Transcription
His long-term project to bring manufacturing back to the United States involves a very, uh, delicate, uh, exercise. On the one hand, he wants to reduce the value of the dollar—the exchange rate between the dollar and the Stelling, uh, the Euro, and so on. He wants to bring it down in order to make American exports more competitive and imports into the United States more expensive, and therefore shift jobs back to the Midwest, let's say. At the same time, and that's why I'm saying it's delicate, he wants to maintain the hegemony of the dollar.
Now, on Thursday last week, President Trump signed an executive order to establish an official government reserve of, uh, Bitcoin ahead of a crypto summit at the White House on Friday. That's a significantly big step towards mainstream acceptance of cryptocurrency, and also, we should say, an about-face of Donald Trump, who just a few years ago was fairly skeptical of digital currency. So, could this be a good thing for the U.S.? Could it be a good thing for the world economy? Well, joining us now with his thoughts is Yanis Varoufakis, economist, author, and former Greece Finance Minister. Kaki Alexis, hello. How are you?
I'm very good, thank you, Yanni. Uh, let's talk about cryptocurrency. I suppose your thoughts about cryptocurrency and whether you think they do belong as part of any country's national reserve?
Look, my personal views are not particularly material here. I personally think that the technology on which crypto, Bitcoin, is based is fascinating, but, uh, I don't believe in, uh, a privatized version of money. I don't believe in the what I call the apolitical fantasy, or the fantasy of apolitical money, that will replace the pound, the Yen, the dollar, and the Euro, and so on and so forth. But that's neither here nor there. What's what is happening in the United States is fascinating because, on the one hand, you you correctly pointed out that Donald Trump was not a great believer in crypto, but the fact of the matter is that a very large section of his constituency—the MAGA constituency, the people who follow people like, uh, Elon Musk and Peter Thiel—they are libertarian. Libertarians within me, and they they they loathe the state; they loathe, at least ideologically, from an ethical point of view, the Federal Reserve, fiat money, state money. And for them, the idea of apolitical money—that is, the kind of digital gold, Bitcoin, or Ethereum, and so on—is appealing to them.
So, on the one hand, Trump is very cynical; that is, he's, uh, he he's bolstering the crypto, uh, reserves of his friends who have, within the MAGA movement, invested in, in—he, let's not forget that him and Millennia actually issued their own, mean, currencies, cryptocurrencies, and they made hundreds of millions of dollars. So he he always likes a quick buck, doesn't he? But besides that, Alexis, I think there's a very interesting and very serious aspect to this reserve that he is pushing forward, which has nothing to do with anything of what I said. And if I if I'm allowed to just explain what that is, look, uh, Donald Trump and the very serious thinkers that he's got in his economic team—and I'm saying this as a very harsh and fierce critic of him and his team—so you know we need to understand and not to dismiss our opponent as a buffoon when he may look like a buffoon, walk like a buffoon, but he's not a buffoon when it comes to his economic policy. Right? Look, his long-term project to bring manufacturing back to the United States involves a very, uh, delicate, uh, exercise. On the one hand, he wants to reduce the value of the dollar. Right? So he doesn't want some other currency to replace the exorbitant privilege that the dollar, um, affords anyone who happens to be in the White House. And the way he's—okay, so what, how is this connected to Bitcoin, to the reserve, the strategic reserve? For the dollar to fall, he needs the Chinese, the Japanese, the Brits, and the Europeans primarily to sell many of their dollars, of their hoarded bucks, green bags. But he doesn't want them to buy, uh, the Chinese currency; he doesn't want them to buy the Euro; he doesn't want them to buy the British pound, because that would defeat the purpose. So if you can create a flow of capital from the American dollar to, um, a melange of cryptocurrencies, uh, and especially these cryptocurrencies are backstopped through some kind of stable coin, as it's called, the currency board by the US dollar, he has achieved his objective. That I think is what is really lying at the heart of the thinking behind establishing this strategic reserve of cryptocurrencies.
So do you think that we're going to see an explosion of cryptocurrency then, not just in the U.S. but elsewhere?
It's highly possible. Uh, there were two steps, two, two steps, two moves that have already done that. One was when Wall Street started establishing trading, uh, platforms for Bitcoin. In other words, uh, this is the the great irony, isn't it? Bitcoin was established as an anti-Wall Street, anti-establishment currency, and but however, the great, the great boost in its value came when they embraced it. That already has happened from the perspective of Wall Street. And the second one is the strategic reserve. So anything that increases the demand of anything increases its price and creates a speculatory flow of capital into it. So, in that sense, you may be right. But on the other hand, because these cryptocurrencies do not reflect any intrinsic value whatsoever, uh, trying to trying to to predict their value is like a cat chasing its own tail, because it's like, you know, average opinion trying to imagine what average opinion will be. Well, that's that's my point. In the fact that it's not based on any intrinsic value. I mean, if you buy shares in Apple, essentially you have a bit of that company, and that company consists of hardware; it consists of stores; it consists of infrastructure. Not quite sure what you get when you have a Bitcoin. I mean, Warren Buffett has compared these cryptocurrencies to a gambling device, almost like what you just described. Now, predicting its value becomes a bit of a gamble, and perhaps that's the addictive nature of cryptocurrency.
