I’m enjoying their weekly issues. You can sub here: https://www.cognitive.investments/get-to-know-us
A few highlights from recent reports, including a very thoughtful and informed assessment of crypto post-FTX:
–
The late 1980s was “Peak Japan” – the West was obsessed with the notion that Japan was going to overtake the U.S. as the most powerful economy in the world. Instead, Japan entered a period of lost decades, while the U.S. presided over an era of globalization, expanding free trade, technological innovation, and (relatively) unrestrained American military power. These were not the only geopolitical conventions that turned out to be wrong. Germany went from Sick Man of the Euro (we can thank The Economist for that prediction) to center of a European industrial renaissance. China emerged out of Tiananmen as the newest and largest “Asian tiger.”
–
It was not until Russia invaded Ukraine in February 2022 that it became clear that the world had changed irrevocably – or at minimum, that global sentiment had changed irrevocably. (Aside: It is ironic that Russia has its fingerprints over the last three major global geopolitical transitions. The Russian Revolution brought us the rise of Communism and the Cold War. The collapse of the Soviet Union brought us U.S. hegemony. Might Russia’s failed invasion of Ukraine now open the door to the multipolar multiverse?)
–
Fiat money allows governments and central banks to be more flexible and strategic – they can design policies around interest rates and money supply without being dependent on what mining companies can extract from the ground. The downside of this is that money, whose value for so long had been based on an objective factor (the value of a precious metal), was now officially politicized.
–
In that sense, FTX may well be the beginning of the long-awaited clash between cryptocurrencies and governments – not because FTX is in any way representative of cryptocurrencies, but because it gives governments the excuse they need to crack down on them. It is unclear how many people lost money, or even their life savings, in the FTX debacle (an issue to societal stability in its own right), but you can be sure governments will use the FTX example as they aim to regulate cryptocurrencies into oblivion – or at least into becoming similar to other tradeable securities rather than as a fundamental threat to the future of money.
–
Max Weber once wrote that the state is defined in part by its claim to the monopoly on the legitimate use of physical force. I think we can add that the state claims a monopoly on the legitimate use of currencies within its borders. When the state decides to use the former to ensure the latter, we will see just how powerful cryptocurrency really is – and based on recent developments, it is a clash soon in the making.