Three days later, Rohan waited by the side of the stage as the founder of a bitcoin ATM company delivered his presentation. It was a huge hit.
The MC gave a brief background on Rohan before motioning him to the stage. Rohan walked on, feeling more nervous than he could remember ever feeling before. He didn’t prepare any slides, preferring instead to give a fluid talk, improvising slightly within the bounds of his talking points. At least that’s what he told Gavin. In reality, he just didn’t have the time to prepare a deck with so much city to explore in the two short days leading up to the conference. He walked on stage with a practiced nonchalance.
“Thank you for the warm applause. I hope by the end of the talk I’ll have earned it. I want to begin my presentation by asking a question. What is the most traded asset class in the world?”
He paced from one side of the stage to the other, before eventually floating back to center as he listened for answers. The audience cried stocks, bonds, derivatives and eventually currencies. Rohan waited for the crowd to tire of guessing.
“The largest single asset class in the world, is the United States Federal Reserve Note, otherwise known as the American dollar, colloquially referred to as the greenback. The dollar, the reserve currency of the world, is the most traded financial instrument in the world. Those green notes grease the whole global economy, and provide Americans with the exorbitant privilege of printing the world’s reserve currency. The dollar’s reserve status is what has allowed the United States to borrow and consume trillions of dollars’ worth of goods and services while producing little more than green promissory notes with an overnight duration and zero coupon. This note is the basis of the western financial system. That much is obvious to everyone here, and it’s something most of us who are here are not ambivalent about. But the question remains, how did it get to be this way? Well, I’ll tell you. It all started with a little meeting at the Mount Washington Hotel, in Bretton Woods, New Hampshire. Now, if you’ve already heard this story, you’ll have to bear with me. But trust me, it will all tie in at the end.”
He saw a couple disinterested looks in the audience, but trudged on.
“Many powerful men assembled at this phenomenal property in New Hampshire, after all, it would be taxpayers who paid the bill. Over White Beluga and Bordeaux, these gentlemen created the International Monetary Fund and the International Bank for Reconstruction and Development, which would later become the World Bank. These brilliant individuals also created a system of centrally planned currency pegs. Since our leaders always think themselves wiser than markets, they decided they could determine the ‘correct’ exchange rates and adjust them over time as needed. Why anyone ever believed they could figure out the optimal exchange rate at all times, we’ll never know, but in their infinite wisdom, they decided that the major European currencies would be fixed to the dollar, which would in turn be convertible to gold. All the wise men at the table agreed they would make the dollar their reserve currency, the denomination in which they held their foreign exchange reserves. The common wisdom was that a single dominant reserve currency would arise due to the network effect anyway, so why not chose one explicitly. A pact amongst friends, as it were. People argued it would provide global stability. Well, we all saw how that turned out.”
Rohan paused to allow a couple laughs.
“I won’t mince my words—the reserve currency status of the dollar has been one of the driving forces behind war, destruction, violence, famine and poverty in the world. But before we get to that, let me continue with my story.” Rohan paused to take a sip from his Evian. This wasn’t going so badly he thought, the audience looked intrigued, even a little shocked at his boldness. Guess they weren’t expecting this out of a money manager.
“So the dollar enjoyed almost a quarter century of reserve status, without crisis. More and more dollars were created as the government piled on loads of debt rebuilding Europe with the Marshall Plan and the various other alphabet soup agencies that were created in the period. This development slowly allowed the US government to wrap its long tentacles around every facet of life in America, all just by creating something out of thin air, the US dollar. Like I said, it all went without a hitch, until 1970 or maybe even a little earlier, when our European brothers began to sense something was wrong. They tallied up the numbers, and it just didn’t make sense. How could the US continue to honor the convertibility of the US dollar into gold when they created money at a pace far faster than that at which they accumulated gold? Slowly, but surely, they wised up and began to convert dollars to gold at the fixed rate of $35 per ounce. As American gold reserves dried up, Nixon faced a crisis. He had no choice but to shut down the gold window in 1971, in what would be known as the Nixon Shock. All of a sudden the reserve status of the dollar, that exorbitant privilege, was in danger.”
