“Price doesn't actually exist as a concept on its own. Price is the relationship between the two items of value that are exchanged for each other.”
Or so says Chris Coney in the latest Weiss Crypto Sunday Special. And it’s not hard to see the logic in his statement as prices for consumer goods continue rising … or rather, as the value of the dollar is falling.
Which is why this week, Chris asked if there’s a solution to price gouging and overregulation to be found in crypto.
For his answer, you can watch the latest Sunday Special, or continue reading for the full transcript ...
Chris Coney:
Hi there, guys, and welcome to this week's edition of the Weiss Crypto Sunday Special with me, your host, Chris Coney.
So, today's topic is Bitcoin, decentralized autonomous organizations (DAOs) and price gouging. But first of all, take a look at this: Have you ever noticed that when you point the finger to blame someone for something — let's say this is the blame finger, number two — there are actually three times as many fingers pointing back at the accuser, like three, four and five?
So why am I telling you that? Now, consider this tweet that I just read by a U.S. senator. I'll quote it for you: “Giant grocery store chains force high food prices onto American families while rewarding executives and investors with lavish bonuses and stock buybacks. I'm demanding the answer for putting corporate profits over consumers and workers during the pandemic.”
That's Sen. Warren's tweet from Twitter.
Now, when I read this … well, I just applied my finger-pointing model. And instead of looking in the direction that they were pointing finger two, I just looked the other way, back at them at fingers three, four and five, in which direction they were pointing in.
So, as I pointed out when I actually replied and quoted this tweet on Twitter, price is nothing but the relationship between the value of money and the value of an item. And due to the laws of supply and demand, if demand for bread suddenly doubled, well, bread has suddenly become twice as valuable.
People are willing to exchange twice as many dollars for it, and the price is simply a reflection of that. But notice that the price doesn't actually exist as a concept on its own. Price is the relationship between the two items of value that are exchanged for each other.
And so, back to my tweet in reply to Sen. Warren. It is the unprecedented printing of new dollars that has dramatically increased the supply of dollars. And it's changing that side equation that naturally and automatically changes the thing that measures the relationship between dollars and food — the price.
So, we saw there, giant grocery retailers are to blame for price gouging and blah, blah, blah. The question I also posed on Twitter was, well, “Why blame the retailer?” What if they had to raise their prices because their wholesaler raised their prices?
And what if the wholesaler raised their prices because their transportation company raised their prices?
And what if their transportation company raised prices because the price of fuel increased?
And what if the price of fuel increased because the fuel companies had to raise prices, because the cost of labor rose in line with minimum wage laws imposed by the government?
Now, to be clear here, this is not a commentary or a judgment on whether the government should or should not do any of these things. All I'm doing is tying together the logical daisy chain of cause and effect, so that the real source of the problem can be identified.
If you apply a solution to something that's not actually the real cause of the problem, don't be surprised if it doesn't get solved.
So going back to my tweet here, where I quoted at the start this “greedy corporations” argument, it actually has a very specific belief at the base of it. It's the belief that businesses should turn themselves almost into public services in a crisis. So that is, if there's a crisis and then the cost of doing business rises, well, the belief is they should simply eat that by taking it out of their own profits.
Well, firstly, there are private companies that do that. They're called insurance companies. Secondly, there always seems to be one crisis or another. And thirdly, the problem with food retailing in particular — according to the research that I've seen — they operate on a profit margin of just 2.5%. That doesn't leave much room for absorbing any shocks to the cost of doing business. But politicians don't seem to care about that. That's just one of those inconvenient truths.
So, should private companies turn themselves into a public service in a crisis?
Well, no, because it's the government's job to provide public services. That's why the huge tax revenues go to them and that's what that's for. So for them to say that's not enough is really to betray a lack of resourcefulness. I mean, misallocation of capital is one thing that governments are famous for and why so many people now begrudge paying taxes. They feel like they're not getting value for money when they pay taxes.
I mean, the reason everything original comes out of the private sector is because of the entrepreneurial spirit. The raw creativity that figures out how to do a lot with a little, and whether that will be a business that starts with a thousand dollars and turns it into a billion dollars or whether it's starting to tinker with electronics in your garage and then building Apple computers.
