What is the problem that cryptocurrencies solve? ..asks the noted economist and New York Times columnist Paul Krugman [link].
We have addressed this question before in this forum. The question today is how somebody could be a serious scholar of economics, or even open ones eyes in any populated area of the planet, and somehow not know the problem that cryptocurrencies solve. This problem is everywhere. The valuations of stocks, the urban development, the Dubais and the Vegases, the Venezuealas and the Zimbabwes, the Pentagon and the DC Lobbyists, the bicycle sharing overproduction, the Monacos and the Caymans, and the communist party loyalists with suitcases full of house deeds. London real estate prices. Bitcoin prices. Quantitative easing and the deep state. All related to issuance malfeasance. How could somebody not know about this problem? Well they should, so it behooves us to state clearly once again the problem (and the solution).
“The power to make a small piece of paper, not worth one cent, by the inscribing of a few names, to be worth a thousand dollars, was a power too high to be entrusted to the hands of mortal man.” [John C. Calhoun, speech, U.S. Senate, Dec. 29, 1841]
Counterfeiting is unauthorized currency issuance. But what if you are an authorized currency issuer? What if somebody then puts a gun to your head and asks for a million fresh dollars which you can easily create with the push of a button? Who do you need to pay off to maintain your position as issuer? Who do you issue money to and how often? What if you could create 5 trillion dollars with the push of a button, what would you do? It doesn't take more than a rudimentary imagination to understand the answers to these questions. Creating money without telling the public about it is suspicious don't you think? We refer to this authorized issuance of currency, in a manner unjust and hidden from parties not privy to the issuance, as issuance malfeasance.
Cryptocurrencies handle the problem of issuance malfeasance by requiring that all issuance events are public - with no exceptions. Therefore counterfeiting and other issuance malfeasance are simply impossible. Well, that's not entirely true. Those public coins which are centralized and have provisions for issuance events (such as e.g. USDT) still have some room for issuance malfeasance. At least for these currencies however, the public does know how much was issued and when.
To treat this situation in all generality we are left with three possibilities here concerning Krugman's claim that he doesn't see the problem solved by cryptocurrencies:
1-- There really is no problem of issuance malfeasance, all currency issuers are benevolent authorized players who not only don't create any more then exactly what society needs to be created but also fend off all less benevolent people who might seek that power, with no exceptions. This of course seems impossible to me but who knows, it could be that I am somehow blind here. If you think this is what's going on please do comment and let me know.
2-- Krugman understands the problem of issuance malfeasance but is a paid mouthpiece of people who wish to badmouth cryptocurrencies at this juncture for one reason or another, or simply is hiding his knowledge of the problem for his own purposes. This seems exceedingly unlikely to me for a few reasons. One is that it doesn't really matter to public opinion all that much what he says. Another is that cryptocurencies are not a problem for the rich and powerful, even for those who are benefitting from issuance malfeasance. In fact cryptocurreencies are a boon for these people because they can be obtained via trade for newly issued currency, thus enabling issuers to ensure their personal wealth in perpetuity. Finally I don't believe the guy is lying to us, he seems like an honest bloke to me and I know some people who know him personally who agree.
3-- This leaves us with the final option, which is some kind of self delusion. When something surrounds us our whole life, we sometimes don't see it as anything out of the ordinary or worth reporting - especially when doing so might tear down other symbolic structures we might have built up in our attempting to label the world around us. If currency malfeasance is just the way the world works, then we don't see it as a problem.
What do you think, is issuance malfeasance enabled by the use of fiat currencies a problem worth solving? Let me know in the comments please.