Well, yes, absolutely. And the fact is that look, when when average opinion is trying to, um, second-guess average opinion, uh, anything is possible; the sky is the limit, and you can go all the way down to zero. Uh, but what is driving the—there is a there is an objective demand for crypto, uh, that comes from, uh, crime, from, uh, terrorists; it comes from friends of mine who have been, like Julian Assange, for instance, who was completely blocked from any access he had to MasterCard, to Visa, and so on. Uh, so there is a utility in cryptocurrencies. What I find interesting and potentially, uh, lethal for the for financial stability is so-called stable coins. Now, for the benefit of our audience who don't know what they are, just very briefly, if you buy, uh, one of those table coins, the company that issues it guarantees or says that it guarantees, uh, the parity between the, say, the dollar and one of those stable coins. So one stable coin is one US dollar, and therefore supposedly it offers you some kind of security, some kind of insurance from fluctuations of this currency. Now, for this to work, that company would have to have somewhere store, hoarded an equal number of dollars as the stable coins that it issues. Of course, they never do that, and nobody checks them. It's a bit like the gold standard before, you know, 1930. Nobody checked, could have checked whether governments have as much gold as they say they have in order to back, uh, gold-backed, uh, Sterling or dollars and so on, which means that if people believe that these stable coins are worth their sold, they're worth the guarantee that they were they are being being sold with, then they a lot of money is going to flow into them because it gives you a lot more flexibility regarding making payments, receiving payments. But the more people trust that, the greater the incentive of the companies that issue them to fib, to say that they they do have, uh, the dollars that are necessary to back to back up that that you know those stable coins without having it. And therefore, this for me is a clear and present danger for a future financial clash or crash.
I'm amazing how much of of our monetary system has to be come down to beliefs. Uh, Yanni, before we, uh, wrap this up, I want to get your thoughts on what we've been seeing at the moment with the American economy. Uh, the tariffs, the uncertainty of the tariffs have all contributed to the American economy suffering. Prices are not coming down; the stock market is suffering. What do you think is going to be the result of what looks like a very unstable time in U.S. markets? Is this an opportunity for the EU group to, to come together and show its economic might? Is that number one spot going to be filled by China, uh, already waiting, uh, with with what seems to be a much more stable economy than the U.S. at the moment? Where do you see this going?
For many, many years, the stock markets in the United States have been booming; they they never had it so good. But but at the same time, Main Street, the average blokes and girls out there in the United States suffered, and that's that's the reason why Donald Trump was re-elected. So Donald Trump's, uh, prospects, political prospects will depend not so much on, uh, Wall Street, but on whether he manages to boost the economy at the lower end of the social stratum and hierarchy. And for him to succeed in doing this, they may have to be a correction in the markets. So seeing the the small, they are small drops in the stock exchanges in NASDAQ, in in, uh, Wall Street, and so on, well that's not necessarily a sign that, uh, his policies are flailing. Uh, the the true test will be whether there is going to be any degree of reindustrialization. We already see capital flowing from Germany, from France, from Italy into the United States. We already see BASF, the great chemical giant, uh, relocating to the United States. That is is going to determine whether, um, whether the new administration's policy works or not. From the perspective of the European Union, uh, well, the European Union has been stagnating now for 15 years. We've missed out on an industrial revolution; we had zero net investment for 15 years. This is why Germany is the industrializing—so you're absolutely right, Alexis. This was the time when the European Union should get together and, uh, you know, take a long, good look at itself in the mirror, uh, come to the conclusion that we have failed Europe because we have not done anything really to divert liquidity. Masses of liquidity—don't forget that, you know, the European Central Bank printed more than 6 trillion, 6,000 billion euros, and almost none of that went into investment—and do something about it. Instead, we have rearmed Europe, and we have another program of smoke and mirrors, the one that was announced by the president of the European commission. And what what do I mean by smoke and mirrors? These huge announcements with very impressive numbers that come from Brussels, but the moment you you look at them a bit more carefully, under the microscope, they dissolve; there's no real money there. And Europe again, I very much fear, is missing an opportunity to turn the crisis into an opportunity.
Well, Yanni, I'm going to have to leave it there, uh, because of time. I wish we had a little bit longer. Thank you, as always, for giving us your time. Yanis Varoufakis, there, the economist, author, and of course, uh, former Greece Finance Minister.