tl;dr: situations in Turkey, Argentina, and Hong Kong force us to recognize that our perception of sound value storage is not universal.
One of the challenges that Americans and the so-called “first world” citizens have when it comes to Bitcoin is understanding the inherent value.
People will ask about the “intrinsic” value and say things such as “aside from speculation, what is it good for?”
Financial Models and Mental Models
Trump, Brexit, and EU politics, notwithstanding, people in the West live in a relatively stable financial model.
Sure, stocks may be volatile on a given day or week, but the price of gasoline, bread, or cell phone service doesn’t change by 30% in a month. There’s some stability.
As a result, the paradigm of central bank-backed fiat currencies as the true definition of “money” is firmly implanted in our collective mind.
Financial Instability Leads to Changing Mental Models
On a recent trip to Turkey, I was discussing politics with a young couple from Istanbul. In their 30s, relatively well educated, and members of the professional and upper class, they were vicious in their assessment of President Erdogan.
In addition to his efforts to change history by, for example, removing the name of modern Turkey’s founder, Ataturk from the airport and, worse, the history books in the schools, they admitted to not feeling comfortable discussing their concerns with most other Turks.
In their mind, Turkey is on the path to becoming a fundamentalist, surveillance state, that is increasingly being guided by Islamic law.
That doesn’t work for them.
What’s more, their perception is that Erdogan is fomenting class warfare, using government handouts to the poor and lower classes to bolster his position and popularity.
Naturally, this costs money.
For a government, there are two ways to get money.
Taxing works…for a bit, until the rich people basically say “screw you, we’re out.” Either that happens in the form of emigration or “safe havens” like the Cayman Islands.
Though rich people are mobile, they still don’t want to uproot their lives, families, and homes to move to another country unless things are really, really bad.
However, they aren’t stupid, and at a point, they will figure out a way (legally-through loopholes, for example; or illegally get out of paying more than each person considers his or her “fair share.” Don’t judge them. You would do the same.)
So, the alternative is to Borrow it. This involves the central bank basically printing new money, creating an additional supply of money.
Given consistent demand for the currency (how many of us want Turkish Lira in our portfolio?), you don’t have to be a Ph.D. in economics to understand what happens.
The 5-year view below of how many Turkish Lira it takes to buy a dollar does a nice job of explaining it.
Given all of that, it’s not surprising that this particular couple owns Bitcoin.
Want more evidence?
Here’s a tweet from Diego of RSK, that drives home the same point albeit from Argentina — which, itself is a case study in horrific financial mismanagement by successive governments.
Originally, when I sat down to write this post, I wanted to make an observation about the protesters in Hong Kong closing the airport and singing a song from Les Miserables.
If you haven’t seen it, you should take a moment to watch the video. It’s powerful. I’ll wait
However, right now, I have to admit that the post has taken a slightly different turn than I expected. No worries, that happens, but if I had to guess what I was thinking at the beginning, it would be something like this.
Governments have gotten used to behaving a certain way because, for centuries, it’s been relatively easy to control the flow of ideas, information, and value across borders.
Hong Kong shows us that a Broadway musical about France in the 1800s can provide the ideological inspiration for a pro-democracy movement today. Without the Internet, that is not possible.
Argentina and Turkey show us that citizens who would have historically had no chance but to just “take it” can now make a choice to vote, not with their feet, but with their store of value.
These governments won’t make it easy, but as Pythagoras said:
“Thought is an Idea in transit, which when once released, never can be lured back, nor the spoken word recalled. Nor ever can the overt act be erased.”
The Hong Kong protesters may get quashed, but the idea will live on.
The governments of Argentina and Turkey may make it increasingly difficult for citizens to store their value in anything other than the Peso or Lira (that’s what capital controls are, after all), but the idea of a global, censorship-resistant, portable, store of value that requires no one’s permission to use is a genie that Satoshi let out of the bottle.
Thank you to my friend, Kubilay, for offering feedback on this post.
Global Movements was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.