As longtime readers know, I believe we are at the beginning stages of what will be historical paradigm level change across the planet. We sit on the precipice of the self-destruction of almost all the dominant institutions we’ve been accustomed to throughout our lifetimes. To borrow a bit of played out and painfully clichéd Silicon Valley lingo, everything is on the table for “disruption.”
Naturally, this doesn’t necessarily mean the paradigm that follows the current one will be materially better, but I am personally optimistic about what will emerge following a period of considerable confusion, hardship and conflict. In order to tilt the scales toward a positive outcome, those of us who wish to usher in a world characterized by human freedom, decentralization, self-government and kindness, need to recognize the most likely avenues we have to get there. Technology is obviously extremely important, as a recent move by Whisper Systems to thwart censorship demonstrates.
As Wired reported last week:
Any subversive software developer knows its app has truly caught on when repressive regimes around the world start to block it. Earlier this week the encryption app Signal, already a favorite within the security and cryptography community, unlocked that achievement. Now, it’s making its countermove in the cat-and-mouse game of online censorship.
On Wednesday, Open Whisper Systems, which created and maintains Signal, announced that it’s added a feature to its Android app that will allow it to sidestep censorship in Egypt and the United Arab Emirates, where it was blocked just days ago. Android users can simply update the app to gain unfettered access to the encryption tool, according to Open Whisper Systems founder Moxie Marlinspike, and an iOS version of the update is coming soon.
Signal’s new anti-censorship feature uses a trick called “domain fronting,” Marlinspike explains. A country like Egypt, with only a few small internet service providers tightly controlled by the government, can block any direct request to a service on its blacklist. But clever services can circumvent that censorship by hiding their traffic inside of encrypted connections to a major internet service, like the content delivery networks (CDNs) that host content closer to users to speed up their online experience—or in Signal’s case, Google’s App Engine platform, designed to host apps on Google’s servers.
It goes without saying how critical technology such as the above, combined with dedicated activists such as Moxie Marlinspike, will be to making the world a better place. Beyond that, we also need to understand what our adversaries will do. I define such adversaries as the defenders of the status quo, who will do whatever it takes to retain power and influence in the face of their increasing irrelevance. As it becomes more and more obvious to people that these legacy institutions have become so corrupt and bureaucratic that they do far more harm than good, their leaders are likely to resort to more and more authoritarian tactics in order to defend their untenable position. This is where we need to see opportunity as opposed to cowering in fear.
We are on the right side of history, while the old institutions are simply living on borrowed time. We must be smart about how we see the world and understand that Donald Trump is likely to react to such a situation quite similarly to a Barack Obama. Whoever’s in charge of the government will by definition work to preserve the power of government as opposed to the liberty of the citizenry. This goes for pretty much every political leader and government worldwide. As such, we must assume government will lash out in increasingly irrational and authoritarian ways in the coming years, as the old paradigm becomes unglued.
As I mentioned earlier, when a government reacts in an absurd and harmful way, we need to see this for the opportunity it presents as opposed to becoming overcome with fear concerning its inevitable near-term harm. A perfect example is the recent extremely destructive decision by Indian Prime Minister Narendra Modi to unilaterally scrap old 500 and 1,000 rupee notes, which merely represents a particularly egregious move within a broader push by elitist and status quo bureaucrats across the world to ban cash. As disruptive as this move has been, it also carries with it a significant silver lining. For example, it’s causing us to ask the really big questions we need to be asking.
As R. Jagannathan wrote earlier today in Swaraja Magazine, where he is the editorial director:
A philosophical question that economists need to answer after Lehman, zero-interest money, QEs, and demonetisation (in our case) is whether central banks ought to have that kind of monopoly over money.
Most free-market economists would agree that monopolies are bad, but they do not usually challenge the state’s monopoly over violence and law-making or the central banks’ monopoly over the issue and regulation of currency.
Leaving aside the state’s monopoly on some kinds of power, let’s ask whether a central bank’s money monopoly is worthwhile since it does not appear to have delivered the kind of benefits to the world in recent decades which can justify the conferment of a monopoly.
The fundamental reason why we have grown to love (or learned to live with) central banks is that we cannot remember a time when they did not exist. So the argument is better the devil you know…
But consider their track record…
The US Fed could not prevent or even moderate the 1930s depression. It took a world war to rescue the US economy from deflation.
