Thread by @Santiag78758327

The Real-Time Tragedy of Aggregation in the Age of COVID19

1/ The current health tragedy surrounding the spread of COVID19 cannot be discounted, however the real tragedy isn't the health crisis, it's the aggregation of power (both economic / political) with the virus as pretext.

2/ This thesis is clear based on 2 trends:

a. The consolidation of monetary power with "the Fed" in terms of money creation -> disintermediation of banks.

b. The destruction of global SMEs during the current supply / demand crisis to the favor of large e-commerce.

3/ Both consolidations have a common thread - digitization. In the former, the aversion to un-monitorable cash drives credit creation via CB ledger adjustments & swap lines, culminating in the CBDC issuance. In the latter, the consolidation around e-commerce supply (Amazon).

4/ This thread is inspired primarily by the latest @RealVision interview with @scientificecon. My admiration should betray the fact that I believe this endorsement to be incredibly underrated:

https://twitter.com/ttmygh/status/1263792558527963139?s=20

5/ The main takeways from the interview, for me, was how lower interest rate policy w/out conditional credit creation by the Fed has two primary impacts:
1. Intentional creation of asset bubbles for the long game of power consolidation
2. Disintermediation of small banks for same

6/ Why are CBs interested in fostering / supporting credit bubbles? W/ out conspiracy I think it's because of the natural incentives provided by their charter clashing w/ the incentives of large banks to control capital flows. CBs have hit an influence limit but want more.

7/ As each credit bubble creates systemic leverage and inevitable busts, the markets become increasingly dependent on monetary policy. Reserve currency status has provided for an exceptional privilege in this regard for the Fed. The markets are now almost entirely Fed dependent.

8/ The next victim of Central Banks will be the banking network of SMEs, and this aligns with the centralization trends of e-commerce giants. At the end of the day, banks are supposed to be risk assessors. A network of banks having the real-time, geographic telemetry to assess.

9/ With low interest rates the network of marginal banks will continue to be disintermediated and local risk assessment will collapse. The mega banks, with the largest capital reserves to weather boom/busts will consolidate power / underwriting. This supports e-commerce giants.

10/ The final blow will be when the Central Bank no longer tolerates interference by the Tier 1 banks, enter the CBDC. The CBDC and an open credit window directly to SMEs and retail is the final blow to mega banks because all of the telemetry & control will flow to CBs.

11/ The only problem with CBDCs is that risk assessment of millions of SMEs is impossible for a Central Bank (at least until they figure out how to use AI to do so at scale with the multivariate factors impacting local risk).

12/ To ameliorate this limitation, Central Banks can simply consolidate the business landscape into a few mega-corporates, who in of themselves disintermediated SMEs by leveraging labor/environmental arbitrage at a global scale. The cycle fuels itself and serves the 0.1%.

13/ I consider to be the root problem to be the need for infinite growth incentivizing aggregation.

This is documented here:

https://twitter.com/Santiag78758327/status/1195566086571397120?s=20

Technology has created mechanisms for leveraging compute towards higher levels of abstraction / network effects

14/ Dollar hegemony has allowed the Fed global privileges, while the BOJ / ECB, only regional ones. This cycle too will end as written here:

https://twitter.com/Santiag78758327/status/1244373373133688839?s=20

and here -> The Role of Banks / FinTech in the Future

https://twitter.com/Santiag78758327/status/1219307186855301120?s=20

15/ The macro-economic landscape at first glance appears incredibly bleak, however the emergence of P2P value transfer has the potential to transform human interactions at a more fundamental level by disintermediating the aggregators once and for all.

16/ What happens in the end game? What does it look like when the FANGs drive 90% of all digital & e-commerce traffic in the US? Alibaba in Asia, etc.? What happens when global CBs become the only risk assessors and incentives become purely political? Soviet Union level collapse.

17/ What is the only practical counter-narrative to these mega trend? Decentralization. The digitization of real world assets. The creation of markets with liquidity, flexibility, & transparency without 3rd party intermediaries. The solution will come from the people & software.

18/ One tenant is most likely true, if the current system fails to service the majority, the majority will seek an alternative. In the absence of an alternative the majority will revolt with aggression & violence but with an alternative there can be peace and equity.

19/ We have a long way to go for the current system to collapse, but when it does it will be sudden & dramatic. Instead of concerning ourselves with the daily injustices / indignities of the current system we should be concerning ourselves with building an alternative.

20/ We should focus on building decentralized structures, resilient & redundant supply chains, liquid governance, digitized assets, data quality, self-sovereignty, digital identity, local risk assessment w/ global investment rails, etc .We should be building the Internet of Value