tl;dr: It may be a stretch to say that the Wall St. Journal has an anti-crypto conspiratorial agenda, but there seems to be evidence to support it.
Right now, I’m kind of angry.
I’m a big fan of the Wall St. Journal.
I think the writing is excellent and I tend to agree with its free market position.
However, when I read The Coming Currency War: Digital Money vs. the Dollar by By Dave Michaels and Paul Vigna, I found myself aghast, wondering if there was some kind of conspiracy.
I do agree with a major premise of the piece, that US dollar supremacy is not a given,
However, I am troubled by a few aspects to the article which do readers a tremendous disservice.
Vigna and Michaels Chose Misleading Words
First off, Vigna, who should know better and who made a pretty weak defense to me on Twitter, opened up the article with a potentially very misleading statement.
“The future of money might be a digital version of the cash that’s already in people’s wallets — potentially upending the currency system that the world has known for many decades.
Such a future, of course, might be a disappointment to many libertarians and tech-savvy investors who are pinning their hopes (and in some cases their money) on private cryptocurrencies such as bitcoin.”
Calling Bitcoin “private” and fiat “public” implies the exact opposite of what the reality is.
Vigna claims that “public money” means “government-backed” and “private” refers to “any money not issued by a government.”
However, with 7 definitions of the word “public”, they left a lot of room for ambiguity.
After all, “private” can mean “limited access” or “under the control of a few” as in “private club” or a “private collection.”
Ironically, it is the US dollar that is “under the control of a few,” namely the Federal Reserve and Bitcoin which is “public,” because literally anyone can access it and own it.
Misleading Charts Biases Readers
In the middle of the massive 2-page spread, sits a chart entitled “Currency Comparison.”
On the surface, it looks like Bitcoin is a paltry, meaningless gnat of financial insignificance when compared to the total M1 money supply.
And this would be true.
However, there is a key point missing here.
Let’s look at the relative change in supply of each currency.
From 2009 until today, the total number of Bitcoin created has been about 18,000,000. We know that there will only be another 3,000,000 minted and we know EXACTLY when those Bitcoin will be minted.(source blockchain.com)
Alternatively, let’s look at the number of dollars in M1 circulation in 2009.
I’m just eye-balling the chart, but I’m calling it 1,400,000,000 (that’s 1.4 trillion).
In the same ten year period, another 2.4 trillion have been minted and there’s no predictability (given last week’s $250 billion overnight minting) or guaranteed end in sight.
The team at Pantera Capital points this out even more sharply
SOURCE: PANTERA CAPITAL
And the end result, over time,
SOURCE: PANTERA CAPITAL
As John Maynard Keynes said
“By this means [increase of money supply] the government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.”
― John Maynard Keynes, The Economic Consequences of the Peace
The conclusion from the Bitcoin is that it “still lags behind the total value of US Dollars in circulation.”
Well, of course, it will.
Every time there is a new dollar printed, it increases the total value of dollars in circulation.
If there were $100 yesterday in circulation and the Fed prints another $100 overnight, the total value of US dollars in circulation doubled.
Now, let’s say that yesterday, there were 10 Bitcoin in circulation. Overnight, let’s say 1 was mined.
Now, there are $200 in circulation and 11 Bitcoin. Yesterday, Bitcoin was 1/10th of the total USD market (10%). Today, since it didn’t double overnight, Bitcoin will be even less of a percentage of total dollars in circulation…only 5.5%.
Maybe a better way to do it would be the “Bitcoin Price Index.”
As everyone knows, in 2010, someone bought 2 pizzas for 10,000 Bitcoin.
That means a pepperoni pizza in 2010 cost 5,000 Bitcoin. Today, however, you can buy that same pizza for 0.001 Bitcoin. That’s a 50,000% increase in purchasing power of the same asset.
(using $10k BTC price and $10 pizza cost per Dominos, assuming tax/tip)1
I couldn’t seem to find a cost for a pepperoni pizza in 2010, but I think it is fair to assume that it wasn’t $0.000002.
In other words, the VALUE of Bitcoin over 10 years in terms of pizza purchasing power dwarfs the purchasing power of a dollar.
They Understate the Dangers of Central Bank-Controlled Digital Currencies
They talk about the appeal of central banks issuing currencies in terms of speed and cost benefits. All of these are true statements. Far superior.
They also highlight how China is most likely going to be the first central bank-issued currency.
But they fail to point out a few key things.
One…just because it is digital doesn’t mean that the same inflationary activities can’t or won’t be taken. Going full digital doesn’t change the nature of the central banks as tools of politicians (as we are seeing in the US). Quantitative easing in a full digital cash environment is still inflation with no checks on it.
Two…and this is minimized by putting it as the 2nd to the last paragraph.
“What you end up with is a situation where the government has potentially perfect surveillance into all the financial flows in the entire economy,” says Travis Scher, vice president of investments at Digital Currency Group, owner of the digital-currency trading firm Genesis Trading.
“In a world where a country like China issues its own digital currency and tries to move the entire economy onto that, it actually will increase demand for cryptocurrencies and digital currencies that are more private and create the potential for more autonomy.”
With a fully digital money, every single transaction in which you engage will be known to the government. In China, it’s accepted and known, but I don’t think most Westerners would want to live in that environment, given the choice.
Disappointed in Vigna and Wall Street Journal
Paul Vigna has been around crypto for a long time. I don’t care that he’s skeptical or even a hater, if he is. What I do care about is the lack of care and attention to a thoughtful presentation of the issues.
I expect more from the WSJ brand and I think they did their readers a huge disservice.
As a subscriber, I’m disappointed.
And as someone who wants people to be informed about how the value of their assets and savings is slowly getting eroded so they can proactively protect their interests (with Bitcoin or otherwise), I am angry.
The Wall Street Journal Does a Disservice to Bitcoin and Crypto was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.