Pierre’s Libertarian Economy

So, putative CPC leadership front runner Pierre Poilievre wants to rejig our economy and monetary policy to use cryptocurrency. In Poilievre’s mind, central banks have “too much power”, and expanding the role of cryptocurrency and blockchain technology in our monetary system would start to break that power down. 

In particular, Poilievre keeps claiming that the quantitative easing policy was equivalent to “printing money” to finance the government.  This isn’t really the case, but it’s an easy, pithy thing for him to say, and a lot of people simply don’t understand enough about government finances and the interacting systems in the markets that are involved, so they will gravitate towards his simplistic explanations. 

The most recent arguments are that somehow cryptocurrency can be a hedge against inflation. There are certainly lots of cryptocurrency advocates that argue that in fact cryptocurrencies can act as a hedge against inflation.  However, we have to recognize that in order to act as a hedge against inflation, cryptocurrencies have to maintain a general valuation that is ahead of the pattern of inflation. The problem here is that cryptocurrencies have been incredibly volatile for the last several years, so the argument of any one cryptocurrency - or even all of them - being an effective hedge against inflation. 

Then we come to an interesting problem with crypto:  vulnerability. Because blockchains are highly distributed, they are highly vulnerable to hacks - and unfortunately, it can be weeks before somebody notices. In so many ways, crypto returns us to the proverbial days of the “Wild West”.  The potential for this to make crypto theft an avenue for attacking a rival nations’ finances really should make us all nervous. 

Lastly, we should take a long look at El Salvador’s experiment with making cryptocurrency part of its national money policy. To call it a disaster is a kind description. At this stage in the development of this technology, I don’t believe that there is sufficient expertise in policy or in securing the technology domain to make it safe to incorporate into the money policy of a nation.