Following Bitcoin will Obliterate your Trust in Corporate Media

"No long term thinking allowed" is far too stupid for people to believe explicitly, but many believe this is correct implicitly

One fascinating thing about following bitcoin is that it obliterates your trust in any kind of corporate media. It doesn't mean that I think they are lying, all the time, so much as that I see newspapers, TV, etc, as being clueless about long term trends.

It's as if they are all following a rule that says "no long term thinking allowed." Of course, this rule would be too stupid for anyone to believe it explicitly, but implicitly, you see this play out all the time. It goes like this:

News: "Look how far bitcoin went down today, doesn't this show that theories about bitcoin working out are wrong?"

Me: "over the long term we are still way, way, way up"

News: "Yes but long term changes don't mean anything. There is no guarantee that they will repeat."

Me: "Why doesn't the same logic apply to short term changes as well?"

News: "But look how far it went down these past few days/weeks/months!"

Me: "Yes but zooming out, adding more context, such as a few years, makes it clear that these drawdowns are regular occurrences and bitcoin has consistently come backfrom drawdowns much bigger than this one."

News: "That doesn't matter, the past doesn't predict the future"

Yesterday and last month are also the past. Why is performance since yesterday a better proxy for the future than 'performance over the 3/5/10 years?"

Or, volatility:

News: "See how volatile bitcoin is? Clearly it's not stable."

Me: "The volatility is markedly asymmetric; nobody complains that their assets go up in value too fast. Bitcoin has been, by far, the best performing asset of the past decade, something like 7 out of the past 10 years. People speculating on it drive the short term volatility; those people give up during crashes; while the coins migrate towards people like me who buy more when the price drops. If only true believers bought bitcoin, the price would go up much more smoothly. Some people taking short term bets on bitcoin says more about them than it does about bitcoin. "

News: "But there's no guarantee that this upside will continue!"

Me: "Ok, but doesn't the same lack of guarantee also apply to volatility? Why should I believe that the volatility is going to continue but the upside won't? Why should I believe that the volatility is intrinsic to bitcoin but the upside isn’t?"

News: "But look how much it's changed over this recent short time window"

And on and on. What happens TODAY is big and loud and meaningful. What has happened over the past 3/5/10 years, who knows, anything could happen again!

Once you see this pattern inside bitcoin, you'll see it outside bitcoin, too.

Anyone who has studied world history knows that currency collapses and nation-state failures happen quite regularly. When you read the history books about the lives of our ancestors, you can usually see the failure of a state coming in advance. The signals are things like “intense polarization between fractious groups of elites, while ordinary people struggle, foreign enemies bide their time, and then ecological disasters like plague and famine finally knock the whole thing over, to the shock and surprise of the squabbling elites.” Does that sound remotely familiar today?

“no system of government, no economic system, no currency, and no empire lasts forever, yet almost everyone is surprised and ruined when they fail.”

Ray Dalio, The Changing World Order: Why Nations Succeed and Fail

But of course, these type of events would be a huge shocker, unimaginable to newspapers and commentators and thought leaders today. Is it possible that when people are paid to share opinions and thoughts about “what has happened in the past day”, they are going to start to become incapable of reasoning and thinking critically about longer term trends? Is it possible that when people’s compensation depends on them repeating stories about the legitimacy of the apparatus that supports them, they aren’t going to question whether or not the whole thing is going down?

This doesn’t mean they won’t talk about longer term trends; it simply means that you won’t see stories thinking critically about the trends. They’ll repeat whatever the state sources say is the long term trend, without asking whether or not this lines up with the data.

Look at the 40 year history of interest rates + inflation. What you'll see is that ever since peak rates in the 80's, the rates kept dropping, punctuated only by occasional rises.

Notice what’s going on there: the grey bars indicate recessions. Each one of those recessions came after a rate increase. See the tiny blip on the right, representing the tiny tiny increase in interest rates? Does that seem commensurate with the market vomiting up blood?

What it would look like if the dollar were failing, and we are approaching a Chernobyl moment in the prevailing world order? I suspect that after 40 years of interest rate cuts fueling increasingly financialized growth, we have finally reached the point where inflation is back and in such a big way, that stopping inflation means killing the global economy.

I’m not interested in selling you on bitcoin, so much as the broader point: try to understand what it would feel like to live though history. Try to understand longer timeframes. Try to imagine what it would be like to live through the French revolution, the collapse of the Qing dynasty in the 20th century, weimar Germany, or the transition of the Roman republic into empire. All of those stories seem idiomatic of the kind of world I think we are headed into.

If the dollar had failed, would they put it on headlines? Or would the stories say, “economic experts predict a bit of turbulence followed by smooth sailing ahead?”