Back to the list

Paris Is On Fire: The Digital Economy As A Symbol Of Freedom From Old Conventions

10 December 2018 10:12, UTC
Oleg Koldayev

Paris is on fire, and there is a suspicion that this is just the beginning. On the basis of the roots of disturbance, we can conclude that Europe tired of taxes no longer wants to suffer from the tyranny of the global economic institutions. And when people are dissatisfied with something, they vote with money, and it seems that this time - in favor of the digital economy. The bitcoin rate from December 1 to 3 may serve an indirect proof of this hypothesis. On Saturday, December 1 at noon, with the start of the “yellow vests” campaign, it leaped by 8% from $3,980 to $4,300. It stayed at the level of more than $4,000 until the night of December 3, when the action stopped and the city authorities counted the damage. After the action ended in nothing, the rate fell, in fact, by the same 8% and did not rise above $4,000 anymore. Simply put, the virtual asset market supported the French day of anger and confirmed its social nature. Similarly, in 2017, bitcoin supported Brexit and the Catalan demarche. Let's try to analyze the nature of this phenomenon and understand why society and cryptocurrencies are so closely related.

The global existential crisis

The popularity of various virtual assets in the Old World is high. For example, in 2017, in France, 6% of citizens had their own e-wallets, in Germany - 8%. In terms of numbers, the figures look more significant: more than 4 million French people and more than 8 million Germans believed in a digital future. Perhaps, in the present time, there is nothing more and no one to believe in.

The well-known stock speculator George SOROS called the situation that is happening now in the global economy the existential crisis. Science defines this state as a feeling of anxiety and discomfort while concentrating on the reason for existence against the background of satisfied needs. According to the financier, everything that could go wrong on the market actually went wrong: an unreasonably strengthening dollar, flight of capital from Southeast Asia, the migration crisis, and populists in power. All this as a whole is pushing the world towards a new financial shock, compared to which, 2008 will seem like a cold against the plague epidemic.

Although, the head of Morgan Stanley, James GORMAN immediately placed the words of Soros in doubt, saying that there was no existential crisis, something like, don’t let the old scamper argue. We will refrain from evaluating the words of Soros, but will quote another economist; the Nobel Prize winner Paul KRUGMAN said the following: “Now, at least, it became possible to imagine the classic crisis of 1997-98, when the emerging market currency crashes, resulting in a dramatic increase in corporate debt, which causes further tension in the economy and the currency crash.” As good crisis as any. Though not existential. The reason for this will be all the same pressure of the dollar economy. “Are we observing the beginning of a global crisis?”- Krugman continues. – “Probably, no. However, if earlier I said that there was not even a hint at such a crisis, now I cannot do this.” But still, something is happening. And this “something” is characterized by three factors.

The guard is tired

The first one: for a long time (since about the 70s of the 20th century), the world has been living in the dollar financial system, where the American payment unit is the main means of accumulating reserves and payments for transnational goods and services. This monetary system was based on the indisputable military-political and economic power of the United States. Even the other superpower of the end of the last century, the Soviet Union, adopted the American rules of the game because economically, the Americans controlled most technological and manufacturing companies, and militarily, they controlled two oceans. Recently, however, this power has weakened.

The production and technology sectors are slowly but steadily moving under the control of other powers: China, Japan, South Korea, and India are fighting for new hegemony. The production left the United States and wandered around the world. Militarily, the successes of the United States also leave much to be desired. Over the past 10 years, America has participated in many wars, but, in fact, won none of them. The Iraq war actually ended with the flourishing of Islamist groups: by breaking one big "monster", the Americans gave birth to many small ones. The Libyan war ended the same way, and the Afghan campaign is far from being over yet.

America is rapidly losing prestige and the dollar is losing trust. But all attempts to turn this trend around end in non-optimal results. For example, the tax reform of Donald TRUMP aimed at returning money to the national economy led to an unreasonable strengthening of the dollar, excessive pressure on the market, and another round of decline in the popularity of the US currency as a reserve and settlement asset.

The impotence of the elites

The second one: the decline in the quality of political elites. It seems that the rulers of the world have lost their treaty capacity in recent years, and not only in foreign but also in domestic policy. Diplomacy has possibly turned from the art into a struggle for the unlikely. European states, even being inside a single economic and political space, have not been able to agree on the issue of migrants for a long time, and formally accepted agreements that are not comfortable for anyone.

The United States cannot agree on anything with either Russia or China. Moreover, the agreements already reached are collapsing. In fact, the ABM agreement has been disavowed, the next one is the Short-And-Intermediate-Range-Missiles treaty. This is about politics. In the economy, within the WTO, the contracts also do not live long.

The United States entered the state of the Cold War against Russia and the economic war against China. At the same time, in the Middle East, the main oil-bearing region of the planet, there is already quite a hot war of all against all. Politicians clearly lack intellectual and communicative skills to smooth over contradictions.