The US government (and the Fed) reneged on their most important commitment – to link the dollar value to gold – in 1971. This link was crucial to getting the world to accept payment in US dollars. But once that got done, the US did not want to honour its commitment since this was costing it a bit. In short, central banks cannot always be trusted.
“Independent” central banks were never able to prevent governments from debasing the currency by resorting to huge fiscal deficits. So they could not maintain the exchange values of their currencies without creating hardships for their people.
Central banks have been particularly bad at predicting when money was too cheap or too expensive – the main job they are supposed to do – and we have seen that in bold relief post-Lehman, and with the ongoing Eurozone crisis and Japan’s never-ending stagflation.
In India, we were happy to assume that for Reserve Bank of India (RBI) governor Raghuram Rajan brought inflation down, but this is a story we concocted after noting that the man was talking a lot about inflation. We presumed that what he did must have helped inflation come down, but we can never be sure. But his predecessor D Subbarao spent five years chasing down both inflation and disinflation (pre-2008, post-2008, and post-2011-12) and was considered “behind the curve” on policy. As if one human being can predict the net outcomes from the individual actions of a billion-and-a-quarter people responding to inflation or deflation.
And now we have a new Governor, Urjit Patel, taking the flak for a decision he was only partially involved in – demonetisation.
But the real question to ask of Urjit Patel and the government that appointed him is not whether demonetisation was a good idea or whether it has been implemented badly, but whether either government or the central bank should have had this monopoly power at all?
That Patel and the Modi government are being attacked both by Left and Right for demonetisation leads us to a larger and more basic question: Could demonetisation have happened if the Indian state did not have a monopoly in central banking, and there were several money issuers vying for the citizen’s custom?
The answer is probably no, for it is only monopoly that assures central banks this kind of power. If India had another currency issuer, the RBI could not have demonetised the currency in one go. It would have had to announce a plan, and take the bad money out in stages.
But the central bank’s monopoly is really a consequence of the state’s monopoly on law-making and power. This is why states, despite being at odds with their central banks on the short-term direction of monetary policy, are equally keen to let them retain their money monopoly.
In the US, a private player launched a gold-based currency called e-Gold, but when it grew big enough, the powers-that-be had it wound up. Launched in 1996, e-Gold, founded by Douglas Jackson, allowed account-holders to make cash transfers to other e-Gold account-holders through its website. At its zenith, e-Gold was said to be handling more than $2 billion worth of annual transactions. (Read more about e-Gold here and here).
But governments can’t stand a rival who challenges their own right to mint currency, and so in 2009, e-Gold was shut down, ostensibly because it did not have a licence to transfer money. The Patriot Act, enacted after 9/11, gave the US government powers to do this.
The 21st century will challenge the idea of the state and its monopoly powers, but Step One in that process is whether central banks should have a monopoly on money.
The answer is no. Competition will be good even in the business of creating money and managing its ebbs and flows.
All of this reminds me of something I wrote recently with regard to the self-implosion of mainstream media in the post, ‘Then We Will Fight in the Shade’ – A Guide to Winning the Media Wars:
It is when you get desperate, scared and panicky that you make the biggest mistakes, and the legacy media is currently desperate, scared and panicky. As Napoleon Bonaparte allegedly said:
“Never interrupt your enemy when he is making a mistake.”
We mustn’t get in the way of the legacy media’s inevitable self-destruction. Part of this means that we do not self-destruct in the process. We need to recognize that there’s a reason independent, alternative media is winning the battle of ideas in the first place. For all the warts, mistakes and bad actors, the emergence of the internet is indeed the historical equivalent of the invention of the printing press on steroids.
The same mindset and strategy should be applied to the state as well. One thing I’m relatively certain of, is that as economies continue to decay under the weight of the status quo way of doing things, the incredibly corrupt men and women in charge of our dominant institutions will flail from one destructive, authoritarian action to the next. We must expect this and prepare to respond.
Technology will do its part by providing the necessary tools to transition from one paradigm to the other, but equally important will be winning the narrative when it comes to the 7 billion people inhabiting the planet. This is where websites such as Liberty Blitzkrieg and others will play an increasingly significant role in pointing out and articulating the harmful, irrational and destructive nature of the status quo response to challenges that arise. In this way, we can be sure to win the battle of ideas, which will be crucial to successfully ushering in a new age of human freedom, creativity, opportunity and progress.