Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.
“What if?” is the dumbest question... when it’s about the past. What if I’d got into Oxbridge? What if I’d taken that job? What if I’d boarded the train before the sliding doors closed? Stop daydreaming about what can’t be undone. Look to the future instead.
And that’s where “what if?” becomes about the smartest thing you can ask. It’s a question bitcoiners are constantly mulling: What if the economy tanks, money-printing causes hyperinflation to rear its ugly head again, or trust in fiat currency disappears overnight?
Those who dismiss bitcoiners say we’re preparing for an apocalypse that will never come. To which I’d simply say: look at Lebanon.
There was a time when this small Mediterranean country was on the news every night for all the wrong reasons. These days, it takes a kiloton explosion for Beirut to make the bulletins, and the media moves on as soon as the dust has settled. In this week’s Spectator, however, there’s a letter from Lebanon which lifts the lid on the country’s appalling economic crisis.
The Lebanese lira is worthless, having lost 95% of its value in the last 18 months. Officially valued at 1,500 to the dollar, you can get almost 15 times that rate on the black market. Medicine and fuel are almost unobtainable. Every day, salaries fall further behind rampant inflation, and Unicef says that 30 per cent of Lebanese children are going to bed hungry.
How did Lebanon get here? In large part, the author explains, because the country’s central bank kept the lira massively overvalued, including through state subsidy of consumer goods. The crisis shows how cheap money quickly becomes the opiate of the ruling classes. The government continued to prop up the artificially-overvalued lira because it was popular with the people, who could buy luxuries at knock-down prices. According to one central banker, politicians “would spend the last dollar in the central bank and all the gold before ending subsidies.”
Bitcoiners don’t assume anything. We ask “what if?” — and we prepare. The question is: are governments asking the same question?
Nation states have a similar momentous choice to make with far-reaching consequences. Recent inflation figures from the US and elsewhere suggest that we are standing in front of the “sliding doors” made famous by Gwyneth Paltrow. Two alternate futures lie before us: the easy path of unfettered money printing a la Lebanon or the hard road of adopting sound money.
As “what if?” cuts both ways, let’s also try to imagine what the path of sound money could look like for countries that choose to adopt it.
In this alternative future, governments adopting sound money (or at least a sound money philosophy) would have a long-term mindset leading to low debt, creating a culture of delayed gratification, saving, and patience; their citizens would value "making do", hard work, and getting rich slow; and everyone would value study and advancement, substance over form, and efficient use of resources.
It seems self-evident that this mindset and the resultant behaviours will lead to an extremely strong economy. The result will be the opposite of Lebanon. Prices will potentially get cheaper as efficiencies translate into lower costs at the till. People will need less each year to achieve the same result. The quality of products sold will increase even as less "stuff" is sold and the cost of living goes down.
In Sliding Doors, Paltrow’s first storyline sees her boarding the train, enjoying an initially happier life, but dying early. In the alternative narrative, she faces more pain and hard work at first but ultimately enjoys far greater wisdom and fulfillment, and it’s implied that she lives happily ever after as a result. It could be the same for all of us: a return to the principles of sound money, although initially challenging, would usher in nothing less than a new and more effective phase of human civilisation.
And that, perhaps, will be Bitcoin’s greatest contribution: to pose a giant “what if?” to the world’s governments and central banks — and to provide the answer to its own question.