To have or not to have

The third one: the crisis of the institution of property. This phenomenon is mostly found in Europe. Paris events are another confirmation of this fact. Ownership of something for EU passport holders is becoming increasingly burdensome every year. Taxes on income and property skyrocket sometimes. In Belgium, for example, citizens pay 42% of the income tax, 48% of the social tax, 10% of the salary remains; in France, respectively - 49% and 40%, as a result, they receive 11% from the earned; in Germany, taxes are 43% and 40%, 17% remains for the employee.

And now let's calculate property taxes: in the UK, it is 11.9% of property value per year, in France - 8.5%, and in Belgium - 7.5%. Other countries of United Europe are at about the same level on these indicators.

But not only the Old World hits its inhabitants hard with exactions. There are high taxes in China, in India, and in the USA. In fact, on all continents, the rate of charges grows every year and sometimes goes beyond common sense. For example, the total tax rate on a business in Argentina is 137%. That is, no matter how much you pay, you still owe the state.

Many tax systems are now absurd. But most importantly, citizens of dozens of European countries see that their money, their country's money goes not to develop its economy or social structure but to reproduce the votes, naturalize former migrants, who essentially manipulate governments. It turns out that the United States is busy with exporting democracy, and the EU - with importing voters.

Lietaer’ vision

Taken together, these factors give rise to distrust of the traditional economy, as a result, to anxiety and the existential crisis which George Soros spoke about. And it is obvious that the way out of it is in the same place where the entrance is, that is, in trust. In other words, in the creation and adoption by society of new carriers of value, new economic relations, and new currencies, which is what the digital economy offers.

By the way, a decentralized cryptocurrency is not an exclusive vision of Satoshi Nakamoto. Today, even well-known experts rarely recall such a term as “additional currency”, although this phenomenon has been known since the end of the last century. In the USSR in 1977, the first “time bank” was created at the Estonian bakery of the town of Kohtla Järve, where the unit of working time was used as a carrier of value. (At about the same time, similar structures appeared in the USA and Japan; the monetary units began to be called, respectively, “Time-Dollar” and “DanDan”.)

Three years later, on February 18, 1980, an interesting experiment was held in the Soviet Union, during which a turnover of units of time took place, by analogy with a circulation of money, between three organizations: the aforementioned bakery, the scientific research institute of blacks, and the local power station. Thus, the first two organizations paid the third with time for the electricity provided. Confirmation of the transaction was, of course, analog and occurred on paper.

The idea did not strike root in the USSR and in post-Soviet Russia. But in some countries, "time banks" are still in effect. The “Time-Dollar” is also popular, though more in volunteer circles. In other words, Satoshi only digitized what had been known long before him.

The Belgian financier and the architect of the euro Bernard LIETAER sees the stabilizing tool for the global economy in additional (crypto) currencies: “In my opinion, most of the existing additional currencies have an impact on the social plane, and not on the economy as a whole. They allow people to make a social exchange of skills or experience, - he said in an interview with one of the Russian publications, - I think the most successful is a community where, after a certain time, the money will no longer be used, since they will no longer be needed.”

Let us not talk about the utopian idea of ​​completely abandoning money, but Lietaer also believes that the same structural conditions are applicable in the economy as for any ecosystem, that is, the existence of a minimum and a maximum of diversity. If we go beyond a certain amount of diversity, there is stagnation, and when we fall below the minimum - the collapse begins.

“Economy is a system of complex flows, in which money circulates. Thus, we can conclude: in the economy, there must be minimal diversity, and one currency per country will not be able to ensure the stability of the existing financial system,” - Lietaer continues. “We can also create niches that will survive a collapse.” But it is obvious that as long as these niches remain as small as they are now, they cannot serve as a counterweight to the system. For example, in Brazil, additional currencies are circulating, but they make up about 1-1.5% of the total money supply in the country.”

The scientist is skeptical about bitcoin, considering it a speculative tool since 99.7% of coins are not used to buy or sell anything. In his opinion, bitcoin is held only in the hope that its price will increase so that it is nothing more than a tool of speculation. But in general, Lietaer is positive about the very idea of ​​digital assets. He believes that they could help in solving fundamental problems, such as poverty.

The other day, the fate of cryptocurrency was discussed by the heads of the G20 states. However, the heavy bureaucratic machine is already going catastrophically behind social development, which causes even greater irritation of people and they prefer an asset that is not associated with any political or economic system.

In conclusion, it would be interesting to consider another trend. Popular disturbance in Paris is not rare, we can recall the epic clash of police with firefighters (the latter won), fires from dozens of cars, lit by offended migrants, and oppositions to same-sex marriages. To arrange different kinds of revolution is the French national tradition.

However, recent speeches are different from all previous ones in that the protesters painted the Arc de Triomphe and separated the head of the statue of Napoleon - the founder of the French state and law in point of fact. Perhaps, this is not just vandalism, because the Parisians had never damaged their national treasures before. Probably, the beheading of Napoleon, the national idol of France, is the signal of the gradual fall of the traditional state. The symbol of the imminent approaching of the future.

We daresay that the next sharp bitcoin leap will happen when the traditional state systems once again demonstrate their inconsistency.