Here is the next installment of the Gradually, Then Suddenly series of articles/blog posts. If you haven’t read all of these articles yet, I’d recommend doing so immediately; they are an incredible educational resource.
In this article, Mr. Lewis delves into what is Quantitative Easing (QE), how QE distorts the pricing mechanism of an economy, why this creates economic instability, and how when the instability manifests in an economic crisis, the default central bank response is more QE(!). Welcome to Bizarro World.
History has consistently established that the experts are limited in the field of their own expertise, yet policies such as quantitative easing continue to be pursued, largely because macroeconomics and central banking is a monoculture, as Taleb describes. The mainstream policy position starts with the assumption that central banking is core to the function of an economy; then debate centers on what levers to pull and how best to manage the economy via central bank planning. Active management of the money supply via quantitative easing is taken as a given; it’s a question of how much and when, rather than if.
However, there remains an opposing economic view which argues that the very function of a central bank and the active management of the money supply is harmful to the economy. The opposing viewpoint cannot practically co-exist within a central bank because it is antithetical to the very function, which is why the monoculture exists and why a different course is never charted. Ultimately, the economic debate played out over the course of the 20th century and ended with what has become the current mainstream position. The consequence has been an economic system that relies heavily on monetary debasement and credit creation, both of which are achieved through quantitative easing.
Now that bitcoin exists, it is no longer merely the subject of an intellectual debate. Instead, we now have two competing monetary systems that present great contrasts: one attempts to create stability through active management of the money supply, while the other tolerates interim volatility in the interest of maintaining a fixed supply. For the last ten years, the bootstrapping upstart has been gaining ground on the incumbent system, as demonstrated by its adoption and steadily increasing value relative to other currencies. Opting in to bitcoin means opting out of quantitative easing, and while it may be a volatile path, the long-term trend will continue because central banks continue to pursue the very policy tool which bitcoin prevents.
Feel free to opt out. #BuyBitcoin