The Northern Ireland Imperative

Living on our planet, today, requires a lot more imagination than we are made to have. We lack imagination and repress it in others.

Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable.

Imagination is not innate, it’s a developed social skill. My two-year old son is currently passing through an early developmental phase in which his thought process is simple cause and effect – “if I put this round block into this round hole, it falls through.” My daughter, on the other hand, is turning five tomorrow and is flexing new areas of her brain and consciousness that allow much more complex forms of play. Basic pretend play has evolved into creative play, wherein she takes great delight in regaling stories about made-up characters and worlds. As adults, more often than not, we need taken by the hand by the likes of JR Tolkien or Phillip Pullman to indulge in anything beyond the concrete forms of thought that mark our daily thought processes.

Imagination gives way to creative impulses, and creativity is necessary for development. The problem is, like in any unused muscle, imaginative flex easily atrophies. As we experience the long tail of the industrial revolution and, as ‘developed societies’ step out into the digital age, author of influential Antifragile, Nassim Taleb, suggests that our atrophied modes of thought are no longer sufficient to guide us. In point of fact, he goes as far as to say that the world we’ve created now creates us. We become bound by our limiting knowledge. As if limiting knowledge isn’t enough, Einstein believed it a lesser quality in any case, claiming, ‘imagination is more important than knowledge, because it embraces all there ever is to know and understand.’

In Northern Ireland it could be argued that we’ve had decades of stifled imagination. Our focus has been on navigating otherness, sectarianism, and sometimes just survival. As a people, long known for our creative story-telling and imagination, we would argue that we’ve wittingly or unwittingly stagnated and prevented our individual collective imagination to flex. It’s my belief that this torpidity has made us economically ill-prepared for the emerging digital world. When we identify how we have passively allowed the flattening of our collective imagination, it is possible that we can mitigate against further repression and enjoy the same economic success in the transition to the new age, just as we did at the height of the industrial era. This must begin with imagination.

Imagination is the fertile ground for creativity. Creativity sees problems and creates solutions. Creativity solved the problem of light when Thomas Edison introduced the lightbulb to the world. Creativity solved the problem of mobility when Henry Ford introduced the Model T to the world. Creativity solved the problem of communication when Steve Jobs introduced Apple’s iPhone to the world. Creativity solved the problem of distribution when Jeff Bezos founded Amazon. Economically embedded creativity is the difference between a thriving society and one that is repressed.

For this reason, sound economics and its structure are foundational to any thriving society. It’s no secret that there’s a direct correlation between financial wellbeing and mental health. This is equally true on an individual level as it is at a sovereign level. If national wellbeing is important, minimising future financial downside for any nation-state is an obvious risk management strategy to be undertaken.

Here are some examples we might begin with. Since over 25% of Northern Ireland’s economy is public sector, we are exposed to a kind of sovereign counterparty risk. It is my belief that the simultaneous erosion of trust in government competency, in part catalysed by botched pandemic responses, and the increase in disruptive decentralised finance (DeFi) technologies, will serve to reduce the size of governments in the near future. Nation states requiring less taxation and offering more competitive or free environments within which to live and do business, will result in the necessary shrinking of governmental departments. Such a transition places civil service employees in the ‘risk-on occupation’ category. This is an instant threat to a quarter of our economy, and it’s not a case of ‘if’ such jobs are threatened, it’s a case of ‘when’.

Furthermore, the fate of our remaining productive economy lies in the hands of the Bank of England’s Monetary Policy Committee (MPC). In other words, the MPC’s nine members, decide the UK’s interest rates, inflation rates, money velocity, and economic health metrics. Similarly, in the US, some 100 individuals at the Federal Reserve and Washington decide the financial outcome of 330 million Americans and many more nations besides, given that the dollar is currently the world reserve currency.[1] The centralisation of currencies is a relatively modern phenomenon and wasn’t always thus, but it assumes that these small groups know what’s best for us.

