Why Cryptocurrencies Won't Replace Fiat Currencies

Despite all the hype, mouth foaming, price rises and fascination with cryptocurrencies, there's a simple reason why they will never replace fiat currencies.  In times of economic stress, whether it's from asset bubbles bursting, pandemics, or whatever else, governments are expected to intervene and provide aid for the distressed, stimulus to the economy and central bank accommodation to the banking sector.  These interventions are done largely by printing fiat currencies.  By design, cryptocurrencies can't be printed by governments.  Thus, they are useless for government policy when times are hard.  

It's no longer optional for governments to step in and provide support when the economy nosedives.  We're way past the days when Herbert Hoover could credibly wax eloquent about sturdy American self-reliance and turn a cold shoulder toward pleas for federal assistance.  Government intervention is embedded as deeply in the economy as the banking system and the transportation system.  Fiat currencies are the primary weapon of government intervention.  Take away fiat currencies, and we're back to the days when gold and silver were the currencies of choice, economic downturns worked their cruel consequences, and Oliver Twist would have been nonfiction except for its happy ending.

Cryptocurrencies really aren't all that different from gold and silver.  It's no accident that the U.S.went off the gold standard in the 1930s and the Federal Reserve hasn't issued silver certificates (redeemable for silver at any federal reserve bank) in some 60 years. Tying government currencies to commodities like gold and silver prevented the kinds of interventions that can aid massive numbers of people. Fiat currencies, for all their flaws, have played a crucial role in government policies that have prevented a great deal of suffering and loss.  In hard times, if you're in need, don't hope for the holders of cryptocurrencies to give you a helping hand.  But you can expect the government to step in and provide cash, food assistance, health insurance coverage, housing subsidies, educational subsidies, unemployment comp, and more, because it can print the money it needs if all else fails.  Carefully managed, the money printing that is used for economic support and stimulus has not proven particularly inflationary.  While central banks must remain alert to the risks of inflation, experience has taught us that prudent money printing can be of great benefit.  

So invest in crypto, if you like.  It's a free country.  But don't think it's a substitute for the dollar.  When times are tough, the cavalry will ride to the rescue with their saddlebags full of greenbacks.

Putin's Victory in America

 The Donald Trump-instigated right-wing storming today of the U.S. Capitol while Congress was counting the electoral votes for Joe Biden's and Kamala Harris' victory in last November's election is the pinnacle of Vladimir Putin's attack on America.  Since 2016 and perhaps before, Putin has sought to undermine democracy in America, since American democracy, the fount of freedom in the modern world, is a titanic embarrassment to dictators and demagogues such as Putin.  Putin has some strange influence over Trump, and Trump throughout his Presidency has sought to emulate Putin and other autocrats.  Putin's intelligence services have massively hacked the U.S. government and American businesses, with nary a whisper of protest from Trump.  For all we know, Putin has access to the inner workings of all significant parts of the U.S. government, apparently with Trump's acquiescence.  

The American people, however, weren't prepared to knuckle under to demagoguery.  Last November, they stood by their democratic principles and freely elected Joe Biden President and Kamala Harris Vice President, thus delivering to Putin a massive defeat in his war against American democracy.  But Trump and his goon-followers, in the most unAmerican way, have disgracefully refused to participate in a peaceful transfer of authority.   They assaulted one of the most fundamental symbols of our nation, the U.S. Capitol, and besmirched it with their unAmerican, undemocratic, violent malice.  Trump's goons won for Putin.

But their victory was short-lived.  Even as I write, Congress, which had to temporarily stop counting electoral votes because of the mob violence, has resumed its work and will count the votes electing Biden and Harris.  Putin's victory will prove Pyrrhic.  Democracy has survived and won.