Rohan paused for effect before continuing, “The ramifications were felt instantly as the price of oil soared along with inflation. GDP fell by over three percent and unemployment skyrocketed to nine percent. The stock market cratered. Then fate played one of its many tricks. Along came this guy Kissinger, who had learned early on never to let a good crisis go to waste. If you’re wondering what I’m talking about, look up his involvement in the Vietnam and Bangladesh wars. But I’m talking about the Yom Kippur War between Israel and the Arabs. More specifically, a coalition led by Egypt and Syria. It was this cold war proxy battle, with the Soviets backing the Arabs and the Americans backing the Israelis, which led to the oil embargo of 1973.”
Rohan took another sip from his bottle, he was losing the crowd but he needed just a few more minutes before he could get to the real purpose behind the story.
“Bear with me guys, there’s a point to all this. Anyway, this guy Kissinger opened up negotiations with the Saudis and gave it an official sounding title: Joint Commission on Economic Cooperation. The outcome was this thing called a Technical Cooperation Agreement. The long and short of it was, the United States would support the Kingdom of Saud, both through martial and political means, and in return the Saudis would conduct the oil trade solely in dollars and buy US Treasuries with all their excess foreign reserves. The same deal of military aid and political air cover was dangled in front of the other major oil producers. Let’s just say this was one deal they literally could not say no to. As critical supplies of energy could only be purchased in dollars, developing nations that didn’t produce oil and gas were forced to accumulate dollars. Rather than buying dollars on the open market and devaluing their own currency, countries around the world began producing cheap goods for export, since the influx of dollars could then be used to buy energy. This was the driving force behind the exportled boom in Asia during the 80s. This pumped up demand for dollars, enforced by the US military, led to three decades of growth and economic dominance. You might remember them as your parents’ golden years.”
Now he could finally get to the good part, Rohan thought.
“But all good things must come to an end, and such is now the case with dollar’s status as a reserve currency. We’re seeing the cracks in the wall, countries all over the developing world have had it. In fact, Saddam Hussein, Hugo Chavez, and Muamar Gaddafi all met their demise because they supported alternative currencies for trade. But their overthrow only stemmed the tide. Slowly the movement is gaining momentum and bitcoin is our next move in the global chess match. I won’t bore you with details of why the dollar is soon to be dead, because if you didn’t know you probably wouldn’t be at this conference.”
Rohan counted another laugh, not bad, he thought. The crowd was clearly sensing they were soon going to get the money shot.
“Now, if we know the current financial system and the global system of trade, almost in their entirety are based on dollars, and if we submit that the days of the dollar are dead, what is the intelligent investor to do?
That is the question Gavin Folsom and I, along with our deceased friend Viktor asked during the days leading up to Cryptonomy. The only answer we could come up with, was to help build an alternative financial ecosystem, one that was uncontrolled by central planners, monetary do-gooders, armchair economists and corrupt politicians.
We thought we could build a closed ecosystem, far removed from the establishment, but we soon realized our folly. To reach the scale necessary for a paradigm shift, the ecosystem had to be connected.
Protected from intrusion and control, but connected so that resources could pour out of the commandeered system into the fair one that we’ve helped build. That ecosystem, I think we all realize now, is bitcoin. A peer-to-peer mechanism for transactions with independence, transparency, and stability the dollar could never achieve. Sure, one can point to the wild swings and ask, what stability?
