A study by Red Flag in June 2018, showed that about 120,000 people say they own some kind of cryptocurrency in Ireland. Millennials are 3 times as likely to own cryptocurrency as the average person. What is it about Bitcoin, the most widely held, that is so attractive to this age group? Irish Millennials currently face a number of headwinds :
- They owe €200 Billion for a property binge leading up to 2008 that they didn’t benefit from. Instead of burning the bondholders, the government burnt the millennials. David McWilliams thinks we should be borrowing even more now. Will more debt solve a debt problem? Maybe the government should be scaling back its size and improving the tendering system to private companies instead of increasing their debts? Maybe the only way to force this change is to remove their ability to borrow money so easily?
- The Euro printing machine is in overdrive. This makes our Euros worth less and disincentivizes saving. The ECB says it will do Whatever it Takes ™ to maintain stability. This bailout mentality penalises savers, privatises gains and socializes losses. Contrast this to Bitcoin, which can’t be inflated, bailed out or co-opted in a crisis.
- Public pensions and publicly financed home care are due to rise by 66% over the next few decades. Who is going to pay for this? Ronan Lyons sums up how serious the situation is here. You can’t confiscate Bitcoin easily to pay for government services that taxpayers didn’t sign up for. Of course our generation wants to help the elderly. Many of us would just prefer to finance our own solutions.
- Over-dependence on tech and pharmaceutical multinationals. If there is a tech recession in the US or a crack down on our tax haven status, the first jobs to go may be the sales and admin roles based in Ireland. We can’t rely on tech incumbents forever. Portugal and South Korea have declared cryptocurrency trading free from capital gains tax. Ireland has claims to be ‘pro-blockchain’ but there has been little legislation to signal this.
- Unaffordable housing. Irish people historically use their house as a store of value due to the tax benefits (no CGT). There is no equivalent tax break for renters. Add to that the asset price inflation caused by QE and you get a rigged market. Some believe property as a store of value it will lose its Monetary Premium, if Bitcoin takes off. Maybe Irish Houses become cheaper as more people realise Bitcoin is a better store of value than a house. Will there be less hoarding of land?
- The Government Housing and Healthcare market are not functioning properly. The Government provide 80% of healthcare spend, about €20B and are the largest owners of the €370B national land stock. All their assets have been estimated at €500B+ . If deregulation of taxis worked, why can’t we do the same for housing and healthcare? No taxi driver got any bailout, government loan or tax break and yet the market didn’t go into some kind of a bubble or collapse. The market balanced supply and demand and we can all get taxis easily today. The problem is that it caused short term pain for taxi drivers, a small voting group. Short term pain in housing and healthcare would be much more widespread and therefore politically impossible. We need a new way to approach the problem.
Ireland went from worst to best performer in Europe by combining a business friendly, low tax environment with strong rule of law. This format has worked in, Singapore, Malta, and Hong Kong among others. China’s threat to the rule of law in Hong Kong shows how free trade alone isn’t enough. Low friction commerce must come with strong property rights. Bitcoin is the digital equivalent. Low friction money, with strong digital property rights.
Bitcoin is the first, un-inflatable, un-confiscatabale, truly global money. But most importantly it is free from politics. When a number of the big Bitcoin companies tried to collude and change the code in 2017, it backfired, confirming that it is the individual user who has control. Much like torrent software, Bitcoin is extremely difficult to stop or change because it is cheap and easy to run the software at home.
Bitcoin, if it succeeds, it should act as a check on governments and central banks. Bitcoiners don't want special treatment, just an equal right to compete with the dollar or Euro. That may be the Central Bankers biggest fear, that people realise printing money without limits only benefits the already wealthy. And yet no Irish economist has taken a stance in favour of it. It is because Bitcoin questions one of the dogmas of today's economists. The need for a Central Bank.
David McWilliams sees a swing towards the left coming in Ireland but I’m not sure. I think we’re moving from the current, populist attempt to attack the rich to an era of taking personal responsibility for our own finances, via Bitcoin. David is a flexible thinker though and my guess is he will side with his friends Max and Naseem soon and come over to the dark side.
Disclaimer: I’m long Bitcoin.