why America should ban cryptocurrencies

A few days ago the Wall Street Journal published an article by Charlie Munger titled ” why America should ban crypto “.

Munger in the US is a real institution, not only because he is 99 years old and has been working in the financial sector at the highest level for 45 years, but mainly because he is Warren Buffett’s right-hand man.

Although he has been in finance and investment for 45 years, Munger is a lawyer, so he is very attentive to legal issues. He is also by no means an expert in technology and innovation.

The Wall Street Journal article

An article he wrote for the Wall Street Journal got a lot of talk, partly because it contains some real nonsense.

The most resounding one, bordering on nonsense, is the explicit call for the U.S. government to take an example from the Chinese communists.

During McCarthyism in the 1950s, a sentence like Munger’s could even have caused him serious financial problems, and he should know better since he was already almost 30 years old at the time.

In fact, he explicitly wrote:

“What should the United States do after banning cryptocurrencies? Well, another action might make sense: thank the Chinese communist leader for his splendid example of uncommon common sense.”

In other words, he asked the democratic United States, where he lives and thrives freely, to do something illiberal and liberticidal by following the example of a totalitarian dictatorship considering the latter splendid and common sense.

Such nonsensical reasoning casts serious doubt on whether Munger at his venerable age still has sufficient mental faculties to be able to discern between freedom and dictatorship, so much so that it even raises the doubt that he would prefer a dictatorship subjugated to his will to a free state.

Then again, such delusions of omnipotence are not uncommon in people of great power.

Criticism

The criticisms that have been raised against his article are numerous, so much so that his clear mention of an alleged “moral” superiority of the Chinese dictatorship has obviously found very few supporters.

The U.S. is not only a free country, but the vast majority of Americans are proud of it. In the rest of the world, too, they are considered among the bastions of freedoms and civil rights, precisely against those tyrannies that insist on denying them, such as China in the first place.

Only Munger is a true institution, and although age now seems to prevail in him over reason, he still has several supporters.

Indeed in some parts of his article, he reports correct information, but the conclusion he reaches remains aberrant.

Even his boss, the celebrated Warren Buffet, is now very old and very much against cryptocurrencies, and over the decades he has shown that he is not always able to understand innovation. Then again, Buffett and Munger approach to investing is very much about analyzing the past, and very little about looking for early-stage innovations that can have a great future without having had time yet to create a solid past.

Other absurdities

In his article, Munger writes that a cryptocurrency is a gambling contract with an almost 100 percent house advantage.

This is true for many cryptocurrencies, but not at all for Bitcoin, which along with Ethereum and stablecoins holds 80 percent of the crypto market.

Bitcoin is not a contract, and it doesn’t even have a “home” because Satoshi Nakamoto gave humanity his public and open-source protocol.

Munger, however, is too far outside the crypto industry to know and understand these things. Moreover, he is a lawyer, much more interested in mere regulatory issues than in actual innovation, especially when it challenges current regulations (which can always be changed).

In fact, it is clear from the article published in the Wall Street Journal that Menger is referring specifically to corporate-issued cryptocurrencies, thus making the huge mistake of completely ignoring that these constitute only a small minority part of the crypto market.

The avalanche of criticisms, often perfectly sensible ones, that have rained down on him for this ham-fisted, liberticidal, and very poorly written article suggest rather clearly that he would have been better off letting it go, and avoiding an unnecessary embarrassment like this. Not least because the utility of such a poorly crafted article is little more than zero.

But probably at his age, he can also afford to simply not give a damn and write whatever nonsense he wants, because someone who listens to him will find him anyway.