History has shown us that this is not the case. Soviet Russia attempted centralisation on a nationwide scale across every aspect of national life. Three hundred people believed that they could co-ordinate and control a country spanning 11 time zones, myriad industries, ethnicities, and socialities. It couldn’t. Many years later, I observed the reverberations of these domestic policies after a brief spell of living in Irkutsk, Siberia. Economic scars that deep don’t easily heal.

On the other hand, the western free market proved that encouraging creativity and imagination could provide abundance. With each of the aforementioned highly imaginative problem-solving technologies, the West became more productive and more efficient. Productivity and efficiency increase meant that goods and services were cheaper. A contemporary and oft cited example is that of Netflix. With upload speeds orders of magnitude faster than dial-up modems, Blockbuster’s once enviable distribution network paled in comparison to Netflix’s ability to stream endless entertainment right into people’s homes. The price of one movie from Blockbuster now allowed the consumer countless films, without the hassle of a trip to one of Blockbuster’s stores, now no-longer viable with all of their attendant overheads and costs.

Technology, then, has a deflationary net economic output. This is pistols at dawn with our current economic model largely influenced by John Maynard Keynes during the early 20^th century.

In 1971 President Nixon announced that the US would be leaving the gold standard during which the dollar was pegged to gold reserves. This now infamous ‘gold shock’ brought in what became a kind of experiment. ‘Fiat currency’ was born. Many critics of this fiat system would point to 1971 as the point at which many ills beset the Western world.[2]

Now, exactly 50 years down the track, Central Banks and Governments, in their centralised wisdom, have been attempting what is almost universally accepted within investment circles as a Houdini trick of trying to escape economic gravity by printing money. This is called inflation. By manipulating interest rates down and by increasing the monetary supply (fiscal stimulus), they are intentionally creating inflation in a bid to steer the global economy out of the shock of shutting it down during the pandemic.

There’s no doubt, in the current flawed and broken system, stimulus and its bedfellow of lower interest rates, were the only tools available to steer a course out of the current economic mire. This is, however, not unlike giving chemotherapy to a cancer patient; at some point you have to stop administering these toxins, otherwise you poison the patient to death.

What effects do these measures have on wider society? In a nutshell, inflation is a form of tax on the poor. Simultaneously, it accretes more wealth to the asset rich, and so the chasm between the upper classes and the middle and lower classes has widened considerably. As someone eloquently put it in a tweet appearing on my feed this morning ‘the middle class are now toast.’ Purchasing power is decreasing by the month, and unless you’re experiencing pay rises at the real rate of inflation, you are, economically speaking, going backwards. In spite of almost weekly all-time highs, even the best performing equity markets are simply keeping pace with inflation.[3]

Put another way, inflation is a violation of private property. The work that one does (in physics is represented by the formula energy/time), is debased or devalued through the arbitrary introduction of more of the tokens (money) reflecting one’s efforts. Under current monetary policy, these tokens are devalued. Naturally, populations, having lost a reliable store of value, move to a higher time preference manifest in unrestrained consumption (often called ‘growth’ by contemporary economists) at the cost of prudence. Sadly, the poor and the environment are not on the benefactor list and so discussing solving economic injustice or climate change out of this model are non-starters and something we’ll discuss in future essays.

‘For how long can we continue on this path?’ is the trillion-dollar question that investors and responsible economists are asking every day. Negative bond yields and frothy asset bubbles are, historically, harbingers of economic turbulence ahead. In 2008 we experienced a global economic shock, largely due to a financial instrument called subprime mortgages. The rot with these began with the aforementioned euro-dollar complex, but essentially debt ran away on the banks and because they were functioning like a giant global ponzi scheme, with the contagion spreading, they ran out of liquidity. Finally, some banks needed to be propped up by government, or in reality, by tax-payers, as they were deemed ‘too big to fail’. The fall-out would have been so catastrophic for society, that governments had no option and so on January 3^rd 2009, The Times reported that ‘Chancellor [was] on the brink of second bailout for banks.’

