The United States of Africa: An Idea Whose Time Has Come (Part V)
Plutocracy, Corporate Influence, and U.S. Currency Issues Which Africa Should Avoid
Plutocracy and Corporate Influence. The American landscape has seen a shift in its democratic contours. We now find ourselves facing an emergent plutocracy, where vast financial resources are strategically mobilized to secure political power. This power, once achieved, frequently extends its reach into the judiciary, working to safeguard the very corporate interests that set the wheels in motion. The classic republic, defined by representation and the common good, is being overshadowed by the machinery of wealth, which is ceaselessly driven to protect its own interests.
I. U.S. Fiat Currency
Earlier in U.S. history, the country’s currency was backed by gold (and in some cases, silver). The U.S. federal government stopped allowing citizens to exchange currency for government gold with the passage of the Emergency Banking Act of 1933. The gold standard, which backed U.S. currency with federal gold, ended completely in 1971 when the U.S. also stopped issuing gold to foreign governments in exchange for U.S. currency.
Since fiat money is not a scarce or fixed resource like gold, central banks have much greater control over its supply, which gives them the power to manage economic variables such as credit supply, liquidity, interest rates, and money velocity. For instance, the U.S. Federal Reserve has the dual mandate to keep unemployment and inflation low, and using fiat money can help it meet those goals.
The U.S. mortgage crisis of 2008 and subsequent financial meltdown tempered the belief that central banks could necessarily prevent depressions or serious recessions by regulating the money supply.
In short, the 2008 meltdown of the U.S. financial services industry was due to a total lack of transparency, a total lack of accountability, and a small group of very cooperative plutocrats who were driven by ego and insatiable greed which resulted in the explosion in the unregulated market of CDOs on the frontend and CDSs on the backend. Meltdowns occur when a plutocracy and corporate influence do not allow regulators to regulate.
II. U.S. Cryptocurrency
The main difference between fiat currency and cryptocurrency is that cryptocurrencies don’t require government backing, while fiat currencies depend on it. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
Cryptocurrencies represent a new, decentralized paradigm for money. In this system, centralized intermediaries, such as banks and monetary institutions, are not necessary to enforce trust and police transactions between two parties. Thus, a system with cryptocurrencies eliminates the possibility of a single point of failure - such as a large financial institution setting off a cascade of global crises, like the one triggered in 2008 by the failure of large investment banks in the United States.
U.S. plutocrats, who are ceaselessly driven to protect their own interests, are justifiably alarmed by a currency system which would be immune to government interference or manipulation.
Recent actions taken by the U.S. plutocracy include:
(a) the FTX debacle wherein Democratic members of congress were allowed to keep the $70.1 million they received in donations from Bankman-Fried/FTX when the sole purpose of these donations was to allow crypto regulations to be drafted by, and for the sole benefit of, Bankman-Fried/FTX;
(b) Operation Choke Point 2.0 which refers to apparently coordinated efforts by the Biden administration to discourage banks from holding crypto deposits or providing banking services to crypto firms on the basis of “safety and soundness” for the banking system. The term was coined following a wave of bank shutdowns that were triggered not just by financial stability concerns, but by the broader push to strangle cryptocurrency; and
(c) the U.S. Securities and Exchange Commission (SEC) policy of “regulation by enforcement” which has created little clarity for the market or investor protection in the digital asset industry. Nonetheless, forcing crypto companies to be tied up in seemingly endless and expensive litigation buys time for the U.S. plutocrats to maximize market share, control crypto regulation, and determine how to best utilize blockchain technology. Regrettably, this will not change until SEC Chairman Gary Gensler leaves office.
Further Reading: