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Life After Capitalism Includes Bitcoin

Posted October 21, 2021

By Guest Contributor

Life After Capitalism Includes Bitcoin

George Gilder is starting to go public with his thesis that we are entering into a new stage of history in terms of economics. We are passing through a capitalist-centered phase into a new experiment in fascistic forms. Big companies cooperate with big government to create industrial cartels that are managed by regulatory agencies that are completely captured by elites. They are not only run by the elites but they are run FOR them. 

He sees the Covid lockdowns and mandates not as an aberration, but the test of a new model of social and economic management. It will certainly lead to economic stagnation. Or worse. It will flop just like the lockdowns. But we’ve learned that our social and economic managers lack the capacity to reverse course. They dig deeper and deeper, refusing to admit error or even see the relationship between the cause and the effect. 

We saw this over the weekend when the Biden administration belittled the problems with inflation and goods shortages. These are “high-class problems,” the White House affirmed. What they meant by this is that these are symptoms of an economy that is growing and changing. Incredibly, they see this as a good trend! That’s absolutely remarkable. 

The Long Winter

In Gilder’s view, we are in for the long haul here. At the same time, certain systems will keep functioning. It is impossible to disable the human mind, its lust for creation, its desire to learn more, the urge to create, the impulse to discover and invent. This discovery and invention will tend to circle around technologies and systems that are less touched by the fascist structures of command and control. For this reason, the real future of progress depends heavily on decentralized platforms that live outside the jurisdiction of the machinery of the state. 

So we live amidst a paradox. There could be a deep crisis right around the corner. It could involve protracted recession combined with inflation. It could feature random shortages and continued demographic upheavals as people flee controls for relative freedom, so long as it lasts. At the same time, the energy and action, and capital available to fund innovation, will live outside the physical realms that government has destroyed and migrate to information systems that do not depend on regulatory permission.

Some People Always Win

Part of the issue here is that the elites are not actually complete idiots. They are seeking returns like everyone else. Slow growth and inflation affects them too. So they need places to park their capital that have a future outside the increasingly decrepit world of physical supply chains and worker-driven production structures. And they have found it for now in the world of crypto currency and blockchain technology. 

You have surely noticed how the attacks on this sector seem to have been dialed back in recent days. The SEC itself is ready to embrace a Bitcoin ETF. The rumor alone sent Bitcoin and other cryptos way up. 

There is nothing unusual about this. The price from the beginning has followed the same pattern. There is a wild frenzy of buying that sends up the price far too high, and this is followed by regret and fear that drives a dramatic sell-off. Time goes by and the price begins to crawl up again, until the point where people see the old high as not crazy at all, but rather a realistic new floor. I’ve been watching this happen again and again, from the time that Bitcoin was $1.00, through its $30 peak, to its $1,000 peak, to its $10,000 peak, to its $63,000 peak. 

Some prophets are certain that we will see $100,000 Bitcoin by year’s end. It’s not a crazy prediction, but if that happens, prepare now for a collapse back to $75,000 in the new year. The people who bought at the top will be livid. The media will declare Bitcoin dead. The bears will again come out in full force to say “I told you so.” And the whole ridiculous charade will begin all over again. The only way to involve yourself in this world is to ignore the whole drama, believe in the technology, and hold on for dear life. 

Not everyone is hip to this world. I recall about 4 years ago speaking to the head of a high-end money management firm. He knew of my views on crypto. He said I was crazy. In his view, all markets are efficient, by which he meant that it is not possible in the long run to outsmart markets. The best path is always to hold diversified index funds and try to avoid frenzies. In general, he might be right. 

And yet there are exceptions. My own view is that wildly exciting innovations are the great exceptions to this rule. His view is that he would wait for mainstream companies to adopt blockchain and big institutional investors to incorporate these strange new assets into their indexed portfolios. My view was that this takes too long. You wait and wait. Sure, it happens eventually, but you miss out on 5 years of high returns while you wait for the markets to catch up to the wisdom of the innovators. 

Who was right? For the last 5 years, I’ve been right and he’s been wrong. But with the Bitcoin ETF, he very well may turn out to be a prophet. That’s why this is such a big deal. The ETF provides a familiar means by which mainstream and large funds can deal in this technology without living under a cloud of confusion over wallets and passwords and odd regulators. It mainstreams what has spent 10 years with the reputation of being a sketchy and wonky plaything. 

Capitalism Never Dies 

Gilder’s thesis is not that we will fully leave capitalist forms. It is that capitalism in the future will take a different and more tragic turn. It won’t be there for everyone, but the elites will figure out a way to make money off the new and wonderful. These days, they know exactly what that is. It is not the old forms of physical capital but the new forms of digital capital that will attract the best of human energy. 

Regards,

Jeffrey Tucker

Jeffrey Tucker

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