Little did that particular journalist know that their words would be recorded in time immemorial by being written in code in the Genesis block of the Bitcoin blockchain.

As a technology, Bitcoin is then, relatively new. However, the idea had been mooted in history. Systems theorist, inventor, architect, and general polymath, Richard Buckminster Fuller when asked in 1983 how he would solve current geopolitical problems without resorting to violence, said:

“I will always try to solve problem by some artifact, some tool or invention that makes what people are doing obsolete, so that it makes this particular problem no longer relevant. My answer would be to develop a world energy grid where everybody is on the same grid. All of a sudden, there would be no problems anymore, no international troubles. Our new economic basis wouldn’t be gold or dollars; it would be kilowatt hours.”

In the shadows – micro-dosing messages to developers and subsequently releasing the Bitcoin White Paper prior to launching the code – the pseudonymous character, Satoshi Nakamoto, introduced exactly this to the world. He brought us a new economic system that was incorruptible. Satisfying the 5 qualities of hard money – salability, divisibility, durability, portability and scarcity – Bitcoin would now show the glaring limitations of fiat currencies and precious metals. Encrypted code – produced and protected by the thermodynamic process of energy expenditure – encapsulates, mimics, and symbolises our toil, better than any other financial technology ever conceived, and does so by orders of magnitude. This radical new system records every transaction on an immutable ledger, irreversibly locked in time, such that it’s impossible to corrupt. It is a currency with an inelastic and finite issuance of tokens that cannot be manipulated, just as the laws of maths cannot be manipulated. More technically put, it is the base-layer for trust-minimized commercial interactions or transfer of private property, mitigating need for any centralised or controlling party.

Perhaps now, more than ever, it’s a technology whose time has come. At the time of writing, the US Federal Reserve’s balance sheet is $8,446 trillion in debt and with another $500 billion of stimulus, will be 10 times the leveraged debt that was inflicted during the 2008 global financial crisis. All of this stimulus or easy credit from Central Banks has been necessary to prevent a global economic implosion in the broken fiat currency experiment. Most investors are witnessing this ‘crack-up boom’ (as Austrian economists call it) and there is a growing disquiet that the shock of an impending collapse is imminent.

Finally, zooming in again, we maintain that Northern Ireland is somewhat stymied owing to our political history. Where once upon a time being tethered to the UK injected energy into our economy, we believe that this arrangement is now detrimental and unnecessary for our society. Relying on a failing government’s largesse forces us into a constant check-box governance exercise, and will never allow us to financially, or morally mature as a nation. As economics philosopher Robert Breedlove claimed, ‘if the base layer of money is corrupted, everything built on top of it also tends towards corruption.’ Nation-state regimes have abdicated responsibility of this gate-keeping of resources that they gradually bestowed upon themselves. Powerful elites and governments can no longer be trusted in their controlling of societal functions. Centralised dynamics, so over-reaching precisely because of the ease with which governments can print money and therefore grow the reach of their machine, have polluted our society, robbing it of energy, property rights, wealth creation, and the grounds for human flourishing. Should we witness a collapse of sovereign currencies and the eventual and right separation of money and state, their propensity to scale into every aspect of life will be much more limited.

We no longer have to imagine a world where war is disincentivised, or financial freedom is possible, or where innovation is rewarded, or where the voiceless are heard, or where our energy is not plundered. We believe that the disruptive disintermediation a new protocol like Bitcoin provides, allows us to set higher aspirations. We can now hold ourselves to our own highest standard, and in doing so, can all rise together in what is not a zero-sum game.  

A new socio-economic revolution is unfolding and we at NI Bitcoin are committed to helping Northern Ireland not only imagine being part of it, but to be integral in its contribution to it.

[1] With the exception of the murky world of the euro-dollar system, which is so opaque, no one seems to be able to even guess what volumes of dollar are created here.

[2] See https://wtfhappenedin1971.com for a comprehensive overview of this perspective.

[3] We believe CPI to be a flawed metric as a measure of inflation since any real measure must include assets like cars and houses to be real world accurate.