Usury and Cryptocurrency
In some weird twist, my Usury article actually got a decent amount of traction on Steemmaker, as well as a thoughtful comment from Semiotic Animal about cryptocurrencies...and a few suggested links.
For anyone wanting to visit the rabbit hole and see what other Catholic bloggers have written on this, check here and here. Some of this gets into pretty serious inside baseball in Catholic moral theology, but I hope my non-Catholic readers will stick around for my discussion on cryptocurrencies that is a response to the above bloggers.
I don't want to speak for Zippy Catholic or Semiotic Animal, but the former has written a lot about economics and has a dismal view of Bitcoin (although I'm not certain on his position of other cryptocurrencies and tokens) while the latter wrote to me in an email the following: "Cryptocurrencies that don't terminate in or securitize some real property are essentially worthless and are related to the same financial anti-realism as usury."
I'm interested in this line of thinking, as both writers share a respect for traditional, realist thinking beyond the casual buzz of oft repeated slogans and tribalism in the pro- or anti- bitcoin camps. The angle these two take when approaching cryptocurrency is rooted in a fundamentally different mindset than the modern one, and that makes their arguments interesting.
You should check them out before reading.
My Response to Semiotic Animal
SA's comment, "Cryptocurrencies that don't terminate in or securitize some real property are essentially worthless and are related to the same financial anti-realism as usury." is a fair one. I think it is incorrect. Let's compare two cryptocurrencies, one that meets his requirement for realism, and one that does not: Digix Gold Tokens, and Monero.
Digix Gold Tokens (DGX) each represent one gram of actual gold that is stored in a safe in Singapore. DGX tokens are digital bearer notes that can be traded on the Ethereum blockchain. DGX can be bought and sold, and if returned to Digix Global, can be turned in for the physical gold they represent. DGX tokens securitize real property, and it is doubtful either blogger would object to their existence and use.
On the other hand, Monero (XMR) does not securitize real property as DGX does. Holders of XMR have the ability to (anonymously) transfer XMR tokens to other accounts, just as Bitcoin holders can transfer BTC to other accounts. The utility of XMR is its anonymity; while price slippage can result in a change in value as compared to USD during transaction times, XMR does offer a service or good that is valuable: anonymous value exchange. This was Bitcoin's original value proposition, which has diminished as new players have entered the market with more privacy and faster transaction times.
My understanding-and I'll stand to correction if proven wrong-is that the idea that money began as gold and silver is an anthropological error made by many economists in the past century. As a somewhat hard money guy myself, who doesn't love the fiat system the US uses (although it seems to be the best looking horse in the glue factory), I have believed this in the past. But there is more evidence showing that humans have used many items as means of exchange throughout history, including rocks as shared ledgers or even community scrip. These organic developments seem to not have involved fraud, but were a community driven way to ensure exchange of unlike goods was done fairly.
Gold and silver came later, and coinage was invented.
( I would contrast the above examples as innately different from the US government's ditching the gold standard, which was not done for the good of the public and has greatly accelerated a usurious system.)
Bitcoin, Monero, and other "non real property" cryptocurrencies are essentially community driven scrip, done as open beta tests that anyone can take part in. The fact that there is massive speculation on their value does not detract from their utility, although I would argue that Bitcoin's utility is dropping fast and cryptocurrencies that have more concrete uses, like Ethereum, will last much longer. I also find the "store of value" argument for Bitcoin ridiculous, as it will only have value if it is useful, which it generally isn't (see r/btc for more reasons why).
To be continued...where I'll explain why DAI is a real property
Disclaimer: I am long all of the above, except Bitcoin and DAI.
-Jeff
Posted from my blog with SteemPress : http://steemmaker.com/usury-and-cryptocurrency/
Just thought I'd let you know I've been reading this series you're doing about usury. I haven't really commented until now because I'm not sure if I'm really grasping the idea yet, and haven't made it over to the other posts (since there's always other things to grab my attention). Still, I do find it interesting and will continue to read on, even if it's slow treading when it comes to Catholic moral theology. :)
Thanks Glen! Hope I can keep it interesting and fresh... I'm a fan of this, but realize it might be a bit dull for some.
I wouldn't consider it dull. I've been learning. I wasn't aware that usury was even a thing for Catholics. While I'm not one, I've been around the Mexican strain of it for decades and this is the first I'm really hearing about it outside of the Jewish and I guess Muslim religions. That in and of itself doesn't mean anything, really, other than I've either not been that observant (quite possible), or there's never ever been a reason for it to be brought up. :)
It is generally not a hot button issue for Catholics, and TBH, the past 40 years or so have been abysmal for Catholic formation. Many of us have had to learn our faith by reading on our own.
I asked a few friends of mine who are also passionate about their faith and they all tended to think usury was just charging high interest rates. The topic has been mostly ignored the last century, and that's a problem.
