Macro & Cheese – Robert Hockett: FTX and the Fall of Cryptocurrency

All digital currency is not created equal. Its technology can potentially be used as a force for good or a force of evil. Robert Hockett joins Steve to discuss both. Let’s start with the evil.

The collapse of FTX, one of the world’s largest crypto exchanges, is still sending shock waves through the mainstream and financial media. It seems that only MMTers are unsurprised by it or the chain reaction, as other crypto schemes are tumbling apace. Bob describes how the collapse follows the same pattern as the junk bond bubble of the 80s and the sub prime mortgage crisis in the aughts. Prices are driven up as more people crowd the market, eager to hop aboard a new investment opportunity. You don’t need a Ponzi to have a Ponzi scheme. And apparently you don’t need to produce anything of value in order to generate huge profits… for a while.

“The irony is that in every one of these cases, there is a clue in the name of the product in question that ought to warn you. If it’s called a junk bond, there’s a reason for that word “junk” being used. And if it’s called a sub prime mortgage loan or sub prime mortgage-based product, there’s a reason for that “sub prime” term. Similarly with cryptocurrency or crypto assets, one of the most ironical names ever conceived for this kind of product. If the word “crypto” comes into it, then that’s a pretty good tip-off that there’s something non-transparent about it, that there’s something opaque and occluded and difficult to understand about it.”

Bob and Steve talk about the development of Central Bank Digital Currency, or CBDC, which will be as safe as a nation’s fiat currency—Bob likens it to the introduction of the greenback dollar in the 1800s. None of this is to say that we at Macro N Cheese approve of the Federal Reserve’s ideology or actions; a neoliberal system will have a neoliberal central bank. No big surprise there.

Robert C. Hockett is an American lawyer, law professor, and policy advocate. He holds two positions at Cornell University and is senior counsel at investment firm Westwood Capital, LLC.