What we mean by stability is in the predictable rate of currency creation, and the transparency with which the process occurs. Of course there are wild swings in the price of bitcoin, as with all nascent currencies. But it is simply a result of uncertainty. The uncertainty comes from the feeling that bitcoin may not be the answer, it might be some other cryptocurrency. Heck, we might even revert back to physical coins made of precious metals like in the Ancient Roman days. That uncertainty, and of course speculation, cause the wild price swings. But we at Legion, we’re ready to draw a line in the sand. We believe in bitcoin, and we are willing to stake our reputations and our wealth on it. We feel that if we all work to help bitcoin achieve its potential, the currency hegemony will be no more.”
There was a murmur of excitement from the crowd.
“And with that, it is my great honor to announce, that Legion Financial, headed by Gavin Folsom and myself, will be the first hedge fund ever to invest in bitcoin. We are giving institutional investors the chance to hedge against the collapse of the petrodollar. Of course that will be just one among a range of trade strategies to grow and protect our investors wealth in times of great upheaval, but it is a key component. It is what sets us apart from every other fund that claims to do the same. We offer a true alternative to traditional investments, an asset that we predict will appreciate greatly when the inevitable happens. Now for a bit of legalese, of course we can only accept accredited investors, you invest at your own risk, blah, blah all the other financial stuff I’m mandated to say by our beneficent overseers. My colleague Austin is standing over to the right with copies of our prospectus, so feel free to grab one. Minimum investment stands at $1 million, so please leave the prospectus for those that have that kind of money. I’m kidding, it has a lot of great information for anyone interested, and we have plenty of copies. And one final note, Legion Financial will be the first hedge fund to have the architecture in place to take initial investments directly in bitcoin. Yes, for all of you looking to escape your respective nation’s regulatory and tax burdens, we have a solution for you! Ok, my publicist is motioning for me to shut the fuck up. See you all on the other side.”
Rohan walked off the stage, feeling a rush like he hadn’t felt in years. The crowd’s excitement was palpable. They could feel this was a game changer. A real financial institution, though a fledgling one, was putting its full weight and support behind bitcoin. The crowd was elated by the prospect.
As Rohan left to go find his compatriots back at the booth, he felt a hand on his shoulder and turned to face the swarthy girl with an aquiline nose that he’d noticed in the front row. She didn’t offer an introduction.
“How can you talk of fighting this imperialist system, as you call it, while simultaneously benefitting from it, Mr. Kapoor?”
Her words carried a strange type of animosity, the kind that drew him into the conversation. Maybe it was just her British accent.
“Excuse me?”
“You denigrate the petrodollar while you simultaneously benefit from it,” she made an exaggerated gesture of looking him up and down. “That tailored suit and that fancy watch had to be paid for in dollars I imagine. Earned by exploiting the very same system you so eloquently criticize.”
Rohan notice her full-length cotton skirt and simple shirt, the only bit of decoration coming from prayer beads draped around her dainty neck. Her austerity painted a stark contrast to his own appearance.
“I suppose you’re right. I have benefitted from this arrangement. But what can I do? Desert the system I was born into and run away to be an ascetic monk? I don’t imagine that’s the most effective form of rebellion. Anyway, what’s your plan?”
“I’m a student. I study anthropology, so I’m hoping to go work with refugees once I’ve left uni.”
“That’s very admirable, and there’ll be plenty of refugees to work with if things continue as they are,” he trailed off. “But we all have our roles to play, I can’t help it if I seem to be enjoying mine a little more than most. I obviously can’t be expected to ask for million dollar investments wearing prayer beads.”
She turned over his answer in her head, thinking this man could justify drilling for water on Mars if someone asked him to.
“So you don’t find it problematic that you earn all this income from an exploitative system and use it for your own consumption? You talk a big game, Mr. Kapoor, but you’re just like the rest. You do all this research to criticize the system, but it’s the same system that pays your bills.”
"I suppose you're right. But luxury is simply the opposite of vulgarity. Someone famous said that."
“Someone famous also said that luxury is just artifical poverty.”
Rohan unexpectedly found himself at a loss for words. He left in a hurry to go find his team, but the peculiar girl's criticism stuck with him for a long time after their brief encounter.