I could see that. I suppose with all there is to be concerned with in the world, take your pick, that usury could end up lower on the priority list. Although, I suppose if the intent of usury, among other things, is to avoid taking advantage of others, that concept should be among the foremost thoughts of everyone. But in the western world, where money is the primary motivator for a lot of things and people, usury would still be marginalized.
A big part seems to be the misunderstanding of the difference between full recourse and non recourse loans, and the fact that the global banking system relies on usury to exist.
There's a reason banks are the biggest buildings in most modern cities.
And to be sure, there has been an enormous amount of economic growth, and we see that people have more access to resources and healthcare today than 100 years ago.
But I'm not sure it is sustainable. Our $20 trillion debt, for instance, won't get smaller, and when the population begins to diminish there could be a serious contraction in the economy (Depression level).
Debt really ought to be a higher priority than it is, but because we've handed over economic policy to the banks, what else would there be? As long as the payments keep coming in, keep riding the debt train.
There's the deficit, the debt and then unfunded liabilities. Over $210 trillion of the latter. Those are all crushing weights just waiting to happen.
Loans have a proper place, I suppose, but on such a large scale, where you're essentially deficit spending and collecting taxes to make loan payments—it's not much of a way to run most businesses (some it might be the only way), so I don't see the advantage of having a government do it unless the banks are in charge. Then it makes perfect sense! To them. :)
You've outlined a great number of examples on how usurious policies have created an insane amount of debt that can never be repaid.
Debt is good when used to leverage a business up; for instance, if you have 10k orders to fill and you don't have the capital to buy supplies fast enough. But it's a terrible public policy tool, as we just end up borrowing from our children and grandchildren for stuff now... usually stuff that is just graft for politicians.
You are perfect. thanks
This is the old "Crypto appears out of thin air so it's worthless" argument. I'm sad to see so many people have this view, because it shows a complete lack of understanding of how crypto works.
The truth is, fiat currency is the currency that appears out of nowhere. They are all controlled by an upper class oligarchy. Centralized consolidation of power and corruption run rampant.
This mysterious asset that most people can't seem to wrap their head around is trust and decentralization. The most valauble cryptos are the ones that are controlled by global consensus instead of by the upper class. Corruption resistance is the "real property" that blockchain deals in.
Ironically, when you peg a crypto to a physical asset like gold it becomes completely centralized and worthless. Who is going to hold the gold? A centralized entity. Who's going to mint coins? The centralized entity that holds the gold. How do you stop the centralized entity from minting coins that should not exist? You can't. They will find a way to lie and print money out of thin air without anything to back it up.
You cant do this with decentralized coins. There are rules. The community decides how coins are minted and distributed independently from a needlessly over complicated secondary asset. These rules are enforced by encryption and can be executed anywhere in the world with an internet connection. It's a clearly superior system than what the current establishment has to offer.
We're in agreement until you call DGX worthless.
DGX has value for a different reason than Bitcoin, but that doesn't mean it is worthless. Just because something is centralized does not make it worthless...I imagine your house or apartment is not decentralized, and yet you assign it value.
Yes, a fraudulent company may try to print gold out of thin air to mint more tokens, but it is not inevitable. There are companies that are over 100 years old that continue to not defraud their consumers.
Did I say worthless? I meant worth less :D
I simply find it ironic that pegging crypto to an asset makes it weaker. Yet sometimes, perception is reality. If you find enough people that believe a pegged asset is worth more then it will be.
The vast majority of the population seems to have a very hard time understanding the value of decentralization and a trustless environment. I assume this is because the establishment is so good at pulling the wool over the eyes of the general population. It's hard to see how messed up the system is when you put your trust in it.
I don't understand what you mean in your second paragraph.
As for "the establishment pulling the wool over the general public", I think that is to blame more on the general public, who are more concerned with entertaining themselves than seeking truth and answers.
Jeff, you turned me on to DGX a few months ago and a crypto backed by gold, seems like a great idea to me. Too many people I know don't understand Bitcoin or any other crypto, not even Steem. I like to go to the coin club meetings here in San Antonio TX and bring up the subject of crypto, it's funny to me what people say. Keep this one going, very interesting topic Jeff.
Thanks, will do!
I hadn't really thought of cryptocurrency in terms of being usurious. My uneducated opinion would be that they have value (represent value) so there has to be something securing it. You're not buying nothing. Although some of the ICOs have been nothing, so what do I know? Ha ha.
This is an interesting series to me. I like knowing how things work, so I find the though process behind it intriguing.
Thanks. Cryptocurrency cannot be usurious in itself; my point I'm trying to make is that there are ways to borrow money by putting up cryptocurrency as a collateral that aren't usurious, and that is an improvement from the standard credit card loans we tend to use in the US.
Now we just need mass adoption.
I understood your point, but didn't do a great job of communicating that I understood.
I think adoption is coming, it just takes time. People have to get used to doing something a different way, and it's rather cumbersome to use still. I think that in time it will get more usage as it becomes easier to exchange.
I didn't saw your posts for long time i have to say that i miss you a bit
i resteem this post for you