Dhe week of the dramatic decline of the FTX crypto exchange ended with strong price gains on the classic financial markets. The stock exchanges were unmoved by the meltdown in the crypto world. This is a strong indicator of macroeconomic irrelevance. How different it was in 2008. When banks gambled, the stock markets collapsed. Governments felt compelled to carry out bailouts because they saw the central function of financial institutions at risk: providing the economy with credit for investment and consumption.
The crypto world crisis, which has now escalated after a series of bankruptcies in the demise of the multi-billion dollar crypto exchange FTX, obviously does not produce any economic risk. There are hardly any entanglements between the crypto world and the real economy, apart from spending millions on advertising, lobbying and software.
Even the great theoretical advantage of so-called cryptocurrencies, that they reduce the costs of financial transactions, has not yet been shown. Ordinary goods are not paid for in crypto, even the most adventurous entrepreneur Elon Musk reinstated the ability to buy Teslas with bitcoin after a trial run. “So much in the crypto-financial world is borrowing in crypto for investing in crypto,” writes economist and blogger Joey Politano.
donors to the Democrats
This is despite the tireless efforts of FTX founder and supposed crypto prodigy Sam Bankman-Fried. He pursued a plan that initially seemed paradoxical as to how the marginal spruce existence of his profession could be ended: with strict regulation. His central thought was that regulation opens up access to the big financial pots: the pension funds, the insurance companies, the corporate securities savings plans of many Americans.
He revealed his motivation in the Washington Post: “If you talk to most institutions now, they are interested, but only superficially. But in order for them to feel safe and in good hands when taking the big step into the ecosystem of digital assets, they need regulatory clarity.” In other words, crypto should become economically relevant.
All the confusing news surrounding Bankman-Fried’s activities in Washington gets new meaning with this interpretation: He was one of the most important financiers for the Democratic Party this year. According to Open Secret, he donated $40 million. The bulk of this went to Democratic politicians and party political campaigns. But Republicans also benefited from Bankman Fried’s grants. The political donations have been accompanied by extensive lobbying activities targeting members of the Congressional Farm Committee who have an impact on regulatory legislation. Bankman-Fried told Politico newspaper earlier this spring that he was considering donating up to $1 billion in 2024 to help with the presidential campaign. He later admitted he shouldn’t have said it.