafficking are real, but they've always been real, and for those of us who value liberty, mass state surveillance is not the answer. Regardless, we need to have an honest conversation about it.
At the end of the day, it's about power. It's always about power.
Warren, even if she's sincere, even if she sees herself as the champion of the little guy, she is still advocating for the concentration of power to herself and others like her... and that never turns out great for "the little guy."
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