I've said that the private sector should not become the public sector. So should the public sector become more like the private sector? Well, no; neither extreme is really good, is it?
But perhaps the whole debate itself is just on too lower a level because all of this exists in what I would call the meta problem that everything seems to come back to: the lack of sound money. A sound money system makes it far easier to draw lines of responsibility and accountability.
And I suspect that's why governments don't want a sound money system: because then they'll become accountable to a force higher than themselves.
And that ultimately brings us to Bitcoin. On the first of January 2021, the price of one Bitcoin was $29,349. And as I record this, the price of one Bitcoin stands at $47,340, a 60% price increase. Why isn't Sen. Warren complaining about giant corporations price gouging Bitcoin? Because price is simply the measure of how much of one item someone is willing to exchange for another item.
What's the price of one Bitcoin in gold? Well, right now 26.19 ounces of gold buys one Bitcoin. Well, how come? Well, because price is simply the relationship between two items that can be exchanged for each other.
So, after watching this, whenever you see any of those stories about price gouging or inflation, remember the fingers that are pointing right back at the accusers, and then start looking at how they are contributing to, if not creating the very problem.
It's not the prices of goods rising. As I've said before, it's the value of the dollar falling.
So that brings us to one final question then: Is there a better solution than this constant tug of war between the public sector trying to arm wrestle the private sector to do its job for it?
Well, I'd say yes. And that solution is already here.
I'm talking about DAOs, D-A-Os: decentralized autonomous organizations. So, these are organizations that are formed from the bottom up and make use of blockchain technology for things like funding and governing specific things.
Now, the scope of a DAO can be broad or narrow. I don't know if you heard about this one, but ConstitutionDAO was formed specifically for the singular purpose of purchasing a copy of the U.S. constitution from a Sotheby's auction.
So that's an example of a very narrow purpose DAO. But why not make a DAO for every town and city, is my question. Why not make sub-DAOs within that for each district within each town and city?
I mean, we even call the government “the administration.” That's their only purpose: administration. I mean, administration is just a fancy name for paperwork. It's not like the creation of any particular value the government does, like an inventor. The government just provides a management service for public services. And if there's one thing that technology continues to do, it's to automate time consuming and expensive administrative functions.
So DAOs are a new technology that provide the tools to allow people to form their own organizations and then govern them autonomously and transparently, more importantly. Imagine a scientific research DAO, which funded research into heart disease, and it would have the obligation to publish its findings freely online. That would turn any of its scientific discoveries into public goods, but it would be funded directly by the people and administered at very low cost, thanks to blockchain technology.
Now that would actually balance accountability on both ends in a private sector and public sector. Because, like, Pfizer (NYSE: PFE) got research funding from the government — that's public money — to create a drug, which it then sold and made billions in profits from.
So don't get me wrong here, I'm not just totally on the side of the massive corporations doing whatever they want to do. Absolutely not. I'm looking for accountability on all ends here. So, using my research DAO example here for public goods like this — like drugs in a crisis, say — DAOs will prevent corruption on both the private- and public-sector ends.
I mean, every time the cost of administration is reduced, it leaves more money in the pockets of whomever it would've previously come from. In the case of my scientific research DAO, instead of having a charity like, say, the British Heart Foundation and all of its administrative costs and its offices and all that sort of stuff, more money would be available to fund the actual research.
Now, I think this may be the answer to the common question of, well, who will pay for the roads if the government doesn't? Well, the answer in the world of DAOs is the same people that paid for them before: the citizens.
The only difference might be that there'll be a vast reduction in the cost of administration, leaving more money to spend on the actual roads.
So, there we go: Bitcoin, DAOs and price gouging, an interesting recipe. Let me know your views on all this by tweeting at me via my account, @ChrisConeyInt, or by sending us an email.
But that is going to do it for this week's edition of the Weiss Crypto Sunday Special. So keep a close eye on your inbox for next week's episode. But until then, it's me, Chris Coney saying, bye for now.
