Central bankers are claiming that Bitcoin BTC
$67,177 is unfair. In doing so, they’re laying the foundation for high tax rates on Bitcoin — from mining to capital gains taxes — and even an outright ban.
But most of the economic evidence — even in papers they themselves publish — suggests that the central bankers are the true cause of our suffering via money printing and inflationary policies and settings.
The ECB argues Bitcoin is unfair
In a new paper by the European Central Bank (ECB), Jürgen Schaaf argues that Bitcoin is inherently unfair.
“In absolute terms, early adopters exactly increase their real wealth and consumption at the expense of the real wealth and consumption of those who do not hold Bitcoin or who invest in it only at a later stage,” writes Schaaf.
Schaaf, who is an adviser to the senior management of Market Infrastructure and Payments, argues that the wealth of Bitcoiners was stolen from non-Bitcoiners.
“The new Lamborghini, Rolex, villa, and equity portfolios by early Bitcoin investors […] are financed by diminishing consumption and wealth of those who initially do not hold Bitcoin,” he writes.
Instead of holding the inflationary policies of central banks responsible for perceived asset misallocation and general misery, he suggests Bitcoin will create economic despair.
“This redistribution of wealth and purchasing power is unlikely to occur without detrimental consequences for society,” he writes.
According to Schaaf, non-Bitcoiners should oppose Bitcoin and even work toward legislation against it, aiming to prevent a rise in the price of Bitcoin “or to see Bitcoin disappear altogether.”
Even while arguing for redistribution away from Bitcoiners, Schaaf argues it’s Bitcoiners are the ones doing the redistributing.
The paper also touches on Bitcoin’s inelasticity — the inability for more Bitcoin to be created — in the form of a graph illustrating how little Bitcoin will be available for late adopters.
The Bitcoin community lambasted the paper, with some, like Tuur Demeester, viewing it as a declaration of war.
On X, Schaaf further expounded on his theory. “Early holders’ wealth and consumption rise while others get poorer, regardless of whether they ever own Bitcoin,” he wrote.
Quantitative Easing
While Schaaf blames Bitcoin for economic dislocations, there is perhaps more evidence that central bank financial engineering wreaks more havoc on fiat-holding non-Bitcoiners than does Bitcoin.
For instance, quantitative easing policies — often labeled “money printing” — might have increased the price of stocks, bonds and other assets in the hands of the wealthy.
In a report by the United Kingdom Parliament House of Lords Economic Affairs Committee called “Quantitative easing: a dangerous addiction?,” the committee examined quantitative easing [QE] in response to the 2008 Global Financial Crisis.
“The policy has also had the effect of inflating asset prices artificially, and this has benefited those who own them disproportionately, exacerbating wealth inequalities,” reads the report.
Furthermore, in a paper published by the University of Massachusetts, the authors examined the effect of the Federal Reserve’s quantitative easing policy on income and wealth inequality.
“The impact of quantitative easing on the distribution income was at least modestly regressive,” the authors wrote.
They conclude that QE led to “modest increases in inequality despite having some positive impacts” on employment and the refinancing of mortgages.
Ultimately, the true effects of quantitative easing may be unknown to even the high sages of economics in their ivory towers.
“The effects of quantitative easing are poorly understood, in part because standard models of monetary policy predict that it doesn’t work,” wrote Vincent Sterk and Wei Cui of University College London.
Inflation
A paper published by Ohio State University Press highlights an international poll of 31,869 respondents in 38 countries:
“The disadvantaged on a number of dimensions—the poor, the uneducated, the unskilled (blue-collar) worker—are relatively more likely to mention inflation as a top concern than the advantaged.”
Moreover, a survey by the United States Census Bureau’s Household Pulse Survey found that inflation hurts low-income households the worst. For instance, they spend more of their income on food, gas and rent where inflation is higher than average. Low-income households cannot buy cheaper goods or more generic bands, like middle-income households, since they generally are buying cheaper goods.
Schaaf fails to convince us that Bitcoin will be the cause of our economic suffering. Academia and even central banks have, meanwhile, presented all the evidence necessary to suggest that maybe Schaaf and his colleagues are the problem.
Perhaps non-Bitcoiners “should realize that they have compelling reasons” to oppose central banks.
