The systemic crises of capitalism and the alternative of a decentralized economy

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The collapse of Silicon Valley Bank and the threat of contagion throughout the Western financial system was not capitalism’s first systemic crisis.

Text by Pyr Marcondes, Senior Partner at Pipeline Capital.

The collapse of Silicon Valley Bank and the threat of contagion throughout the Western financial system was not the first systemic crisis faced by capitalism. Possibly, it will not be the last, if the structures of the centralized system are maintained, in which the gatekeepers are the central banks and the rules of operation and business are still linked to principles of a time gone by.

Or that they don’t recognize a new time that, some time ago, has already arrived.

The Fed’s action was swift and meritorious. Ditto of the European financial macrostructure. And that’s great.

But if we look for the origins of all this, we will arrive there in 2008, in another systemic crisis of the model, this one more overwhelming, and from there to here in a system that, for 14 years, maintained interest rates, notably in the US , managed “downwards”, making capital raising cheap and, apparently, without high cost or greater apparent risk. It is as if it were more expensive not to invest than the other way around.

The result is a distortion of asset values and prices, detached from a free market reality and anchored by administered rules of centralized financial management.

And the effect is a classic model, which we all know, of boom and bust. See chart below.

Inflation is the most obvious result of this whole process and, to contain it, the FED must continue to raise the cost of money to at least 5%. In other words, to contain inflation promoted by the regulatory model of stimulating indebtedness and accelerated liquidity, in which the price of assets distorts the vital signs of the economy, they are invested in initiatives that are not necessarily productive or profitable, and debase the value of the money. And, therefore, of capitalism itself.

I lived the internet boom, before the bust, in the late 1990s. I was General Manager of a portal that broke in the bubble of 2000, called Starmedia. There was a common phrase at the time …” money is not an issue”.

Like this? Money is always THE issue.

In recent years, market liquidity has been the norm. The distortions I mentioned above ditto.

Now, the retraction has caused these assets excessively (and unduly) exposed to risks and inconsistencies to return home. And they turned into dry powder. Resources, capital, investments, locked in investor vaults. Which will come out in broad daylight when US inflation shows signs of control. That will happen later this year. At the latest, early next year.

And then, you know what? Gooooooooooooommmm!!! All over. And over again.

This is just a light analysis, but let’s also, slightly, think of an alternative: a decentralized and open economy, in which the financial supply chain was all tokenized and managed on blockchain and the assets were all digital assets. Just imagine.

The Pipeline Capital Investment Group will soon launch a white paper about all this and a little more, in which it defines (and defends) a new look at macroeconomics and the investment market. Wait.

Text by Pyr Marcondes, Senior Partner at Pipeline Capital.

Article originally published by Exame.

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