June 2068, a conversation with my grand daughter
On finance, central banking and crypto in the 2020s... and 2068.
I recently had the following conversation with my grand-daughter. It was on the day she obtained her Proof-of-Pertinence in applied cryptography. PoP as you may know, is a degree sanctioning the ability of someone to ask sufficiently pertinent questions about a few fields of knowledge. It requires the person to understand enough to be able to ask the un-answered questions.
“Papou, I’m glad you’re at touch-distance today with us. Really. I am glad you’ve made it and although I earned my PoP, I still have a few silly questions for you! Tell me, is it true that when you were a child, banks used to charge value dates?”
“Not only when I was a child! The practice lasted until the 20s I think.”
“But you once told me that you had smartphones instead of our e-brains chips — so you had access to real time information and interaction, no? why would they charge value dates back then? it doesn’t make sense!”
“You know you have legacy technologies and techniques which do not disappear immediately when a more dominant one emerges. For example, today we still have road transportation despite drones and aerotrains. Back then, bitcoin was in its infancy, and smart contracts on the Ethereum blockchain were still considered a techie’s fantasy. It wasn’t a prerequisite for intellectual jobs to be able to order code from a computer — back then, you wouldn’t order code but write it…”
“But why would people then accept to pay it? and weren’t there competitors offering financial services without value dates?”
“Well, the irony didn’t stop at value dates. Interest rates were set by the bank, they weren’t governed by smart contracts. They were calculated with complex dates set in months or days, and those were counted arbitrarily by the bank itself. We came a long way today with the instant real time calculations of so-called liquid interest rates… the reason for this is simple. Back then, the whole financial system was centralized around a few major players. A few major central banks, which were the banks of their countries’ banks, and a couple of globalist institutions like the IMF. Add to this a bunch of conservative regulators, and that was it. These were the players deciding how, when and where money was created, distributed and collected. And these players, back at the time, were adamant to protecting their turf, so they kept shielding banks from competition and deregulation until the decentralization tsunami, in 2024. Although cracks in the system could have been traced back to 2008, these abuses were largely unsanctioned back then.”
“What do you mean, the financial rules were set by institutions instead of smart contracts?”
“Not even by institutions, it was worse than that. When you say institutions, you probably think about interest groups whose members vote to be governed by an auto-charter, like today. Well, back then, institutions were governed not by a charter, but by a few individuals in positions of power. For example, money creation was decided by central committees within central banks, who gauged the market appetite for their policies by talking to a happy few of their friends at the biggest banks.”
“Wait, are you telling me that capitalism was governed at its core by a communistic-cum-totalitarian regime holding the destiny of financial markets in their hands? This does not make sense Papou, I thought communism and capitalism were antagonists!”
“Let me try and explain. Until the early 21st century, it was common belief that monetary policy could be used as a tool to manage the economy and the markets. For example, a central bank would cut interest rates to try and revive growth and let lose a subdued inflation. Back then, AI models weren’t advanced enough to identify second and third order effects, which in this very case, often defeat the purported first objective.
The modern school of thought in economics, the so-called “energetic current”, which swears by the energy standard to determine value, did not exist yet. As I told you, bitcoin was in the starting blocks, and critics used to pretend that it was an ecological threat, a tool for criminals! They did not foresee it becoming the prime unit of account as we know it today.
So, while we know today that our unit of account is a given, that it is issued at a known pace, and that it is generated out of a scientifically measurable source, ie electrical energy, it was not that obvious then… People did not measure value in satoshis. They didn’t even know how to relate value of things to the combined energy needed to recreate the equivalent needs these things fulfill in humans. For example, in the art market, paintings of grand masters could fetch millions back then, without observers being able to justify or explain such prices. Today we know that the value of such a painting — brace for it — is for example 95% of the time within 1 standard deviation of the value of the electricity needed to re-generate the same level of interest, curiosity, emotions, as measured by hormones, within the bodies of the number of people who liked the painting on the most summoned gamified universe on e-brains, times the Wisemann-Faylasuf constant of 1.424242… Or should I say our sentient AI models know it for us.
But I am digressing. I am tired I think, don’t you want to pursue the conversation with my e-Brain?”
“Sure Papou, I love it when it comes from you, but I will pick your e-Brain for sure on that topic until I fall asleep tonight!”
“I’m glad I still have the chance to meet you physically. I will go and take a nap before we pick the next shuttle with your grandma. I just want to tell you these final words.
In 2021, the Covid-19 malady was only 2 years old, and it was taking a heavy toll on the whole planet. There weren’t ethics algorithms able to calculate the cost-benefit tradeoff of groupal decisions — it was called political decisions back then — on health. The enormous frustration created by the hectic decisions, whereby each “country” would choose and apply its policy, while the world was already a global connected village, was the real spark that brought the decentralization tsunami of 2024.
Never forget, my dear, that a minuscule, proto-life form called a syndrome, as in “SARS-CoV-2”, caused the second renaissance.
Destiny may be the puppeteer, but irony sets the stage.”