A significant portion of Talking to My Daughter About the Economy: A Brief History of Capitalism is dedicated to addressing what Varoufakis calls “unemployment deniers.”
Varoufakis sums up what he understands the arguments of “unemployment deniers” to be: that if a person can’t find a job at the wage standards they want, they simply need to lower expectations until they find a job at a lower wage, and eventually the economy finds equilibrium.
But the author holds that isn’t what happens. Let’s say that an employer who makes bicycles finds out that a union has agreed to take a wage cut, or that wages are going down. To Varoufakis, that means the employer will *not* hire more people or buy more equipment, since lower wages mean that people have less discretionary income — and that means fewer people will be buying bicycles, so the employer had better cut back on expenses.
So economic predictions by employers are a self-fulfilling prophecy. If employers believe the economy is doing well, they’ll pay employees more, hire more employees, and buy more equipment — and this will bring about the general prosperity they predicted. Conversely, if they predict the economy will crash, employers will stop hiring, will hand out pay cuts, and will not purchase more equipment or expand their factories, and this will bring about the stagnant economy they feared.
As Varoufakis’s concerns about the boom-bust cycle, the black magic of bankers, and elite ownership become increasingly obvious as the book progresses, he reaches a question:
Can Bitcoin stop this cycle?
I wanted to read this book because of its style and the diversity of influences on and opinions of Varoufakis. But I also wanted to read it because the author directly mentions Bitcoin — and indirectly mentions tokenization.
Varoufakis’s chapter on Bitcoin is a little disappointing, and it seems he’s dismissed it before thinking enough about it.
He sees the appeal of many aspects of Bitcoin, but ultimately Varoufakis insists that Bitcoin’s monetary policy will never allow it to be the money used by a stable market society.
The reason? Flexible monetary policy, according to Varoufakis, is needed to allow central banks to increase the money supply in order to ease crises. Otherwise, crises will turn truly catastrophic.
Listeners who like the Austrian school of economics will immediately see Keynesian influence here. Followers of Keynes believe that the actions taken after the Great Depression prevented it from being even worse, and that similar action in recessions since has prevented another Depression. Followers of Austrian economics posit that, if anything, Keynesian remedies made the Great Depression longer or worse — and that even if similar action in recessions delayed Depressions, they’re just setting us up for a worse Depression in the future.
Even if you believe monetary supply shouldn’t be fixed, and that inflation is needed to ease crises and/or to clear out old debt, cryptocurrency doesn’t necessarily exclude a more flexible monetary supply. In some cases, cryptocurrencies might allow for monetary supply adjustments to be voted in.
I personally hope that doesn’t happen with Bitcoin
But what I find interesting is that now we can experiment with monetary policies. Most government-level economists have run on theory, with too little evidence to back them up. We can try things out, see what works.
Will a more democratic system, where the network votes to change monetary supply, work? Or will the voters always sacrifice the long-term for the short-term, like Austrian economist argue governments are doing now?
As long as that monetary policy isn’t arbitrarily controlled by some centralized, corruptible entity, I remain optimistic. Whatever we build, it can’t be worse than the Fed, right?
Source: ICO Alert